A European Rail Network

The Commission wants to provide market access for new domestic passenger railway operators from December 2019 and remove obstacles so that companies can operate EU wide.

It also wants to encourage greater innovation, efficiency and better value for money, and to enable infrastructure managers at the heart of the rail network to have more control over infrastructure investment planning, day-to-day operations, maintenance and timetabling.

Member States should, further, have the possibility to protect workers by requiring new contractors to take them on when public service contracts are transferred, going beyond the general EU requirements on transfers of undertakings.

These objectives are contained in a series of proposals for a fourth railway package, designed ultimately to deliver better quality and more choice in railway services across Europe. According to the Commission, rail is a vital part of EU transport, playing a key role in addressing rising traffic demand, congestion, fuel security and pollution.

Context

The European rail industry generates a turnover of €73 billion and employs some
800 000 employees. In 2009, public authorities across the EU invested roughly €20 billion in payments for public service obligations (PSO) and €26 billion in public investment for infrastructure.

Rail is also critical to the effective functioning of the European economy. More than 8 billion passenger journeys are made by rail each year. Rail carries about 10% of all freight traffic across Europe, with estimated revenue of €13 billion. Freight transport is projected to increase, by around 40% in 2030 (compared to 2005) and by little over 80% by 2050.

However, many European rail services however are currently facing stagnation or decline. Bureaucracy involved in the market entry process has been identified as the main barrier for entry for new rail undertakings in certain Member States. National domestic passenger markets remain largely closed. This is why the Commission has put forward these measures and structural reforms.

The Fourth Railway Package

The Commission believes that this recently announced package of measures will address the remaining barriers to completing the Single European Railway Area (SERA), including low efficiency and quality of railway services and ongoing market distortions.

This will be achieved by focusing on four specific areas: 
• Infrastructure governance
• Rail market access
• Interoperability and safety
• Social dimension

The Fourth Railway Package includes a Communication, six legislative proposals and three reports. These reports focus on the progress made towards achieving interoperability of rail systems and on the profile and tasks of other train crew members. In total, the package consists of: 
Communication on completing the Single European Railway Area
Proposal for a Directive amending Directive 2012/34/EU establishing a single European railway area
Proposal for a Regulation on the European Railway Agency
Proposal for a Directive on railway safety
Proposal for a Regulation repealing Regulation (EEC) No 1192/69 on common rules for the normalisation of the accounts of railway undertakings
Proposal for a Directive on the interoperability of the railway system within the EU
Proposal for a Regulation amending Regulation (EC) No 1370/2007 concerning the opening of the market for domestic passenger transport services by rail
Commission Report on the progress made towards achieving interoperability of the rail system
Commission Report on the profile and tasks of other train crew members
Commission Report on the implementation of the provisions of Directive 2007-58-EC on the opening of the market of international rail passenger transport.

The Communication addresses the issues of market entry obstacles that continue to hamper competition and innovation. It is based on the 2011 Transport White Paper, which outlined a vision for establishing SERA, and is accompanied by Report from the Commission on the implementation of the provisions of Directive 2007/58/EC on the opening of the market of international rail passenger transport.

Key Proposed Changes

The Communications sets out main proposals to tackle the existing obstacles in completing SERA through amendments to six pieces of legislation on railways in the EU, covering the four following topics:

Strengthening infrastructure governance

EU railway infrastructure is and will likely remain a natural monopoly. Existing EU legislation requires a degree of separation between Infrastructure Managers (IMs) and Railway Undertakings (RUs), which run the train services on it.

However, current separation requirements do not prevent conflicts of interest, and often discriminate against new entrants. Moreover, the current system does not allow for incentives for European and intermodal cooperation unless obstacles to the efficient operation of IMs are eliminated.

To tackle these issues, the Commission proposes to amend Directive 2012/34/EU establishing SERA to ensure that IMs are able to perform all functions needed to run the infrastructure in an optimised, efficient and non-discriminatory manner. The Commission proposes an institutional separation of infrastructure management and transport operation.

