Virgin Trains is launching legal proceedings against the government for choosing the "highest risk bid" for the west coast mainline over its own.
The court challenge is a last-ditch attempt by Richard Branson to block rival FirstGroup from securing the franchise. Virgin claims the government procurement process had ignored a "substantial risk" to taxpayers and customers from FirstGroup's bid.
Earlier transport secretary Justine Greening confirmed she would sign the new contract with FirstGroup. The move defies an e-petition, which now has over 154,000 signatures, calling for the decision to be reconsidered.
Branson, backed by the opposition and the chair of the Commons' transport committee, had suggested a pause to allow additional scrutiny of the decision by parliament.
After ministers ignored his demands he began the legal challenge.
"We had hoped that parliament or an external review would be able to scrutinise this badly flawed process before the franchise was signed," Branson said.
"However that opportunity would be denied if the Department for Transport (DfT) follows through with its determination to rush through the process before Parliament returns next week.
"We have not taken this decision lightly, but it is the only course now available to try to unravel this sorry process."
Greening insisted today's contract signing came at the end of a "very fair, established, rigorous process" which had lasted 15 months, in which Virgin Trains had not raised any concerns until the decision was announced.
"I have a huge amount of respect for both Richard Branson and Virgin as a company, but we have to take the bid that is the best value for taxpayers," she told the Today programme.
"If we're going to move off above-inflation rail rises we have to start getting more value from lucrative franchises like west coast mainline."
FirstGroup said they would give the government £5.5 billion, compared to Virgin's £4.8 billion. Some observers have doubted their ability to achieve that figure, which requires annual revenue increases of ten per cent, but Greening insisted that the bid was "achievable".
"The taxpayer invested £9 billion over the last decade in upgrading the west coast mainline," Greening added. "We expect some return."
Virgin pointed out that the incremental value from FirstGroup's bid would only be delivered after 2022 and pointed out that its own bid had been "more deliverable and a lower risk".
Labour has also warned that FirstGroup has ended its Great Western main line services before its franchise period came to an end, thus avoiding the heaviest payments to the government.
"This incentivises an early exit from the franchise as premium payments rise and the recent history of the company heightens concerns that this is a very real possibility, not least when the penalty for terminating the franchise is a fraction of these amounts," shadow transport secretary Maria Eagle wrote in a letter to Greening yesterday.
"Due to the wide-ranging nature of these concerns, I would therefore urge you to delay any signing of this contract until after you have made the statement to parliament – a statement I'm sure you will agree is appropriate for such an important and contentious decision."
Greening's decision to ignore the call will disappoint the many celebrity tweeters who have voiced support for Virgin, including Alan Sugar, Eddie Izzard and Derren Brown.
Dermot O'Leary said he was a big fan of the uniforms worn by Virgin staff, while Rio Ferdinand stated that "u know you get good dindins coming home from Matches".