The definition of a Primary Purpose Customer is a customer(s) other than the third party referred to in Condition J7.1.2(a). … ORR considers that this must be the customer where the QAR [“Quantum Access Right”] concerned relates to transport services provided to that customer. It cannot be just any other customer of the Incumbent reliant on another QAR. The Primary Purpose rule relates to the transport service using a specific QAR .

(ORR appeal of ADA21, para 63)

ORR considers that the definitions in the Network Code and in the track access contracts are not inconsistent. A QAR [“Quantum Access Right”] with a Y-Path in the Rights Table should appear as a Y-Path in the Working Timetable, assuming that the Train Operating Company has made an access proposal for both. The track access contract concerns the allocation of QARs. The Working Timetable is how those rights are expressed in a timetable period as Train Slots.

(ORR appeal of ADA21, para 70)

It is my view that the obligation is on operators, whether the Applicant or Incumbent to provide sufficient evidence for their Third Party Notice, or Third Party Counter Notice in the first instance to substantiate their submissions. This case has involved late disclosure of additional information which has made it harder for NR to discharge its obligation under Part J and made this ADA more complicated than it needed to be.

I find that NR discharged its obligations under Part J of the Network Code, acted in good faith and reasonably and that its decision should stand subject to the amendments in relation to the associated Train Slots.

(ADA50, paras 57, 58)

… acceptable reasons for a Failure to Use all revolve around a factor which is quite clearly outside the control of the train operator – a commodities fluctuation, a fire, a strike. In these cases, the cessation of use follows directly from a decision or action which was taken by someone other than the train operator … though the list is non-exhaustive we consider it would be wrong, having regard to the intention of Part J, to allow reasons which do not share that characteristic. It logically follows then, that a Failure to Use which flows from an action taken by the train operator and which is within its control is not an acceptable reason for a Failure to Use.

In ORR’s view, a Failure to Use arising out of the decision (taken here for economic reasons) to close the … terminal is a classic example of a decision within the control of the operator. As such it is not an acceptable reason for a Failure to Use. The economic nature of the decision is not the decisive factor in considering acceptable reasons for a Failure to Use.

(ORR appeal of ADA05, paras 84, 85)

…the Panel also finds that Condition J4.9.1 [now J4.8.1] states that when serving any Counter Notice, the Train Operator “must provide evidence with the Counter Notice in support of its contentions….

The Panel was advised, by the Disputes Chairman that a requirement that a proposition be supported by evidence is, in this particular instance, not legally satisfied merely by an assertion made without support of evidence.

The Panel considered the Counter Notices as served by DBS, and concluded that, notwithstanding such other background information that it might have been given, such as the letter from Stobart supplied to Network Rail on 11th November 2009, and representations made at the hearing, its mandate to consider whether or not DBS had a “reasonable on-going commercial need” had to be determined on the evidence, as opposed to any assertion, provided “with the Counter Notice in support of its contentions”.

After careful consideration the Panel concluded that DBS had not supplied any evidence of “reasonable on-going commercial need” with its Counter Notice, and that neither an assertion, nor a letter (that of 28th September) sent on November 11th (four weeks after the Counter Notice), fulfils that requirement. Failure to comply with such an unequivocal formulation as ““must provide evidence with the Counter Notice in support of its contentions” has therefore to imply that

• the Counter Notice does not have effect;

• the Panel has no basis or requirement to consider the merits of any arguments brought by DBS in relation to “reasonable on-going commercial need”; and

• Network Rail is entitled to proceed as if, in accordance with J4.9.2 [now J4.8.2], “no [valid] Counter Notice is served within 10 Working Days of receipt of a Failure to Use Notice: (a) the Train Operator [now Part J Access Beneficiary] will be deemed to have agreed to the surrender specified in the Failure to Use Notice;” and therefore

• Network Rail shall be entitled to proceed to carry out the processes for “Surrender of Access Rights” as prescribed in Conditions J4.12 and J5.4(d) [now J5.3.1(f)], and their transfer to the Applicant…

(ADP42, ADP44, paras 37, 38, 39, 40)

[The logic of the arguments addressed in the immediate foregoing paragraphs were considered by the ORR, to be “correct in terms of DBS’ challenge on the grounds of reasonable on-going commercial need”. This endorsement, which may be of value in other instances, was rendered irrelevant by the ORR’s other findings in respect of the proper interpretation of J5.3 (qv). The adequacy or otherwise of the form of a Counter Notice, is of but academic interest, where the initial Notice has been deemed to have been inadequately formulated.]

