Tunnel vision? Completing the European rail market - European Union Committee Contents

Tunnel vision? Completing the European rail market

CHAPTER 1: Introduction

Achieving a Single European Railway Area

1.  The European rail network plays a crucial role in facilitating the transportation of goods and people around the Single Market. However, this network is fragmented and therefore its ability to serve the Single Market is constrained. The European Commission began its efforts to liberalise international rail passenger and freight services in 1991. Since then progress has been faster for freight than for passenger services, with the domestic and international freight market opened up to full competition from 1 January 2007. A measure to open up international passenger rail services to competition was adopted in 2007 and entered into force on 1 January 2010.[1]

2.  The Commission published a White Paper, Roadmap to a Single European Transport Area, on 28 March 2011.[2] It sets out how the Commission intends to achieve a competitive and resource efficient transport system by 2050. One of its major aims is to move medium-distance passenger travel from road and air to rail. Some of its specific proposals for Europe's railways are summarised in Box 1 and these provide the backdrop to our inquiry.


Transport White Paper—Railway Proposals
  • Completing the internal market for rail services in order to achieve a Single European Railway Area.
  • Strengthening the role of the European Railway Agency in rail safety.
  • The development of a European high-speed rail network by 2050.
  • Developing a common approach for the internalisation of noise and local pollution costs on the whole rail network, as well as measures to increase capacity in the long-term.
  • Developing a new funding framework for transport infrastructure.
  • The development of a unified approach to passengers' rights across all transport modes.
  • The liberalisation of domestic passenger rail services.

The Channel Tunnel

3.  The idea of constructing a tunnel or bridge to connect the United Kingdom and France has been proposed sporadically since the early nineteenth century, but never progressed beyond schematics or exploratory excavations due to problems over funding and engineering, and national security concerns. Substantive progress was eventually achieved with the signing of the Treaty of Canterbury[3] on 12 February 1986, which was implemented in the United Kingdom by the Channel Tunnel Act 1987—4 years before the Commission began focusing on the development of the European railway market. Apart from giving "fresh impetus to relations between the two countries", the Treaty's preamble acknowledged its European dimension with a commitment to the "development of relations and of exchanges between the Member States of the European Communities". The key provisions of the Treaty are outlined in Box 2.


Treaty of Canterbury—Key Provisions
  • Article 1 provides for the construction and operation of a 'Channel Fixed Link' by private Concessionaires as the infrastructure managers, stipulating that the link was to be constructed "without recourse to government funds or to government guarantees of a financial or commercial nature".
  • Article 2 obliges the signatories to ensure that its operation is consistent with international obligations.
  • Article 4 states that "frontier controls shall be organised in a way which will reconcile, as far as possible, the rapid flow of traffic with the efficiency of the controls".
  • Article 6 allows for the Channel Tunnel to be closed by either signatory in exceptional circumstances—such as natural disasters and acts of terrorism.
  • Article 10 establishes an Intergovernmental Commission (IGC) to manage all aspects of the operation of the Channel Tunnel on behalf of the UK and French governments.
  • Article 11 establishes the Channel Tunnel Safety Authority (CTSA). It makes proposals for safety measures that must also comply with "the national or international laws in force", which the IGC is responsible for approving.
  • Article 12 states that Concessionaires are free to determine their own commercial policy, in terms of charges they apply and what services they offer, as long it accords with EU law, including competition rules.

4.  On 14 March 1986, a Concession Agreement for the construction, financing and operation of the Channel Tunnel was awarded to a Franco-British consortium of banks and construction companies for an initial period of 55 years.[4] These became subsidiaries of a holding company called Eurotunnel, which contracted with TransManche Link to construct the Channel Tunnel. Work began in 1987 and the Tunnel opened on 6 May 1994, linking Folkestone in Kent with Coquelles in Pas-de-Calais. Both freight and passenger services began later that year. The tunnel's 38 kilometre undersea portion is the longest of any tunnel in the world, and in total it stretches for more than 50 kilometres. It now connects with two high-speed lines on both sides of the English Channel: LGV Nord in France and the Channel Tunnel Rail Link (now known as HS1) in the UK, which became fully operational on 14 November 2007.

