Tata Steel warned court action likely over Dalzell state aid as Holyrood kept in dark
MSPS were left in the dark around the potential threat of legal action around the Dalzell steelworks deal despite warnings of ministers being dragged in front of the courts.
Tata Steel, the former owners of the steel works, solddalze ll to the Scottish Government in an unprecedented“back-to-back” sale for £1, with the government selling the plant immediately to Sanjeevg up ta’ s steel giant, liberty Steel.
As part of the deal, Scottish ministers took on all of Tata Steel’s potential liability for all known and unknown liabilities at the site, including around environmental cleanup, costs which could end up in the millions. Ministers agreed an equivalent clause with Liberty, with the aim of ensuring the costs would not pass to the taxpayer.
However, as Liberty Steel’s parent company, GFG Alliance, began to wobble last year following the collapse of its main funder, Greensill Capital, due diligence by ministers appeared to suggest the deal broke state aid rules. This, ministers said, meant the deal was unenforceable and that the taxpayer would not be held liable for any costs.
New documents, obtained by the Scottish Liberal Democrats show Tata had warned ministers of the potential for legal action and of their unhappiness with the “unilateral” decision to claim the contract breached state aid rules. The party is now calling for the business minister, Ivan Mckee, to apologise for his “cavalcade of deception”.
The business minister, Ivan Mckee, was first informed of a potential issue with the deal two months before MSPS were updated, but only spoke to Tata days before going public. The steel giant complained of the limited time to respond and requested an opportunity to challenge the conclusion the deal breached state aid rules.
In a letter sent to the government on December 14, 2021, the day before Mr Mckee’s statement to parliament, Tata told ministers it believed a final conclusion on state aid and therefore whether taxpayers are liable for millions in environmental clean-up would have to be determined by the court.
It said: “We note that it is not within the Scottish Government’s competence to make a legally binding determination on the existence of State aid. Such a proposition would, if necessary, be a question for the courts (or the European Commission).”
The letter also raised concerns about the“absence of any definitivelegal ruling” and around the “factors driving the apparent urgency of this process”.
On December 15, Mr Mckee told MSPS about the potential breach of state aid but kept them in the dark about legal action concerns. He told the Holyrood chamber that Tata Steel “will need time to reflect and consider their position”.
Willie Rennie, the Scottish Liberal Democrat’s economy spokesperson, said the documents confirmed the fact Tata intend to take the government to court to “force them to pay for the clean-up costs”.
A Scottish Government spokesperson said the 2016 deal was done “at pace” and rescued more than 100 jobs, with the legal advice around the state aid breach reported “promptly” to parliament. They added this means “no money would legally have to be paid out” if the clause was ever called upon.