Examination of Witnesses (Questions 14900
- 14919)
14900. You welcome those two concessions, but
what you say is that there is a need for further bespoke adjustments
to the compensation system?
(Mr Oatway) That is right
and that is to meet Crossrail's intention, as I understand it
to be, that operators will be compensated on a no net loss, no
net gain basis for the building of the project and that is the
criterion that certainly we would support.
14901. Why is it that you consider that the
standard industry compensation regime is inadequate for the Crossrail
project?
(Mr Oatway) I believe there
are five points I want to raise here quickly. The first one is
that the standard industry mechanism, known as the `network change
procedure', where train operators are compensated for enhancements
to the network, this does not include changes of a temporary nature,
of an operational nature which do not last for longer than six
months in duration. We believe that the Crossrail project would
involve many of these types of operational disruptions and, as
they are not compensated under the industry standard procedure
of network change, we will not receive compensation for those
temporary disruptions.
14902. Were the standard railway industry compensation
regimes drawn up having in mind schemes such as Crossrail?
(Mr Oatway) The normal standard
industry mechanisms are enshrined in our track access agreements,
known in the railway industry as the `Schedule 4 possessions regime'
and the `Schedule 8 performance regime'. As far as freight is
concerned, those regimes were designed to ensure that freight
operators would only receive compensation for planning failures
by Network Rail, so if they planned possessions at short notice
and that caused disruption to our services, we would get liquidated
damages for those, not full costs and losses, just liquidated
damages. Therefore, those types of issues where under Crossrail
the possessions would be planned a long time in advance, ie, they
would be pre-planned, as we would expect with a project the size
of Crossrail, EWS and other freight operators would not receive
compensation for those possessions under the standard industry
possessions regime.
14903. You set out this matter in some detail
in EWS25 which I am not going to take you through in detail, but,
for instance, you have just been referring to Schedules 4 and
8 and that matter is all explained, is it not, in EWS25?
(Mr Oatway) Yes, that is
correct.
14904. If we could put up EWS26 please, you
are showing there, are you not, some of the heads of claim, ie,
some of the areas of loss which you might suffer and which you
are anxious to make sure that compensation is provided for?[61]
(Mr Oatway) These are typical
areas of heads of losses that a freight operator would expect
to incur where there is disruption or planned disruption of the
network.
14905. I think there are five areas you have
mentioned. Can you quite briefly just explain to the Committee
the five areas where you feel that EWS is threatened and ought
to be given special protection?
(Mr Oatway) The first one
I went through just now which is disruptions of a temporary operational
nature which are not compensated for under the network change
procedure as it stands at the moment. The second one, which is
in some respects the most serious, is that under the network change
procedure there is a provision known as `G5'.
14906. Just pause there because this is not
familiar to everyone. Could we put up EWS27 because, as you say,
this is one of the most important points and it is a point where
we are hoping that Ms Lieven, on behalf of Crossrail, may be able
to give some assistance.[62]
There we have condition G5, "Changes imposed by competent
authorities", and where Network Rail implements a network
change as a result of any change of law, then compensation is
not payable. Is that right?
(Mr Oatway) That is correct,
yes. Costs and losses lie where they fall.
14907. The issue is whether the Crossrail Bill
becoming an Act is going to be any change of law for condition
G5. Now, what have you been told so far by Crossrail?
(Mr Oatway) So far we have
received a letter from the Department basically saying that they
would not expect G5 to be activated or invoked.
14908. That is a letter of 20 June sent to Mr
Smith from a Mr Anthony Ferguson of the Crossrail Bill Division
saying that the Department would not expect clause G5 to be exercised,
but that is their expectation. What is it you are seeking?
(Mr Oatway) Well, we are
seeking a strict undertaking that it will not be invoked because
an expectation just falling some way short of that and given the
seriousness of if G5 is invoked, it would imply that EWS would
not receive any compensation at all for the implementation of
the building of the Crossrail project which leaves us very, very
concerned indeed.
14909. What is the third area?
(Mr Oatway) The third area
is another one that is very concerning. It is the implication
that Crossrail could invoke the Bill powers to change in some
way Part G, ie, the network change procedure, to amend its effects.
It has basically got powers or it is seeking powers to be able
to do that, so it could, through those powers, change some of
the abilities for EWS to be able to object to the detail of such
schemes which obviously have not been drawn up yet.
14910. And the fourth matter?
(Mr Oatway) The fourth matter
is one I touched on earlier which is basically about pre-planned
possessions. Unlike franchise passenger operators, freight operators
are only compensated, and only then with a liquidated sum, for
short-notice possessions. Crossrail possessions are likely to
be planned well enough in advance to mean that EWS would not receive
any compensation through its Schedule 4 regime in its track access
agreement which is the standard industry mechanism.
