Case No: 1258/5/7/16
Neutral citation  CAT 14
IN THE COMPETITION APPEAL TRIBUNAL
London WC1A 2EB
5 July 2017
B. THE PARTIES
C. THE TRIAL
D. THE CLAIM
E. THE FACTS
"The Supplier shall deliver the Services in accordance with the Sentinel Scheme Rules (issue NR/SP/OHS/050 issue 3 dated June 2005) and the audit protocol documentation; relevant Railway Group Standards & Legislation provided in Schedule 2; and the minutes of the Sentinel operations Meetings since October 2005.
Network Rail may publish updated copies of these documents from time to time and these shall be provided to the Supplier by Network Rail's Representative."
"Submit suggestions each month at the Sentinel Operations Meeting which identify opportunities to continually improve the effectiveness of the audit protocols and process."
"We are a public sector company that operates as a regulated monopoly. Our income is a mix of direct grants from the UK and Scottish Governments, charges levied on train operators that use our network and income from commercial property."
"There are two options for client companies employing contract and subcontract staff, agency staff and the self-employed. The options are either:
(i) Include such staff in a competence management system that uses the same or equivalent standards as the client company uses. The client company should be able to verify and audit the competence management system and keep copies of certification showing individuals have been assessed as competent; or
(ii) Regard these people as the client company's own staff and take them into the client company's own competence management system, with periodical reassessments, training and keeping suitable records."
(1) Network Rail's Competence Management System ("CMS"), which defines the mandatory requirements for managing the competence of individuals who undertake work on Network Rail controlled infrastructure. The CMS was updated in 2012.
(2) Network Rail Standard NR/L2/CTM/202 Quality Assurance in Training and Assessment (referred to as "Protocol 202"), with which, since June 2010, approved trainers and assessment providers are required to comply. This is part of the CMS and specifically requires that training organisations must use approved trainers and training materials and must have sufficient resources and appropriate processes in place to deliver Network Rail-approved training; and use approved assessors and have appropriate processes in place to undertake competence assessments of individuals. The current version of Protocol 202 dates from December 2011.
(3) Network Rail Standard NR/L2/CTM/021 Competence and Track Safety, which has formed part of the CMS since late 2006. This sets out the minimum requirements for training and assessment of individuals who undertake track safety activities on Network Rail's managed infrastructure.
(4) The Rail Training Accreditation Scheme (RTAS) Rules. The only document produced in evidence comprises the "interim" rules issued on 5 December 2013, which Mr Wilmshurst-Smith confirmed is the version still in force.
(5) The Sentinel cards and Sentinel Scheme Rules. Sentinel smartcards are issued to qualified individuals who have undergone appropriate training and assessment, and the information on them is stored on a central database and can be updated regularly. The Sentinel Scheme Rules have been periodically revised and updated. In March 2011, the Rules were revised to include not only additional safety and technical competences, but also to include the requirements comprised in the auditing of training and assessment organisations. Mr Smith stated that this was in order to make clear what was required of those audits and of those being audited. With effect from 6 January 2014, they were fundamentally re-drawn to separate the Scheme training and medical rules.
"the advancement of education and training primarily for the benefit of the members (without prejudice to the generality of the foregoing) in the railway sector by increasing the level of skill and training of its workforce."
"Developed by the Industry, for the Industry
NSAR has been established by the industry employers to meet the growing demand, both in terms of quality and quantity, for railway engineering skills across the UK.
NSAR is the epitome of collaboration; it has been developed by the industry for the industry to fulfil the strategic role of developing and implementing the skills strategy, which supports the industry's vision to create an engineering workforce with the necessary skills to support the maintenance, development and expansion of a first-class, cost effective 21st Century railway.
NSAR supports all type of employers large and small – from the infrastructure client organisations and their contractors to traction and rolling stock companies and their supply chains…"
Relationship between Network Rail and NSAR
"… Network Rail is prepared to allow private providers of training, such as [UKRS], both to provide safety training and also to assess the competency of those who have received its training, but only on the basis that there is an independent assessment of both the training and the competence-assessment standards adopted by the private providers on its behalf."
"The role of the Accreditation Organisation is to deliver Rail Training Accreditation Scheme (RTAS) on behalf of Network Rail. They are responsible for ensuring, that Training Providers and Individual Trainers/Assessors accredited under RTAS Rules meet the specific requirements of Network Rail."
"In consideration of the payments to be made by Network Rail to the Supplier [NSAR] as hereinafter mentioned the Supplier hereby covenants with Network Rail to provide services in conformity in all respects with the provisions of the Agreement."
