Great North Eastern Railway Ltd v Office of Rail Regulation & Ors

Railway infrastructure charging rules must be construed purposively and consistently with their European objectives. Different charges for franchised and open-access passenger operators are not unlawfully discriminatory where their conditions of access to infrastructure differ materially. Fixed charges may operate as mark-ups for full cost recovery, while variable charges may reflect the regulator’s best available estimate of directly incurred costs. In judicial review, the court will accord substantial latitude to an expert regulator’s technical and economic judgment. A challenge to a long-standing charging regime may be refused on delay and good-administration grounds, particularly where third parties have relied on it.

Great North Eastern Railway Ltd challenged the Office of Rail Regulation’s decision to grant Hull Trains and Grand Central Railway track access rights on the East Coast Main Line. It argued that the charging regime, under which franchised operators paid a fixed track charge but open-access operators did not, breached the Railways Infrastructure (Access and Management) Regulations 2005, Directive 2001/14 and European state-aid rules.

The claim also challenged the decision under the Railways Act 1993 and alleged breach of the regulator’s own policy. The policy ground was withdrawn. The central questions were whether the charging arrangements were discriminatory or constituted unlawful state aid, and whether any relief should be granted despite the regime having existed since 2000.

1. Permission and outcome. Permission to apply for judicial review was granted, but the substantive claim was dismissed. The decision granting track access rights was not quashed.
2. Directly incurred costs. The variable track access charge was the Office of Rail Regulation’s best available measure of the cost directly incurred by operating additional services. The regulator had undertaken detailed consultation and obtained expert advice. The court would be very slow to impugn that technical judgment: R (London and Continental Stations and Property Ltd) v Rail Regulator [2003] EWHC 2607.
3. Discrimination. The 2005 Regulations had to be construed purposively, in light of Directive 2001/14. The relevant comparison was not confined to passengers’ broad downstream market. Franchised and open-access operators faced materially different conditions when seeking infrastructure access. Franchise agreements involved government-specified services, protection against certain charge changes, and risk-sharing arrangements. Open-access operators faced capacity and moderation-of-competition hurdles and operated at the margin. Treating those unlike cases differently was therefore not discriminatory.
4. Charging structure. The fixed track charge could be treated as a mark-up under Schedule 3, paragraph 2(1), enabling full recovery of the infrastructure manager’s costs. Requiring open-access operators to pay the same fixed charge, while leaving the other elements of the regulatory and franchise framework unchanged, would itself be unfair because they did not receive the protections available to franchise operators. The charging regime had to be assessed as a whole.
5. State aid. The absence of the fixed charge for open-access operators did not confer an unlawful selective advantage. The two routes into the passenger rail market were materially different. Franchise bidders could take the fixed charge into account through their bids, subsidies or premium payments. The reasoning was consistent with Banks v The Coal Authority [2001] ECR I-6117, where different methods of acquiring rights, available without discrimination, did not establish distortion of competition.
6. Delay and relief. The challenge was in substance directed at a regime operating since October 2000. GNER had repeatedly raised its objections during regulatory consultations and knew the regulator’s position. Even if the regime had been unlawful, relief would have been prospective and declaratory only. Reopening historic charges would have harmed good administration, and the issue would properly have been addressed in the forthcoming 2008 review.

First-instance judicial review proceedings. The court granted permission but dismissed the substantive application.