A challenge by train operator GNER in the High Court against a decision by the Office of Rail Regulation  ("ORR") to grant access to two open access operators to compete on the east coast main line has been unsuccessful.

The issue related to the variable track usage charge that the two open access operators had to pay, in contrast to the additional hefty fixed track charges that franchised train operators such as GNER were being charged.  GNER argued that the different charges that it, as a franchise operator, had to pay for accessing the railway tracks amounted to (i) unlawful discrimination and (ii) unlawful state aid.

GNER's main argument was that both GNER and the open access operators were railway undertakings that performed services of an equivalent nature in a similar part of the market yet paid different charges.   GNER held that this was discriminatory.

ORR argued that the focal point of the UK Regulations was on the need to ensure that all railway undertakings had equal and non-discriminatory access to tracks and that the different charges are necessary to achieve this. The conditions under which the two types of railway undertakings could gain access to tracks are significantly different.  Franchise agreements differ in that they provide for a suite of services to be operated with the service levels specified in a supply contract with the DTI.  The agreements also provide protection against certain changes to charges and can provide risk sharing.  Open access operators, on the other hand, do not enter into such a contract and furthermore in order to be granted access they must demonstrate that their service is not primarily abstractive (that is to say, that the removal of revenue from existing franchise operator was not the primary impact of the new service).

The High Court agreed that the different market conditions indicated that franchise and open access operators operate under different market conditions.  Whilst a literal reading of the Regulations may have favoured GNER's position, the correct approach was to interpret the regulations in light of the intended aim of the directive.  Open access providers operate on a very different economic model from franchise operators and hence treating such different operators as if they were the same would prevent them from gaining precisely that which the regulations were meant to achieve: open access.  That would be discriminatory.

In relation to state aid, GNER argued that ORR's waiver, in effect, of the fixed track charge in respect of open access providers distorted competition and was unlawful.  The High Court held that GNER had approached the issue by isolating one element from a complex regime which, viewed as a whole, did not distort competition.

Overall, the court clearly favoured a more per se approach and held that differentiation does not necessarily amount to discrimination.  Indeed, discrimination can also occur if different cases are treated as if they are alike.

The full article can be read in the latest edition of Utilities Law Review.

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