Eleventh-hour challenge to Railtrack share sale

An eleventh-hour court challenge is being launched against the Railtrack share sale by the Save Our Railways campaign which mounted a partially successful action against the franchising programme last year.

The group will seek leave for a judicial review from the High Court on Monday alleging that the Government has misled potential investors by failing to provide information on the prospective risks of investment. If the group is successful it could delay the sale next month.

The terms of the SOR case is similar to criticisms expressed by the British Rail chairman John Welsby earlier this month when he said he had "serious concerns" about information in the draft prospectus for the Railtrack flotation. A leaked letter from Mr Welsby to Sir Patrick Brown, permanent secretary at the Department of Transport, suggested that theprospectus failed to set out the risks to investors such as what happens if Railtrack fails to meet performance targets.

The SOR case is based on legal advice which suggests that state aid, including the pounds 69m in dividends being paid to new shareholders even though the profits were made while the company was publicly owned,has not been cleared by the European Commission.

SOR's lawyers, Leigh Day and Co, also question whether the prospectus underest- imates the cost of the backlog of investment in the network.

Yesterday, SOR had a setback in the courts when it failed with a challenge against the decision by the franchising director, Roger Salmon, not to allow British Rail to bid for any franchises. SOR decided to drop the action after the three private-sector bidders for the London. Tilbury and Southend franchise wrote, on the request of Mr Salmon, that they might withdraw if BR were allowed to bid.

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