Explanatory Memorandum to COM(2013)28 - Amendment of Regulation (EC) No 1370/2007 concerning the opening of the market for domestic passenger transport services by rail

Please note

This page contains a limited version of this dossier in the EU Monitor.

dossier COM(2013)28 - Amendment of Regulation (EC) No 1370/2007 concerning the opening of the market for domestic passenger transport services by ...
source COM(2013)28 EN
date 30-01-2013
1. CONTEXT OF THE PROPOSAL

In its 2011 White Paper on transport policy adopted on 28 March 2011[1], the Commission put forward its vision of a Single European Railway Area with an internal railway market where European railway undertakings can provide services without unnecessary technical and administrative barriers.

Several policy initiatives have recognised the potential of rail infrastructure as a backbone for the internal market and a driver of sustainable growth. The European Council conclusions of January 2012 highlighted the importance of unleashing the growth potential of a fully integrated Single Market, including measures with regard to network industries. The Commission Communication on Action for Stability, Growth and Jobs adopted on 30 May 2012 stressed the importance of further reducing the regulatory burden and barriers to entry in the rail sector. Likewise, the Commission Communication on strengthening the governance of the Single Market[2], adopted on 6 June 2012, stressed the importance of the transport sector.

In the last decade, three legislative ‘railway packages’ have aimed at opening up national markets and making railways more competitive and interoperable at EU level. Regulation 1370/2007 on public passenger transport services by rail and by road, published in December 2007, set out a framework for awarding public service contracts and compensating for public service obligations but not a common approach to awarding contracts for rail passenger transport. Despite the new EU legislation, the modal share of rail in intra-EU transport has remained modest.

3.

1.2 Problems to be addressed


Stakeholders consider that, under the current legal framework, rail passenger services are underperforming in terms of quality of service and operational efficiency. 54 % of respondents to the 2012 Eurobarometer survey were not satisfied with their national and regional rail systems. Within the Consumer Scoreboard 2011[3] the overall satisfaction of train passengers was 6.7/10, well below of the most consumer goods and services. Among consumers rail services score worse than all other transport modes (urban transport and airlines in particular scored better) and are ranked 27th out of 30 services markets. There are considerable gaps in operational efficiency between the best and the worst performing railway systems. These gaps reflect significant differences in asset utilisation such as rolling stock and infrastructure as well as labour productivity. These operational efficiency gaps lead to a substantial need of public funding compared to other economic sectors (leaving infrastructure funding aside) as many railway undertakings are loss making.

There are a number of obstacles to improving railway companies’ quality of service and operational efficiency. These relate first of all to access to the market for domestic passenger services and the lack of competitive pressure. In many Member States this market is closed to competition, which not only limits growth, but creates disparities between those Member States that have opened their markets and those that have not. Different national approaches to opening of the market for domestic passenger transport services by rail prevent the emergence of a genuine Internal Market for rail passenger services.

However, the overwhelming majority of domestic passenger services is not provided on a commercial basis, and is therefore performed under public service contracts. Given that no common EU rules on the award of such contracts apply, some Member States have introduced competitive tendering for these contracts, while others award them directly. This patchwork of regulatory systems in the EU makes it difficult for railway companies to exploit the full potential of operating in a Internal Market. Therefore, this legislative package also covers competition for public service contracts, barriers to competition such as the availability of suitable rolling stock for potential bidders for such contracts, and non-discriminatory access to information systems and integrated ticketing systems where they benefit the passenger.

4.

1.3 General Objectives


The main objective of the European Union’s transport policy is to establish an internal market for transport contributing to a high degree of competitiveness and the harmonious, balanced and sustainable development of economic activities. The 2011 Transport White Paper stated that rail should account for the majority of medium-distance passenger transport by 2050. This ‘modal shift’ would contribute to the 20 % reduction of greenhouse gas emissions provided for in the Europe 2020 Agenda for smart, sustainable and inclusive growth i. The White Paper concluded that no major change in transport would be possible without the support of an adequate rail infrastructure and a smarter approach to using it.

The overall objective of this proposal, as part of the Fourth Railway Package, is to improve the quality of rail passenger services and to enhance their operational efficiency, thereby improving the competitiveness and attractiveness of rail vis-à-vis other modes and developing further the Single European Railway Area.

5.

1.4 Specific Objectives


This proposal encompasses common rules on the award of public service contracts for passenger transport by rail, together with accompanying measures to increase the success of competitive tendering procedures.

