Advanced Search
First Group may take legal action over West Coast franchise fiasco


FirstGroup may take legal action over West Coast rail franchiseTransport department could face challenge if Virgin contract extended as government faces pressure to finalise route's future

Email Dan Milmo, industrial editor The Guardian, Sunday 7 October 2012 19.53 BST 
A Virgin train on the West Coast mainline route near Abington in Scotland.

FirstGroup is considering a legal challenge against the Department for Transport if Virgin Trains secures an extension of the West Coast rail franchise, amid warnings the government is running out of time to make a decision on the route's future.

Virgin Trains is in the frame to continue running the London to Glasgow route beyond 9 December, when the contract expires, following the DfT's shock decision to abandon a handover to FirstGroup. As the process threatens to descend into a legal quagmire, the alternative is a transfer to the government's in-house rail unit, Directly Operated Railways (DOR), which operates the East Coast franchise and is preparing for a West Coast takeover.

According to legal sources, a Virgin Trains extension could be challenged under the Railways Act and EU law, with both offering FirstGroup grounds for a legal intervention. A source familiar with FirstGroup's thinking said a legal move against an extension is "an option". Virgin Trains said: "Virgin's lawyers have made it clear that there is no issue about competition law in this." Under an alternative legal opinion, a temporary contract lasting more than a year – and unilaterally offered to any operator – could be deemed anti-competitive.

A FirstGroup spokesman said: "Because we have not yet received a briefing from the DfT to tell us exactly what happened, you would therefore expect that we are exploring all rights and options."

The transport secretary, Patrick McLoughlin, is also considering a transfer to DOR, which has deployed a team of more than 30 staff, including temporary employees drawn from the rail sector, to draw up plans for a takeover. A source close to DOR said: "We are continuing to prepare for mobilisation should the department ask us to take over." The source added that DOR's handling of East Coast should dispel fears of a disjointed handover, but warned that the DfT would have to act soon. "If we are asked to take over we shall have to know very soon."

According to one rail industry source, both DOR and Virgin Trains need a decision from the government by the end of the week because franchise handovers or extensions require a minimum of 10 weeks' planning. The 9 December cutoff date is now eight weeks away, with the added complication of engineering work on the line over Christmas. "This has to be signed off one way or the other by the end of the week," said the source.

McLoughlin threw the franchise system into chaos last week after cancelling the award due to "deeply regrettable and completely unacceptable mistakes made by my department in the way it managed the process".

Three civil servants were suspended, with McLoughlin claiming that the risk associated with FirstGroup's bid had been miscalculated. FirstGroup had offered to pay the government £13.3bn over the course of the 15-year contract but the DfT discovered that the revenue and inflation assumptions used to vet that offer were wrong. This resulted in the department seeking a loan of £190m from FirstGroup to underwrite the contract – a number that the DfT now accepts was excessively small.

The franchising system, where the government leases routes to train operators, is in a state of paralysis while the government conducts two investigations into the West Coast debacle. In the meantime, all franchise competitions have been put on hold in a move that threatens a repeat of the West Coast extension impasse.

Four franchises are due to expire next year: East Coast, Great Western, Essex Thameside and Thameslink. The RMT trade union has urged the government to bring those contracts under the control of DOR as they expire.
from: http://www.guardian.co.uk/uk/2012/oct/07/firstgroup-legal-action-west-coast-rail

Delicious Digg Facebook Fark MySpace
Views: 737 views    Report Inappropriate Content
All Articles