Stagecoach and Virgin Trains launch second legal action over Chris Grayling’s Transport department blocking rail franchise bids

  • Firm disputes decision to ban it from bids unless it  shoulders pension liabilities
  • Latest legal action is over West Coast rail franchise bidding process
  • Stagecoach has also launched similar claim over East Midlands rail franchise

Stagecoach has launched a second legal action against the Government for banning it from rail franchise bids unless it agrees to shoulder potentially huge staff pension liabilities.

The firm and partners Virgin Trains and French rail business SNCF will take their dispute over the bidding process for the West Coast mainline franchise to the High Court.

Taking on responsibility for pensions would be financially unviable and shouldn’t be a requirement for making bids to run rail lines, according to Stagecoach. 

Rail row: Taking on responsibility for pensions would be unviable, claims Stagecoach

Rail row: Taking on responsibility for pensions would be unviable, claims Stagecoach

It launched a similar legal claim earlier this month against a Department for Transport ban on it bidding for the East Midlands rail franchise.

The business is also banned from pitching for the South Eastern franchise. Stagecoach shares were up 0.4p at 27.9p in early trading.

Stagecoach chief executive Martin Griffiths said: ‘We believe the rail system should be about appointing the best operator for customers, not about passing unquantifiable, unmanageable and inappropriate risk to train companies.

‘It is disappointing that we have had to resort to court action to find out the truth around the DfT’s decision-making process in each of these competitions.

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‘However, we hope court scrutiny will shine a light on the franchising process and help restore both public and investor confidence in the country’s rail system.’

The latest claim has been brought by West Coast Trains Partnership Limited, in which Stagecoach has a 50 per cent share, with SNCF holding 30 per cent and Virgin 20 per cent.

Guillaume Pepy, SNCF executive chairman, said he was ‘disappointed’ and added: ‘We strongly believe rail franchises should be let on a sustainable basis to those operators who offer the best services, the best trains, and the best customer experience in a cost-efficient manner.’

Patrick McCall, senior partner at Virgin, said the DfT is ‘focused on which bidder is reckless enough to take on various unquantifiable risks, such as pensions’.

He added: ‘It is extremely frustrating that the reason our bid was disqualified has nothing to do with looking after passengers or running a good train service.’

Earlier this month, Stagecoach said the DfT was forcing bidders to take on pension liabilities that could be in excess of £1 billion. The firm said it refuses to accept the potential pension risks that the department requires operators to bear.

The DfT said: ‘Stagecoach is an experienced bidder who knowingly submitted non-compliant bids on all competitions. In doing so, they disqualified themselves.

‘We do not comment on legal proceedings. However, we have total confidence in our franchise competition process and will robustly defend decisions that were taken fairly following a thorough and impartial evaluation process.’

 

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