(ORR appeal of ADP42, ADP44)

[The Panel was asked to determine when, (i.e. what were the preconditions to be met) Network Rail could issue a Third Party Failure to Use Notice. Thus:]

The Panel … construed J5.1 on the following basis.

The issuing of a Third Party Failure to Use Notice by Network Rail to an Incumbent is dependent upon the fulfilment of four specific stated pre-conditions: as these pre-conditions are all linked by “and”, the Panel considered that all four must be met or no notice can be issued.

J5.1 (a) states that the route to the issuing of a notice starts with “an application from … (the “Applicant”) for a Quantum Access Right to a Train Slot”; this means that the Applicant (in this case FSR) is seeking (i.e. does not already possess) Rights such that it may become the Train Operator authorised to make use of a specific Train Slot; this in itself implies that the Train Slot sought is one that pre-exists the application and is not a Train Slot already secured by the Applicant (i.e. FSR);

“Train Slot” is itself a defined expression, (“a train movement or a series of train movements, identified by arrival and departure times at each of the start, intermediate (where appropriate) and end points of each train movement” [Network Code Part D]) and relates to the totality of the capacity Network Rail is required to allocate for the complete passage of the relevant service.

In J5.1(b) [now J5.1.1(b)] this definition is further qualified, in relation to both the Applicant and the Incumbent, viz (b) the Train Slot: [i.e. the Train Slot that is the subject of the application] (i) is one in respect of which the Applicant can demonstrate a reasonable commercial need; and (ii) was secured in exercise of a Quantum Access Right of another … (the “Incumbent”); and (iii) is one in respect of which there is a … Failure to Use by the Incumbent

The Panel noted that the parties had focussed their disagreement upon the meaning of Condition J5.1(b) (ii), and the Panel considered this first, as failure to fulfil any one of the four pre-conditions would validate Network Rail’s decision to decline to issue a Third Party Failure to Use Notice.

• J5.1 (b) (ii) makes clear that the Train Slot that is the subject of an application needs to derive from the Quantum Access Right of …. “the “Incumbent”, which cannot therefore be FSR “the Applicant”. Furthermore, as a Train Slot has no substance other than when incorporated as an entry in a Working Timetable, “was secured in exercise of a Quantum Access Right” can only mean that the Right was converted by the Incumbent from latent obligation to practical reality by the process of Bidding and Offering prescribed in Part D (Timetable Change). Had DBS, the Incumbent, made a bid, the Train Slot that would have been secured would have been one permitting the passage of a Freight train over the Forth Bridge en route between Hunterston and Longannet (or vice versa).

• FSR did not make explicit precisely what Train Slot(s) it currently has “secured in exercise of” its Contingent Rights; however, to the extent that those Train Slots relate to services between Edinburgh, Fife and Aberdeen, FSR’s Train Slots have very little in common with the Quantum Firm Rights to move coal from Hunterston to Longannet held by DBS (at most no more than timings between Dalmeny Junction and Inverkeithing or Charlestown Junctions); therefore

  • it would not be reasonable to equate a Train Slot between Hunterston with Longannet with one between Edinburgh and Aberdeen, and

  • the common fragment of both Train Slots (i.e. across the Forth Bridge) does not qualify to fulfil the definition of a Train Slot;therefore

• FSR’s case falls because

  • DBS has not secured a Train Slot, and even if it had

  • the Train Slot secured in relation to movements between Hunterston and Longannet, would not have sufficed for a passenger service between Edinburgh, Fife and Aberdeen.

On the basis of this construction of Condition J5.1(b) (ii) the Panel questions Network Rail preparedness to concede that FSR fulfilled Condition J5.1(b) (i). Whilst FSR has a “reasonable commercial need” for paths across the Forth Bridge to operate passenger services between Edinburgh, Fife and Aberdeen, FSR’s “commercial need” cannot be fulfilled in terms of the Train Slots that might be “secured in exercise of” DSB’s Level 1 Rights.

