Over the past decade, the European Commission has pursued a strategy for the revival of rail transport in the European Union (EU), to achieve a more competitive and resource-efficient transport system. In 2013 this process has moved to a new phase with the publication of a draft legislative package to liberalise domestic passenger rail services within EU Member States.
In the wake of the White Paper on Completing the Internal Market, work began in the early 2000s on a series of legislative packages to create a common framework for an internal rail market. The packages introduced reforms to boost the competitiveness of European railways by means of gradual liberalisation. The First Railway Package (2001) laid the foundations for the opening of freight services. The Second Railway Package (2004) aimed at improving interoperability, established the European Railway Agency and set a common regulatory framework for rail safety. The Third Railway Package (2007) provided for the opening of international passenger transport. In 2012, the European Parliament (EP) and the Council recast the first package to simplify, consolidate and reinforce existing provisions and establish a single European railway area.
The European Commission’s proposals for a Fourth Railway Package – published in January 2013 – take this process to its conclusion. The new package comprises six legislative proposals amending most of the existing EU directives and regulations in the railway sector and focusing on three key areas, reviewed briefly below. The Commission also proposes to repeal a Regulation authorising Member States to pay financial compensation to certain companies for expenses linked to obligations (e.g. family allowances, pension contributions, etc.), which companies operating in other modes of transport are not required to assume. This Regulation is incompatible with the new provisions of the 2012 Directive establishing a Single European Railway Area, as well as with other legislative measures currently in force (e.g. on State aid).
Under the First Package there was a requirement to have, within a vertically integrated rail entity, a degree of functional separation (e.g. legal and organisational separation) between its infrastructure-management activities and its service-operation activities. However, the European Commission observed that the requirement often resulted in discrimination between incumbents and new entrants. To address the issue, the Commission suggests introducing a much greater distinction between infrastructure managers and service operators, either through complete institutional separation (e.g. via independent corporate groups) or in a vertically integrated company (e.g. with a holding structure) to guarantee the necessary legal, financial and operational separation (e.g. separate decision-making bodies, financial flows and IT systems and cooling-off periods for transfer of staff). The aim of these measures is to ensure that the liberalisation of rail services is not hampered by discriminatory measures on the part of infrastructure managers (for example, aiming to keep a new entrant out of the profitable segments of a route).
Opening of domestic passenger markets
The Commission proposes that, by December 2019, EU railway companies are granted access to infrastructure (i.e. track, signals, etc) to provide all services – including, for the first time, domestic passenger services – in all EU Member States. Until now, such access was granted only for freight operations (under the second package) and for international passenger services (under the third package), although international passenger operators were allowed to transport passengers between stations within a single Member State as long as they were on the international route (cabotage). The opening of domestic passenger markets would be subject to the provision that the access granted must not compromise the “economic equilibrium” of a public-service contract (i.e. rail operations under which the operator is subject to a “public service obligation” to undertake unprofitable activities).
In addition, the Commission suggests that public-service railway contracts be subject to mandatory tendering. This will apply to all new public service contracts from December 2019 and all existing public service contracts from the end of 2022. However, the obligation will be linked to a value threshold, below which there can be direct awards if the cost of a competitive tender would exceed the expected savings of public funds.
Interoperability and safety
Rail liberalisation can only be achieved in practice if there is interoperability between the railway infrastructure, rolling stock (e.g. locomotives, carriages) and systems of different Member States. Under the second package, a European Railway Agency (ERA) was established to facilitate this, producing common technical standards and safety indicators and targets. However, its role has largely been one of making recommendations. Under the fourth package, the European Commission proposes to enhance ERA’s role. The agency’s new powers would include issuing vehicle authorisations for placing on the market, safety certification for railway companies, monitoring national safety authorities, and supervising national rules. The idea is for the new agency to act as a one-stop-shop and reduce by 20% the cost and length of the rolling-stock authorisation procedure, and the time needed for new companies to enter the market.
In December 2013, the EP’s Transport Committee adopted the respective reports. These largely follow the initial Commission proposals, while allowing for more flexibility on the most controversial points.
On domestic passenger markets and governance (Saïd El Khadraoui, S&D, Belgium) the date for opening was kept at 2019. On the subject of the governance model, the text retained strict financial conditions for vertically integrated companies (e.g. separate accounts between entities, no cross-subsidy, etc.) but left the definition of “organisational” conditions (e.g. waiting period before staff can move from one company to another to prevent conflicts of loyalty) to national regulators. With regard to the social dimension of the package, MEPs backed compliance with collective agreements set up at national level.
In relation to the award of public service contracts (Mathieu Grosch, EPP, Belgium), the report adopted in committee maintains the possibility of attributing public contracts directly. However, the public authorities have to justify their choices before the regulator. Member States would have until 2022 to phase in the new rule. To ensure that new entrants and smaller operators are able to fulfil public service contracts, a minimum number of public service contracts to be awarded in a MemberState would be set, based on the size of the national market. The EP mandate foresees one for very small countries (under 20 million train/km), two to three for countries with 20 to 200 million train/km, and four for countries with over 200 million train/km.
The repeal of the regulation authorising Member States to pay financial compensation (Jaromír Kohlíček, GUE, Czech Republic) to certain companies was voted. Under the technical pillar, the recast of the regulations on interoperability (Izaskun Bilbao Barandica, ALDE, Spain), safety (Michael Cramer, the Greens/EFA, Germany) and the new powers of the European Railway Agency (Roberts Zīle, ECR, Latvia) was confirmed. Gradually, the national certification agencies should transfer their competence to ERA (over four years), unless mutual recognition is established between certain Member States.
In January 2014, Greece’s Deputy Minister for Infrastructure Michalis Papadopoulos assured the members of the EP’s Transport committee that the Fourth Railway Package would be a top priority for the Greek EU Presidency. The Presidency intends to come up with a general approach on ERA’s revised powers in March 2014. Work is also due to begin on domestic passenger markets and governance (the exact order is not yet clear). The Presidency plans to present a progress report at the Transport Council in June. However, the probability of moving on the technical pillar ahead of the European elections seems pretty low because of lack time. In addition, according to the minister “the overwhelming majority of States are either indifferent or opposed” to the idea.
Speaking at the European Railway Awards ceremony in January 2014, European Commission Vice President in charge of transport Siim Kallas noted that negotiations were ongoing but he believed they would not be easy. He went on, observing that he expected the Commission to face conservative positions in the discussions on market opening.