Rail Franchise Litigation 2019 – Stagecoach and West Coast challenges dismissed

17 Jun 2020

The Technology and Construction Court this morning handed down judgment in the first phase of the 2019 Rail Franchising Litigation ([2020] EWHC 1568 (TCC)).

The 2019 Rail Franchising Litigation was one of the Lawyer’s Top 20 cases for 2020 and involves 14 Members of Monckton Chambers.

The case involves claims by Stagecoach and the West Coast Trains Partnership (which includes Stagecoach, Virgin and SNCF) against the Department for Transport arising out of procurement competitions for the South Eastern, East Midlands and West Coast Partnership railway franchises between 2017 and 2019. The claimants challenged their respective disqualifications from the competitions, seeking damages and other relief, and contested the legality of the awards of the East Midlands and West Coast franchises to Abellio and First Trenitalia respectively.

A fourth claim was brought by Arriva, but was settled on the eve of trial.

The hearing related to pensions issues – namely whether the Secretary of State’s approach to future pensions liabilities was lawful. At the time of the competitions, intervention by the Pensions Regulator had caused significant uncertainty about the way in which pensions deficits and future pensions contributions should be accounted for as part of the Rail Pensions Scheme. That privatised scheme, which remains open to new employees, had around 344,000 members at the end of 2018. The Department for Transport had issued contract terms, as part of a re-bid process, which offered defined but limited protection against some (but not all) of the pensions risks under a so-called Pensions Risk Sharing Mechanism. Stagecoach, Arriva and West Coast rejected the Secretary of State’s risk allocation and offered to contract on different terms.

In today’s judgment, Mr Justice Stuart-Smith ruled in favour of the Department for Transport on all grounds. He held that the pensions terms of the tender met the requirements of transparency and fairness; that the process followed was compliant with the relevant regulatory framework and principles of proportionality and equal treatment; and that the Department acted lawfully in disqualifying the claimants and awarding the franchises to the winning bidders.

Tim Ward QC, Ewan West, and Daisy Mackersie represented Stagecoach

Philip Moser QC, Jack Williams, and Ciar McAndrew represented Arriva

Anneli Howard, Brendan McGurk, Azeem Suterwalla, Fiona Banks, Alfred Artley, and Will Perry represented the Department for Transport

Valentina Sloane QC represented First Trenitalia

Rob Williams QC represented Govia