Legal action against Lews Castle hotel lease

Legal action over “flawed” Lews Castle hotel lease

19 May 2015

Legal action is being lodged to try and overturn the Comhairle’s decision to lease the redeveloped Lews Castle to outside firm, Natural Retreats.

Cala Hotels - the biggest hotel group in the Hebrides - is going to the Court of Session in Edinburgh over the issue.

The court action is being launched by Kenman Holdings which owns the Cabarfeidh, Caladh and Royal hotels in Stornoway under the Cala brand.

The group said it is also lodging a formal complaint to European Commission.

Natural Retreats - through its parent company, Natural Assets - intends to open 26 flexible rooms or self-catering apartments - a total of 52 bed spaces - in the castle next summer.

There is concern amongst many Hebridean hospitality operators that the outside multinational rival is benefiting from public cash to set up in direct competition with similar local businesses.

Widespread outrage erupted when it emerged Western Isles Council - which owns the castle - had quietly changed the initial proposals for a plush hotel within the castle - a main part of an overall £18 million rescue of the crumbling building.

Recently, the Comhairle and Highlands and Islands Enterprise (HIE) topped up previous financial contributions with an extra £3.2 million to redevelop the upper floors of the Lews Castle to the firm’s parent company, Natural Assets.

Kenneth Mackenzie, boss of the Cala hotel group, said he believes the procedure over awarding the lease was “flawed.”

Though the hotel group is pursuing the legal action independently, he highlighted over 40 island businesses shared his concerns.

Local providers have stressed the market is already over-saturated and warn they will struggle if unfair competition undercuts their prices.

Mr Mackenzie said: “Kenman Holdings Ltd has through its legal advisers been in correspondence with both the Comhairle and Highlands and Islands Enterprise in relation to the process leading to the decision to award a contract for private sector development partner for the Lews Castle development to Natural Assets Investments Limited and its associated company Natural Assets Lews Castle Limited.

He said the hotel group was raising legal action in the Court of Session for a judicial review “seeking reduction of the award decision on the basis that the tender process was not genuine and was significantly non-compliant with applicable European laws.”

At the same time, a separate official complaint is being lodged with the European Commission on the “grounds of breach of European Rules on the award of concessions and the rules on state aid.”

Kenneth Mackenzie said: “Our action has the support of over forty small local businesses who, whilst very supportive of the museum and ground floor renovation of the castle, are seriously concerned their businesses will be badly damaged by the subsidised operation of the accommodation proposed on the upper floors of the development”

Local objectors previously said public money should not be used as a subsidy to allow an incoming competitor to undercut existing local businesses.

Objectors had warned the council‘s "economic regeneration strategy for the castle is flawed and fatal for those already serving this market and should be reconsidered."

Western Isles Council said it will defend the court action.