Ministry claims €400,000 contractual penalty for ferries entering service too late

The ferry Leiger as it awaited handover in Turkey to TS Laevad, a subsidiary of the state-owned Port of Tallinn. (TS Laevad)
1/6/2017 12:19 PM
Category: Business

The Ministry of Economic Affairs announced on Friday that it would claim a contractual penalty of €400,000 from TS Laevad, the carrier responsible for the late delivery of four new ferries that were supposed to take up regular service on Oct. 1, 2016.

One of the new ferries was now in Estonia, and a second getting ready to be underway within the next few days, Minister of Economic Affairs and Infrastructure, Kadri Simson (Center), said on Friday. As the contractual partner of the government, carrier TS Laevad is liable for the delays.

The company’s inability to have the ships operational within a reasonable time frame meant that TS Laevad would now be required to pay a penalty for the delay of each new ferry. According to the contract, four new ferries were supposed to be operational and take up regular service on Estonia’s island routes on Oct. 1 last year.

The maximum the ministry can claim is €5m, which it would do in case shipping traffic on a line came to a complete standstill due to the delays. The ministry found that at this point, considering all the breaches of contract that occurred so far, an initial €400,000 penalty is appropriate.

TS Laevad, a subsidiary of state-owned port operator AS Tallinna Sadam, can in turn claim penalties from the wharfs in Turkey and Poland that failed to get the ferries ready on time.

The ministry argues that despite TS Laevad’s ability to continue regular services to Estonia’s western islands, the delays that occurred as well as the fact that the transport conditions did not correspond to the government’s contract with the carrier justified the amount of money claimed.

The ministry will continue to review the contracts and conditions every three months. If TS Laevad should continue to use ferries on its routes that do not correspond to contractual conditions (and those call for the brand-new ships), the ministry has the right to claim further penalties of up to €100,000 per ship.

Editor: Dario Cavegn

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