Eurotunnel's duty-free war wins court referral

Eurotunnel's fight against duty-free sales by rival cross-Channel ferries received an important boost yesterday when its case against Snat, the French ferry company, was sent to the European Court.

The Anglo-French Channel Tunnel operator is alleging unfair competition against Snat, claiming that sales of duty-free goods amounts to a "hidden subsidy".

Eurotunnel is claiming compensation for loss of traffic and challenging the right of the European Union to extend duty-free sales until 1999, despite the creation of the single market in 1993.

The company, which operates the Le Shuttle transport service and receives usage fees from Eurostar, can sell tax-free goods at its terminals either side of the Channel, but not during the journey. The company's co-chairman, Sir Alastair Morton, estimates that this costs pounds 170m in lost revenues and puts Eurotunnel at a big disadvantage.

Eurotunnel's case was referred to the European Court in Luxembourg by the Paris Tribunal de Commerce.

Similar action in the British courts was rejected in the summer, albeit on technical grounds, because Eurotunnel had failed to meet deadlines.

Eurotunnel, weighed down by bank debts of more than pounds 8bn, said the EU's decision to extend the sale of duty-free goods was against the free competition envisaged under the "borderless" single market.

"Eurotunnel intends to campaign relentlessly to abolish intra-community duty-free sales before 1999 if possible, but in any case to stop the numerous abuses it creates and to prevent any extension beyond that date," the company said.

Eurotunnel's finances had been based on the assumption that duty-free sales would be abolished in 1993.

In September, Eurotunnel slashed duty-free prices by up to a third at its Folkestone and Calais terminals, a move the company claimed yesterday had significantly boosted revenue.

But Eurotunnel still makes far less money from tax-free sales than ferries, which it has described as "floating supermarkets". Analysts estimated that less than 10 per cent of Eurotunnel's revenues came from duty-free sales, compared with 30 per cent for the ferries.

Ferry firms offer return day-trips for as little as pounds 1 because the on-board spend generates more cash than ticket revenues.