As FSR does not fulfil either of J5.1 pre-conditions (b) (i), or (b) (ii), a consideration of (b) (iii) might be considered superfluous. In the event, the parties and the Panel were agreed that there was no Failure to Use by the Incumbent as the Incumbent, for responsible and previously tested reasons, had elected not to exercise the right to secure a Train Slot between Hunterston and Longannet via the Forth Bridge in the December 2009 Working Timetable. The Panel therefore concluded that, because of its failure to meet the requirements of J5.1(b)(ii), by extension FSR’s notice did not meet the requirements of J5.1(b)(iii).

(ADP41, paras 19, 20, 21, 22, 23, 24, 25, 26)

… for Condition 7.1.2(a) parties must look at the transport services actually provided and not entirely rely on what is in the contract with the customer.

(ORR appeal of ADA21, para 61)

The ability to associate Train Slots and with Firm Access Rights is currently open to subjective determination and it has been put to me that it is unclear if the two can be associated. NR and DBC submit that Firm Access Rights and Train Slots can be associated when minor variances exist. GBRf agrees with this in principle.

It is my view that each case must be decided on its facts but in general, as in the circumstances before me, Firm Access Rights and Train Slots can be associated when they share substantially similar characteristics. In this case the Arrival Window was quite different (13:15 – 14:15) compared to the Train Slot … However, on the basis that the Origin, Destination and Departure Window matched, in my view it is enough to establish that there were substantially similar characteristics. In my view a pragmatic approach is required in approaching this matter and the fact that the Train Slot is outside the Arrival Window of the QAR does not negate the establishment of association when the other characteristics of Origin, Destination and Departure Window are similar.

In short, a Train Slot does not need to match all of the contractual characteristics set out in columns 1 to 18 of the Rights Table in order to be considered “related” to a QAR under the definition of “Rights Subject to Surrender” within Condition J1.2 sub-paragraph (i) “any Train Slot, including any Y-Path, or part of it in the Working Timetable which relates to that Quantum Access Right.” However, a Train Slot does need to match substantially the contractual characteristics. The word “substantially” is being used in its ordinary sense, meaning to a significant extent or more than 50%.

[Therefore…]

I determine that DBC is the Train Operator who is replacing the Incumbent, GBRf, in the provision of transport service to a third party, PN, where the QAR relates to the provision of those transport services.

GBRf had a contractual relationship with PN when operating the service. DBC has a contractual relationship with ER and ER, in turn, has a contractual relationship with PN. …

I am satisfied that the transport services are so closely related as to satisfy the requirements of Condition 7.1.2(a). The transport services are the same, namely the transportation of spoil belonging to PN from Angerstein Wharf to Roxby Gullet and the insertion of ER into the contractual chain between PN and DBC, the freight Train Operator satisfies the test in Condition 7.1.2(a) of replacing GBRf in the provision of transport services to a third party. In my view the third party subcontractor can be considered the relevant freight customer, as referred to in Condition J7.2.1 (a).

… In support of its application DBC provided an email from the Third Party, ER, a company with whom GBRf has never held a commercial relationship for the operation of the traffic. GBRf submits that the correspondence from ER is not relevant because the relevant letter must come from the freight customer for whom the Access Rights were established.

In my view on the basis that ER is the Third Party the evidence submitted by DBC is sufficient.

In my view had PN inserted an intermediary and that intermediary had subcontracted the transport services to GBRf, GBRf would have continued to operate the transport services using the Rights Subject to Surrender.

(ADA50, paras 53, 54, 55, 32, 33, 34, 36, 37, 38)

I am satisfied that DBC has suitable access to Roxby Gullet. I determine that it was sufficient for DBC to specify in the application that it has suitable access to and from the relevant facility to meet its obligations under clause 6.4 of its access agreement. There is no burden of proof in Condition J7.3.1(d) or in Condition J7 generally on DBC because GBRf has no entitlement to determine whether DBC is meeting the terms of clause 6.4. It is NR that has these entitlements. GBRf is not entitled to request proof of the access arrangements particularly where those arrangements are commercially confidential. I determine that DBC provided information to NR that permission is granted to enable the transport services to access Roxby Gullet for the purposes of meeting its obligation under clause 6.4 of the access agreement and this is sufficient.

(ADA50, para 43)

Train Slots should not be removed by the incumbent prior to a Hearing, lest they have the potential effect of pre-empting the outcome of an ADA.

(ADA50, paras 50, 51, 52)