Controversial ferry contract extended

Gozo Channel Ltd's six-year exclusivity agreement, which expired on April 21, has been extended until the government completes delicate discussions with Brussels.

The controversial contract - providing Gozo Channel with a monopoly over the ferry service between the two islands - has been condemned by the European Commission since it breaches the EU's strict competition rules.

The agreement, signed just days before Malta joined the EU in 2004 without a call for tender, also stipulated that the company would benefit from an annual subsidy of €3.4 million as part of its Public Service Obligation (PSO).

Malta has been taken to the European Court of Justice over the agreement and the case is expected to be heard shortly.

Despite the legal wrangling with Brussels, the government has still not issued a new call for tender, citing "ongoing negotiations" with the EU for the delay.

In the meantime, the government has decided to engage the current service provider, which currently employs 249 staff, to continue the service on current terms until the new tender is awarded.

According to EU sources, this will mean that Gozo Channel will continue to operate in a non-competitive environment and receive subsidies at least until a new tender is issued, adjudicated and awarded.

In 2007, following the start of infringement procedures, the government had embarked on a process to issue a call for tenders and liberalise the market. However, no tender has ever been issued.

A Transport Ministry spokesman said: "A tender document has been drafted and is currently being discussed with the European Commission since the tender incorporates a public service obligation, the terms of which have to be in line with EU competition policy.

"The tender document will be issued once discussions with the Commission are concluded," the spokesman said, though there is no indication of timeframes.

According to EU rules, the Malta-Gozo ferry service has to be open to competition, but the government is known to be taking a protectionist attitude, especially to protect the jobs involved.

"We are very sensitive on this issue as the ferry service between the two islands is Gozo's lifeline and not just a normal ferry service," the ministry spokesman said.

The government is trying to convince the Commission that the service cannot be operated by more than one company, he said.

However, Brussels has been insisting that the service should be open to full competition where all European companies interested will be able to tender.

EU sources said: "Gozo Channel should not be given any privileges and should compete on an equal footing with all the other commercial companies interested in providing this service. The PSO to be granted by the government is there to guarantee the social dimension of this service."