Sir Richard Branson’s Virgin Group, Stagecoach and the French national rail operator have launched legal action against the UK government’s decision to bar Virgin Trains from bidding for the West Coast rail franchise.
The high court action alleges that the Department for Transport breached its statutory duties barring the group from the tendering process. The companies, who were bidding as the West Coast Trains Partnership but were expected to operate as Virgin Trains, are also seeking a judicial review.
The incumbent on the London-to-Glasgow route is Virgin Trains, which is co-owned by Virgin and Stagecoach and was hoping to renew the contract with SNCF onboard. Virgin Rail Group Holdings, Virgin and Stagecoach’s joint-venture company, will have taken more than £600m in dividends from Virgin Trains by the time the west coast route is handed to a new operator within the next 12 months.
“It is extremely frustrating that the reason our bid was disqualified has nothing to do with looking after passengers or running a good train service,” said Patrick McCall, senior partner at Virgin Group. “The DfT has ignored this track record and instead focused on which bidder is reckless enough to take on various unquantifiable risks, such as pensions.”
Branson has previously warned that the bidding ban could mean Virgin Trains disappearing from Britain’s railways after more than two decades.
Earlier this month, Stagecoach and the German rail giant Arriva launched separate high court actions against the DfT after being disqualified for bidding for the East Midlands franchise, which has been awarded to Dutch operator Abellio.
In April, the DfT barred Stagecoach bids for the East Midlands and South Eastern franchises and a renewal of the West Coast franchise, which is due to include the high-speed HS2 line from 2026, after the company lodged bids that breached rules on underwriting pensions for rail staff.
“It is disappointing that we have had to resort to court action to find out the truth around the DfT’s decision-making process in each of these competitions,” said Martin Griffiths, the chief executive of Stagecoach. “However, we hope court scrutiny will shine a light on the franchising process and help restore both public and investor confidence in the country’s rail system.”
The DfT said Stagecoach submitted non-compliant bids on purpose and that it would “robustly defend” its decision-making process.
“Stagecoach is an experienced bidder who knowingly submitted non-compliant bids on all competitions,” said a DfT spokeswoman. “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 has claimed that helping plug the gap in the Railways Pension Scheme – which has a deficit of £7.5bn – would have exposed the firm to risks “well in excess of £1bn” across the three franchises.
“We strongly believe rail franchises should be let on a sustainable basis to those operators who offer the best services, the best trains and the best customer experience in a cost-efficient manner,” said Guillaume Pepy, executive board chairman at SNCF. “We are disappointed at how the DfT has handled the procurement process for the West Coast Partnership franchise.”
Labour’s shadow transport secretary, Andy McDonald, said the mounting legal action was an indictment of the government and the transport secretary, Chris Grayling.
“The news that four transport groups are now taking legal action against his department over its handling of two rail franchising processes shows that this system is beyond reform,” said McDonald.
“Labour’s plans to bring track and trains together under one public company will deliver the affordable fares and reliable rail services passengers desperately need and deserve.”
Virgin and Stagecoach have a track record in challenging DfT rulings, most significantly when overturning the result of the last franchise competition on the West Coast in 2012, when the contract had been briefly awarded to rival First Group.
Last year, Branson successfully sued the NHS for £2m after private healthcare group Virgin Care missed out on an £82m contract to provide children’s health services across Surrey.
A Guardian analysis found that Virgin was awarded NHS contracts of almost £2bn over a five-year period. In one year alone, Virgin Care won deals potentially worth £1bn to provide services around England, making it the biggest winner among the private companies bidding for NHS work over the period.
