Stagecoach sues for second time on rail franchises

UPDATE 1 — Perth-based bus and rail giant Stagecoach Group plc said on Friday it is taking legal action against the UK’S Department for Transport (DfT) after being disqualified from bidding for the West Coast rail franchise along with partners SNCF and Virgin. 

Stagecoach has already started a legal action against the Department for Transport for disqualifying it from bidding for the East Midlands franchise, which it had operated since 2007. 

Stagecoach said earlier this month it was disqualified from the three UK rail franchise competitions because it was unwilling to take on “well in excess” of £1 billion of pensions liability.

Stagecoach was disqualified from the contests for the East Midlands, West Coast and South Eastern franchises.

“Stagecoach Group plc confirms that along with partners SNCF and Virgin it has commenced legal action against the Department for Transport in connection with the procurement of the West Coast Partnership franchise,” said Stagecoach in a stock exchange statement.

“A claim has been issued at the High Court in London under Part 7 of the Civil Procedure Rules together with a judicial review claim. 

“The claim alleges that the Department for Transport breached its statutory duties under the relevant provisions of Regulation 1370/2007 and the relevant principles of EU and English law, in connection with the procurement of the ongoing competition for the franchise.

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

“On 8 May 2019, Stagecoach East Midlands Trains Limited issued a Part 7 claim against the DfT in connection with the procurement of the new East Midlands rail franchise, which was awarded to Abellio.

“The legal action follows a decision by the DfT in April 2019 to disqualify Stagecoach and its partners from the East Midlands, West Coast Partnership and South Eastern franchise competitions.

“The claims vary in certain respects but common to both is our refusal to accept the pension risks that the DfT requires operators to bear in relation to the new franchises. Further details are set out in our previous statements of 2 and 8 May 2019.”

Stagecoach CEO 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.

“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.”

Guillaume Pepy, SNCF executive board chairman, said: “We are disappointed at how the DfT has handled the procurement process for the West Coast Partnership franchise.

“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, Virgin Group, said: “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.

“Virgin Trains consistently tops independent customer satisfaction tables for long-distance franchises thanks to our continued focus on innovation and customer experience, and our fantastic people.

“Dubbed ‘mission impossible’ when we first started, we’ve created a successful business which has paid almost a billion pounds to taxpayers in the last five years alone.

“We’ve continued to lead the industry with initiatives like automatic delay repay and scrapping the Friday evening peak fares.

“The DfT has ignored this track record and instead focused on which bidder is reckless enough to take on various unquantifiable risks, such as pensions.”