DFDS contract reveals termination clause and performance penalties

The government has published its concession agreement with DFDS, which Jersey's Economic Development Minister says has 'teeth'.

New clauses and factors have been introduced to the contract so the government can hold the Danish ferry firm to account if it is not performing as well as it should.

This includes financial penalties for delivering below the minimum standard required or, in the worst-case scenario, a termination of the contract.

Deputy Kirsten Morel explains that these things were added to make the lifeline service to and from the island more sustainable:

"What we saw in the previous operating agreement between Condor and the government was that the operating agreement had no 'teeth' from the government perspective.

"When Condor put up prices enormously, we had no way we could hold them back, [but] what we have now is a concession agreement that enables the government to hold DFDS to account, so if they're not running the level of service, there are penalties around that."

When asked about these penalties, the Minister explained that they are not enormous, but they are financial ways that the government can 'make DFDS pay' for a failure to deliver the minimum services the contract asks for.

However, he assures islanders that this cost will not be passed on to customers in the annual price reviews.

"Regardless of any penalties that are levied against DFDS, year-on-year price rises are limited to a mixture of Jersey's RPI and the UK's CPI."

When it comes to Clause 33, or the termination clause, it states that this would only be considered if there have been consistent failings from the ferry firm and a failure to follow a remediation plan.

When asked how poor services would have to get before action is taken, Deputy Kirsten Morel says there is no question that it would have to be bad.

"It would have to be significant, but I think what we're saying with 'significant' is that it would have to be over a period of time, let's say a couple of years of underperformance, or a failure to actually invest in vessels when there was no reason for them not to invest in vessels, that would be another potential reason to do it, you know, if DFDS put their feet down and say 'we're not going to do that part of it' I think we would have very good reason to exit."

He told Channel 103, due to the legally binding contract, the government would have to evidence continued failings from the ferry firm, and would have to feel it is on 'sure ground' as it would stand up to judicial review.

However, the Economic Development Minister says if the government goes down this road, it would take time, which is not a bad thing.

"You have to remember that you want it to take some time, because Jersey cannot operate without a ferry service, so you wouldn't want to wake up on a Tuesday and say 'DFDS are doing badly, we're cancelling the contract today' and that would be it, because who would turn up on the Wednesday? There would be no one.

"If we were to go down that road, which is a big and highly unlikely if, but if we were to go down that road, you would want it to be over a period of time because you have to plan for a takeover of ferry services."

The published contract can be read on the government website.