GNER sues regulator over east coast rivals

The rail regulator was yesterday accused of making an "an unlawful grant of state aid" by allowing competing services on the flagship East Coast Main Line run by Great North Eastern Railways (GNER).

The train operator urged the High Court judge Mr Justice Sullivan to quash the decision made in March this year by the Office of Rail Regulation (ORR), the independent statutory body which regulates the rail industry.

The ORR granted two train operators, Hull Trains and Grand Central Railway, the right to run "open access" passenger services on the east coast route. GNER, which has operated services on the line between London and Scotland for nearly a decade, argues that Hull Trains and Grand Central will be charged less than GNER for access to the same rail network for the provision of equivalent services.

GNER is seeking a declaration that the charging scheme is "unlawful and discriminatory" in favour of the two other companies. Rabinder Singh QC, for GNER, said at the start of an estimated week-long hearing that the regulator had "fundamentally erred in law".

The ORR is contesting the case, and Hull Trains and Grand Central are represented as interested parties.

Last year, GNER beat off three rivals to retain the franchise for the east coast route. Under the contract GNER will pay £1.3bn to the Treasury over the life of the seven-year franchise if performance targets are met. Senior directors at GNER have made it clear that its ability to pay such a premium is called into question by the ORR's decision.

An "open access" operator only has to pay a variable, Government-set charge to access the railway infrastructure, whereas GNER, as the franchise operator, must pay both the variable and a fixed track access charge.

The ORR granted applications by Hull and Grand Central for track access, but rejected a GNER application for additional services between London King's Cross and Leeds - which was part of its franchise commitment - unless Network Rail was able to find additional network capacity.

GNER argues that all companies should pay an "equivalent" amount for access to the rail network for equivalent services.

During the hearing this week the ORR will say that challenges to its policies are "misconceived and unmeritorious". It argues that the challenge is aimed at decisions taken by the ORR "many years ago and which have been consistently and openly applied by it, in relevant circumstances, ever since".

The hearing will continue today.