COMPETITION IN PUBLIC TRANSPORT
(21618)
10776/00
COM(00) 7
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Draft Regulation on action by the Member States concerning public
service requirements and the award of public service contracts in
passenger transport by road, rail and inland waterways.
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| Legal base:
| Articles 71 and 89 EC; co-decision; qualified majority voting
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| Document originated:
| 26 July 2000 |
| Forwarded to the Council:
| 13 September 2000 |
| Deposited in Parliament:
| 3 October 2000 |
| Department: |
Environment, Transport and the Regions
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| Basis of consideration:
| EM of 18 October 2000 |
| Previous Committee Report:
| None |
| Discussed in Council:
| 18 October 2000 |
| Committee's assessment:
| Politically important |
| Committee's decision:
| Not cleared; awaiting further information (on progress)
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Background
11.1 Article 73 EC states that aids shall be
compatible with the Treaty if they represent reimbursement for
the discharge of certain obligations inherent in the concept of
a public service. Regulation 1191/69/EEC[29]
provides for the imposition of public service obligations (PSOs)
on operators of public service passenger transport by road, rail
and inland waterways; and for the reimbursement of costs, including
a mechanism for calculating the financial burden resulting from
PSOs. This basic framework was amended by Regulation 1893/91/EEC[30]
which established public service contracts as the normal method.
11.2 Since 1991, there has been some opening
of the public transport market to competition and some multinational
operators have emerged. The Commission says that the existing
Regulations address neither how public service contracts should
be awarded, nor the evolving market for public transport provision.
The Commission believes that there is a need for an entirely new
Regulation to establish clear rules putting competition in public
transport on a Community basis.
11.3 The Commission adopted the proposal on which
we now report in July 2000. On the same day, it also adopted a
complementary proposal for a Regulation concerning the granting
of aid for the co-ordination of transport by road, rail and inland
waterways. We report separately on that document in paragraph
32 of this Report.
The document
11.4 This is a complex and detailed proposal.
In his Explanatory Memorandum of 18 October 2000, the Parliamentary
Under-Secretary, Department of the Environment, Transport and
the Regions, (Mr Hill) summarises the document as follows:
"The proposed Regulation
does not seek to impose a single European mechanism to be used
in all Member States, rather it offers a range of tools for authorities
to use under European law. The Commission believes that the framework
proposed will: ensure better value for money and better services
in public transport; ensure that operators have a real opportunity
to gain access to the market; harmonise key aspects of the competitive
procedures adopted in Member States; and promote legal certainty".
"Adequate public passenger transport
"The proposed Regulation includes a new concept
of adequate public passenger transport, ensuring that quality
of service is taken into account in awarding public service contracts,
and that specific integrated information about public transport
is available on request. Criteria for quality of service are set
out in the Regulation.
"Public service contracts
"The proposed Regulation sets out that, unless
authorities are laying down minimum criteria for public transport,
their intervention in public transport will be through public
service contracts. The Regulation indicates that public service
contracts (PSCs) should normally be awarded by competitive tendering,
with a limited duration (normally 5 years), and it defines some
aspects of the content of the contracts.
"Some PSCs would not have to undergo competitive
tendering. These fall into two major groups:
"— PSCs awarded directly to a given
operator. These could be awarded on the basis of inability
to meet safety standards in any other way, efficiency of light
rail/metro systems, bus services fully integrated with rail services,
small contracts (less than 400,000 euros average p/a, or 800,000
euros if for all public service requirements), or for a new public
service with no new public money involved.
"— PSCs for an individual route, where
no new public money is involved. Proposals must have been invited,
and the authority must select the operator that will provide the
best service to the public, by quality comparison of the proposals
received.
"The proposed Regulation also sets out mechanisms
for controlling damaging market concentration, and protecting
employees in the case of a change of operator. This also addresses
the need for reciprocity between Member States with regard to
the establishment of multinational operators in the passenger
transport market, by confirming that authorities may require operators
to be established in the Member State concerned, making them subject
to the national requirements on established operators. This is
in line with the Common Transport Policy objective of freedom
of establishment for operators of a Member State established in
another Member State to be guaranteed effective access to the
public transport market of that State in a transparent way without
discrimination".
"Minimum criteria for public transport operation
"The proposed Regulation sets out the conditions
that would apply when authorities specify minimum criteria with
which operators must comply, in particular when authorities intend
to compensate operators for compliance. It would allow authorities
to secure public service requirements that are additional to or
separate from those set out in PSCs. The compensation would be
limited to one fifth of the value of the operator's services.
