Stagecoach launches legal action over rail franchise competition ban
DfT accused of 'opaque decision-making' after firm was disqualified from lodging bids
Staff and agencies
Wed 8 May 2019 14.00 EDT First published on Wed 8 May 2019 12.26 EDT
A jointly operated Virgin and Stagecoach train in Edinburgh. Photograph: Murdo Macleod/The Guardian
Stagecoach has launched legal action against the Department for Transport (DfT) after it was disqualified from the East Midlands rail franchise competition.
In a move that threatens to mire the rail franchising process in legal squabbles, the firm said it was also considering lodging lawsuits over further bans from the South Eastern and West Coast franchises.
In a claim issued at the high court, Stagecoach alleged that the DfT breached its statutory duties over East Midlands, where it was the incumbent operator before the government announced it would be awarded to Dutch state-owned Abellio. At the beginning of May the government barred Stagecoach from the East Midlands, South Eastern and West Coast franchises after the company lodged bids that breached rules on underwriting pensions for rail staff.
Stagecoach's high court claim alleges the East Midlands franchising process breached requirements that the contract award should be "fair, transparent and non-discriminatory". The company said it was also preparing a claim for a judicial review over the East Midlands contract, as it warned the DfT that it was considering legal action over West Coast and South Eastern.
Announcing the East Midlands legal claim, Stagecoach voiced its frustration over the three disqualifications.
Stagecoach's chief executive, Martin Griffiths, said: "We remain deeply concerned at the Department for Transport'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.
"As a result, regrettably we have had no option but to commence legal action against the DfT to ensure the serious issues involved and the DfT's opaque decision-making are subject to proper public scrutiny."
A DfT spokesperson said Stagecoach was an experienced franchise bidder who knowingly submitted non-compliant bids and "in doing so, they disqualified themselves".
The spokesperson added: "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."
The disqualification of Stagecoach, a joint partner with Sir Richard Branson in the Virgin Trains operation on the west coast route, means the Virgin brand is due to disappear from the British rail network after more than 20 years of operations. Stagecoach said helping plug the gap in the Railways Pension Scheme – which has a deficit of £7.5bn – would have exposed the firm to risks "well in excess of £1bn" across the three franchises.
Griffiths said the legal action made it untenablefor the DfT to sign a new East Midlands franchise contract with another operator until there had been a "full and proper" review of the process. Stagecoach is also angered that information on Stagecoach's bid for the East Midlands franchise was leaked to Abellio before the Dutch company won the contract.
This month, Branson called for all rail franchise awards to be suspended due to the pensions row and the East Midlands leak.
"It is far from clear that any franchise can be let robustly as things stand," he said.
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