5.  The Channel Tunnel is now a vital link between the United Kingdom and mainland Europe, and provides the only method by which rail passengers can travel direct to destinations on the Continent. However, while there is now more than one provider of freight services through the Channel Tunnel[5], Eurostar remains the sole provider of passenger-only services (although Eurotunnel also carries passengers on its vehicle Shuttle services). The Government retains a direct interest in Eurostar through its ownership of London & Continental Railways, which holds a 40% shareholding in the company.[6] It has no interest in Eurotunnel, a private company whose only revenue is generated from access charges levied on railway undertakings.[7]

Infringement proceedings

6.  The Commission began infringement proceedings against France and the United Kingdom on 29 September 2011 regarding their alleged failure to implement aspects of the First Railway Package[8] in their joint management of the Channel Tunnel.[9] Each of the Commission's concerns, including the lack of separation between infrastructure managers and railway undertakings and the insufficient implementation of provisions concerning access charging, independent regulatory bodies and capacity allocation, were raised by contributors to our inquiry and are addressed in our report.

7.  The Commission's letters require a reply within two months. If the Member States' responses are deemed to be unsatisfactory, a reasoned opinion may be issued seeking the full implementation of the First Railway Package. If the Member States do not oblige then the Commission may choose to make a reference to the Court of Justice of the European Union. Any judicial proceedings are likely to take a number of years to complete.

The Committee's inquiry

8.  The Committee has conducted two previous inquiries into the development of the European rail market from the freight perspective.[10] We decided that the focus for this inquiry should be on passenger services, using the Channel Tunnel as a case study. Both passenger and freight services face similar challenges, however, so the freight perspective is also examined where appropriate. We chose the Channel Tunnel because, despite the continued importance of the Tunnel as a symbolic and commercially significant link between the United Kingdom and mainland Europe, more than 50% of its capacity remains spare.

9.  We begin by considering the EU legislative and regulatory framework and the obstacles to progress. We then consider the governance structures put in place by the Treaty of Canterbury in the context of this framework, as most of the measures were not in place when the Treaty was signed 25 years ago. After considering other potential barriers to growth and to the completion of the Single European Railway Area, we then consider the consumer perspective, which we believe should be considered paramount in the future development of this sector.

10.  We do not consider any ongoing commercial disputes. Our recommendations are restricted to the Government and its interests in the Channel Tunnel governance structures, as well as EU Institutions. They do not concern the French government (including regulatory authorities) or private companies such as Eurostar, Eurotunnel and Deutsche Bahn.

11.  The members of the Internal Market, Energy and Transport Sub-Committee who conducted the inquiry are listed in Appendix 1, showing their declared interests. We are grateful for the written and oral evidence that we received for our inquiry; contributors are listed in Appendix 2. In particular, we are grateful to Eurostar, Deutsche Bahn and Eurotunnel for taking the time to travel to London to provide evidence to the Committee. The call for evidence that we issued is reproduced in Appendix 3, whilst a glossary of terms and abbreviations can be found in Appendix 4. The evidence we received is available online.[11]

12.  We make this report to the House for debate.

1   Directive 2007/58/EC amending Council Directive 91/440/EEC on the development of the Community's railways and Directive 2001/14/EC on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure. Back

2   COM (2011) 144 Back

3   Treaty between the United Kingdom of Great Britain and Northern Ireland and the French Republic concerning the Construction and Operation by Private Concessionaires of a Channel Fixed Link with Exchanges of Notes, signed at Canterbury on 12 February 1986. Back

4   These were organised into two separate Concessionaires as France-Manche SA and the Channel Tunnel Group. The Concession was subsequently extended to 2086 on 17 December 1997. Back

5   Operated by DB Schenker Rail (UK) (previously English, Welsh and Scottish Railway) and Europorte, a subsidiary of Eurotunnel. Back

6   The other two shareholders in Eurostar International Limited are SNCF, with a 55% stake, and SNCB, with a 5% stake. The company is incorporated under English law and is based in London. Back

7   Incorporated under French law as public limited company-Groupe Eurotunnel S.A.-listed on both the London Stock Exchange and Euronext Paris. After financial restructuring in 2006 it reported a profit for the first time the following year. Back

8   This Package was adopted in 2001 to open up the international rail freight market and comprises a number of Directives, which are discussed in more detail in the following chapter. Back

9   A Commission memo summarising the grounds for infringement proceedings is available at:

10   European Union Committee, 4th Report of Session 2004-05: Liberalising Rail Freight Movement in the EU (HL Paper 52) and 10th Report of Session 2008-09: Recast of the First Rail Freight Package (HL Paper 90). Back

11   http://www.parliament.uk/documents/lords-committees/eu-sub-com-b/EuropeanRailMarket/EURailMarketev.pdf  Back

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