Rail Franchise Disqualification Leads to Legal Action

Following the decision by the government to disqualify Stagecoach from the East Midlands rail Franchise, the railway operator has decided to pursue legal action against the DfT.

Stagecoach claims that the government has breached its statutory duties when making its decision and so, it is considering further legal action after being disqualified from two other franchises – the South Eastern and West Coast franchises.

In April, the DfT prevented Stagecoach from being a part of the rail franchise competitions, claiming that the bids were not compliant with the pension regulations. This resulted in the operator requesting an immediate meeting with the DfT, accusing it of putting the future of the UK rail industry in doubt.

According to the government, the company had consistently ignored the rules that were in place and was therefore responsible for being disqualified as it refused to agree with the pension rules.

Once again, the dispute over rail pensions has come to a head following the decision to disqualify Stagecoach. Claims have been made that the DfT took a riskier approach to pensions and that it had refused to accept a pension risk over £1bn.

Warnings have already come from the Pensions Regulator, stating that train operators face a pension void of £7.5bn, while legal action has been threatened by the RMT over the pension shortfall.

The chief executive of Stagecoach, Martin Griffiths has made it clear that the company has no option other than to take legal action against the government in an attempt to scrutinise the decision-making of the DfT publicly. There are concerns around the DfT’s procurement of the three most recent rail franchise competitions and the thinking behind the decisions it has made.

Even after requests for complete transparency around the matters, there are still many questions that remain unanswered. The DfT has made it clear that it has no plans to comment on any on-going legal proceedings but has said that it believes completely in the franchise competition process.

The successor to Stagecoach’s East Midlands rail franchise is Abellio, although other operators who also bid alongside stagecoach are considering taking legal action.

Deborah Lillis

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