High Court Rules in Favour of DfT

The High Court has found that the government’s decision to disqualify bidders for non-compliance on the issue of pensions was lawful. Consequently, the challenge by Stagecoach and others has failed.

In January 2020 Stagecoach Group took the Department for Transport (DfT) to court, following the DfT’s decision to disqualify the operator from bidding for franchises due to a pensions dispute.

East Midlands Train in 2015
 

Background

The franchises in question were the South Eastern, East Midlands, and West Coast Partnership franchises. The essence of the dispute was as follows: the government offered contract terms for each franchise that put the risk of pension liabilities on the train operating company that secured the franchise. The claimants in the court case were those TOCs that submitted bids but rejected the government’s allocation of the risk of pension liabilities (Stagecoach South Eastern Trains Ltd, Stagecoach East Midlands Trains Ltd, West Coast Trains Partnership Ltd and others). They instead offered to contract on different terms. This offer was refused by the government and therefore the TOCs in question were disqualified from bidding.

After Stagecoach was told on 9 April 2019 that it had been disqualified, the East Midlands franchise went to Abellio East Midlands Ltd, commencing on 18 August 2019, the West Coast Partnership franchise went to First Trenitalia West Coast Rail Ltd, commencing on 8 December, while the South Eastern competition was cancelled on 7 August 2019.

Stagecoach (together with Arriva and Virgin) brought proceedings challenging the government’s insistence that it was obliged to accept the allocation of risk with regards to pensions and therefore its disqualification.

Arriva chose to settle before the trial on confidential terms.

John Thomas, Director of Policy, Rail Delivery Group, said:

“Today's judgment on previous franchise bids has been accepted by both parties. [...]

“We continue to work with the Pensions Regulator, DfT and the unions with a view to agreeing a sustainable pensions framework for the train operator sections of the Railway Pensions Scheme.”

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