Eurostar GC: Track record

In his short time as Eurostar’s GC, Scott Marshall has steered the company through a panel rationalisation and a High Court defence case

Scott Marshall, general counsel at Eurostar International, must have felt like pulling the emergency stop cord just days after taking the job. After inviting panel firms to present to the legal team, one firm representative apologised because the train in a picture he used for a Powerpoint presentation had red lights at the ‘front’, meaning it was, in fact, the back. He could not get a picture of a train showing the white lights that go at the front.

Little did the partner suspect that Marshall himself did not know the difference between the front of a Eurostar train and the back, but he soon had much more serious matters to deal with.

Fleet first

When Marshall joined Eurostar in 2011 from TalkTalk, the politically heated litigation between the company and France’s Alstom Transport was already well under way. The case saw Alstom sue Eurostar and Siemens over the decision to grant the German company a contract for the provision of a new fleet of Channel Tunnel trains. The idea that Eurostar, partly controlled by French state rail group SNCF, could grant a key contract to a German company was not well-received in Paris and reportedly led to then-French president Nicolas Sarkozy taking the issue up with German chancellor Angela Merkel.

Alstom alleged that Eurostar’s procurement process breached the Utilities Contracts Regulations 2006, a claim that relied on the argument that Eurostar was a “utility” and thus required to comply.

Eurostar instructed Burges Salmon partner Chris Jackson and Monckton Chambers duo Michael Bowsher QC and Ewan West, while Alstom turned to Hogan Lovells partners Ciara Kennedy-Loest and Rupert Sydenham, who instructed Keating Chambers’ Sarah Hannaford QC and Jessica Stephens of the same set. Eurostar’s in-house effort was led by impressive head of legal Paula Staunton, who has since left.

The case had already been to court twice and was set for a third hearing when Marshall arrived as Eurostar’s first general counsel.

“I was lucky,” Marshall comments. “I joined in September 2011 and by that stage the case was well under way. Before I arrived, we’d already been to court twice, with a third hearing looming.”

The case went to the High Court, which ruled in January 2012 that Eurostar was not a utility and not subservient to the regulations. People had only perceived Eurostar as one because it had chosen to abide by certain procurement guidelines for utilities.

Scott Marshall

“Because we followed that process a lot of people assumed we were a utility,” Marshall points out. “Alstom cried foul and the debate continued throughout the legal proceedings that followed.”

The case was an awakening for Marshall, who was also briskly getting down to another key item on the legal team’s agenda: a panel review. Indeed, this was on the agenda from day one. Marshall saw the need to farm less work out to private practice firms, which, for Eurostar, had included Burges Salmon for rail advice, Osborne Clarke for corporate, commercial, TMT and employment matters and Clifford Chance for areas such as competition and finance.

The review was far from drastic, with Burges Salmon and Osborne Clarke holding on. The big change was the elimination of Clifford Chance, not because of its quality or performance but because Marshall felt a company the size of Eurostar did not need magic circle advice.

CMS Cameron McKenna took Clifford Chance’s place, advising on regulatory and competition matters, with corporate partner Bill Carr and competition partner David Marks to the fore.

Osborne Clarke had been on the list for some seven years, while Burges Salmon had been on board for three to four. One of Osborne Clarke’s biggest gigs was its advice to Eurostar on its incorporation in 2010, prior to which it was a joint venture between SNCF, Belgian rail operator SNCB and London and Continental Railways. Corporate partner Simon Smith led the Osborne Clarke team, with Clifford Chance advising on competition matters.

The competition environment was key as the Third Railway Package was coming into force in the same year, pressing operators to make their infrastructure available to any service provider.

Around the same time, Eurostar entered into its infamous agreement to acquire 10 trains from Siemens, with Burges Salmon advising. Clifford Chance advised on the loan to fund the deal.

The panel appears to be treating Eurostar well, although not all its advisers are on it formally: it also uses Eversheds partner Marc Meryon for industrial relations and union matters, as well as Liedekerke Wolters Waelbroeck Kirkpatrick in Belgium and August & Debouzy in France.

The firms may be under scrutiny again this year.

“The panel was for a two-year period that will expire around the end of 2013,” Marshall says. “We have an option to extend it to the end of 2014. You always want to allow yourself a bit of wriggle room.”

At least this time he’ll know what a white light on a train means.

Scott Marshall, Eurostar

Title: General counsel

Reporting to: Gareth Williams, regulatory director and company secretary

Employees: 1,700

Legacy capability: Six in London, two in Paris

Annual legal spend: Around £1m (excluding Alstom litigation)

Annual revenue: £803m (2011)

Main external law firms: Osborne Clarke, Burges Salmon, CMS Cameron McKenna, Eversheds, August & Debouzy, Liedekerke Wolters Waelbroeck Kirkpatrick

Eve Monot, GC, SNCF Voyages Développement / head of legal, SNCF Voyages

Mon

In-house lawyers in the rail sector face many challenges in the next months or years.

First, the upcoming Fourth Railway Package from the European Commission (EC) will modify our daily activities. According to directive 91/440/EEC, member states must separate infrastructure, operated by infrastructure managers, from rail services, operated by carriers. Rail undertakings and member states must discuss how to comply – to unbundle or not to unbundle – without higher transaction costs, splitting liability or compromising safety.

In the same package we will have to work on liberalisation in domestic markets, with its impact on Public Services Obligations and competitive tendering.

International markets have been open since 2010. The implementation by national regulatory bodies of international liberalisation must be checked out, mainly on cabotage rights and track access charges.

Second, consumer associations and the EC have asked for better passenger rights regulations, linked to better connectivity between transport modes. Passengers should be able to plan, book, pay for and collect their tickets seamlessly.

Lawyers should also check that their internal strategies comply with competition laws, so as not to discourage new entrants. So all in all, 2013 will be a tough year.

Lucy Lazzeri, GC and company secretary, HS1

Laz

HS1 holds the concession to run the UK’s only high-speed railway, High Speed 1 (HS1), which connects St Pancras to the Channel Tunnel. On HS1, Eurostar operates the international service and Southeastern High Speed is operated by LSER.

The regulatory review of our operation, maintenance and renewal charges comes up for the first time in the next 24 months. At the same time we are looking for new customers: for example we’ve been in discussions with Deutsche Bahn for a service from Frankfurt and Amsterdam to London. This is all considered in European open access regimes including the Fourth Railway Package. Publication of the package has suffered delays and, given pressure from Germany and France, its introduction is likely to remain a hot topic.

In October 2012, HS1 issued private placement notes to partially refinance acquisition debt. On 25 January we established a multi-currency bond programme and negotiated a new bank facility with the aim of refinancing the outstanding amounts. This will all result in a refinancing of around £1.5bn.

Given the unique framework we work within, this has been a great challenge but also an opportunity to explain HS1’s great performance record. We have achieved an ‘A-minus’ rating, which will contribute to successful completion in the next few weeks.