Various Documents considered by the Committee - European Scrutiny Committee Contents

3 Railways




COM (10) 474




COM (10) 475

+ ADDs 1-2

Commission Communication concerning the development of a Single European Railway Area

Draft Directive establishing a single European railway area (Recast)

Legal base(a) —

(b) Article 91 TFEU; co-decision; QMV

Documents originated 17 September 2010
Deposited in Parliament(a) 23 September 2010

(b) 11 October 2010

Basis of considerationTwo EMs of 1 November 2010
Previous Committee ReportNone
Discussion in CouncilNot known
Committee's assessmentPolitically important
Committee's decision(a) Cleared

(b) Not cleared; further information requested


3.1 In the last decade legislation on EU railways has been adopted in three so-called packages. The main aim of the First Railway Package was to open up the trans-European rail freight network to international goods services by 2008. The Second Railway Package was designed to provide for a legally and technically integrated EU railway area. The Third Railway Package aimed to revitalise the international rail passenger market by extending competition and establishing a harmonised system of minimum passenger rights, to improve the interoperability of the EU rail system and to enhance the performance and size of the EU rail freight market.

3.2 The First Railway Package consisted of three Directives: Directive 2001/12/EC, which amended a 1991 Directive on the development of EU railways, Directive 2001/13/EC, which amended a 1995 Directive on the licensing of railway undertakings and Directive 2001/14/EC on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure. The package was aimed at creating "a single European railway area" and the intention was to reform the regulatory framework to ensure integration of the railway sector at EU level, therefore opening up the market to competition to enable it to compete with other transport modes. The First Railway Package was specifically designed to:

  • open up the international rail freight market;
  • establish a general framework for the development of EU railways;
  • clarify the formal relationship between the state and the infrastructure manager, on the one hand, and between the infrastructure manager and railway undertakings (train operators), on the other;
  • set out the conditions that freight operators must meet in order to be granted a licence to operate services on the EU rail network; and
  • introduce a defined policy for capacity allocation and infrastructure charging.

3.3 In May 2006 the Commission reported on implementation of the First Railway Package — it had found that, although Member States had introduced the necessary legislation, some countries needed to take further measures to ensure an effective regulatory framework as well as satisfactory functioning of the railway markets. This report was followed up by a questionnaire to Member States in May 2007 on their implementation of the directives of the First Railway Package. In June 2008, following a detailed analysis of national legislation the Commission sent letters of formal notice to 24 Member States (that is, excluding Malta and Cyprus, which have no rail networks, and the Netherlands) regarding their failure to implement the First Railway Package properly. The Commission is pursuing infringement action against those Member States (that is the 24, excluding Bulgaria, Finland and the UK) who have not correctly implemented the package.

The documents

3.4 In the Communication, document (a), the Commission outlines a strategy for establishing a single European Railway Area based on an integrated infrastructure network and interoperable equipment, enabling seamless transport services throughout the EU and neighbouring countries. The objective is to enable EU railway operators to offer efficient services aimed at meeting passenger and business expectations and to compete with alternative transport modes, in terms of price, flexibility, journey time and punctuality. The Commission's intention is to boost the competitiveness of the rail sector and its environmental attractiveness and to build on what has already been achieved in the rail market. It gives a broad outline of further measures which could be taken in the next few years to promote the development of an effective EU rail infrastructure, establishing a truly open rail market, removing administrative and technical barriers and ensuring a level playing field with other transport modes.

  • The strategy outlined focuses on four key areas. The first is promoting development of effective rail infrastructure — the aim is to:
  • mobilise international, EU, national and private funds for the development of new rail transport projects;
  • ensure that existing infrastructure is maintained and optimised through an appropriate financial environment that stimulates investment in the rail sector by Member States and candidate countries; and
  • make it easier to adapt existing infrastructure to growing specialised demands, in particular high-speed rail.

Noting that a substantial part of the EU rail budget is dedicated to the development of rail infrastructure, the Commission says that:

  • this will address the current lack of interoperability of some Member State networks and the presence of bottlenecks at cross-border sections;
  • it is currently reviewing policy for the Trans-European Transport Network (TEN-T) and will produce a draft proposal in 2011;
  • any further increase in direct funding (over and above that already provided from existing sources including TEN-T projects and European Investment Bank loans and guarantees) will depend on the next Financial Framework (for 2014-2020) and the development of new funding instruments; and
  • it intends to outline its approach in its forthcoming White Paper on future EU transport policy.

