January 20, 2020 / 10:53 AM / in a month

UK's Stagecoach takes government to court over rail bids

LONDON (Reuters) - British transport company Stagecoach (SGC.L) is taking the government to court after it was excluded from bidding for rail contracts, in the latest clash between a private company and the state in the troubled rail franchising system.

The court case comes ahead of the publication of a review into how Britain’s privatised rail network should be run in future, following the failure of several high-profile rail contracts and amid consumer complaints over strikes and poor service.

Stagecoach alleges that ministers acted unlawfully when they disqualified it from bidding for three franchises after the pair clashed over pension liabilities last year.

The Department for Transport (DfT) asked bidders to take on the full long-term funding risk of parts of the Railways Pension Scheme as part of any rail contract and disqualified Stagecoach’s bids because it did not comply with that request.

Stagecoach said at the time that it was asked to take on too much financial risk.

“It is disappointing that we have had to resort to legal action. However, we believe there are important issues to be determined by the court, and we have a strong case,” a spokesman for Stagecoach said in a statement ahead of the case starting on Monday.

The DfT said in a statement: “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 brought the legal action over the West Coast route from which it was excluded alongside its bidding partners, Richard Branson’s Virgin Group and French state-owned rail company SNCF.

Since being left out of three rail bids last year, Stagecoach no longer has UK rail operations and is now solely focused on UK buses and trams after selling a North American unit in 2019.

The company has also launched separate legal action over the South Eastern and East Midlands franchises.

A similar but unlinked case brought by Arriva, owned by Deutsche Bahn, had also been filed with the court.

“We can confirm that we have agreed a settlement on terms confidential to both parties and, as a result, have withdrawn our claim,” a spokesman for Arriva UK Trains said.

Reporting by Sarah Young; Editing by Kate Holton and Jan Harvey

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