Faroe refuses Smyril compensation

By JOHN ROBERTSON

The Faroese prime minister has refused to offer to compensate Shetland for its diminishing investment in the troubled Smyril Line. Instead the leaders of the two island groups are looking forward to a new start to their diplomatic relations at a summit in Orkney later this year.

Council convener Sandy Cluness wrote to Kaj Leo Johannesen two months ago asking for the £4.2 million investment by Shetland Development Trust to be returned or for the Smyril ship Norröna to resume her summer trips to Shetland. The action was taken after the government and other investors pumped more money into the company to save it, diluting Shetland’s share.

The long-awaited reply, received on Wednesday, did not fulfil the convener’s wishes, the prime minister explaining that without a majority stake in Smyril it did not have “the power to intervene in the daily running of the company”.

According to prime minister Johannesen, Smyril approached the government last autumn to help it raise £7.7m (65m Danish kroner) to stop it going bankrupt after the banks said if it did not provide insurance it would pull the plug and the assets would be sold, most notably the Norröna.

He said: “This would most likely have meant that no passenger ship would have a regular route to the Faroes and our country would effectively have been cut off from the outside world in terms of ship-based passenger movement. It would also have severely crippled the transportation of goods.”

Smyril proposed a fresh start by raising the £7.7m in new share capital along with major changes to company operations and a new timetable for the ship. The Faroese parliament, the Løgting, voted to allow the government to buy nearly £3.6m in shares and the rest of the capital was raised from other investors.

While unable to fulfil Mr Cluness’ wishes in his letter, the prime minister was upbeat about relationships with Shetland. “I would like to use this opportunity to underline how highly I value the good relations we enjoy with Shetland. The underwater telecom cable from the Faroes to Scotland via Shetland testifies to the many avenues of cooperation available.”

He looked forward to the next summit of the North Atlantic Islands Group when he would meet Mr Cluness for the first time. “We can use the occasion to discuss further the continued strengthening of our cooperation in the future.”

The two island leaders have not met previously because Mr Johannesen only came to power in September when a new coalition government was formed in Faroe.

Mr Cluness said it was good that Shetland had received a response and he said he fully understood the steps the Faroese government had taken to protect what was the equivalent of NorthLink to Shetland. He said Smyril was a sensitive subject in Faroe and the parliament had only just voted in favour of investing more money in the shipping company.

The convener will not be pursuing his demands from the prime minister in the meantime although he will reply to the letter and intends raising Smyril again at the summit, which has previously been held in Shetland, the Western Isles and Faroe.

“At least we’ve opened contact with them again and we will keep in touch and see how things develop. Unless the boat was sold there is really not an awful lot we can do as minority shareholders. But you never know with the Faroese, they stopped coming with the old Norröna for a few years and then came back again. As long as we have this relationship with them there is a hope that it comes back because it is a big money-spinner in the summertime for the tourist industry.”

The council still gets official reports from Smyril as a shareholder and would have to be part of any major decision, such as replacing the Norröna with a smaller, less expensive ship.

At the last summit in Lerwick in 2007 a previous Faroese prime minister, Joannes Eidesgaard, said his government was powerless to prevent Smyril removing Lerwick from its ports of call for the Norröna, again because of the state’s small shareholding and because it did not interfere in the decisions of commercial companies. After a visit to Sullom Voe the prime minister had said Faroe might use the terminal to store oil if commercial quantities were found in Faroese waters.