3.5 The Commission's second key area is establishing an attractive and genuinely open rail market — the Commission believes that, despite the rail freight and international passenger transport markets being open to competition since January 2007 and January 2010 respectively, competition between railway undertakings is still limited by various factors, for example, protectionist behaviour of incumbent operators and the lack of rail infrastructure open to all applicants in an open, transparent, fair and non-discriminatory manner. The Commission says that:

  • it thinks that existing legislation goes some way to addressing some of these issues;
  • it is aware that problems will persist if the existing EU regulatory framework is not implemented correctly by Member States;
  • this is the reason for its formal notice to 24 Member States regarding their failure to implement the First Railway Package properly and for pursuing infringement action against those Member States which have not correctly implemented the legislation;
  • it understands, however, that existing rules need to be modernised and clarified and that is why it has adopted a proposal for a recast of the First Railway Package Directives, document (b);
  • it believes that market opening will remain incomplete for as long as EU railway undertakings do not have the right to provide domestic passenger transport services throughout the EU; and
  • it plans, therefore, to evaluate the overall costs and benefits of competition for domestic passenger transport in 2011 and then to adopt a new initiative to facilitate further market opening by 2012 at the latest.

3.6 The third key area for the Commission is removing administrative and technical barriers — it says safety requirements and the lack of interoperability still impose significant barriers to entry to the EU rail market. The Commission:

  • argues that, although harmonisation of safety certificates and introduction of common safety methods and targets has laid the groundwork for making progress on overcoming these barriers, there is a need for strong, efficient and independent national safety authorities interacting with each other to prevent duplication or multiple checks;
  • says that it will continue to monitor Member States' compliance with EU legislation governing the creation of such bodies;
  • says that it will look at how the European Railway Agency (ERA) role can evolve in a gradual fashion to complement, or even to take on part of, the activities of national safety authorities in the certification and authorisation process; and
  • comments that, in terms of the lack of interoperability, it has required the ERA to develop tools that will make it easier for existing rail vehicles to be brought into service in all Member States under the principles of cross-acceptance of national rules.

3.7 The last of the Commission's key areas is ensuring a level playing field with other transport modes. The Commission says that:

  • while the proposed revision of the Eurovignette Directive, Directive 1999/62/EC, will allow the internalisation of external costs to reflect the level of external environmental and congestion costs which lorry operators impose, the proposed recast of the First Railway Package would introduce a scheme of harmonised noise-differentiated track access charges which would apply under specific conditions; and
  • it would also facilitate adaptation of the charging schemes to take into account other environmental effects throughout the EU;
  • this would help to make EU transport more sustainable and efficient; and
  • it is, however, also considering whether further measures may be needed to stimulate the energy efficiency of the rail sector.

3.8 The Commission says that it intends to consult interested parties on the initiatives outlined in the Communication.

3.9 The draft Directive, document (b), is to recast (consolidate and amend) the First Railway Package legislation in order to address the failure, the Commission perceives, of the package to achieve its declared objective of market opening. The intention is to increase transparency of rail market access conditions and improve access to rail-related services, for example, station, freight and maintenance facilities, with explicit rules on conflicts of interest and discriminatory practices. Adoption of the proposal would also:

  • extend the competence of national regulatory bodies, their independence and powers;
  • provide for increased co-operation between regulators on cross-border issues;
  • offer more certainty to investors; and
  • adapt charging rules to stimulate investments in green and interoperable technologies.

3.10 The draft Directive has three strands:

  • simplification and consolidation by merging the three Directives, 2001/12/EC, 2001/13/EC and 2001/14/EC and their subsequent amendments, eliminating existing cross-referencing and harmonising terminology;
  • clarification, that is addressing the issue of interpretation of rail access provision — some existing provisions are ambiguous, which has resulted in different interpretation and application in Member States; and
  • modernisation, by adapting the legislation to new market conditions, that is eliminating outdated provisions, which were related to the former structure of the rail industry in the EU, and by introducing new provisions which better align to today's market.

3.11 The draft Directive is accompanied by the Commission's impact assessment and a summary of that assessment.

The Government's view

3.12 In her first Explanatory Memorandum, on the Commission Communication, document (a), the Minister of State, Department for Transport (Mrs Theresa Villiers) says that the Government:

  • considers that competition between rail undertakings in the rail freight and international passenger market is limited and that securing further market opening by 2012 is desirable;
  • notes that the UK has seen remarkable growth in both freight and passenger traffic since privatisation, as a result of market opening;
  • is in favour of developing more effective links between the TEN-T and the transport networks of neighbouring European countries and accession countries, as this will aid the free flow of trade from EU to neighbouring countries and regions at the same time enabling and aiding regional co-operation in the given area — this should have no financial impact on the UK;
  • believes that the Commission should focus on ensuring that Member States implement existing legislation correctly before it proposes new measures;
  • notes, however, that it is pursuing infringement action against those Member States that have not correctly implemented the First Railway Package; and
  • will need to carefully consider any forthcoming proposals or initiatives arising from this Communication and will work with the Commission and other Member States to ensure that the actions taken are proportionate and are consistent with the subsidiarity principle.

