Scottish Government: loans to third parties – loan agreements

Mr Paterson made this Freedom of Information request to Scottish Government

This request has been closed to new correspondence from the public body. Contact us if you think it ought be re-opened.

The request was successful.

Dear Scottish Government,

Scottish Government: loans to third parties – loan agreements

With reference to the Appendix of Freedom of Information Request FOI/18/02172, please provide a copy of the loan agreements (or if not produced, a similar document setting out the basis of the loan) for each of the following:

Loan (reference numbers in brackets are as those stated in the appendix to FOI/18/02172).
(2) £133.2 million @0% interest, due within 1 year
(3) £39.5 million @0% interest, due within 1 year
(31) £7.89 million @ 4.22% interest, 11 year term
(32) £48.2 million @0.10% interest, 25 year term
(34) £15 million @15% interest, payment at end of loan

Please acknowledge receipt of my request.

Yours faithfully,

Mr Paterson

Dear Scottish Government,

Scottish Government: loans to third parties – loan agreements

I refer to my message of 13 September 2018 on the above subject - please confirm receipt of my FOI request.

Yours faithfully,

Mr Paterson

Mr Paterson left an annotation ()

Legal backstop for response: 11 October 2018

Scottish Government

1 Attachment

Dear Mr Paterson

 

This is to confirm receipt of your request for copies of the loan
agreements relating to various loans listed in our response to
FOI/18/02172. The Scottish Government received your request on 13
September 2013, and in line with the requirements of the Freedom of
Information (Scotland) Act 2002, we will respond within 20 working days,
that is by 11 October 2018 at latest.

 

Please quote the above reference number FoI/18/02623 in any
correspondence.

 

Best regards

 

 

 

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Ben Plouviez

Head of Information Governance - Agriculture and Rural Economy Directorate

The Scottish Government 

Saughton House | Broomhouse Drive | Edinburgh EH11 3XD

 

[1]http://saltire/Documents/Communicating%2...

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Mr Paterson left an annotation ()

It appears that loan (34) relates to Ferguson Marine.

Interest at 15% payable at end of loan.

Dear Scottish Government,

Message for Ben Plouviez

Reminder - FoI 18/02623

This is a reminder that a response to my FOI is due. Please note that the date of 11 October 2018 is a legal backstop and not a due date.

Yours faithfully,

Mr Paterson

Mr Paterson left an annotation ()

Based on the response to FOI/18/02239 the loans are:
(2) £133.2 million – Farm payments (multiple recipients)
(3) £39.5 million – Farm payments (multiple recipients)
(31) £7.89 million – Grandhome Housing Development
(32) £48.2 million – LAR Housing Trust
(34) £15 million – Ferguson Marine

Dear Scottish Government,

Message for Ben Plouviez

Overdue response - FoI 18/02623

The response to my FOI request 18/02623 is overdue. Please respond in full to my request without any further delay.

Yours faithfully,

Mr Paterson

Scottish Government

7 Attachments

Dear Mr Paterson

 

Apologises for the late reply

 

Please find attached the response to your FOI that I am sending on behalf
of Ben Plouviez

 

 

Yours sincerely,

 

Sara

 

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Sara Yague

Information Governance- Agriculture and Rural Economy Directorate

The Scottish Government 

Saughton House | Broomhouse Drive | Edinburgh EH11 3XD

T: 0131 244 5689

 

[1]http://saltire/Documents/Communicating%2...

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Dear Scottish Government,

For the attention of Elinor Mitchell, Director, Agriculture and Rural Economy.

I am writing to request an internal review of Scottish Government's handling of my FOI request 'Scottish Government: loans to third parties – loan agreements'.

I am appealing against the decision to redact information under section 30(c) ‘public affairs’ and section 33 (1) (b) ‘commercial interests’. I am not appealing against information redacted under section 38 (1) ‘personal information’.

