New contracts for a new era

25 July 2000
ORR/00/21

The Rail Regulator, Tom Winsor, today published his provisional conclusions on the streamlining and strengthening of the principal contracts between Railtrack and train operators, thus empowering the companies in the privatised railway industry. The new contracts will be used as and when major network enhancements are put in place and as train operators have their franchises replaced. With 20-year franchises will go 20-year access contracts.

Commenting on these proposals, Tom Winsor said: Standard and stronger access contracts will equip the railway industry for the challenges ahead. These are the challenges of higher traffic, higher levels of passenger and freight services and much higher amounts of investment. Investment needs clarity and stability, with prompt, adequate and effective remedies. That is what the new generation of access contracts will provide.

Empowerment of the parties to these contracts prevents a culture of disagreement and division. When parties have clarity in their obligations and of the consequences of failing to meet them, they are far more likely to understand their duties and to discharge them.

If something has gone wrong, the greatest chance of a successful resolution without resort to law is when the innocent party can deal with the defaulter from a position of strength. Strong and clear contracts spur delivery, not litigation. It is delivery which matters most to the passenger and the freight customer.

The process of consultation and development of the new standard contracts has lasted since January 2000. It has involved all industry parties and the relevant regulatory bodies. It has met with a wide degree of enthusiastic support from all quarters.

The Regulators proposals include arrangements for:

• far clearer specifications of what Railtrack must deliver for the access charges which train operators pay, and how these obligations are to be enforced
• clarity and assurances about the access rights which train operators will be able to use on the network
• a system of trading access rights
• better and stronger procedures for carrying out network enhancements
• cutting down the confusion and difficulties in an over-complex and malfunctioning liability regime
• clearer statements of the remedies for breach, with special rules allowing train operators and Railtrack to obtain urgent performance orders which put matters right swiftly rather than having to wait to claim financial compensation after the event

The Regulator has been very critical of the quality of access contracts established at privatisation. He regards them as weak, vague and unsatisfactory. He believes that these shortcomings have cost the industry opportunities for investment and development which should not have been missed.

Use of these new standard contracts will be mandatory.

A copy of Model Clauses for Track Access Agreements: Provisional Conclusions is available from this website or from the ORR Librarian, Sue MacSwan, 1 Waterhouse Square, 138-142 Holborn, London EC1N 2TQ. Tel: 020 7282 2001. Fax: 020 7282 2045. E-mail: "rail.library@orr.gsi.gov.uk".