Railways Act 2005

Railways Act 2005

2005 CHAPTER 14

Commentary on Sections and Schedules

Part 2: Public Sector Funding Authorities for Railways

Assisting and securing the provision of services

Section 12: Transfer schemes at end of franchising agreements

76. Section 12 provides for the making of a Transfer Scheme when a franchise agreement terminates (for whatever reason) to transfer the relevant franchise assets (as defined in section 12(8)). Under section 27 of the 1993 Act, the SRA has power to designate property, rights and liabilities as "franchise assets" under a franchise agreement. These "franchise assets" are important to the operation of the franchised services, and accordingly section 27 provides that franchise assets may not be disposed of by the franchise operator without the consent of the SRA. Schedule 1 of this Act amends section 27 so that these functions will be exercised in future by the Scottish Ministers in relation to Scottish franchise agreements, and by the Secretary of State in relation to other franchise agreements.

77. Section 12 is primarily intended for use where a franchise agreement is terminating, and a new franchisee is taking over from the existing franchisee. The Secretary of State or the Scottish Ministers, as appropriate, may make a Transfer Scheme for the transfer of the franchise assets from the old franchise company to the new franchise company. The old franchise company will be paid for the franchise assets in accordance with the terms of its franchise agreement.

78. However, there may be circumstances in which a franchise agreement terminates but is not replaced with a new franchisee. This may happen, for example, where the franchise agreement terminates and the services have to be provided under amended section 30 of the 1993 Act by the Secretary of State or the Scottish Ministers as "operator of last resort". In order to enable the Secretary of State or the Scottish Ministers (or a company owned by one or both of them) to discharge the duty to act as operator of last resort, it is necessary for the franchise assets to be transferred to them. Section 12(2) makes provision for this.

79. Section 57(3) and (4) explains the meaning of companies which are "wholly owned" and "jointly owned" for the purposes of this Act. Section 12(2) uses these terms.