The European Court in Luxembourg has decided that a train operating company did not break European equal pay laws when it refused to give a woman employee a concessionary travel pass for her lesbian partner.
The concessions are available to what are described as common-law spouses - provided there is a meaningful relationship and the partners are of the opposite sex.
Rail worker Lisa Grant had argued that the pass, worth £1,000, would have been granted if her partner were male.
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But the court backed the claim of South West Trains (SWT) that its policy does not break current European law - because the travel concession denied to Jill Percey as a lesbian would also be denied to the homosexual partner of a company employee.
Ms Grant initially accused SWT of sex discrimination in 1995. Two years later, represented by Cherie Booth QC she took the case to the European Court in Luxembourg.
The lesbian couple were downcast after the court's judgment was read out.
They had hoped the judges would move the law on, as they were advised to do in September 1997 by the Advocate-General.
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Ms Grant said it was now up to national governments to change legislation.
"We believe this was a straightforward case of sex discrimination, but obviously the judges did not agree, " she said.
But she said simply by raising the issue, the case had done some good. "We set out to try to raise awareness that there is discrimination in the workplace and we have done what we set out to do."
The decision has also come as a blow to lesbian and gay rights campaigners who believed a victory in Luxembourg could have forced major changes in Britain's employment, pensions and social security systems.
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A spokeswoman for one such group, Stonewall, said she was "bitterly disappointed" with the ruling. "We think it is wrong, but there is no appeal open to us."
The group said it would now switch its campaign to press the government to bring in legislation in the UK to outlaw discrimination against gays and lesbians.
Lesbian and Gay Employment Rights spokesman Dai Harris said campaigners were now looking ahead to the case of a sailor sacked by the Royal Navy in 1995 because he was gay.
Terry Perkins is claiming that his dismissal was sex discrimination and is waiting for a date for his case to be heard in Luxembourg.
Stonewall
European Court of Justice
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