And condition 2.1 states:
"The Supplier warrants that it has exercised and will continue to exercise in the performance of the Services all the reasonable skill care and diligence as may be expected of a properly qualified and competent member of the Supplier's profession experienced in carrying out services in relation to a project (if any) of a similar size scope and complexity to the Services."
- "Attendance at briefing sessions
- Support and guidance on completion of Self-Assessment Report
- Support and guidance on completion of Quality Improvement Plan
- Completion of baseline inspection
- Completion of further inspections at frequency determined by performance
- Guidance from Inspectors during inspection
- Business Improvement advice and guidance
- Publication of inspection results and grading on the National Skills Academy for Railway Engineering website
- Access to National Skills Academy for Railway Engineering website
- Ability to use National Skills Academy for Railway Engineering logo for company promotion (subject to licensing obligations)
- Support and guidance from NSARE Ltd
- Initial visit, guidance and support from Principal Inspector for new providers
- Follow up inspections if required will be charged at cost
- Additional inspections if requested will be charged at cost"
"Rail Training Accreditation Scheme (RTAS)
Network Rail has recently reviewed the Rail Training Accreditation Scheme (RTAS) with the purpose of identifying a way to continue to raise the minimum standards of skills training delivery across the training provider network.
After consideration, the NSARE Quality Assurance Participation scheme has been identified as the current minimum standard that will enable the industry to benchmark its performance whilst being effectively aligned to RTAS and Sentinel Scheme rules via a risk-based assurance framework."
"Rail Training Assurance Scheme (RTAS)
A review of the Rail Training Assurance Scheme (RTAS) has recently been conducted and Network Rail has concluded that a more rigorous rail training inspection regime is required in order to raise the minimum standards within the training provider network.
After consideration, a new NSARE Quality Assurance Participation Scheme has been selected and this letter informs you that the current scheme will cease on the 31 December 2015 and the new Scheme will start on 1 January 2016.
The new Scheme is appropriately aligned to RTAS and Sentinel Rules and will deliver a significant improvement in the depth and detail of the inspection. The Scheme has the ability to increase training standards across the rail industry and takes a more critical view of the standard of training as well as training provider infrastructure; collectively this will improve training standards across the industry. The details of the Quality Assurance Participation Scheme will be distributed shortly but the key changes are:
a) Delivery of assurance will be brought in house (to NSARE) and utilise assessors with rail knowledge and skills.
b) Ad hoc visits will be introduced outside any scheduled plan.
c) Evaluation will be risk based and aligned to methodology used in the Skills Assessment Scheme.
d) The ethos of continuous improvement features throughout the Scheme proposal.
e) Overall the Scheme is much more in depth and demands a greater level of supportive evidence."
He concluded by stating that the pricing structure would be largely unchanged.
"c. Rail Training Assurance Standards. Support the development of the Rail Training and Assurance Scheme (RTAS) standards.
d. Delivery of a rail training assurance scheme. Develop and deliver a rail training assurance scheme that drives up the quality of the training and the trainers."
"It enables NSAR to take steps and help us to change both RTAS and the requirements for Sentinel as and when we both think necessary and as required according to new developments. We recognise that NSAR has the relevant expertise and we are prepared to be guided by NSAR."
Relationship between NSAR and training providers
(1) organisation of the external exams which individual trainers have to take;
(2) liaison with Network Rail and their IT providers to help process issue of Sentinel cards; and
(3) regular two-monthly meetings or workshops with invited speakers on relevant industry issues or updates on the requirements of the relevant Network Rail rules and the Framework.
F. THE LAW
"At any time when the court determines a question arising under this Part, it must act (so far as is compatible with the provisions of this Part and whether or not it would otherwise be required to do so) with a view to securing that there is no inconsistency between—
(a) the principles applied, and decision reached, by the court in determining that question; and
(b) the principles laid down by the Treaty and the European Court, and any relevant decision of that Court, as applicable at that time in determining any corresponding question arising in Community law."
"… the concept of an undertaking encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed…."
"The fact that employment procurement activities are normally entrusted to public agencies cannot affect the economic nature of such activities. Employment procurement has not always been, and is not necessarily, carried out by public entities."
"It has also been consistently held that any activity consisting in offering goods and services on a given market is an economic activity [citing earlier authority]".
"In the present case, the medical aid organisations provide services, for remuneration from users, on the market for emergency transport services and patient transport services. Such activities have not always been, and are not necessarily, carried on by such organisations or by public authorities. According to the documents before the Court, in the past Ambulanz Glöckner has itself provided both types of service. The provision of such services therefore constitutes an economic activity for the purposes of the application of the competition rules laid down by the Treaty."
