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Stagecoach goes to court over East Midlands franchise disqualification

08 May 2019

UK: Stagecoach Group commenced legal action against the Department for Transport on May 8, following DfT's decision to award of the next East Midlands franchise to Abellio.

The NS subsidiary was named preferred bidder on April 10, and the initial 10-day standstill period was extended to midnight on May 8. 

Stagecoach issued its claim at the High Court in London under Part 7 of the Civil Procedure Rules, alleging that DfT had breached its statutory duties under Regulation 1370/2007, which requires the government to adopt a competitive tendering process which is open to all operators, fair, transparent and non-discriminatory.

Incumbent Stagecoach was disqualified from the East Midlands bidding process after its bid was deemed non-compliant. The issue centres on the way the next franchise would change the allocation of financial risk associated with the industry-wide Railways Pension Scheme.

Stagecoach said it had informed the DfT that it was also preparing a claim for judicial review of the decision to disqualify it from the process, and was also considering legal action against DfT in respect of the ongoing competitions for the West Coast Partnership franchise and the next South Eastern franchise, from which it has also been disqualified for similar reasons.

Stagecoach said the legal actions in progress or under preparation varied in certain respects, but common to all was its ‘refusal to accept the potential pension risks that DfT requires operators to bear in relation to the three new franchises’. It said the full extent of these risks was unknown, but it estimates them to be well in excess of £1bn. 

‘We remain deeply concerned at the Department for Transport's procurement of the three most recent rail franchise competitions and the rationale behind its decisions’, said Group Chief Executive Martin Griffiths. ‘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 DfT to ensure the serious issues involved and 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.’

Responding to Stagecoach’s announcement, a DfT spokesperson 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.’

  • On May 9 DfT confirmed it had signed the contract confirming Abellio as the new operator of the East Midlands franchise from August 2019.