Granting the railway operators in the Union the right to access rail infrastructure in all member states to operate internal passenger transport services can have implications for the organization and financing of railway passenger transport services provided as part of a public service obligation. Member States should have the option of limiting such right of access where it would compromise the economic equilibrium of those public service contracts and where approval has been given by the relevant regulatory body. The Proposal on establishing the Single European Railway Area and other proposals related to the Fourth Railway Package are subject to a complex debate in Brussels and across Europe.
In the past decade, three railway legislative packages have progressively opened domestic markets, improving the competitiveness of railways and interoperability in the EU. However, despite the harmonisation of the EU legislation with that of member states, the modal share of rail in intra-EU transport has remained modest. This proposal, Directive 34/2013, targets the remaining obstacles that limit the effectiveness of railway markets.
“Remaining obstacles relate first of all to the access to the market for domestic passenger services. In many Member States these markets are closed to competition, which does not only limit their development, but also creates disparities between those Member States that have opened their markets, and those that have not”, believes the European Commission.
“A second set of problems which prevent the rail market from developing its full potential are issues relating to the governance of infrastructure managers. Since infrastructure managers are natural monopolies, they do not always react to the needs of the market and its users, thus hindering the performance of the sector as a whole. In a number of Member States infrastructure managers are unable to fulfil their tasks, since their functions are separated between different bodies. Moreover, the current legal framework has not led to improved cross-border cooperation among infrastructure managers,” the Commission points out.
In the latest legislative proposals, the Commission believes that “in order to ensure equal access to the infrastructure, any conflicts of interest resulting from integrated structures encompassing infrastructure management and transport activities should be removed. Removing incentives to discriminate against competitors is the only way to guarantee equal access to the railway infrastructure. It is a requirement for the successful opening of the market for domestic passenger transport services by rail. This should also remove the potential for cross-subsidisation, which exists in such integrated structures, and which also leads to market distortions”.
According to the latest proposals, railway undertakings will be granted, under equitable, non-discriminatory and transparent conditions, the right of access to railway infrastructure in all member states for the purpose of operating all types of rail passenger services.
If member states still maintain an infrastructure manager which is part of a vertically integrated undertaking, they should at least introduce strict safeguards to guarantee effective independence of the entire infrastructure manager in relation to the integrated undertaking. However, “despite the implementation of the safeguards guaranteeing independence vertically integrated undertakings could abuse of their structure to provide undue competitive advantages for railway operators belonging to such undertakings”, believes the Commission which, according to the new proposals, “should verify, upon request of a member state or on its own initiative, that these safeguards are effectively implemented and that any remaining distortions of competition are removed. In case the Commission is not in a position to confirm that this has been achieved, all member states should have the possibility to limit or revoke access rights of the integrated operators concerned”.
Regulatory bodies should assess the potential economic impact of domestic passenger services provided under open access conditions on existing public service contracts following a request made by interested parties and on the basis of an objective economic analysis.
The assessment of whether the economic equilibrium of the public service contract would be compromised should take into account predetermined criteria. Such criteria and the details of procedure to be followed may evolve over time, in particular in the light of the experience of regulatory bodies, competent authorities and railway undertakings and may take into account the specific characteristics of domestic passenger services.
The Commission also believes that there is another series of barriers which result from situations where infrastructure management and transport operations are part of the same integrated structure. In such a case, infrastructure managers face a conflict of interests as they have to take account of the business interests of the integrated structure and its transport subsidiaries and have an incentive to discriminate in the provision of access to the infrastructure.
Moreover, in the explanatory memorandum on the establishment of the Single European Railway Area, the Commission points out that “integrated structures make it much more difficult to enforce the separation of accounts between infrastructure management and transport operations. Regulators find it difficult to trace financial flows between the different subsidiaries and the holding company in an integrated structure. Accountancy tools allow for the artificial increase or decrease of the results of the respective subsidiaries. Cross-subsidising practices and transfers of infrastructure funds to competitive activities are a serious market entry barrier for new operators that do not have the possibility to rely on such funds. Cross-subsidising practises may also imply State aid granted to competitive activities”.
Thus, one of the legislative proposals which compose the Fourth Railway Package repeals Regulation (EEC) No 1192/69 of the Council on common rules for the normalisation of the accounts of railway undertakings.
This Regulation permits member states to compensate 36 enumerated railway undertakings for the payment of obligations which undertakings of other transport modes do not have to support, such as special family allowances and other operating expenditures (except in the case of compensation for the provision of public services).
The Commission believes that according to the latest legislations in force over the past decade, the aforementioned Regulation is currently inconsistent and incompatible.
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