Stagecoach Group plc (LON:SGC) has launched legal action against the Department for Transport (DfT) over its disqualification from the East Midlands rail franchise.
The FTSE 250 transport operator has alleged that the DfT breached its statutory duties under an EU regulation which requires the government to adopt a “competitive tendering process” which is open to all operators and conducted in a “fair, transparent and non-discriminatory manner”.
READ: Stagecoach stunned as government disqualifies it from three rail franchise tenders
Stagecoach also said it was considering legal action regarding the West Coast Partnership and South Eastern franchises, which it was also disqualified from.
The firm had previously said that a senior DfT official had told the company that its disqualification was because its bids had not complied with requirements for operators to bear potential pension risks for train franchise employees.
Stagecoach retorted by saying that it had refused to accept the risks as their full extent was unknown and estimated to be “in excess of £1bn” for the three franchises.
"We remain deeply concerned at the Department for Transport's procurement of the three most recent rail franchise competitions and the rationale behind its decisions”, said Martin Griffiths, Stagecoach’s chief executive.
"Despite our continued requests for full transparency around these matters, many fundamental questions remain unanswered. As a result, regrettably we have had no option but to commence legal action against the DfT to ensure the serious issues involved and the DfT's opaque decision-making are subject to proper public scrutiny.”
In a response, the DfT said Stagecoach was “an experinced bidder who knowingly submitted non-compliant bids on all competitions. In doing so, they disqualified themselves.”
“We do not comment on legal proceedings. However, we have total confidence in our franchise competition process and will robustly defend decisions that were taken fairly following a thorough and impartial evaluation process.”
In late-afternoon trading on Wednesday, Stagecoach shares were 1.1% higher at 135.4p.
--Adds DfT statement--