Awards, contracts & appointments

09.05.19

Stagecoach launches legal action against government over rail franchise disqualification

Stagecoach has taken legal action against the DfT over its decision to disqualify the operator from the East Midlands rail franchise.

The railway operator claims the government has “breached its statutory duties” in its decision, and is also considering further legal action over its disqualification from two other franchises, the South Eastern and West Coast franchises.

The DfT barred Stagecoach from the three rail franchise competitions in April, stating that the bids were “non-compliant” with pension regulations, causing the operator to request an urgent meting with the DfT and accuse it of putting the future of the UK rail industry in doubt.

The government said the company had “repeatedly ignored established rules” and was “responsible for their own disqualification” by refusing to agree with its pension rules.

The decision to disqualify Stagecoach has brought the dispute over rail pensions to a head once again, claiming that the DfT had chosen a “higher risk approach” to pensions and that it had refused to accept a pensions risk in excess of £1bn.

The Pensions Regulator has previously warned that train operators face a pensions black hole of £7.5bn, whilst the RMT has threatened legal action over the deficit.

Stagecoach’s chief executive, Martin Griffiths, said the company had “no-option” but to pursue legal action against the government to publicly examine the DfT’s decision-making.

“We remain deeply concerned at the DfT's procurement of the three most recent rail franchise competitions and the rationale behind its decisions.

“Despite our continued requests for full transparency around these matters, many fundamental questions remain unanswered.”

The DfT said it would not comment on ongoing legal proceedings but said it had “total confidence in our franchise competition process.”

Abellio has been announced as the successor to Stagecoach’s East Midlands rail franchise, although a number of other operators who bid alongside Stagecoach are reportedly also considering legal action.

Image credit - Peter ByrnePA WirePA Images

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