SIR Brian Souter’s Stagecoach has ramped up its battle with the UK Government over rail franchising by launching a legal action against the Department for Transport (DfT), amid a £1 billion pensions wrangle.
The Perth-based transport giant is claiming the DfT breached its statutory duties over its move to ban Stagecoach from bidding on the East Midlands rail franchise.
It says it is also considering legal action against the department over ongoing competitions for the West Coast Partnership and a new South Eastern franchises, both also under DfT restrictions.
The firm’s rail expansion plans looked to have been left in shreds after the firm was disqualified from bidding for the three franchises, one of which was awarded to the firm that operates ScotRail, Abellio.
READ MORE: Stagecoach banned from competing for rail franchises
Chris Grayling, the transport secretary, said then the Government had agreed a plan with Abellio East Midlands that it expects will result in the firm exceeding the expectations set under a highly demanding and challenging specification for the franchise, which Stagecoach has run for 12 years.
The DfT also said at that point the firm had breached the rules of the competition citing concerns about pensions costs, and a spokesman said that the department has “total confidence in our franchise competition process and will robustly defend decisions that were taken fairly”.
Concerns centre on who should pay the bill for meeting pensions liabilities for rail workers, which the Government has shouldered historically.
Stagecoach Group, founded by bus and trains magnate Sir Brian in 1980, said a claim has been issued at the High Court in London which alleges that the DfT “breached its statutory duties … in connection with the procurement of the new East Midlands rail franchise”.
READ MORE: Stagecoach suffers rail reverse as ScotRail operator advances
The firm said: “We have informed the DfT that we are also preparing a claim for judicial review of its decisions to disqualify us from bidding for the East Midlands rail franchise and to award the franchise to Abellio.
“Additionally, we are considering legal action against the DfT in respect of the ongoing competitions for the West Coast Partnership franchise and a new South Eastern franchise.
It said one claim has been issued and the further legal actions under preparation “vary in certain respects but common to all is our refusal to accept the potential pension risks that the DfT requires operators to bear in relation to the three new franchises”.
Stagecoach said: “The full extent of these risks is unknown but we estimate them to be well in excess of £1 billion.”
READ MORE: Rail firm reveals franchise pension bill would have topped £1bn
Martin Griffiths, Stagecoach Group chief executive, said: “We remain deeply concerned at the DfT’s procurement of the three most recent rail franchise competitions and the rationale behind its decisions.
“Despite our continued requests for full transparency around these matters, many fundamental questions remain unanswered. As a result, regrettably we have had no option but to commence legal action against the DfT to ensure the serious issues involved and the DfT’s opaque decision-making are subject to proper public scrutiny.
“In view of the legal action we have taken today we believe it would be untenable for the DfT to proceed to sign any contract for the East Midlands franchise without a full and proper review of the procurement of that franchise to help restore public confidence in the process.”
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A DfT spokesman said: “Stagecoach is an experienced bidder who knowingly submitted non-compliant bids on all competitions. In doing so, they disqualified themselves.
“We do not comment on legal proceedings. However, we have total confidence in our franchise competition process and will robustly defend decisions that were taken fairly following a thorough and impartial evaluation process.”
Stagecoach shares closed marginally up – 0.1p – at 134p.
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