Sea Containers

GNER disappointed by ruling in Judicial Review against the Office of Rail Regulation
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date 27 July 2006
source Sea Containers
type Press release

HAMILTON, Bermuda, July 27 Great North Eastern Railway (GNER), the UK rail subsidiary of Sea Containers Ltd. today said that it is extremely disappointed with the conclusions reached by the High Court on GNER's application for judicial review of the decision by the Office of Rail Regulation (ORR) to grant access rights on the East Coast Mainline to Grand Central Railways and Hull Trains based on a different charging regime to franchised train operators.

GNER sought an order quashing the ORR's decision of 23 March 2006 and a declaration that the ORR's charging regime is unlawful. Mr Justice Sullivan declined to grant the order or the declaration.

GNER considers that the judgement is fundamentally flawed. It considers that two train operators calling at the same station and picking up the same set of passengers are not in competition because of their differing contractual arrangements with government. It is obvious that GNER and its competitors operate in the same market.

GNER continues to believe that the ORR's charging regime is discriminatory, is in breach of national and European law, amounts to an unlawful grant of state aid and distorts competition. It also continues to believe that the decision to grant access rights was unfair.

GNER has always been a supporter of competition both on the East Coast Mainline and in the rail industry in general. However, it believes that franchised and open access operators should operate on a level-playing field, which is not the position under the current charging arrangement.

This regime makes franchised operators pay significantly higher charges than open access operators for access to the same infrastructure.

Additionally, GNER believes that by stopping at York, which already has 61 services a day to and from London, under an industry revenue allocation system at least 80 per cent of Grand Central's revenues will be abstractive from GNER's premium-paying franchise.

GNER is taking legal advice in respect of the options now open to it, including the possibility of an application to the Court of Appeal and/or a complaint to the European Commission..

GNER will need to look more closely at Mr Justice Sullivan's decision before being able to quantify the precise impact on the company.

Commenting on today's announcement Bob MacKenzie, President and CEO of Sea Containers, the parent company of GNER, said: "Today's decision is truly extraordinary. It has serious commercial consequences for GNER and for the Department for Transport. It undermines the profitability of GNER, which already operates to modest margins, and devalues a recently-awarded public contract agreed with government and the East Coast franchise in perpetuity. It will also make bidders for other franchises elsewhere on the network more risk-adverse.

"We believe we had a strong case to contest the ORR's decision. The real losers from today's judgment are not just those who believe in fair competition, but also passengers on the East Coast Main Line and other rail users on the network who may not see as much money reinvested into their railway.

"We will be discussing the serious implications of today's decision with the Department for Transport, as it is likely to jeopardize GNER's ability to pay some of the premium payments agreed with the government over the course of our franchise. This cannot be what the government intended to happen to any of its newly-awarded rail franchises."

Once it has considered the consequences of the High Court's decision in full, Sea Containers, GNER's parent company, intends to issue a further statement in August, which will also include a financial update on trading matters relating to GNER.

Railhub Archive ::: 2006-07-27 SEC-001