Rail Regulator calls for better quality contracts for railway industry

7 January 2000
ORR/OO/01

Rail Regulator calls for better quality contracts for railway industry

Tom Winsor, the Rail Regulator, today published a consultation document onhis moves to establish better quality track access contracts between Railtrackand passenger and freight train operators.

Explaining why such a move is necessary, Tom Winsor said: "Thesignificant growth in the demand for railway services, the investment which therailway industry needs to put in and the commencement of the franchisereplacement programme create a need for better contracts between empoweredparties. The process of negotiating these contracts can be streamlined,accelerated and made less costly in terms of management, legal and otherresources by the establishment of model clauses."

"Model clauses for access contracts in the railway industry could do agreat deal to achieve a number of desirable objectives, including:

• providing a sound framework for strong, sustained and timely investment on conditions which are fair and economic;
• facilitating the franchise replacement programme;
• enabling parties to understand in advance what is expected of them and what the consequences of breach will be through clarity and simplicity of expression and proper specification of their rights and obligations; 
• empowering the parties to access contracts themselves to assert their rights and, where necessary , enforce them; and
• streamlining, simplifying and accelerating the process of establishing new access rights at lower cost in terms of management, legal and other resources.

"I believe such clarification and simplification is necessary to enablethe railway industry to move into the next phase of railway investment andimproving services to passengers and freight users. It is also longoverdue."

Although section 21 of the Railways Act 1993 provides for the Regulator toprepare and publish model clauses for access contracts, none has been producedin the intervening six years.

"Model clauses for track access agreements: a consultation document" is available on request from Sue MacSwan, ORR Library, 1 Waterhouse Square, 138-142 Holborn, London EC1N 2TQ. (Tel: 0207 282 2001; fax: 0207 282 2045; e-mail : rail.library@orr.gsi.gov.uk). Some responses to the Model Clauses document have already been received and can be read on this website.

Notes to Editors

1.     Every contract between Railtrack and a train operator for access to Railtrack's network of track and signalling requires the approval of the Rail Regulator (except in insignificant cases, which are exempt).

2.     Between April 1994 and April 1997, as privatisation took place, track access contracts were established between Railtrack and the passenger train operators. Track access contracts were also made between Railtrack and freight train operators.

3.     Track access contracts provide for train operators to be able to run trains on Railtrack's network. In return, they pay access charges at levels set by the Regulator. Track access contracts should contain proper specifications of what the train operator gets for his money, in terms of the quality and capability of the network, and the investment which Railtrack will put into it in return for the access charges which it receives. However, the first generation of track access contracts failed properly to specify these things, resulting in the hindrance of the establishment of a mature and empowered relationship between Railtrack and the train operators.

4.     Section 21 of the Railways Act 1993 provides:

"Model clauses for access contracts

21.--- (1) The Regulator may prepare and publish model clauses for inclusion in access contracts.

(2) Different model clauses may be prepared and published in relation to different classes or descriptions of railway facility.

(3) The Regulator may from time to time revise any model clauses published under this section and may publish those clauses as so revised.

(4) In preparing or revising any model clauses under this section., the Regulator may consult such persons as he thinks fit.

(5) The Regulator shall encourage, and may require, the use of any model clauses of his in access contracts wherever he considers it appropriate."

5.    Model clauses are standard clauses. They are used in all cases for which they were designed unless there is a sound reason to disregard or depart from them. They are not straitjackets. Nor are they optional extras. They are the bases on which the industry should expect to contract in ordinary cases. If parties wish to enter contracts with different provisions, they should be prepared to explain why their case warrants such an alternative approach. Every case will of course be decided on its individual merits. But the starting point should always be the model clauses.

6.    Model clauses are not new. The upstream oil and gas industries have had model clauses for petroleum licences since the passage of the Petroleum (Production) Act 1934. They have been kept up to date and very rarely departed from. The Transport and Works Act 1992 provides for the making of model clauses for use in orders made under that Act, and the Secretary of State has used his power to devise and publish them.

7.    Tom Winsor became Rail Regulator on 5 July 1999.