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05 Dec 2019

Rail: a round-up of 2019 and looking forward to 2020

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With the end of 2019 rapidly approaching and – for many – thoughts turning towards the prospect of some time off with family and friends, rail partners Tammy Samuel, Suzanne Tarplee and Darren Fodey offer their thoughts on rail in 2019 and look forward to what are likely to be some of the key issues for the industry next year.

Rolling stock and franchising – Tammy Samuel

What have been your 2019 highlights?

Whilst the Williams Review has led to a pause in the franchising programme, we have still seen some activity this year, with a number of direct awards and the award of the high profile East Midlands franchise with a new fleet of Hitachi rolling stock. The rolling stock market remains active and it is great to see a number of new fleets being rolled out (if you’ll pardon the pun) delivering real passenger benefits. These have included for Caledonian Sleeper, Northern, Greater Anglia and TfL Rail. Particular highlights for me have included working with Spanish rolling stock manufacturer CAF on its project to transform the Welsh railway with new rolling stock and in relation to the supply of new trams in Birmingham.

We obviously cannot forget some our team highlights. In addition to the great work we have been doing for a wide range of clients (thank you!) we were named “Rail Law Firm of the Year” for the sixth consecutive year and were recognised once again by the legal directories for our “fantastic knowledge of the sector”.

What will the key issues be in 2020?

It is fair to say that the introduction and refurbishment of a number of fleets of rolling stock in the UK in recent years has not been as smooth as expected, in a number of cases with significant delays. The passenger benefits of the new and refurbished fleets are evident, although there is the possibility of disagreements and disputes next year. Has there been “Permitted Delay”? How do agreed variations affect the delivery programme and requirements? Who takes the risk of particular issues emerging?

Technology is also likely to be a hot topic. With the introduction of new technology onto the railway in recent years through the Smart Ticketing on National Rail initiative, we have started to see the types of legal issue which emerge when implementing technological innovation. Our technology team has been giving some thought to areas which need to be considered at the outset of a project such as data sharing and cyber security. Innovative use of technology is likely to be a key theme in 2020.

Disputes, procurement and operation of the railway – Suzanne Tarplee

What do you think the key developments for the industry have been in 2019?

It continues to be a challenging time for the operational railway, with a series of strikes affecting passengers during December. News reports suggest that it continues to be very difficult for franchise operators as well – with reports that South Western Railway investors have written down the entire value of their investment. Passenger numbers and revenue no longer seem to be growing at the levels seen historically and this makes it very challenging for operators, particularly in an environment where the risk profile has become very much skewed against the operator: an issue which the Williams Review has also considered (see below). There have been increasing calls for the railway to be renationalised as a result – forgetting that Network Rail effectively already is.

Perhaps this is why we have seen an increasing willingness to challenge decisions which have been made – whether as part of the procurement process or “in-life” of the contract. Helpfully, working with colleagues in our top-rated Rail disputes team, this year we offered our series of “top tips” on how to deal with disputes such as “Change” under franchise/concession agreements, track access disputes, procurement and the NEC form of construction contract.

What will the key issues be in 2020?

Following the significant timetable disruption in May 2018, there are moves to address a number of the underlying issues identified in the subsequent investigations. Included in this is a reform of Part D of Network Rail’s network code, which sets out the process for preparing (and amending) the timetable. Consultations are already in progress on some of the proposed changes. One of the messages we have heard is that actually Part D works relatively well – and whilst you can amend a contract to set out a process, it is behaviours that really need to change and that may well take longer.

Funding of the railway is also likely to remain a “hot topic”. Network Rail and the government have both made clear that they want more private investment in the railway – and private investors want to make that investment. However, there have not been many examples of private investment actually being made in infrastructure – not helped by the DfT’s “market-led proposals” guidance, which was not well received by the industry. No doubt 2020 will see fresh calls for private investment in rail infrastructure projects and – hopefully – there will be viable schemes of interest.

Williams Review, fares reform and the “B” word – Darren Fodey

What has been the big “rail news” for you in 2019?

Probably the biggest news story of the year has been the “root and branch” Williams Review of the industry – and we have been keeping readers updated as key messages have emerged. With the forthcoming General Election leading to a delay in the publication of the White Paper, it will probably be early 2020 before we see the emerging messages. What seems clear already is the need for a “guiding mind” for the industry, with franchising moving away from the DfT to an independent body and a rethinking of how risks are properly allocated. There has been talk of moving towards a TfL-style concession model, with revenue risk being held by this new independent body and risks being more fairly balanced between public and private sector.

Of course, once the General Election has concluded, top of the in-tray will be resolving Brexit. It is worth remembering that the United Kingdom historically led the way in Europe on the railway – such as the separation of track and train. It is only in recent years – such as through the “recast” Railway Packages and the Fourth Railway Package that Europe has caught up and is going beyond what the UK has historically done, in the interests of driving genuine separation. The current intention is to retain all EU law as English law following Brexit and until the terms of the future relationship with the EU is known, alignment is likely to continue. With the possibility of Williams recommending greater partnerships between track and train, compatibility with EU legislation could become a key focus and in future this could become an area for review.

What will the key issues be in 2020?

It seems clear that fares reform is on the cards – making fares simpler to understand whilst still retaining flexibility for different travel patterns. The Rail Delivery Group is championing reform of fares, so everyone seems to be on board with the need for change. This probably means looking at the Ticketing and Settlement Agreement which underpins the ticketing system – a contract which goes to two volumes and hundreds of pages – and one which few lawyers understand, let alone the people that need to use it! Implementing the other recommendations of the Williams Review through franchise (and legislative?) reform will no doubt be on the agenda in 2020. The scale of reform is likely to depend on who has the keys to 10 Downing Street on 13 December.

The Stephenson Harwood rail team wish you and your families a merry Christmas and a happy and prosperous new year.

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KEY CONTACT

Darren Fodey

Darren Fodey
Partner

T:  +44 20 7809 2388 M:  +44 7920 201 290 Email Darren | Vcard Office:  London

Tammy Samuel

Tammy Samuel
Partner

T:  +44 20 7809 2227 M:  +44 7766 991 053 Email Tammy | Vcard Office:  London

Suzanne Tarplee

Suzanne Tarplee
Partner

T:  +44 20 7809 2389 M:  +44 7718 247 220 Email Suzanne | Vcard Office:  London

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