A MULTIMILLION-pound project to turn a historic castle into a luxury hotel could be in jeopardy after a local hotelier threatened legal action over the deal.
Lews Castle at Stornoway is undergoing a massive £18milion transformation to create a unique attraction which could attract up to 50,000 people to the Hebrides every year.
But the project’s backers now face a court battle after a businessman revealed he was seeking a judicial review of the tender process, which he claims broke European laws.
Kenneth Mackenzie, managing director of Kenman Holdings Ltd, fears that his and other accommodation businesses will be badly affected by the decision to pour public money into the scheme.
He wants to overturn the granting of a long-term lease of the building to Natural Assets Investments Ltd, whose associated company Natural Retreats will operate upmarket visitor apartments.
The company runs a number of tourist attractions across the country, including CairnGorm Mountain.
Last week, it was revealed that Highlands and Islands Enterprise and Western Isles Council had stepped in to plug a £3.2million funding shortfall which threatened the scheme.
Mr Mackenzie, whose company owns The Cabarfeidh, Royal Hotel and Caladh Inn in Stornoway, says Natural Retreats now has an unfair advantage over other businesses.
He said he had the support of more than 40 local businesses, and had instructed solicitors to raise an action in the Court of Session for a judicial review which could lead to the lease agreement being cancelled.
He claims the process leading to the decision to award a contract to Natural Assets Investments Limited was flawed.
Mr Mackenzie has also instructed solicitors to lodge a complaint with the European Commission on the grounds of breach of European rules on the award of concessions and the rules on state aid.
He said: “Our action has the support of more than 40 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.”
Graham McLellan, owner of Hebridean Luxury Holidays in Stornoway, said: “If one operator is given £4million of funding when other people don’t have access to that funding, then they would have a massive advantage.
“Nobody wants to see the castle project stopped, but it has got to be fair. It has got to be thought out properly and done in an even-handed manner.”
But last night, the leader of Western Isles Council, Angus Campbell, said the local authority would “vigorously defend” the legal action.
He said: “We have every confidence in our processes and procedures regarding the Lews Castle Museum and Archive project, including the appointment of our operator partner.
“If the threat of legal action and formal complaint transpires, it will be vigorously defended and responded to by the council.
“I am extremely disappointed at what I hope is not an attempt to undermine the most significant investment in cultural and tourism assets ever undertaken in the Outer Hebrides.
“This is a flagship, generational project for the community of the Outer Hebrides which will create much needed jobs and benefit businesses throughout the area.
“I would encourage as many people as possible to go and meet the Natural Retreats in the Town Hall over the next three days and to hear the facts for themselves about what the opportunities are.”
He added: “I also want dispel the statement in Mr MacKenzie’s press statement regarding a subsidised operation.
“Natural Assets Investments Ltd are committed to a minimum capital contribution of £500,000 as well as taking the whole operational risk associated with the project.
“The procurement of the private sector partner undertaken in 2012 was open and transparent.
“Despite registering his interest during the open tender period, Mr MacKenzie chose not to submit a tender.”