I request disclosure in the public interest. I highlight the following:

1. General public interest argument for full disclosure: Maintaining and increasing public confidence in public institutions - such as the government and parliament.

Subjecting public money to scrutiny builds public confidence in public institutions such as governments and parliaments. Scrutiny - by parliament and by the general public - reduces both the possibility and public perception of corruption or other wrong-doing in government decision-making. It encourages both the efficient and effective use of public resources and supports collective learning by experience. It helps protect both public ministers and private contractors through processes which are seen to be above board. Conversely, secrecy with public funds damages and in the long-term undermines public confidence in public institutions. I understand that some of these loans have not been debated In the Scottish Parliament even in private session.

2. Public disclosure standards are a necessary part of contracting with the public sector

The Scottish Government should not lower its disclosure standards to those of commercial enterprises as this may be seen as a method of hiding information from public and political scrutiny. Instead, the Scottish Government should set expectations when contracting with third parties that public disclosure standards are to be upheld. If commercial organisations seeking commercial loans are unwilling to accept such standards then they should seek alternative arrangements with private sector organisations. In summary, public disclosure standards are a necessary part of doing business with the public sector.

3. Redactions have not been cross referenced to the claimed reason for redaction.

The failure to cross reference redactions to the claimed reason for redaction may mean that redactions are being made for unjustifiable reasons.

Please acknowledge receipt of my request for internal review.

Yours faithfully,

Mr Paterson

Dear Scottish Government,

For the attention of Elinor Mitchell, Director, Agriculture and Rural Economy.

FOI/18/02623

I note my request for internal review has not been acknowledged. Please acknowledge receipt of request and my supporting arguments.

Yours faithfully,

Mr Paterson

Scottish Government

1 Attachment

Dear Mr Paterson

 

Please find attached an acknowledgement of your FOI review request.

 

Best regards

 

Stuart Strachan

 

Advanced Manufacturing | Economic Development Directorate | 3^rd Floor
Atlantic Quay | 150 Broomielaw | Glasgow | G2 8LU |
[1][email address]

 

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Scottish Government

1 Attachment

Apologies

 

Document now attached

 

Stuart

0131 24(41255) / 07557 744 850

 

From: Strachan S (Stuart)
Sent: 23 October 2018 18:01
To: '[FOI #519639 email]'
<[FOI #519639 email]>
Subject: FOI/18/02623 - Review Acknowledgement

 

Dear Mr Paterson

 

Please find attached an acknowledgement of your FOI review request.

 

Best regards

 

Stuart Strachan

 

Advanced Manufacturing | Economic Development Directorate | 3^rd Floor
Atlantic Quay | 150 Broomielaw | Glasgow | G2 8LU |
[1][email address]

 

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Mr Paterson left an annotation ()

Legal backstop for response: 14 November 2018

Dear Scottish Government,

Message for Stuart Strachan

Reminder - FOI/18/2623

This is a reminder that a response to my request for internal review is due. The legal backstop is 14 November 2018. I look forward to receiving a response shortly including (if applicable) a high quality demonstration of the public interest test.

Yours faithfully,

Mr Paterson

Dear Scottish Government,

Message for Stuart Strachan

Overdue Response FOI/18/2623

The response to my request for internal review is overdue. The legal backstop was 14 November 2018.

I look forward to receiving a response very shortly.

Yours faithfully,

Mr Paterson

Alan Smith left an annotation ()

How did they get the consent of the public to loan public money to 3rd parties? And where do the collected interest rates go? Do the interest rates get accounted for by the tax man? So many questions. But a breach of the Nolan Principles come to mind.

Mr Paterson left an annotation ()

The £15 million loan to Ferguson Marine Engineering Limited is a "bullet repayment" loan where interest and capital accumulates and is only repaid at the end of the loan period (in about 10 years time). I believe this loan is also a convertible loan and can be converted into shares in FMEL. This is a way of writing off the loan - it is no longer repayable once it is converted into worthless shares. I believe the medium-term conversion into shares was the intention when the loan was set up. This is a method of transferring money into the hands of the private sector - initially disguised as a 'loan'.