The objective of mandatory competitive tendering for public service contracts is to intensify competitive pressure on domestic rail markets, in order to increase the quantity and improve the quality of passenger services. Competitive tendering for rail contracts can also ensure better value for money spent on public transport services. Common rules on the award procedure contribute to creating more uniform business conditions for railway companies. These proposals have to be seen in connection with the proposed amendments to Directive 2012/34/EU of the European Parliament and of the Council of 21 November 2012 establishing a single European railway area (recast)[5], which introduce open access rights for railway undertakings and strengthen provisions on non-discriminatory access to the rail infrastructure.

Contents

1.

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS



In order to support the Commission in the impact assessment process, an external consultant was asked to prepare a support study and to undertake a targeted consultation. The study started in December 2011 and the final report was delivered in September 2012.

To gather the views of stakeholders, a broad mix of targeted consultation methods was preferred to an open consultation. Between 1 March and 16 April 2012, tailored questionnaires were sent to 427 rail-related stakeholders (railway undertakings, infrastructure managers, public transport ministries, safety authorities, ministries, representative bodies, workers’ organisations etc.). The views of passengers were collected through a Eurobarometer survey of 25 000 respondents evenly spread over the 25 Member States with railways. The network of the Committee of the Regions was used to reach local and regional authorities.

Consultations were complemented by a stakeholder hearing held on 29 May 2012 (with some 85 participants), a conference (with some 420 participants) on 24 September 2012 and by interviews with specific stakeholders throughout 2012. Commission staff met representatives from Community of European Railways (representing railway companies), the European Passenger Transport Operators, the European Transport Workers Federation, the European Passengers’ Federation, the European Rail Infrastructure Managers and UITP — the International Association of Public Transport). Dedicated meetings with stakeholders were also organised in France, Germany, Netherlands, Poland, Sweden and the United Kingdom.

The majority of respondents (60 %) agreed that additional new open access rights, compulsory competitive tendering or a mix thereof could stimulate market integration. Open access for domestic rail passenger transport subject to an economic equilibrium test assessing its possible impact on the viability of public service contracts was the most popular option (55 % of respondents) The current arrangements were viewed very negatively (with only 20 % supporting them).Workers representatives expect that any opening of the market for domestic passenger transport services by rail will result in worse working conditions and more strikes.

Regarding compulsory competitive tendering, 45 % of respondents favoured flexible options akin to those of the negotiated procedure for public procurement and transitional periods for gradually putting all public service contracts out to tender (80% of respondents).

The majority of respondents (60 %) agreed that the creation of rolling stock leasing companies would help to improve access to rolling stock and a large majority (75 %) called for full access to technical information to be provided by the infrastructure manager. As regards integrated ticketing, there was a preference for non-binding provisions or enabling clauses for voluntary agreements rather than compulsory measures at EU level or at Member State level.

The Sectoral Social Dialogue Committee on railways was consulted on 26 March and 19 June, in particular on the options and the assessment of their social impact.

Based on the external study mentioned above and on the conclusions of the consultation process, the Commission made a qualitative and quantitative assessment of the impacts of the various options for modernising the existing regulatory framework.

The impact assessment showed that a combination of the following would fare best in terms of economic, environmental and social impacts, generating a net present value of between €21 and €29 billion from 2019 to 2035:

– broadly defined open access rights subject to a test of their impact on the economic equilibrium of public service contracts;

– competitively awarded public service contracts;

– voluntary national integrated ticketing systems; and

– an obligation on Member States to ensure non-discriminatory access to suitable rolling stock for railway undertakings which want to participate in a public tender procedure.

2.

LEGAL ELEMENTS OF THE PROPOSAL



6.

3.1 Definition of competent local authority (Article 2, point c)


This amendment increases legal certainty by specifying that a ‘competent local authority’ covers urban agglomerations or rural districts, not large parts of the national territory.

7.

3.2 Specifications on how competent authorities define public service obligations and the geographical scope of public service contracts (Article 2, point (e) and new Article 2a)


This Article provides a flexible but formalised and transparent procedure for defining public service obligations and the geographical scope of public service contracts, if competent authorities consider that public intervention is necessary to ensure a politically desirable level of mobility in the territory under their responsibility. It requires competent authorities to establish public transport plans defining the objectives of public passenger transport policy and supply and performance patterns for public passenger transport. It also requires competent authorities to justify the kind and extent of public service obligations they intend to impose on public transport operators and the scope of the public service contract with a view to achieving the objectives defined in the public transport plans. They must apply criteria based on general Treaty principles such as appropriateness, necessity and proportionality, as well as economic criteria such as cost-effectiveness and financial sustainability. This Article also requires the competent authority to ensure appropriate consultation of interested parties, e.g. passenger and employee organisations and transport operators. For rail transport, it requires independent rail regulatory bodies to ensure legal review of the procedure. In addition, it sets a threshold for the maximum volume of passenger transport by rail under each public service contract, in a flexible manner, in order to ensure effective competition while taking account of the varying size and administrative structure of rail passenger markets in Member States.

