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Enforcement Policy: Rail Franchise Agreements and Closures

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Enforcement Policy: Rail Franchise Agreements and Closures Enforcement Policy: Rail Franchise Agreements and Closures July 2008 Contents 1. Executive Summary .....................................................................................3 2. Introduction ..................................................................................................4 3. Enforcement Orders.....................................................................................6 4. Penalty Policy.............................................................................................10 5. The Contractual Framework.......................................................................15 Annex A: Statutory Instrument 2005 No. 218: The Railways Act 1993 (Determination of Turnover) Order 2005....................................................19 Annex B: Table showing relevant sections of the Railways Act 1993 ............23 1. Executive Summary 1.1 The passenger railway is a public service, specified by the Government and delivered by the private sector. The Secretary of State has a duty to protect the public interest by securing compliance with the franchise agreements under which rail services are delivered. She also has a duty to ensure that the law in relation to the closure of railway services and infrastructure is complied with. 1.2 The purpose of this document is to explain how these duties are discharged. It details the Department for Transport's enforcement policy in relation to: contraventions of franchise agreements; and contraventions of closure legislation - relating to the discontinuance of passenger railway services and the closure of networks, stations and light maintenance depots. 1.3 The document details how the Department takes a stepped approach to ensure that any enforcement action is proportionate to the contravention and explains the enforcement tools available to the Department. 1.4 The document also sets out the Secretary of State s policy in relation to the imposition of penalties for such contraventions and the determination of the amounts of those penalties. The Secretary of State is required under the Railways Act 19931 to consult on and publish this policy: consultation took place between 15 October 2007 and 4 January 2008. This document has been updated in the light of consultees responses. 1.5 This policy document covers all passenger rail franchises in England and Wales. 1 Section 57B(1). In this document, references to legislation include any amendments as at the date of this document. 3 2. Introduction 2.1 The Railways Act 1993 (the 1993 Act ) gives the Secretary of State power to enter into franchise agreements for the provision of passenger rail services. Franchise agreements form the basis of the contractual relationship between the Secretary of State and the operators of those services, and set out the obligations that operators are required to fulfil. 2.2 The 1993 Act and the Railways Act 2005 (the 2005 Act ) set out the basis on which passenger rail services may be discontinued and passenger rail infrastructure may be closed. Collectively the discontinuance of services and the closure of infrastructure are referred to in this document as closures , and the relevant provisions of the 1993 and 2005 Acts in relation to closures are referred to in this document as closure restrictions . 2.3 Annex B to this document lists the sections of the 1993 Act which relate to the Secretary of State s power to enforce compliance with franchise agreements and closure restrictions. 2.4 This document explains the Secretary of State s legal powers to enforce compliance with the terms of passenger rail franchise agreements and closure restrictions, and sets out her policy in relation to the exercise of those powers. 2.5 The Department for Transport monitors the delivery of franchise agreements on behalf of the Secretary of State on an ongoing basis. It also receives information on contraventions of franchise agreements from sources such as Passenger Focus, passenger transport executives and members of the public. In addition, operators themselves are required to inform the Department on becoming aware of any contravention of their franchise agreements. The Department would become aware of any breach of closure restrictions in a similar way. 2.6 Where there is an area of concern, the Department will investigate and, if appropriate, take enforcement action. The Secretary of State has broad powers to require operators to submit information and documents for this purpose2. 2.7 The Department adopts a stepped approach to enforcement in order to ensure that any action taken is proportionate to the contravention. The aims of the Secretary of State s enforcement policy are to: ensure that franchise commitments are delivered and franchise agreements are complied with; maintain the effectiveness of competition for franchises by ensuring that bids are realistic and achievable; 2 Section 58 of the 1993 Act. 4 ensure that, if appropriate, the taxpayer is reimbursed if operators do not deliver the obligations in their franchise agreements; and ensure that closure restrictions are complied with. 2.8 There is a range of enforcement tools available in relation to contraventions of franchise agreements and closure restrictions. These include using the Secretary of State s powers under the 1993 Act to make an enforcement order or impose a financial penalty. 2.9 Where a franchise agreement has been contravened, the franchise agreement itself will, in most cases, provide the Secretary of State with additional means of enforcement. This might involve requiring the franchise operator to produce a plan to remedy the breach, requiring the operator to enter into an agreement giving such a plan contractual force or, in some cases, termination of the franchise. 2.10 The Department will seek to respond in a consistent manner where different train operators commit similar contraventions. 2.11 Sections 3 to 5 of this document describe the Secretary of State s enforcement powers and policy in more detail: 1. Section 3 ( Enforcement Orders ) deals with the Secretary of State s power under the 1993 Act to make orders requiring operators to take specified steps in order to comply with the terms of their franchise agreements or with closure restrictions. 2. Section 4 ( Penalty Policy ) relates to the Secretary of State s power under the 1993 Act to impose financial penalties for contraventions of franchise agreements or closure restrictions. It explains how the decision whether to impose a penalty will be made and how the amount of the penalty will be calculated. 3. Section 5 ( The Contractual Framework ) outlines the contractual measures which the Secretary of State may take to enforce compliance with franchise agreements, and sets out her policy in relation to the use of those measures. 2.12 The 1993 Act gives the Office of Rail Regulation ( ORR ) similar powers to enforce compliance with licences issued by it under that Act. The ORR has issued a consultation document (Enforcement Policy and Penalties Statement - November 2005) containing its policy in relation to those powers. 2.13 The legal information contained in this document is for general information only and should not be treated as legal advice. The policy contained in this document shall be kept under review and may be revised from time to time. 5 3. Enforcement Orders 3.1 Under section 55(1) of the 1993 Act, if the Secretary of State is satisfied that an operator is contravening, or is likely to contravene, its franchise agreement or any closure restriction, she must make an order to end or prevent the contravention. An order under section 55(1) is referred to in this document as an enforcement order or a final order . 3.2 An enforcement order will contain such provision as is required in order to secure compliance with the relevant franchise agreement obligation or closure restriction3. 3.3 The measures which the order requires the operator to take may be expressed as inputs, outputs, or a mixture of the two. The order must specify: what the operator is required to do, or not to do; and the time it takes effect, which must be the earliest practicable time. 3.4 The Secretary of State s duty to make an enforcement order is subject to certain exceptions, which are described at paragraph 3.8. 3.5 An enforcement order may include provision that a reasonable sum be paid by the operator in the event of a specified contravention of the order. This is described in more detail at paragraphs 3.16 to 3.20. Provisional Enforcement Orders 3.6 A provisional enforcement order (referred to in this document as a provisional order ) is an interim measure for cases of urgency and may last for no more than three months. The Secretary of State may make a provisional order without going through all the procedural steps which would be required for a final order. 3.7 A provisional order will expire at the end of the period stated in the order unless the Secretary of State confirms the order. If confirmed, a provisional order becomes a final order. Circumstances where an Enforcement Order is not Required to be Made 3.8 The Secretary of State is not required to make an enforcement order under section 55(1) of the 1993 Act in the following circumstances: a) where she is satisfied that her duties under section 44 of the 1993 Act preclude her from making the order. In these circumstances, she cannot make an enforcement order5; 3 Section 55(1) of the 1993 Act. 4 Section 4 duties include promoting the use of the railway network and protecting the interests of users of railway
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