14911. And the fifth matter?
(Mr Oatway) The fifth matter
is about compensation for access into our depots, sidings, access
to stations and to other facilities along the network. Again we
do not believe the standard industry mechanisms are sufficient
to be able to give us full compensation on a no net loss, no net
gain basis.
14912. Those are the five areas. Can we just
come back to the third area which is the intention to prevent
operators from blocking a Crossrail-related network change. Why
do you find that objectionable?
(Mr Oatway) Well, basically
Crossrail, as I understand it, have said that they do not believe
that operators should have the veto to block any Crossrail network
changes because of the parliamentary procedure that is currently
taking place, ie this procedure, being part of that and, therefore,
once Parliament has said that Crossrail should go ahead, then
it should go ahead. Now, we do not dispute that once that process
is gone through, the principle of Crossrail going ahead is not
something that we would find we would need to veto. However, the
concern we have got is the fact that there are more ways to implement
things than just one and there will be lots of individual network
changes no doubt coming out of this project and if some of that
detail is not of sufficient comfort to us, then we would seek
to rely on our current right under the standard industry mechanisms
of being able to challenge that and having any disputes independently
arbitrated.
14913. Your conclusion then on the application
of standard industry compensation entitlements for freight?
(Mr Oatway) My overall conclusion
is that basically we are satisfied that compensation on a no net
loss, no net gain basis, which Crossrail has indicated in page
H2, is sufficient for our purposes. What is not sufficient is
the fact that the current standard industry procedures for freight
do not compensate freight operators on a no net loss, no net gain
basis and, therefore, we are seeking to have a bespoke measure
to be able to top up that compensation so that we are held blameless
for the effects of Crossrail.
14914. Do you see a potential for really quite
considerable losses as a result, for instance, of temporary speed
restrictions and the like?
(Mr Oatway) Yes. As Mr Smith
said earlier on, our trains travel across the whole network, across
the whole country and just a small delay on one part of the network
can have a domino effect by the time that train reaches other
parts of the network. If there are many disruptions in the London
area, that will ripple across the whole network and eventually
our customers will be very concerned and angry that EWS is not
providing the performance and timings of the trains that it is
committed to, which could then lead to loss of customer confidence
and loss of contracts.
14915. Mr Oatway, is there anything unusual
in legislation making special provision for the compensation consequences
of work such as this?
(Mr Oatway) No, I do not
believe there is. There are a couple of examples that have occurred
in the past which I would like to touch upon and bring the Committee's
attention to. The first one is to do with the CTRL project. When
the CTRL project was being put through back in 1996, a bespoke
provision was inserted into all affected operators' track access
agreements which would enable those operators to receive full
compensation for any disruptions that the CTRL project would have
on their services that affected Network Rail's network. That would
take out any dubiety over whether any disruption would last less
than six months or over six months. You would be satisfied and
confident that you would be fully compensated for any of those
disruptions.
14916. So far as the CTRL Act—we know
that those works are now getting towards completion—what
was the position about when you had a temporary speed restriction
lasting for not less than six months? Was compensation paid?
(Mr Oatway) Yes. It enabled
EWS to claim compensation for the effects of that speed restriction
on similar terms to what the network change procedure would have
given had they constituted network change.
14917. That is the sort of provision which you
think ought to be put into this Act as well?
(Mr Oatway) I believe so.
14918. Secondly, you refer to the East London
line extension, exhibit EWS 28.[63]
The East London Line is a new extension of a railway in London.
It is done under a Transport and Works Order under the 1992 Transport
and Works Act rather than a Bill but it includes, does it not,
provisions such as you would seek to be inserted into the Crossrail
Bill?
(Mr Oatway) It does. The East
London line is typical of these types of third party schemes affecting
Network Rail's network.
14919. The next page of the exhibit should be
schedule 11.[64]
There is a black line against paragraph 1(2) against relevant
costs. We can see that the relevant costs are the costs, direct
losses and expenses reasonably incurred by each train operator.
Is EWS a train operator?
(Mr Oatway) Yes, it is.
61 Committee Ref: A168, Non-Compensatable Disruption
Losses (LINEWD-19605-081). Back
62
Committee Ref: A168, Condition G5-Changes imposed by competent
authorities (LINEWD-19605-082). Back
63
Committee Ref: A168, The London Underground (East London Line
Extension) (No. 2) Order 2001 (S.I., 2001, No. 3682), www.opsi.gov.uk
(LINEWD-19605-083) Back
64
Committee Ref: A168, Schedule 11, Protection for Railtrack, The
London Underground (East London Line Extension) (No. 2) Order
2001 (S.I., 2001, No. 3682), www.opsi.gov.uk (SCN-20060711-006) Back
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