Certain Bus Operating Companies In the Stagecoach Group & Ors v Secretary of State for Transport & Anor

Compensation for a tariff obligation under Regulation (EEC) No1191/69 is intended to restore the operator to the financial position it would have occupied without the obligation. It does not generally confer a reasonable profit on traffic generated by concessionary fares.

The calculation distinguishes anticipated traffic from actual traffic. Additional costs caused by generated traffic are recoverable, while cost savings are taken into account. Article 11.2 provides a floor where the market makes the Article 11.1 calculation insufficient to cover total relevant costs. Compensation arrangements may use a transparent pricing formula, but year-end reconciliation must reflect material facts.

Bus operators and concession authorities challenged decisions concerning reimbursement under concessionary travel schemes established under the Transport Act 1985 and Transport Act 2000. They sought declarations concerning the interpretation of Regulation (EEC) No1191/69, the recovery of commercial fares and profit on generated traffic, revision of reimbursement values, and compliance with articles 1 of Protocol No 1 and 6 of the Convention.

The preliminary issues arose from consolidated judicial review claims challenging decisions made by the Secretary of State under the statutory reimbursement regimes. The central question was whether the European Regulation required reimbursement of the commercial fare for all concessionary journeys, or only compensation for the financial consequences of the tariff obligation.

1. Construction of the European Regulation. The claimants’ interpretation of Articles 11 and 12 was rejected. Article 11.1(a) distinguishes the anticipated traffic that would have existed without the concession from the actual traffic, including generated traffic. The first amount therefore measures the revenue lost on the anticipated traffic, applying the most favourable existing rate or the rate a commercial operator would have charged.
2. Article 11.1(b) compares the costs that would have been incurred at the commercial rate with the costs actually incurred under the obligatory rate. The computation accommodates both increased costs and cost savings. Additional costs caused by generated traffic are therefore recoverable, but the scheme does not award a separate profit on that traffic.
3. Article 11.2 supplies a floor where, because of market conditions, the Article 11.1 calculation is insufficient to cover the total costs of the affected traffic. In that context, “cost” means the relevant net cost and does not generally include a reasonable profit.
4. The interpretation was supported by the wording, structure and policy of the Regulation, including its aim of limiting market distortion while compensating financial burdens. Altmark Transport GmbH v Nahverkehrsgesellschaft Altmark GmbH and the other European authorities did not require a different construction. The Regulation operated as a separate code for determining whether compensation fell within its scheme.
5. The Article 1 Protocol No 1 challenge was rejected. The operators were compensated for lost profit on traffic that would otherwise have been carried, and the alleged interference did not amount to an unjust deprivation. The Article 6 challenge also failed. The reimbursement process was more akin to commercial negotiation than adjudication of witness credibility, and statutory intervention by the Secretary of State or Welsh Assembly, together with judicial review or private-law proceedings where appropriate, provided sufficient safeguards.
6. The Secretary of State’s power under the Transport Act 2000 was not the proper first route for general legal challenges, although an illegality arising in a particular scheme could be identified. The wider power under the Transport Act 1985 could permit corrective modification affecting other compulsory participants, subject to procedural fairness.
7. Declarations (i)–(iv), (vi) and (vii) were refused. As to declaration (v), the court held that material facts and values must be capable of being reflected through reconciliation, subject to insignificant variations and orderly scheme discipline. The relevant determinations were to be quashed and re-determined by consent.

First-instance judicial review proceedings. The claims were consolidated by order of Wyn Williams J on 14 May 2009, and preliminary issues were tried before the Administrative Court.