The Voice of European Railways Public Service Rail Transport in the European Union: an Overview Public Service Rail Transport in the European Union: an Overview Table of contents Public Service Rail Transport in the European Union: an Overview The Voice of European Railways The Community of European Railway and Infrastructure Companies (CER) brings together more than 70 railway undertakings, their national associations as well as infrastructure managers and vehicle leasing companies. The membership is made up of long-established bodies, new entrants and both private and public enterprises, representing 73% of the rail network length, 80% of the rail freight business and Foreword p .4 about 96% of rail passenger operations in EU, EFTA and EU accession countries. CER represents the interests of its members towards EU policy makers and transport stakeholders, advocating rail as the backbone of a competitive and sustainable transport system in Europe. Publisher: Community of European Railway and Infrastructure Companies (CER), Avenue des Arts 53, 1000 Brussels - Belgium Author: Miguel Ángel Caramello-Álvarez, CER Chief Legal Officer Special thanks to former CER Legal Stagiaire’s Christina Kechagia and Alberto de Juan Saiz Design and production: Page in Extremis - www.inextremis.be Photos: Kindly provided by CER members & purchased at www.fotolia.com Overview p .6 Published in June 2017 For more information: www.cer.be DISCLAIMER CER, nor any person acting on its behalf, may be responsible for the use to which information contained in this publication may be put, nor for any errors which may appear despite careful preparation and checking. Reproduction is authorised, provided the source is acknowledged. 2 CER - The Voice of European Railways Public Service Rail Transport in the European Union: an Overview PART 1 Legal, political and 2. State of play and trends PART 2 Country reports economic context 2.1 Introduction p. 18 1. Legal, political and economic context 2.2 General framework for the organisation p. 19 of public service operations 1.1 First steps towards the fair provision of public p.11 2.3 Operators on the market p. 20 service transport: Regulation 1191/69 2.4 Definition of public service requirements p. 22 1.2 The turning point: the Altmark judgement p.12 2.5 Scope of public service transport by rail p. 23 1.3 Overhaul of the legal framework: p.14 2.6 Contract p. 26 Regulation 1370/2007 2.7 Awarding of public service contracts p. 27 Belgium p. 48 Lithuania p. 96 1.4 Application of Regulation 1370/2007: p.15 a brief overview of the relevant case law 2.8 Contract negotiation p. 31 Bulgaria p. 51 Luxembourg p. 100 1.5 The Fourth Railway Package: amendment of p.16 2.9 General payment conditions p. 32 Croatia p. 55 The Netherlands p. 102 Regulation 1370/2007 2.10 Duration of public service contracts p. 34 Czech Republic p. 58 Norway p. 105 2.11 Rolling stock p. 36 Denmark p. 62 Poland p. 108 2.12 Involvement of the regulatory body p. 37 Estonia p. 66 Portugal p. 115 or other authorities in public service contract Finland p. 69 Romania p. 118 discussions France p. 71 Slovakia p. 123 Germany Slovenia 3. Public service financing: p. 75 p. 126 Greece Spain the ‘heart of the matter’ p. 82 p. 129 Hungary p. 84 Sweden p. 132 3.1 Overview of the provisions foreseen in the p. 39 Italy Switzerland p. 137 amended Regulation 1370/2007 p. 89 Latvia p. 94 3.2 Current state of the art: too much p. 42 under-compensation 3.3 The problem of under-compensation p. 43 CER - The Voice of European Railways 3 Public Service Rail Transport in the European Union: an Overview Foreword Is there a foreword? Public service transport plays a crucial role in passenger trans- Over the next six years, the evolution on these two fronts continued and port in the European Union, both from a political and an economic has to a certain extent become even more noticeable today. First, com- point of view. The vast majority of passenger transport services petition has substantially grown, with an increasing number of public in the EU are currently provided within the context of public service contracts being tendered out: approximately 17% of regional service contracts, which in many cases represent substantial rev- services are awarded exclusively through a competitive process, while enue for railway undertakings. Moreover, public service transport the relevant percentage for long-distance services is 12.5%. Apart from is unarguably an important social policy instrument for public the traditionally competitive markets of Germany, Great Britain, Italy and authorities. Sweden, other national markets, such as Bulgaria, the Czech Republic, Denmark, the Netherlands, Norway and Poland have emulated this exam- The operation and organisation of public service transport ple and achieved discernible progress. In light of the regulatory overhaul differs greatly throughout the EU due to the various needs and brought about by the Fourth Railway Package – the main thrust of