Heathrow Airport Ltd v Office of Rail and Road . Transport for London and Another (Interested Parties) Civil Aviation Authority (Intervener)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Ouseley |
| Judgment Date | 26 May 2017 |
| Neutral Citation | [2017] EWHC 1290 (Admin) |
| Date | 26 May 2017 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/4518/2016 |
[2017] EWHC 1290 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr. Justice Ouseley
Case No: CO/4518/2016
and
and
Mr Gerry Facenna QC and Ms Ligia Oscepciu (instructed by Heathrow Airport Limited) for the Claimant
Mr Rhodri Thompson QC, Mr Nicholas GibsonandMs Anita Davies (instructed by the Office of Rail and Road) for the Defendant
Mr Marc Rowlands QC and Mr Simon Taylor (instructed by Transport for London) for the 1 st Interested Party
Mr Tom Hickman (instructed by the Government Legal Department) for the 2 nd Interested Party
Ms Anneli Howard (instructed by the Civil Aviation Authority) for the Intervener
Hearing date: 21–23 February 2017
Approved Judgment
Heathrow Airport Ltd, HAL, challenges the decision of the Office of Rail and Road, ORR, that the amount which HAL can charge for the use by Crossrail services, and others, of the Heathrow Spur off the main Great Western Main Line, GWML, into the airport, cannot include any amount referable to the recovery of its costs of building the Spur. It contends that the ORR's conclusion is irrational on the evidence before it, and applying the test required by the relevant Regulations. HAL has a second ground, known as Ground 1, logically first, but more conveniently dealt with second, by which it contends that the ORR had no power to reach any decision on the Heathrow Spur access charge at all. Transport for London, TfL, and the Secretary of State for Transport, SST, take particular exception to that latter ground, while also supporting the ORR on the access charge ground, with additional arguments as well. The Civil Aviation Authority, CAA, has given evidence and provided oral submissions as an intervener, because some of the arguments and background relate to its role, and what it did permit or would have permitted as the aviation regulator.
The context for the ORR decision
The Heathrow Spur is a 5.3 mile stretch of railway track and railway infrastructure connecting Heathrow Airport with the GWML into Paddington, via London facing spurs. The part owned by HAL stops at tunnel portals about 1 mile south of the spur junction with the GWML, (Airport Junction), west of Hayes and Harlington station. The line runs into the airport connecting the central terminal area with terminals 4 and 5.
HAL owns Heathrow Express Operating Co. Ltd., HEOC, which operates the non-stop Heathrow Express; a more recent stopping service, Heathrow Connect is operated jointly with First Greater Western Ltd. Those are the two services currently running over the spur and into Paddington. HEOC pays track access charges to Network Rail for its use of the GWML. The accounting, corporate or business relationship between HAL and HEOC had to change in September 2015, when the right to receive fare revenue was transferred to HEOC, with access charges for use of the Spur being levied by HAL on HEOC for the first time.
The Act empowering the construction of the spur was passed in 1991. BAA plc decided in 1993 to proceed with its construction, pursuant to a joint operating agreement with British Railways Board, BRB, and BAA plc. It bought out BRB in June 1996. Railway services over the track began in 1998.
One piece of the regulatory framework, the significance of which was much at issue between the ORR and HAL, was the Railways (Heathrow Express) (Exemptions) Order 1994 SI No.574. Under the Railways Act 1993, ss17–18 in particular, the ORR could compel a facility owner, such as HAL, to grant access to others to operate services over facilities such as the Heathrow Spur, or to require ORR approval of the terms of any access agreement granting permission to do so. S20 permitted the SST, by Order, to exempt certain facilities from those requirements. That is what the Exemptions Order did in the case of the Heathrow Spur. The exemption lasts until 23 June 2028. It ensured for HAL sole use or control of the use of the Spur for that period.
The regulated rail system had been evolving with EU Directives aimed at splitting the operation of train services from the operation of the track and infrastructure, and providing for non-discriminatory access to the track for third parties, that is operators other than the original track owner. The primarily relevant Directive for the ORR's decision is Directive 2001/14/EC "on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification." For present purposes, the crucial provisions relate to charging; the ground which I consider second requires consideration of other parts of it.
