Virgin legal challenge delays West Coast rail handover

While political and public pressure had failed to sway the government, the decision of Virgin to file for judicial review in the High Court in London today will stop the transport minister signing a new franchise agreement with FirstGroup to operate the line from December – at least in the short term. While it will take several days before a judge rules on the legal challenge, the court filing is enough to delay the signing, Transport Minister Justine Greening said.

“We had hoped that Parliament or an external review would be able to scrutinise this badly flawed process before the franchise was signed,” Sir Richard Branson said in a blog on his company website today. “However that opportunity would be denied if the Department for Transport follows through with its determination to rush through the process before Parliament returns next week.”

Sir Richard argued that the government was ignoring the wishes of the Labour opposition, two Commons committees, many backbench Conservative MPs and more than 150,000 people who signed the Downing street e-partition in 10 days.

Contingency plans

Transport Secretary Justine Greening was expected to sign the contract as early as Wednesday, but she said the ministry now needs time to study Virgin’s legal documents.

“We’re obviously going to defend our position and the robustness of the process as well,” Ms Greening said in an interview with Channel 4 News, adding that the government would consult its legal team. The UK has contingency plans in case of a delayed handover, she said without elaborating.

Judicial review involves a judge reviewing the lawfulness of a decision made by a public body. It is a challenge to the way the decision was made rather than a ruling on whether the decision was correct or incorrect. If Virgin’s application is deemed to have merit by the High Court, the Transport Ministry is likely to review its decision, which would delay the handover further. Nothing would prevent Ms Greening from making the same decision again however, as long as the decision was deemed to have been made in a lawful way.

Sir Richard: government process is “insane”

Sir Richard branded the bidding process “insane” and threatened to end all of Virgin’s involvement with the railways. He expressed concern that FirstGroup would not be able to live up to its financial and service-providing targets for West Coast.

“We have tried for three weeks to get clarity over the Department for Transport’s decision and to have a number of key questions answered. On each occasion we have been refused information,” Virgin said in a statement today.

Virgin has operated the West Coast line for 15 years.

“We question whether FirstGroup’s bid has been correctly risk adjusted by the department given all of its supposed incremental value is delivered after 2022,” Virgin said.

“The current process is geared to selecting the highest risk bid and needs to be independently audited to prevent a repeat of former franchise failures.”

In May 2011, FirstGroup chose not to extend its rights to the First Great Western rail franchise, effectively exiting the contract three years early. At the time, analysts said the company had been astute in that of the £1.13bn it had undertaken to repay during the course of that franchise, some £828m was due in those final three years. FirstGroup CEO Tim O’Toole said the decision was to allow the company to negotiate a longer-term deal.