Strengthening the role of infrastructure managers will enable them to control all the functions at the heart of the rail network – including infrastructure investment planning, day-to-day operations and maintenance, as well as timetabling. The new proposals will ensure that a single entity – the infrastructure manager - performs all the functions related to the development, operation, including traffic management, and maintenance of the infrastructure.

This will not prevent the infrastructure manager to subcontract, under its supervision, specific renewal or maintenance works to railway undertakings. Rail undertakings, independent of infrastructure managers, will have immediate access to the internal passenger market in 2019.

Furthermore, the Commission is also proposing to create a Network of Infrastructure Managers to ensure that cross-border and pan-European issues are properly addressed in a coordinated manner. These issues include the implementation of the TEN-T network and rail freight corridors.

Opening up domestic passenger services

Domestic rail passenger services, which account for more than 94% of the EU rail passenger market, need to be strengthened vis-à-vis other modes of transport in terms of service quality and efficiency. The Commission wants to achieve this by opening up the market for domestic passenger transport services by rail as of December 2019, with the possibility of limiting access in certain cases.

The Commission believes that without change, national monopolies will continue to exist in many domestic markets, preventing service improvements triggered by competitive pressure.

There are two ways in which companies would be able to offer domestic rail passenger services across the EU under the proposals; either by offering competing commercial services or through competitive tendering. This means that a company would be able to set up and run its own services, competing with other operators, or bid for public service rail contracts.

This already happens in some Member States – for example regional services in the German Laender, which the Laender themselves tender, or the UK rail franchise system. The Commission has put forward a flexible definition of maximum contract volume. Contracts directly awarded after the adoption of this legislative package would not be able to continue beyond 31 December 2022.

Nationwide mandatory ticketing systems run by incumbents can have discriminatory effects, where commissions of up to 25% on all ticket sales can be charged. This discourages entry into new markets and decreases competitive pressure.

In order to address this, the Commission proposes the establishment of national ticketing systems on a voluntary basis, subject to non-discrimination requirements. This will enable Member States and operators to establish national-wide ticketing systems, clarify existing provisions and remove some legal uncertainties.

Interoperability and safety

The current system of technical standards and approvals is fragmented between the European Railway Agency (ERA) and national authorities. This situation creates excessive administrative costs and market access barriers.

The Commission therefore wants to cut administrative costs for rail companies and facilitate the entrance of new operators into the market. Under the new proposals, the European Rail Agency would become a "one stop shop," issuing EU wide vehicle authorisations in the form of "vehicle passports" as well as EU wide safety certificates for operators.

The ERA would have a greater role in:
• Supervising national rules
• Monitoring national safety agencies 
• Facilitating the deployment of the European Rail Traffic Management System (ERTMS)

The aim of these measures is to allow a 20% reduction in the time to market for new railway undertakings and a 20% reduction in the cost and duration of the authorisation of rolling stock. Overall, this should lead to a saving for companies of €500 million in five years, says the Commission.

The social dimension

Due to demographic changes in the coming decade, the Commission has emphasised the importance of improving the attractiveness of the rail sector as an employer of innovative and highly skilled professionals.

Approximately 30% of all rail workers will retire in the next 10 years leading to workforce shortages. The availability of a skilled and highly motivated labour force in the transport sector is essential for the supply of efficient and competitive transport services.

This is why the Commission is proposing that pan-European RUs should be required to create European Works Councils, in line with the European Works Council Directive and to take part in the Railway Social Sectoral Dialogue Committee.

The Commission also wants to ensure that Member States can better protect workers by requiring new contractors to take them on when public service contracts are transferred, so going beyond the general EU requirements on transfers of undertakings.

Next steps

The Commission's proposals must now be approved by the European Parliament and Member State Governments, before being adopted.