8.

3.3 Provision of operational, technical and financial information about passenger transport covered by a public service contract to be put out to tender (Article 4(6) and new Article 4(8))


This new provision in Article 4(8) obliges competent authorities to provide certain operational, technical and financial data to potential bidders for a public service contract so that they can make a well-informed bid and hence ensure enhanced competition. The amendment of Article 4(6) clarifies that competent authorities have to clearly indicate in the tender documents whether they require public service operators to comply with social standards or criteria.

9.

3.4 Upper limits for the direct award of small volume contracts and direct awards to small or medium-sized enterprises (Article 5(4))


This provision introduces specific upper limits on the value of direct awards for small volume contracts for rail transport. The existing limits are geared to transport by bus and track-based transport modes other than rail. The proposed limit for rail follows the logic of permitting direct award if the cost of organising a tender procedure outweighs the expected benefits. The corresponding limit in terms of train-kilometres reflects the average unit cost of rail transport provision.

10.

3.5 Mandatory competitive award of rail contracts (Article 5(6) and Article 4)


Deleting Article 5(6) denies competent authorities the option of deciding whether to award a public service contract for rail directly or based on a competitive tender. The general rule of competitive tendering will also apply to rail.

11.

3.6 Restrictions on award (new Articles 5(6))


In order to enhance competition after the introduction of competitive tendering for rail contracts, this provision enables competent authorities to decide that contracts for rail passenger transport covering parts of the same network or package of routes will be awarded to different railway undertakings. To this end, the competent authorities may decide to limit the number of contracts to be awarded to the same railway undertaking following a competitive tendering procedure.

12.

3.7 Access to rail rolling stock (new Article 5a and new Article 9a)


Introducing an obligation on Member States to ensure effective and non-discriminatory access to suitable rail rolling stock for operators wishing to provide public passenger services by rail addresses a major barrier to effective competition for public service contracts. In Member States where there are no well-functioning leasing markets for rail rolling stock it is up to competent authorities to take measures to ensure access to rolling stock in order to open up the market. However, as the situation and needs may vary from country to country, the new provision leaves competent authorities broad scope to choose the most appropriate ways of achieving the objective, while indicating the most frequently used measures. The details of the procedure and measures to ensure access to rolling stock shall be defined in implementing acts based on the examination procedure referred to in Article 9a of this Regulation.

13.

3.8 Publication of certain information on public service contracts (Articles 7(1) and 7(2))


This provision obliges competent authorities to include information about the starting date and duration of public service contracts in their annual reports on public service obligations as well as in their prior information notices on envisaged tender procedures. This additional information and the obligation on Member States to facilitate access to the annual reports published by competent authorities will increase transparency regarding the public service contracts awarded and likely new awards, and hence help transport operators prepare for future tender procedures.

14.

3.9 Transition period applied to competitive tendering (Article 8(2))


This provision makes it clear that the ten-year transitional period to 2 December 2019 applies only to Article 5(3) on the obligation on competent authorities to organise a competitive tendering procedure. All other provisions of Article 5 (e.g. on the option of making a direct award to an internal operator, for a small-volume contract or as an emergency measure, and legal review of the award decision) are immediately applicable.

15.

3.10 Transition period for existing directly awarded rail contracts (new Article 8(2a))


This provision introduces an additional transitional period for public service rail contracts that are directly awarded between 1 January 2013 and 2 December 2019. Those contracts may remain in place until they expire but only up to 31 December 2022 at the latest. This gives those railway undertakings that have been directly awarded a public service contract sufficient time to adapt and prepare for competitive tendering procedures.

16.

3.11 Adaptions of provisions of Regulation 1370/2007 related to the exemption of state aid notification and the conditions of state aid compatibility due to Treaty requirements


In its proposed draft amendments to Regulation (EC) No 994/98 (Enabling Regulation)[6], the Commission proposed also an amendment of Regulation (EC) No 1370/2007 bringing, in accordance with the procedures foreseen in Articles 108 i and 109 of the Treaty, aid for the coordination of transport or reimbursement for the discharge of certain obligations inherent in the concept of a public service as referred to in Article 93 of the Treaty under the scope of the Enabling Regulation. The Commission currently expects a consequential, future block exemption Regulation to reproduce the substance of the current exemption, except to the extent that Regulation 1370/2007 is amended by this legislative proposal relating to the rail sector.