which social backgrounds. This is why the Community of European is to fully liberalise the market for passenger railway services – this trend Railway and Infrastructure Companies (CER) decided in 2005 to is likely to become the norm. publish the first edition of a brochure illustrating the different approaches in the European Union. At the time, it was striking On the second front, although there is still vast room for improvement to see that the conditions for operating public service contracts and fuller compliance with EU legislation, some further progress has were divided into two major groups: the EU-15 countries, been made with regards to the financing of public service require- where public service passenger transport was organised in ments. A significant development to that effect can be detected in the compliance with a straightforward legal framework and where overall increase, particularly within the EU-13 Member States, of the du- railway operators were considered as commercial enterprises; ration of public service contracts. These longer agreements provide some and the EU-10 countries, where the situation was much more leeway to railway operators to make more efficient long-term plans for problematic, with operators being forced to provide public their business and allow for the gradual proliferation of leasing markets services while receiving inadequate financial compensation in for rolling stock. Nevertheless, financing levels remain unsatisfactory and return. In other words, the conditions under which public service fail to unlock the sector’s untapped potential in terms of attracting modal transport was provided were multifarious and it was thus clear shift to rail. that homogenous rules could not be applied without taking into account the specific political and economic context in each In this context, CER is publishing the third edition of this brochure Member State. which describes the current rail public service landscape in the Euro- pean Union as well as in Norway and Switzerland. A general commen- Six years later, at the time of our first update of the brochure in tary is also included, guiding the reader through the various elements 2011, there was already a marked evolution of the situation in two to be taken into account when analysing the provision of public service key areas: competition as evidenced by increased tendering of public transport. With this brochure, CER hopes to provide a useful analytical service contracts was growing, and some improvement was being tool to stakeholders in their assessment of the constantly changing legal made with regards to the financing of public service obligations. framework for railway undertakings in Europe. 4 CER - The Voice of European Railways Public Service Rail Transport in the European Union: an Overview Libor Lochman CER Executive Director Public service transport plays a crucial role in passenger transport in the European Union, both from a political and from an economic point of view. The vast majority of passenger transport services in the EU are currently provided within the context of public service contracts. CER - The Voice of European Railways 5 Public Service Rail Transport in the European Union: an Overview Overview Overall, passenger railway traffic increased Traditionally, government payments were annual budget discussion on the overall level of their political choices; while on the other, from 2010 to 2015 by 5.6%. In 2014 a provided in the rail transport sector as a means of the operating subsidy. This in turn gave operators had strong incentives to meet the total of 429 billion passenger-kilometres of serving three main objectives. First, the poor incentives for the state-owned railway quantitative targets listed in the contract in a were operated across Europe, out of provision of a transport service of general company, which rather than concentrating on cost-efficient way. which 404 billion passenger-kilometres interest to all citizens, with a view to satisfying generating new sources of revenue, or trying on national railway networks and just 25 the fundamental right to mobility, has been to reduce costs, would focus on the annual In 2000, the European Commission voiced its billion on international routes.1 However, it an essential element of political agendas budget negotiations with the Government. concerns about the fact that this Regulation, should be noted that although the volume throughout the years. Second, securing last modified in 1991, was not reflecting of passenger rail demand has grown, its affordable and continuous rail services has been At the time, the main piece of EU legislation current needs as it did not fit in with the modal share in land transport at EU level an important component of governments’ social on public service obligations (PSOs) for overall Commission policy of opening up the has shifted only a half of a percentage point welfare and regional aid programs, aimed at rail and road was Regulation 1191/69.