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Thursday 25 October, 2001

Strategic Rail Auth

SRA Enforcement Action

Strategic Rail Authority
25 October 2001


         Arriva Trains Faces £2million Fine in SRA Enforcement Action

The Strategic Rail Authority today published a notice containing the draft of
an enforcement order, as well as details of a proposed penalty, to be made
against Arriva Trains Northern Limited (ATN).  This follows extensive service
disruption in recent months on the wide ranging North of England operation.
Around 1000 trains a week have regularly been cancelled over the May to
September period this year.

The SRA will consider any representations which are made during the 26 day
consultation period, which starts today, on the proposed enforcement order and
penalty.  The SRA proposes to levy a penalty of £2 million in relation to ATN's
cancelled trains in respect of the period from May to August and to make the
proposed order in respect of train cancellations during September / October so
as to ensure that ATN recruits and trains sufficient drivers to enable it to
provide its timetabled services.  In the event that the order, when made, is
breached, ATN will be required to pay an amount of £5,000 per driver per
calendar month below the agreed target.  The SRA expects that the penalty and
the enforcement order will be imposed on ATN in late November.

SRA Chief Executive Mike Grant said,

'Passengers on this intensive regional network have suffered an unacceptable
level of cancellations in recent months. ATN has until 19 November to convince
me that it is operating, and will continue to operate, a proper service. If
performance does not improve, the company faces the possibility of further
serious sanctions including, ultimately, franchise termination'.

ATN and other interested parties can make representations to the SRA about the
proposed enforcement order and penalty, by 19 November 2001.  The SRA will
require Arriva Trains Northern to display copies of the order at every station
that it serves.

Separate from today's enforcement order, the SRA and PTEs have agreed a service
mitigation plan with the company.  This permits ATN to remove temporarily an
average of 1000 services per week (Mon-Sat) with effect from 29 October 2001 to
24 February 2002.  During these 4 months, ATN will be required to operate and
publicise details of substitute bus services in the areas of the network
affected.

In return for this permission, Arriva Trains Northern must fund passenger
benefits to the value of £250,000 per four week Period for the duration of the
plan.  The service reduction has been permitted for this limited period to
provide passengers with greater certainty about which services will be
operating, and to enable focus on recruitment and training of drivers.

Notes to Editors

1.      The Notice is given under Sections 56 and 57C of the Railways Act 1993,
as amended by the Transport Act 2000.  The action is taken under Sections 55
and 57A.

2.      Whether the order is made or not, ATN will continue to be liable for
payments under the performance regime in place between it and the SRA and PTEs.
The standard Passenger's Charter compensation arrangements apply and are
unaffected by the issue of this order or penalty.

3.      The SRA proposes to make an enforcement order because, in its opinion,
ATN is likely to continue to commit breaches of the franchise agreement as it
is likely to cancel more than 3.5% of the trains during future periods.  This
is above the limit in its franchise agreement for call-in. The SRA proposes to
impose the proposed penalty because, in its opinion, a penalty is appropriate
in the circumstances of ATN's poor performance over the last few months. If any
operator has three or more call-ins in three years, the SRA must consider what
breach action is appropriate.  Normal enforcement action in the form of breach
notices have been issued for the periods up to Period 13 this year (from 4
March 2001 to 31 March 2001).

4.      ATN runs approximately 9,000 trains each week.  The call in limit on
ATN for cancellations is 3.5% and for breach 4.5% and for total cancellations
is 2.5% for call-ins and 3.5% for breach.  These limits are based on historic
BR levels of performance.  For the purpose of measuring cancellations in the
franchise agreement, certain types of incident specified in the agreement are
treated as force majeure.  The franchise operator is allowed to deduct these
before calculating the percentage of cancellations.  Force majeure does not
apply in the incentive regime.

5.      The Regional Railways NorthEast franchise commenced on 2 March 1997.
It subsequently changed its name to Northern Spirit.  The original franchisee
was MTL Rail Ltd.  In February 2000, Arriva plc acquired the company.  The
franchise has now been renamed Arriva Trains Northern and is contracted to
finish in February 2003.

6.      Section 55 of the Railways Act 1993 imposes a duty on the SRA to act to
take action against a franchise operator, where the operator is in breach or
likely to be in breach of the franchise agreement.  The SRA can achieve this by
issuing a provisional or final order which specifies the action required to
prevent or rectify the breach and which may impose a fine.  Provisional orders
do not require any prior notice period and expire within three months of their
being made unless confirmed as a final order during that period.  Before a
provisional order can be confirmed or a final order issued, the SRA must
publish it and must consider any representations or objections that are made.
At least 21 days must elapse between publication and confirmation or issue of
such orders.  The SRA must not make a final order or confirm a provisional
order, if to do so, would conflict with its duties under section 4 of the
Railways Act 1993 or under Section 207 of the Transport Act.

7.      Section 56 covers the procedural requirements for S55 orders.

8.      Sections 57A of the Railways Act provide the SRA with a penalty power
separate to enforcement orders.  This power is additional to the powers to 
impose an enforcement order and particularly allows past contraventions to be 
addressed.  The penalty will apply to Periods 2 to 6 (29 April 2001 to 15 
September 2001).

9.      In setting a monetary penalty which is appropriate in the
circumstances, the SRA has had regard in particular to the level of
cancellations since April 2001 and the value of passengers' time contained in
the incentive regime under Schedule 7 of the Franchise Agreements; the amount
of the Franchise Payments payable to ATN and ATN's turnover.  For the fine in
the enforcement order the SRA has focused on what the order is trying to
achieve, ie an increase in the number of productive drivers so that ATN can
operate its timetabled services.

10.  Representations should be sent to David Rea, Strategic Rail Authority, 55
Victoria Street, London SW1H 0EU (marked 'ATN Responses').

      E-mail address: [email protected] Fax: 020 7654 6010


       Media Enquiries: SRA Press Office 020 7654 6339/ 6387/ 6234/ 6294

    Latest news and announcements from the SRA can be viewed on our website
                                www.sra.gov.uk


                               Important Notice

This news release is issued by the Strategic Rail Authority and its contents
have been approved for the purposes of section 57 of the Financial Services Act
1986 by KPMG Corporate Finance.

KPMG Corporate Finance is a division of KPMG which is authorised to carry on
investment business by the Institute of Chartered Accountants in England and
Wales. This news release has been prepared for general information purposes
only and is not intended to form the basis of any investment decision or
constitute an offer or invitation to bid for any passenger rail franchise or to
acquire shares in a train operating company. Neither this news release nor any
copy of it should be taken into or distributed in Canada, France, Japan or the
United States except in accordance with an applicable exemption. The
distribution of this news release in other jurisdictions may be restricted by
law and therefore persons into whose possession this news release comes should
inform themselves about and observe any such restrictions.

KPMG Corporate Finance is acting for the Strategic Rail Authority  and will not
regard any other person as its client in relation to passenger railway
franchising or be responsible to anyone other than the Strategic Rail Authority
for providing the protections afforded to clients of KPMG Corporate Finance nor
for advising any other person on the contents of this news release or any
matter referred to in it



                                                                                
                                                 

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