Heathrow Airport Ltd v Office of Rail And Road

Higher railway access charges based on the long-term costs of a specific investment may be imposed only where the infrastructure manager shows that the project could not realistically have proceeded without the prospect of recovering at least some of those costs from rail users. The question is hypothetical and commercial. Actual recovery, or an intention to maximise railway revenue, is not conclusive. The alternative availability of funding through an airport’s regulatory asset base or single till may establish a realistic alternative source of finance. The court’s role on a rationality challenge is not to re-evaluate the evidence, particularly where the regulator has specialist expertise. Delay and detrimental reliance may justify refusing judicial review relief under section 31(6) of the Senior Courts Act 1981.

Heathrow Airport Ltd challenged the Office of Rail and Road’s decision of 27 May 2016 concerning charges for use of the Heathrow Spur by Crossrail and other services. The ORR concluded that the proposed investment recovery charge did not satisfy paragraph 3 of Schedule 3 to the Railways Infrastructure (Access and Management) Regulations 2005, so that only directly incurred operating costs could be recovered.

HAL alleged that the decision was irrational and that the Regulations did not apply to the Heathrow Spur. Transport for London also argued that the Regulations had wrongly transposed the relevant Directive and raised issues concerning delay, reliance and the Crossrail contribution arrangements.

1. Investment recovery charge. The relevant question under paragraph 3 of Schedule 3 to the Railways Infrastructure (Access and Management) Regulations 2005 was whether there was a realistic commercial possibility that the Heathrow Spur could have proceeded without a prospect of recovering at least some infrastructure costs from rail users. The question was not whether HAL in fact proceeded on the expectation of such recovery, nor whether recovery from rail users was commercially sensible.
2. The ORR correctly treated the requirement as an exception to the ordinary rule that charges are limited to costs directly incurred by operating the train service. It was entitled to conclude that the airport’s single regulatory till or regulatory asset base provided a realistic alternative source of funding for the whole of the Spur’s infrastructure costs. The evidence showed that the Spur was integral to Heathrow’s development, surface access and expansion, rather than a stand-alone rail investment. The ORR’s conclusion was rationally open to it.
3. The court was not an appellate fact-finder. Although the issue was not a pure policy judgment, the ORR’s specialist regulatory experience remained relevant. The evidence had been considered in the round, and HAL had not crossed the high threshold required to establish irrationality or absence of an evidential basis.
4. The relevant provisions of Article 8(2) of Directive 2001/14/EC were clearly transposed by paragraph 3 of Schedule 3. The Directive permitted higher charges for qualifying future projects and qualifying completed projects. It did not prohibit charges being imposed after completion where the statutory conditions were met. The transposition challenge therefore failed.
5. The court declined to determine whether the Heathrow Spur was a network intended only for urban or suburban passenger services. Any declaration in HAL’s favour would have been academic, and relief would in any event have been refused because of undue delay, substantial prejudice, detriment to good administration and HAL’s conduct of the Crossrail arrangements under the Senior Courts Act 1981.
6. Had the irrationality challenge succeeded, relief would also have been refused in the court’s discretion because HAL had presented its Crossrail contribution case on the basis that access charges would not recover historical long-term costs, and would otherwise obtain an unjust financial advantage.

The application for judicial review was dismissed.

First-instance judicial review proceedings. The challenged decision was the Office of Rail and Road decision dated 27 May 2016.