Scottish Government

2 Attachments

Dear Mr Paterson

 

Please find attached a response to your request for a review of the
attached case.  Please accept my sincere apologies for the submission of
this review beyond the 20 working day deadline.

 

Best regards

 

Stuart Strachan

 

 

show quoted sections

 

Mr Paterson left an annotation ()

INTEREST

5.1 For so long as no Event of Default has occurred which is continuing unwaived, interest is payable on the Loans (but subject to clauses 5.2 and 5.3) at a fixed rate of 15% per annum annually in arrears on the anniversary of first utilisation of the Loans, on the date of any early
repayment, cancellation or prepayment and on the Final Repayment Date.

Dear Scottish Government,

Message for Stuart Strachan

Thank you for your response to my request for internal review.

I have reviewed your response and do not believe the responses you have provided are robust. I also note that you have made reference to the work of Audit Scotland. I do not believe you have authority to represent their work.

I will now appeal to the Scottish Information Commissioner.

Yours faithfully,

Mr Paterson

Mr Paterson left an annotation ()

Appeal to Scottish Information Commissioner: 20 November 2018

Mr Paterson left an annotation ()

section 33(1)(b) will apply only where the disclosure of information under FOISA would, or would be significantly likely to, cause substantial prejudice to the commercial interests of any person. "Substantial prejudice" for these purposes means "real and significant", not "hypothetical or marginal" damage.

Dear Scottish Government,

Message for Stuart Strachan, Head of Advanced Manufacturing

FOI/18/02623

In my previous message I said that I did not consider your response robust. I think it is important to explain why. The bar for withholding information using FOISA qualified exemptions is set high. It requires the public authority to demonstrate (A) the significant probability of (B) substantial prejudice.

In your response you have relied on three statements – two under section 30(c) and one under section 33(1)(b). In your use of s30(c) you have used “confidence to protect commercial interests” and “could establish precedent on contractual terms”. The first statement is a duplicate of your statement under s33(1)(b) and ignores the FOISA compliance clause set out in the contract – i.e. the contractor is aware of the disclosure risk prior to entering into the contract. The second statement fails to meet the criteria of “significant probability”. In your use of s33(1)(b) you have used “market intelligence” but have not demonstrated the nature of the perceived detriment. Providing “market intelligence” is in itself not a detriment.

It is only when a public authority has demonstrated the significant probability of substantial prejudice can it move on to the Public Interest Test. In all other circumstances, the information should be disclosed.

The Public Interest Test requires a public authority to set out the competing arguments – the public interest arguments for disclosure and the public authority’s arguments for withholding the information (the existence of a significant probability of substantial prejudice). In carrying out the Public Interest Test you have not set out the competing arguments but moved swiftly into decision making. You have also stated “protecting the Government’s ability to provide support to industry in appropriate cases, particularly where this is for the purpose of maintaining economic activity and employment”. This statement is spurious as disclosure of information does not necessary “inhibit economic activity and employment” – if you believe so you need to explain why. I also note that you have made reference to Audit Scotland. I do not believe you have the authority to do so. I do not believe Audit Scotland have carried out a specific audit of this contract. Their work is in relation to the Annual Accounts 2017/18 of the Scottish Government of which this contract forms an incidental part.

Yours faithfully,

Mr Paterson

Scottish Government

2 Attachments

Mr Paterson

 

With regards to your ongoing appeal with the Information Commissioner for
FoI/18/02623, we have since reviewed the FMEL Loan Agreement previously
released to you and are now proposing to release more information. Please
find an updated version attached.