The same operator could receive compensation under a PSC".
"Procedures
"An exemption from notification is proposed
for compensation paid in accordance with the Regulation. The proposed
Regulation also gives a structure for award procedures, transparency
requirements, the need for a public appeals body and accounting
procedures".
"Final provisions
"The proposed Regulation maintains in a simplified
and modernised form the Community rules laid down in Regulation
1191/69 for ensuring that excessive compensation is not paid.
It also provides for a transitional period of between three and
six years. It maintains the rights already granted to operators
from most of the countries seeking accession to the Union to be
treated as Community countries. Additionally, it would require
Member States to consult the Commission on laws, regulations or
administrative provisions necessary to implement the Regulation.
The Commission would be required to produce a report within 5
years on application of the Regulation and to propose any necessary
amendments."
The Government's view
11.5 The Minister says:
"Policy Implications
"We agreed that the current regulations in relation
to public service requirements need to be updated because they
do not satisfactorily address the current situation. There has
been a major process of liberalisation in Europe over the past
thirty years, particularly in the UK.
"We believe the Commission's proposals are generally
helpful. They — and the proposal for a Regulation concerning
the granting of aid for the co-ordination of transport by rail,
road and inland waterways (21565) — provide simplification
and greater certainty.
"However, there are a number of aspects which
require detailed clarification and discussion. These include the
potential implications for the large deregulated régime
for the provision of local bus services outside London (important
changes to that régime are of course already proposed in
the Transport Bill now before Parliament) and for the arrangements
for the tendering of bus services, both inside and outside London.
"The Shadow Strategic Rail Authority ((S)SRA)
may also be affected due to tendering of franchises and the right
to appeal to a public body. At present there is no appeal from
the Franchise Director's decision, other than judicial review.
The Regulation would require the establishment of an appeals body
to consider appeals prior to judicial review, and at present there
is no obvious UK body that could perform this function without
conflict of interest.
"The Public Service Requirement Regulation is
effectively establishing a framework for financial compensation
to operators of socially necessary passenger services, working
together with the State Aid regulations. This leads to very prescribed
circumstances for further financial compensation.
"In addition, if it seems likely that there
will be cases where there is uncertainty over whether the conditions
of this Regulation or of the Public Procurement Directives will
apply, we need to seek clarification on the relationship between
this Regulation and the Public Procurement Directives.
"These proposals could potentially affect UK
metro and light rail systems, and we are currently investigating
the implications.
"The Regulation is intended to apply to international
operation of public passenger transport. This raises the issue
of competence for international routes: if several competent authorities
are involved, how would the decision-making process work with
regard to granting exclusive rights or open access?
"The proposed benchmarking against international
and national rail standards in this Regulation is not quite clear.
Further clarification is needed.
"This autumn, the Department will consult the
transport industry, the Devolved Administrations, Local Authorities
and other interested parties on this proposal and the proposed
complementary Regulation concerning the granting of aid for the
co-ordination of transport by rail, road and inland waterways.
"Some significant financial implications are
possible. This depends on the need to change existing legislation.
These could include any costs resulting from changes to the arrangements
for bus services. However, the extent of these changes —
and therefore the magnitude of any resulting costs — is
as indicated above still subject to clarification and discussion.
It may also affect arrangements in the metro and light rail sector;
the potential restriction of financial compensation for the public
passenger transport sector; the possible need to set up a new
public appeals body and potential for risk assessment for rail
safety standards. We intend to undertake a Regulatory Impact Assessment".
11.6 As regards timetable, the Minister says
that the Council was due to have its first substantive discussion
on 18 October 2000.
Conclusion
11.7 We note that the Government believes
the Commission's proposals are generally helpful. But it is evident
that there is a range of potentially important issues requiring
clarification and discussion. These proposals come also at a time
when, in the passenger rail sector, the arrangements for the industry
are under particular scrutiny, following serious rail accidents.
Furthermore, we note that there could be significant financial
implications, although these cannot be properly assessed at the
moment. We leave the document uncleared, and invite the Minister
to keep us in touch with its progress. In any event, we would
like to have a further Memorandum from him when the Regulatory
Impact Assessment has been completed.
29 OJ No. L 156, 28.6.1969. Back
30 OJ
No. L 169, 29.6.1991. Back
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