The public service obligation tender for the fast ferry service was EU-wide, meaning strict competition and procurement rules applied, maritime industry sources warned on Tuesday.

“The government should be careful how to proceed. This is not a common tender and the EU is normally very attentive to ensure that all is done above board. Fouls might have repercussions that will affect many other similar PSOs across the EU and, therefore, Commission officials will be closely monitoring what is going on in Malta,” the sources added.

A call for tenders for the subsidised Gozo ferry service was suspended on Monday amid claims it was designed to favour the present operators, the Times of Malta is informed.

Read: Fast ferry tender process 'completely suspended' after Virtu Ferries objects

The decision was made by the public contracts committee following a formal objection by Virtu Ferries, provider of the fast ferry service to Sicily.

Virtu Ferries submitted that the way the tender was designed clearly favoured state company Gozo Channel to the detriment of other operators wanting to compete for the same public service.

In its legal challenge, Virtu Ferries argued that, according to EU rules, the Ministry of Transport was required to treat economic operators equally and without discrimination and to act in a transparent and proportionate manner. The rules also laid down that the concession-award procedure should not aim to unduly favour or disadvantage certain economic operators.

Virtu Ferries insisted there were indications the process was designed to give an advantage to Gozo Channel. For example, the successful bidder had to launch the services within three months from the award. This favoured Gozo Channel, which already had its own vessels, Virtu Ferries said. Also, it added, the duration of the contract – not more than five years – was too short a time for a new investor to recoup the massive investment.

Read: Gozo-Malta fast-ferry provider must run traditional crossing

A new operator was also expected to employ all present Gozo Channel staff. In addition, the company which runs the catamaran service to Sicily, said, the Transport Ministry declared it could not be held responsible for “the veracity” of the information provided by Gozo Channel regarding the state of play employees and labour costs.

Virtu Ferries last week objected to an announcement made by the Gozo Ministry that it had chosen Islands Ferry Network Ltd as its partner to provide the fast ferry component of the service.

Islands Ferry was registered this month and did not have any experience in the provision of fast ferry services, the maritime sources pointed out. It is owned by Magro Brothers and Fortel, the company that owns Captain Morgan cruises and the Fortina Hotel.

What the EU representation office in Malta said on December 22:

Would the short concession period of five years, and the need to take over the conventional services, deter any other operator from coming forward and making the required investment?
• EU law (Council Regulation No 3577/92) does not specify the duration of public service contracts for maritime transport services. In 2014, the Commission issued an interpretative document on those rules. While they don't foresee any minimum duration for a contract, it is the Commission's view that the duration of a contract should not exceed 12 years. In addition, any public service contract lasting more than five years ought to be justified by objective criteria, such as the need to recoup the investments made (e.g. investments in vessels or infrastructure). More information here in section 5.5.2

If the call for tenders is done in such a way as to favour Gozo Channel and to deter competition by a new operator, would that not infringe EU Competition Law?
• In line with the principle of non-discrimination laid down by the Regulation 3577/92, member states must not set obligations that are tailor-made for a given shipping company and that would prevent other Union shipowners from entering the market. Member States cannot either apply obligations that would have such effect. More information here in section 5.3.2

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