3.13 On more detailed points the Minister comments that:

  • the Commission refers to proposals relating both to the safety and interoperability of EU railways;
  • the Railway Safety Directive (2004/49/EC) facilitated the introduction of a common approach to safety to help support the development of a single market for rail transport services in the EU whilst ensuring that safety levels are maintained and, if possible, improved and the first Interoperability Directive (96/48/EC), required Member States to use harmonised Technical Specifications for Interoperability, as the set of standards to build and renew the Trans-European Transport Network;
  • both the Interoperability and Safety Directives were revised in 2008 and will allow the extension of the scope of these regimes to encompass the whole rail system;
  • whenever any new subsystem (vehicles or infrastructure) is to be put into service on the Trans-European Transport Network railway network in the UK, the design has to comply with the relevant Technical Specifications for Interoperability and any applicable national rules and be authorised by the National Safety Authority (for Great Britain this is the Office of Rail Regulation, for Northern Ireland the Department for Regional Development Northern Ireland and for the Channel Tunnel the Inter-Governmental Commission);
  • the European Railway Agency was established as a technical body and advisor to the Commission in the areas of rail interoperability and safety — its mandate includes the development of Technical Specifications for Interoperability as well as common safety targets, common safety methods and common safety requirements for safety certification;
  • the Commission indicates that it intends to examine how the European Railway Agency's role might evolve to take over some activities currently undertaken by National Safety Authorities such as the processes for the certification and authorisation of subsystems;
  • the Government will oppose extensions to the competence of EU bodies if the proposals do not reflect the spirit of the original Directives' intentions — new proposals must preserve the principles of subsidiarity and it will seek the retention of national flexibility if it provides a better solution for the UK;
  • with regard to access charges, the Government has concerns relating to the difference in treatment of noise compared with other environmental impacts and about the complexity and potential regulatory burden of this proposal;
  • the existing structure of track access charges in the UK has successfully encouraged competitive market-entry and investment in efficient wagons with track-friendly bogies and quieter braking systems — it is unclear what benefit there would be in introducing further complexity in infrastructure charging;
  • additionally, and given the significantly lower carbon emissions of rail compared with road freight transport, it is not yet clear what the overall environmental impact of the suggested measures might be were route noise emission ceilings to have the effect of limiting rail freight traffic growth on major routes; and
  • the Government will need to examine in detail any Commission proposal for further measures to stimulate energy efficiency to ensure the UK is not disadvantaged.

3.14 In her second Explanatory Memorandum, on the recasting Directive, document (b), the Minister first discusses fundamental rights, saying that the draft Directive includes proposals whereby operators of service facilities (such as maintenance depots) which are owned by operators occupying a dominant position in a railway service market for which the facility is used, must:

  • operate the service facility independently of the remainder of the undertaking;
  • make the service facility available to competitors; and
  • advertise the service facility for rent or lease if it is not used for two consecutive years.

She comments that:

  • in principle, these provisions may be seen as an interference with the free enjoyment of property thereby potentially engaging Article 1, Protocol 1 of the European Convention on Human Rights;
  • the provisions are however designed to promote competition in the general interest and therefore if proportionate and necessary to that end would not be incompatible with the requirements of Article1, Protocol 1; and
  • on the other hand, there is uncertainty as yet as to how these provisions would operate (for instance whether operators of service facilities would be required to keep capacity open) and hence it is not yet possible to reach a final view on the likely effectiveness and proportionality of these measures.

3.15 Turning to the policy implications of the draft Directive the Minister says that:

  • the Government considers that the First Railway Package has not achieved its declared objective of market opening;
  • it does not appear that the separation of infrastructure management and train operations, as transposed by and practised in a number of Member States, has achieved the desired intention of ensuring transparent, equitable and non-discriminatory access to rail infrastructure for non-incumbent, independent operators;
  • the Government supports the Commission's overall aim of clarifying and strengthening the regulatory framework for rail market access;
  • in particular, it endorses the need to ensure adequately resourced and properly independent regulatory bodies in order to facilitate market entry and competition as well as to develop rail service markets, including those linked to the provision of rail freight transport services;
  • the Government believes that the Commission should focus on ensuring that Member States implement existing legislation correctly before it proposes new measures; and
  • it does note, however, that the Commission is pursuing infringement action against those Member States that have not correctly implemented the First Railway Package.