 

Kind Regards

Jennifer

 

Jennifer Moore

Policy Officer, Strategic Industrial Projects

Innovation, Investment and Industries

 

Directorate for Economic Development

Scottish Government, 3^rd Floor, Atlantic Quay, 150 Broomielaw, Glasgow G2
8LU

 

'013124(44386)

'07584206983

y[1][email address]

 

[2]Scottish Government logo

 

 

 

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Mr Paterson left an annotation ()

Previously redacted clause, now released:

"15. PUBLICITY

Subject to clause 14.2, the Borrower agrees there shall be no publicising of this Agreement nor a disclosure of the role of the Scottish Ministers in the provision of the Loan without the prior written consent of the Scottish Ministers. "

Mr Paterson left an annotation ()

Is information being redacted to hide a breach of contract - failure to deliver annual financial statements (2017) - recorded as overdue at Companies House (possibly clause 10.1.3) ?

"10. UNDERTAKINGS BY THE BORROWER

The Borrower undertakes to the Scottish Ministers that throughout the Loan Period it shall:

10.1 deliver to the Scottish Ministers such information as the Scottish Ministers may reasonably require including the following:

10.1.1 any changes in key personnel or office bearers of the Borrower;

10.1.2 [Redacted] and in a format acceptable to the Scottish Ministers), [Redacted] to include
details of the [Redacted]

10.1.3 [Redacted] which shall be received by [Redacted]

10.1.4 [Redacted]

10.1.5 [Redacted] in connection therewith and any such other information as relevant to the [Redacted]

10.1.6 [Redacted] "

Scottish Government

2 Attachments

Mr Paterson

 

With reference to your ongoing appeal with the Scottish Information
Commissioner for FoI/18/02623, please find attached a further reviewed
version of the FMEL Loan Agreement with new information released and
redactions colour coded by exemption.

 

Redactions in blue are exempt under Section 33(1)(b) – Commercial
Interests.

Redactions in red are exempt under Section 30(c) – Otherwise prejudice
effective conduct of public affairs.

 

Kind Regards

Jennifer

 

Jennifer Moore

Policy Officer, Strategic Industrial Projects

Innovation, Investment and Industries

 

Directorate for Economic Development

Scottish Government, 3^rd Floor, Atlantic Quay, 150 Broomielaw, Glasgow G2
8LU

 

'013124(44386)

'07584206983

y[1][email address]

 

[2]Scottish Government logo

 

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Scottish Government

2 Attachments

Mr Paterson

 

Please accept my apologies. When sending you further info on the loan
agreement last Friday, I had meant to number the redactions as well as
colour code them. The colours are the same, but please now find attached a
further copy with redactions numbered.

 

Kind Regards

Jennifer

 

Jennifer Moore

Policy Officer, Strategic Industrial Projects

Innovation, Investment and Industries

 

Directorate for Economic Development

Scottish Government, 3^rd Floor, Atlantic Quay, 150 Broomielaw, Glasgow G2
8LU

 

'013124(44386)

'07584206983

y[1][email address]

 

[2]Scottish Government logo

 

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Scottish Government

1 Attachment

  • Attachment

    Appeal Stage 2 FoI 18 02623 FMEL Loan Agreement Further Release 100419.pdf

    402K Download View as HTML

Mr Paterson

 

With reference to your ongoing appeal for FoI/18/02623, please find
attached further information.

 

Kind regards

Jennifer

 

Jennifer Moore

Policy Officer, Strategic Industrial Projects

Innovation, Investment and Industries

 

Directorate for Economic Development

Scottish Government, 3^rd Floor, Atlantic Quay, 150 Broomielaw, Glasgow G2
8LU

 

'013124(44386)

'07584206983

y[1][email address]

 

 

show quoted sections

 

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Scottish Government

1 Attachment

  • Attachment

    Appeal Stage 2 FoI 18 02623 FMEL Loan Agreement Further Release 160419.pdf

    404K Download View as HTML

Mr Paterson

 

With regards to your ongoing appeal for FoI/18/02623, please find attached
a further version of the £15m FMEL loan agreement.