"254. Applying those principles to the present case, we note first that GISC is a private company that has been set up by the industry itself without any statutory basis. It exists solely by contract. GISC is not accountable to Parliament, nor to Ministers, nor indeed to anyone other than those in the industry who belong to GISC. As far as the constitution of GISC is concerned, GISC is run by a Board of Directors most of whom are, or have been, active in the industry….
255. On this basis GISC appears to us to have the features normally to be found in a private sector organisation or company accountable to its members, rather than a publicly constituted body exercising "public powers". We note also that, in the cases cited to us where the exercise of official or public authority was held to fall outside the competition rules, the activity in question had been exercised on some statutory basis of one kind or another. In the present case, GISC lacks any such statutory foundation.
256. We doubt whether, as a matter of Community law, the notion of the exercise of "official authority" or "public powers" can extend to cases where the legal basis of the activity in question is not to be found in the public law of the Member State but relies entirely on contract between private parties. Even if the Government is supportive of the principle of self regulation in the general insurance sector – which may not be quite the same thing as supporting a monopoly regulator for the whole sector, … - the Government is not, constitutionally speaking, the legislature….
257. Lastly, while it is true that the assumption of regulatory powers in respect of general insurance could properly be an activity of the State, … the setting up of a framework for promoting professional standards and consumer protection in general insurance is not an activity which, by reason of its intrinsic nature, can necessarily only be carried out by public authorities, as the case law appears to require.… "
"Taken as a whole, Eurocontrol's activities, by their nature, their aim and the rules to which they are subject, are connected with the exercise of powers relating to the control and supervision of air space which are typically those of a public authority. They are not of an economic nature justifying the application of the Treaty rules on competition."
"22. The anti-pollution surveillance for which SEPG was responsible in the oil port of Genoa is a task in the public interest which forms part of the essential functions of the State as regards protection of the environment in maritime areas.
23. Such surveillance is connected by its nature, its aim and the rules to which it is subject with the exercise of powers relating to the protection of the environment which are typically those of a public authority. It is not of an economic nature justifying the application of the Treaty rules on competition [citing Eurocontrol I]."
(1) A functional approach is appropriate: where a body carries out several activities it is necessary to consider whether the activity in question can properly be regarded as a discrete function: Aéroports de Paris; Eurocontrol I and II.
(2) Where the activity is of its nature a core function of the State, the body will not be an undertaking: Port of Genoa; Eurocontrol I; cp Höfner and Elser.
(3) The fact that the body does not operate for profit is relevant but by no means decisive: Ambulanz Glöckner; Höfner and Elser; Eurocontrol II.
(4) Where the activity in question has been (or is also) carried out by a private body on a commercial basis, that indicates that it is to be regarded as an economic activity such that the body carrying it out is an undertaking: Hofner and Elser; Ambulanz Glöckner.
(5) Where the charges levied by the body are determined not by it but by a public authority, that indicates that it is not an undertaking: Port of Genoa; Eurocontrol I; cp Aéroports de Paris.
(6) Where the power exercised by the body derives directly from legislation or is exercised on behalf of the State or a public authority, that indicates that it is not an undertaking: Eurocontrol I and II; Port of Genoa; and cp GISC.
"29. Whatever the position in 1947, running a railway is not seen nowadays in the United Kingdom as a function normally performed by a government authority. Indeed the [Railways Act 1993] reflected the view of the Conservative government of the day that ownership of and responsibility for running a rail network and providing train services belonged in the private sector. The present government shows no sign of wishing to return the railways to public ownership or control.
30. We are further impressed by the tenor of Council Directive 91/440/EEC on the development of the Community's railways, which was implemented by the 1993 Act. Whilst it contemplates railway undertakings continuing to receive public funds or remain in public ownership, it sets out firmly in the third recital that, in the interests of competitiveness and efficiency,
"Member States must guarantee that railway undertakings are afforded a status of independent operators behaving in a commercial manner and adapting to market needs"
31. Section 11 is headed "Management independence". Article 4 requires Member States to ensure that railway undertakings have independent status and management, administration, internal controls, budgets and accounts separate from the state. Article 5 requires measures to enable such undertakings to adapt to the market and run as commercial concerns.
32. To summarise, the Directive which gave birth in large measure to the 1993 Act adopts the principle that running railways is an activity for independent bodies, however created and funded, operating as competitive, commercial concerns according to the dictates of the market. Such an approach is the antithesis of the proposition that running railways is a function of governmental authorities."
The Hon. Mr Justice Roth
Dr. Clive Elphick
Charles Dhanowa O.B.E., Q.C. (Hon)
Date: 5 July 2017