Article 7(2) provides so far as material that "the charges for the minimum access package and track access to service facilities shall be set at the cost that is directly incurred as a result of operating the train service." (My emphasis.) This had not appeared in any earlier Directive. Article 7(2) provides for exceptions in Article 8. The relevant one is Article 8(2). This provides:
"2. For specific investment projects, in the future, or that have been completed not more than 15 years before the entry into force of this Directive, the infrastructure manager may set or continue to set higher charges on the basis of the long-term costs of such projects if they increase efficiency and/or cost-effectiveness and could not otherwise be or have been undertaken. Such a charging arrangement may also incorporate agreements on the sharing of the risk associated with new investments." (My italics.)
That Directive was transposed by the Railways Infrastructure (Access and Management) Regulations 2005 SI No.3049, as amended by SI 2009 No. 1122. Regulation 12 brings in Schedule 3. Schedule 3 requires the infrastructure manager, here HAL, to set the access charge so as to comply with its Network Statement, and repeats the language of Article 7(2). Paragraph 1(3) requires the infrastructure manager to ensure that his charging system is based on the same principles over the whole of his network, but permits exceptions where specific arrangements are made in accordance with paragraph 3. This is intended to transpose Article 8. It reads:
"3. (1) Subject to sub-paragraph (2), for specific investment projects completed –
(a) since 15 th March 1988; or
(b) following the coming into force of these Regulations,
the infrastructure manager may set or continue to set higher charges on the basis of the long-term costs of the project.
(2) For sub-paragraph (1) to apply –
(a) the project must increase efficiency or cost-effectiveness; and
(b) the project could not otherwise have been undertaken without the prospect of such higher charges."
TfL raised an issue about the correctness of the transposition of this Directive, to which I shall return. There was also a Directive in 2012 to which I shall come.
Crossrail, from Shenfield to Reading, was promoted through a Bill introduced in Parliament in 2005. Part of this very large project was to permit the operation of its rail services into Heathrow Airport via the Spur. The Bill included power to enable the SST to disapply the Heathrow Exemptions Order; indeed that power was enacted in s26 of the Crossrail Act 2008. But HAL petitioned against the Bill; an agreement, known as the Deed of Undertaking, was reached between the SST, BAA Ltd, HAL and HEOC on 30 May 2008. By that Undertaking, the SST agreed not to use her new powers to disapply the Exemption Order, on certain conditions. No SST has used those powers.
There then followed negotiations between those parties and the CAA over the contribution which HAL should make to Crossrail, because Crossrail is to start serving Heathrow Airport in 2018, and that is seen as a benefit to the Airport. A contribution agreement was signed between the SST and HAL on 2 February 2015; HAL was to pay £70m to the Crossrail project. But that did not cover the sums which HAL was entitled to charge Crossrail for the use of the Heathrow Spur. Those were dealt with pursuant to the 2005 Regulations, notably Regulations 11, 12 and Schedule 3.
The ORR was required by Regulation 12 to establish the charging framework and specific charging rules. HAL had published its Network Statement of June 2015, as required by Regulation 11, to comply with its obligations under the Regulations to determine the fees to be charged for use of the infrastructure in accordance with the charging framework, specific charging rules, and the principles and exceptions in Schedule 3. Regulation 28 makes the ORR responsible for ensuring that the charges levied by the infrastructure manager comply with the Regulations. Clause 5.1.1(iii) (b) of the Deed of Undertaking had also made publication of the Statement a condition of the continued undertaking by the SST not to use his powers to remove HAL's exemption.
This Statement set out the proposed criteria, rules, deadlines and procedures for charging and capacity allocation over the Spur. Part 6 contained HAL's approach, within the ORR's charging framework, to calculating various charges, including the Fixed Track Access Charge, for access to the Heathrow Spur. Its avowed purpose was "to allow HAL to recover historic investment on rail infrastructure, in accordance with paragraph 3 of Schedule 3 of the Rail Regulations 2005." This is sometimes called the "investment recovery charge." The steps in its calculation were then set out. This charge would apply to Crossrail, HEOC and any other would-be operators of services over the Spur.
The Statement was then sent out for...
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