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The Isle of Man Steam Packet and the User Agreement

The following commentary has appeared on the Isle of Man Progressive Action Group Web Site – February 2007. It provides useful information as to what is the “User Agreement”.

The User Agreement regulates the terms for the Steam Packet’s use of the linkspans (but not other facilities) in Douglas Harbour. It came into being following the Government decision to provide their own linkspan at the King Edward Pier, rather than allow the Steam Packet to own both linkspans in Douglas Harbour, a situation which arose following the merger with Manx Line in 1985. There are two parts of the Agreement, one for the use of the Government linkspan and the second to “licence” the Steam Packet to site and use their own (ex-Manx Line) linkspan at the Victoria Pier. The original agreement was approved by Tynwald in July 1995 to run for 10 years but with the option of a further 5 year extension. In 2002 the company asked for and received the extension to 2010, albeit with some changes in the terms and conditions. At the end of 2004 the company negotiated a further extension to 2020, with an option for further extension to 2026 plus an extra year (up to a maximum 3 years) for any year in which the TT might be cancelled.

In return for the near (but not completely) exclusive use of the linkspans the company has had to guarantee minimum frequencies of service, which have been adjusted upwards at each extension. There are formulae both for payments for use of the facilities and also increases in passenger fares, although the arrival of “special offer” fares – which have become a requirement since 2002 – have rather confused that issue. Services are required to be operate to a port in north west UK and also (at a lesser frequency) to either Liverpool, Holyhead or a port in between. There is also a requirement specified for Irish services. The ports used have to be nominated by the Company and accepted as being suitable by the Department of Transport. The required ports, until agreed otherwise, are Heysham, Liverpool, Belfast and Dublin. It should be noted that the actual level of service provided is considerably in excess of those specified as a minimum in the User Agreement.

The Company has also had to commit to fleet and marketing investment. Under the 1995 agreement a fleet investment of £20 million (indexed to 1994) was required evidenced by the building of the Ben-my-Chree and the re-introduction of fast craft. The extension to 2010 did not require further investment but was reported as giving the company “enough time in which to earn a return on any fleet renewal programme they may undertake”. Nevertheless the 2004 extension (to 2020/2026) was required because (in the words of then Transport Minister John Shimmin- Hansard 14th December 2004) The Steam Packet has advised that it needs the security which would be given by a new User Agreement to run from 2010, in order to progress the early replacement of the existing 74 metre SeaCat and the MV Lady of Mann. Although the Lady of Mann was sold in 2005 that investment has yet to be made – but the extended agreement requires a fleet investment of £26 million by 2015 (of which £18 million needs to be spent by 2012).

At this point it should be noted that as soon as the User Agreement was signed, Sea Containers launched their successful bid to take complete control of the Company. The 2002 extension immediately preceded the sale of the company to Montagu Private Equity. The further extension agreed in late 2004 again preceded the sale on to Macquarie, a company whose publicly stated objective was to invest in infrastructure projects with good long-term cash-flow prospects.

In all these processes there has been no invitation to other companies to bid for the provision of Isle of Man services nor has there been any stipulation of performance targets eg percentage of sailings operated and on time which need to be met and monitored. There has been no requirement for the company or the Department of Transport to establish customer views or requirements prior to any of the extensions to the Agreement. The parties to the Agreements have certainly incorporated some stipulations which are of benefit to passengers but these are based on their own perceptions.

The EU has now indicated requirements for the tendering and provision for subsidised ferry services (which ours are not) that require open tenders in which operators set out how they will consult with user groups. The establishment of TravelWatch-Isle of Man may be helpful in this context. It should however be said that the EU procedures are causing as many problems as they are solving and are not being recommended as an alternative to the limitations of our own User Agreement.


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