Governance and market opening proposals

At a glance

In addition to technical revisions, the 4th railway package proposes reform in the areas of governance and market opening. These changes are covered in proposals to update two existing pieces of legislation and to repeal a third legislative act which would be incompatible with the changes. The aim is to open up the domestic rail passenger market to competition, resulting in improved quality and efficiency. This would also be an important step towards the completion of the single European rail area.

One of the main proposed changes is to introduce mandatory competitive tendering for public service contracts for railways. This would make it easier for new companies and rail operators to enter the market by offering competing commercial services or bidding for public service rail services.

Alongside this, the 4th railway package also proposes to strengthen the governance of infrastructure managers. Infrastructure managers and rail operators are often still part of the same integrated structure. The proposed changes would separate infrastructure managers from rail operators, except in specific circumstances where there are sufficient safeguards in place.

In detail

1. Proposal on opening the market for domestic passenger rail transport services - 2013/0028 (COD)

The existing regulation (1370/2007) set out a framework for awarding public service contracts and compensating for public service obligations. However, it didn't establish a common approach or any common EU rules for awarding contracts for rail passenger transport. 

The proposed amendment to the 2007 regulation would introduce common rules on the award of public service contracts for passenger transport by rail. It also contains accompanying measures to increase the success of competitive tendering procedures. The proposal includes:

  • a procedure for competent national authorities to define public service obligations and the scope of public service contracts
  • limits for the direct award of small volume contracts and direct awards to small or medium-sized enterprises
  • mandatory competitive tendering for rail contracts
  • the requirement for member states to give non-discriminatory access to rail rolling stock for operators wishing to provide public passenger services

2. Proposal to amend the directive establishing a single European railway area - 2013/0029 (COD)

Single European rail area

EU rail policy aims to encourage the development of high-quality, reliable, safe and efficient rail services.

Putting into place a single European rail area would help increase the competitiveness of the rail sector, develop an integrated rail network and increase the efficiency of rail transport services.

The 2012 directive (2012/34) made some progress in establishing the single European rail area. In particular, it helped improve access to rail-related services for rail operators and strengthened the independence of national regulatory bodies. However, there are still a number of problems that need to be addressed. 

The proposed amendment would change the original directive to open the market for domestic passenger rail transport services and increase competitive pressure on all domestic passenger rail markets. Routes would be opened to new entrants and service providers from December 2019.

The proposed changes would also enhance the governance of infrastructure managers to ensure equal access to rail infrastructure, including:

  • removing conflicts of interest, due to integrated structures, which affect decisions by the infrastructure manager on market access
  • improving the coordination between infrastructure managers and rail operators so they can better respond to market needs
  • establishing information and integrated ticketing schemes common to all rail operators running domestic passenger services

Under the proposal, rail operators that are vertically integrated, including those with a holding structure, would maintain ownership of the infrastructure manager, as long as that there were strong and efficient safeguards to protect the infrastructure manager's independence.

3. Proposal to repeal the regulation on the standardisation of railway undertakings' accounts - 2013/0013 (COD)

The regulation concerned (1192/69) was adopted before the rail market was liberalised. At the time, European rail transport was developing largely within national borders, with rail services and infrastructure often operated by single integrated companies. The regulation aimed to put rail operators on an equal competitive footing with operators active in other modes of transport.

However, with the changes proposed under the 4th railway package, the 1969 regulation will no longer be in line with EU legislation for the rail sector. In particular, it would not be consistent with rules such as the separation of rail operators and infrastructure managers, non-discriminatory access to infrastructure and the restriction of state funding to infrastructure managers. The proposal is therefore to eliminate the 1969 regulation and eliminate inconsistencies with other EU rail sector legislation.

In the Council

At a TTE meeting on 3 December 2014, the Council adopted a general approach on the proposal to repeal the regulation on the normalisation of railway undertakings' accounts.

At a TTE meeting on 8 October 2015, the council agreed on a general approach on the remaining proposals to open the domestic passenger rail transport services and on strengthening the governance of rail infrastructure.

The Council held a first policy debate on the proposals on market opening and the single European railway area during a meeting of the Transport, Telecommunications and Energy (TTE) Council on 8 October 2014. Discussions focused on whether market opening is the best way to make railway services more dynamic and encourage investment and innovation. Many ministers also spoke of their opposition to 'cherry picking', whereby commercial companies focus on profitable lines to the detriment of loss-making lines that are in the public interest. The Council also looked at competitive tendering and access to rolling stock.

The Council discussed the two remaining proposals under the governance and market opening pillar at a TTE meeting on 13 March 2015. In particular, ministers gave their views on the functions of infrastructure managers, the role of regulatory bodies and access to rolling stock (trains). Many member states agreed that a 'one size fits all' approach would not be the best option for all. They generally agreed on the importance of a level playing field and on the role of regulatory bodies. On access to rolling stock, however, member states felt that it should be the choice of each member state to select appropriate measures and that EU-level rules therefore shouldn't be too detailed or too strict.

The European Parliament adopted its position at first reading on 26 February 2014 on all 6 pieces of legislation under the 4th railway package.

At a TTE meeting on 11-12 June 2015, ministers looked at a further progress report on the two remaining proposals. Some areas are still a concern for many member states including:

  • the implementation of competitive tendering - the conditions and exceptions to be allowed and the Commission's proposed deadlines for implementing mandatory tendering
  • the independence of infrastructure managers - many member states want to have two categories of infrastructure managers, making a distinction between essential and non-essential functions

Transport ministers resolved these issues at their meeting on 8 October 2015 and adopted a general approach. They agreed that, as a rule, competitive tendering should be used for awarding public service contracts.  Some exceptions include small contracts and the overriding need to ensure long-term continuity of public rail transport services.

The Council also agreed on longer deadlines compared to the Commission's proposal. As a result, national authorities would be able to continue to award public service contracts directly for 10 years after the regulation enters into force.  In addition, existing contracts would run unchanged until they expire. 

Council's general position also clarifies that rules on the independence of infrastructure managers would only cover their essential functions, such as train path allocation and infrastructure charging.

The Council co-legislates with the Parliament through the ordinary legislative procedure. For the regulation to become law, both institutions need to agree on a final version of the regulation during the trilogue negotiations.