 

Kind Regards

Jennifer

 

Jennifer Moore

Policy Officer, Strategic Industrial Projects

Manufacturing and Industries Division

 

Directorate for Economic Development

Scottish Government, 3^rd Floor, 5 Atlantic Quay, 150 Broomielaw, Glasgow
G2 8LU

 

'013124(44386)

'07584206983

y[1][email address]

 

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Mr Paterson left an annotation ()

The £15m FMEL loan is subject to amendments by Ministers which are yet to be published here.

Scottish Government

1 Attachment

  • Attachment

    Appeal Stage 2 FoI 18 02623 FMEL Loan Agreement Further Release 080519.pdf

    404K Download View as HTML

Mr Paterson

 

With reference to your ongoing Appeal for FoI/18/02623, please find
attached a further released version of the FMEL Loan Agreement.

 

Kind Regards

Jennifer

 

Jennifer Moore

Policy Officer, Strategic Industrial Projects

Manufacturing and Industries Division

 

Directorate for Economic Development

Scottish Government, 3^rd Floor, 5 Atlantic Quay, 150 Broomielaw, Glasgow
G2 8LU

 

'013124(44386)

'07584206983

y[1][email address]

 

show quoted sections

 

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Mr Paterson left an annotation ()

5. INTEREST

5.1 For so long as no Event of Default has occurred which is continuing unwaived, interest is
payable on the Loans (but subject to clauses 5.2 and 5.3) at a fixed rate of 15% per annum
annually in arrears on the anniversary of first utilisation of the Loans, on the date of any early
repayment, cancellation or prepayment and on the Final Repayment Date.

5.2 Following the occurrence of any Event of Default, interest is payable on any overdue sum at
the rate of 17% per annum.

5.3 Any accrued interest shall be converted automatically to principal as of the date such interest
fell due. Interest so converted to principal shall be treated for all purposes hereof and the
Finance Documents as principal (other than for the purpose of calculating the Available
Facility).

Scottish Government

1 Attachment

Mr Paterson

 

Apologies, please disregard my e-mail sent yesterday. Attached is now the
latest release for FoI/18/02623.

 

Kind Regards

Jennifer

 

Jennifer Moore

Policy Officer, Strategic Industrial Projects

Manufacturing and Industries Division

 

Directorate for Economic Development

Scottish Government, 3^rd Floor, 5 Atlantic Quay, 150 Broomielaw, Glasgow
G2 8LU

 

'013124(44386)

'07584206983

y[1][email address]

 

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Dear Scottish Government,

Dear Freedom Of Information Unit

FOI/18/02623

Please ensure the unredacted loan agreement recently released in this case is promptly disclosed on the Scottish Government's disclosure log.

Yours faithfully,

Mr Paterson

Mr Paterson left an annotation ()

Why was the SECOND loan (£45 million) made to FMEL when FMEL were already (from 1 April 2018) in default of the terms of the FIRST loan agreement ? Could this not be seen as reckless lending?

Terms of £15 million loan agreement:

“10. UNDERTAKINGS BY THE BORROWER

The Borrower undertakes to the Scottish Ministers that throughout the Loan Period it shall:

10.1 deliver to the Scottish Ministers such information as the Scottish Ministers may reasonably require including the following:
……………………………
10.1.3 annual audited accounts to be received no later than nine months after the end of the relevant financial year, other than for the year ended 31 December 2016 which shall be received by 31 March 2018;”

“12. EVENTS OF DEFAULT

12.1 If any of the following events shall occur:
……………………………
12.1.3 the Borrower defaults under any other provision of this Agreement and, if capable of remedy, the default is not remedied within 15 Business Days after notice to the Borrower requesting action to remedy the same; or”

Mr Paterson left an annotation ()

Why was the interest in the event of default on the terms of the loan agreement just 17% (just 2% above the loan agreement rate of 15% pa). How would this act as a disincentive ?