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Network Rail avoids suspension of contract during dispute

Posted: 12th February 2020   In: Corporate Commercial

Network Rail has succeeded in lifting the automatic suspension of a £1.8 billion contract for the delivery of a digital train control system.

The issue arose after it invited tenders to install the European Train Control System (ETCS), a common digital signalling and control standard adopted by the EU to improve interoperability between railways in different member states.

Alstom Transport UK Ltd submitted a tender but was unsuccessful. It then challenged the procurement process.

This triggered an automatic suspension of the contract until the matter could be settled in court. However, Network Rail applied to have the suspension lifted because it would cause problems that could not be rectified by the award of damages if it won the case.

The High Court found in its favour.

It accepted that any breach of regulations that deprived Alstom of a contract worth £1.8 billion would be extremely serious. However, the company was unable to establish that it would suffer losses for which damages were not an adequate remedy.

Inherent in any tendering process was the risk that the bid would be unsuccessful, resulting in wasted costs and lost profits. Those losses could be quantified.

It was not credible for Alstom to suggest that it would be at a disadvantage in future tenders for ETCS schemes in the UK: it had extensive experience in delivering such projects. If it incurred redundancy costs they could be quantified, and there was no evidence that its solvency was threatened. It was likely that damages would be an adequate remedy if it went on to win the case.

In contrast, there was evidence that delayed improvements to safety, and the wider impact on business and the travelling public caused by delays and disruption to rail services, could not be quantified properly or compensated. It was likely that damages would not be an adequate remedy for Network Rail if it succeeded at trial.

Maintaining the suspension was likely to cause the abortive costs of urgent replacements, years of delay and risked putting in peril funding for the project. The balance of convenience lay in favour of lifting the automatic suspension.

Please contact Sing Li if you would more information about the issues raised in this article or any aspect of contract law.

Network Rail avoids suspension of contract during dispute

 [2019] EWHC 3585 (TCC)


QBD (TCC) (O'Farrell J) 20/12/2019
Posted by: Sing Li
Corporate Commercial
Luton Office