The Rail Regulator, Chris Bolt, is being taken to the High Court over his decision to allow increased competition between train operators on the east coast mainline between London and north-east England.
GNER, the incumbent operator on the prestige route, issued proceedings for a judicial review of the Office of Rail Regulation's decision yesterday, claiming it breached European state aid rules and would distort competition. It will be represented in court by Rabinder Singh QC.
Mr Bolt angered GNER earlier this year when he decided to grant Grand Central Railway the right to begin operating services between Sunderland and London next year. At the same time, the regulator refused a request from GNER to run an extra 12 services a day between London and Leeds.
The decision could have serious consequences for the financing of GNER and its ability to pay the £1.3bn in premium payments it agreed with the Government last year in return for being granted a fresh ten-year franchise.
The judicial review, due to be heard in July, will also pit Mr Bolt against Tom Winsor, his predecessor as Rail Regulator, who is acting as legal adviser to Grand Central in the case. Although the case itself is being brought against the ORR, Grand Central is regarded as an interested party.
GNER claims the ORR's decision is unlawful and creates unfair competition because Grand Central will not be liable to pay fixed-track access charges to Network Rail or any premium payments.
It argues that if Grand Central were to compete on equal terms it would need to pay £6m a year. As it is, GNER claims it will be forced to subsidise Grand Central by as much as £114m under a revenue sharing arrangement.
This is because Grand Central's trains will stop at York - which is already very well served - entitling it to a £5m share of revenues on the route, regardless of the number of pas- sengers it carries or the quality of service.
The ORR was not available for comment. Ian Yeowart, the managing director of Grand Central, defended the regulator's decision to award it access to the line. "As far as we are concerned, GNER's case does not have any merit. Our disappointment is that this legal challenge will almost certainly delay the launch of services from the North-east, which is one of the most depressed regions of the country and urgently in need of improved rail connections."