3.16 The Minister continues that the Government is still in the process of considering the detail and implications of the draft Directive, but it has identified a number of areas which are of potential concern to the UK:

  • Article 13, conditions of access to services — which includes provisions requiring legal, organisational and decision-making independence of facility operators from their owning companies, if these companies have a dominant position in any rail transport market. The Government will need to understand the scope of these proposals and their effect on the existing market structure;
  • Article 13, introduction of "use-it-or-lose-it" provisions — these would give the regulator powers to require part of a facility's capacity to be reserved for alternative operators if it is unable to accommodate all the capacity requests which arise and no viable alternative site is available. Such a decision would appear to require some facilities to either keep capacity spare or be prepared to displace existing customers; either of these requirements could have the potential to deter third party investment in these facilities;
  • Article 14, cross border agreements — this would give the Commission a role in examining agreements between Member States to check their compliance with the recast Directive. The Government will need to understand whether this has any implications for the Channel Tunnel Rail Usage Contract, although its understanding is that this will apply only to new agreements;
  • Article 17, which sets out requirements under which railway undertakings can only apply for licences if Member States or nationals of Member States own in total more than 50% of the undertaking and effectively control it. This would affect on the ownership of some existing UK train and freight operating companies and potentially could block some current proposals for new operators;
  • Article 31, principles of charging — this includes provisions for noise-related track access charging which would now become obligatory for rail if road-related measures were introduced. The Government has concerns about the complexity and potential regulatory burden of this proposal and the justification for its mandatory application to noise;
  • Article 32, exception to charging principles — this provides detailed rules which would appear too rigid and simplistic to cater for UK's complex rail industry and the markets within it;
  • Article 36, reservation charges — which includes a proposal that a reservation charge shall be levied if there is more than one applicant per path. This appears to have a disproportionate effect on rail freight services which, by their very nature, run only when there is a demand from the customer;
  • Article 55, regulatory body — in respect of its effect on the scope of powers of the Office of Rail Regulation and the consequential increase of regulatory burden on the rail industry, as well as the implication for economic regulatory role of the Inter-Governmental Committee for the Channel Tunnel;
  • Annex III, services to be supplied — the Government will need to understand the effects on current UK practices covering a number of services including ticketing and information systems, port facilities and relief/towing facilities; and
  • Annex VIII, requirements for costs and charges relating to railway infrastructure — these may be too detailed and inflexible to be aligned with the current UK charging structure.

3.17 The Minister discusses the financial implications of the proposal in the context of the Commission's impact assessment, saying that:

  • in terms of competition, the Commission considers that implementation of the package of modifications will have a slight impact on freight modal share, halting the decline or leading to a slight increase in the market share of rail freight, that the proposed modifications should be capable of generating an up to 4% increase in the number of railway undertakings and up to 3% more market share for non-incumbents, as well as saving some fatalities in road freight transport and that operating costs could be reduced by about 6%;
  • two types of administrative cost have been taken into account — one-off administrative costs, defined as start up-cost or costs incurred when re-designing the way administrative obligations are met or actions carried out, and recurrent administrative costs, defined as annual costs;
  • these costs primarily consist of new publication requirements for Member States (charging rule framework and medium/long-term development strategy), infrastructure managers (new information in network statement), managers of terminals (access conditions) and licensing bodies (license conditions);
  • the Commission expects the proposal to generate 1,000 new jobs across the EU, the modal shift from road to rail would result in a slight decrease of employment in road transport and there would be general demand for more skilled personnel and a higher demand for training centres;
  • the Commission expects that implementation of the modifications will provide benefits in reduced carbon dioxide emissions and improved air quality, that increased rail traffic may create more noise, but this would be off-set by proposed noise-abatement measures, and that benefits due to a reduction of energy consumption are expected to have maximum effect in the year of full implementation and then decrease slightly because of improved energy efficiency expected for lorries.

3.18 The Minister tells us that:

  • the Government is obtaining industry stakeholder views on the recast proposal to help inform its policy stance and negotiating position;
  • a formal public stakeholder consultation will be launched as soon as possible;
  • the Government is not yet in a position to comment on the methodology or robustness of the Commission's impact assessment; and
  • it will produce its own full impact assessment with a robust evaluation of options, costs, benefits and the wider effects of the proposals for the UK once it has stakeholders' initial views and better understands the implications of the proposal.


3.19 Both these documents are important steps in efforts to achieve an integrated railway system for the EU. Although we clear the Commission Communication, document (a), we note the Government's caution about some of the suggestions in the paper and that any proposals based on it will need careful examination. However before considering the draft Directive, document (b), further we should like to hear about:

  • any resolution of whether the rights of operators of service facilities are infringed under the European Convention on Human Rights;
  • progress on the several matters of concern to which the Minister has drawn our attention;
  • the outcome of the Government's consultations on the proposal; and
  • the results of its impact assessment.

Meanwhile this document remains under scrutiny.

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