Single European Railway Area

The Commission has proposed a Directive that would establish a “Single European Railway Area”. It aims to revive the railway sector by ensuring better rail services, increasing competition in the railway market, and improving the framework for investment in rail. Technically, the proposed Directive would amend the “First Railway Package” of 2001.

In essence, says the Commission, the new Directive will simplify, clarify and modernise the legislative framework for access to the rail transport market.

In the proposal for a Directive setting up a Single European Railway Area the Commission proposes a recast of the First Railway Package addressing the ambiguities and problems of the current regulatory framework in order to fulfill the initial objectives of the legislation.

In a communication accompanying the proposal, the Commission says that rail transport can be environmentally friendly, safe, reliable and of high quality but that it is of vital importance to set up a Single European Railway Area since the Member States have been operating rail transport in different ways in their territories.   

Problems to be addressed

The proposal for a single rail market has been prompted by intricate issues. The Commission aims to give a response to the following problems by simplifying and consolidating the legislative framework for access to the rail transport market.

Financing and pricing of the infrastructure

In a significant number of Member States an underinvestment in rail infrastructure development has been observed. This is due to the absence of clear investment plans and long-term strategies. The quality of the existing infrastructure is insufficient and does not allow rail undertakings to keep pace with other modes of transport and attract investment.

Barriers to competition

Numerous barriers to competition on the rail market have been identified. The conditions of the market are not sufficiently transparent and a poorly functioning institutional framework has been observed. New entrants to the market face serious difficulties when trying to access rail-related services which are often owned and operated by the incumbent rail undertakings.

Regulatory oversight

Regulatory bodies have in the past shown to have visible difficulties in carrying out their tasks, namely to ensure non-discrimination between rail undertakings, assuring that charging principles are complied with and guaranteeing that the provisions on the separation of accounts are fully respected.

Objectives of the proposal

The key objective of the EU’s transport policy is to establish an internal market by introducing common policies, promoting harmonious competition in the sector and allowing economic activities to develop in a sustainable way. Therefore, it is necessary to strengthen the EU’s existing legislative framework in the rail sector, making it a viable alternative to the traditional road transport.

The Commission strives at simplifying the present legal framework by merging the three Directives which form part of the First Railway Package into one coherent text. The Commission feels that a clarification of some provisions of rail access legislation is required for the proper transposition and implementation of EU law in the several Member States. In addition, there is a need to modernise legislation by substituting outdates provisions by new provisions which directly concern the functioning of the market today.

The specific objectives laid down in the proposal of the Commission are the following: ensure adequate, transparent and sustainable funding of the infrastructure coupled with a more appropriate level of infrastructure charging, avoid the distortion of competition related to the use of State funds for commercial activities, and provide for an independent regulatory oversight of the market.
In the proposal the Commission presents a number of measures, as outlined below.

Separation of accounts

The new provisions make it compulsory to have separate accounts for activities that enjoy a legal monopoly in contrast to activities that are subject to competition. This mandatory separation in railway undertaking accounts should enhance transparency and avoid State funds devoted to unprofitable activities being shifted to finance commercial activities.

Independence of essential functions

Member States have to ensure that access to infrastructure is assigned to bodies or firms that do not themselves provide rail transport. Accordingly, the proposal abolishes the possibility to assign to railway undertakings the collection of rail infrastructure charges. This provision aims to promote undistorted competition in the market and assure non-discriminatory financial management of the infrastructure.

Infrastructure development strategy

The proposed changes oblige Member States from now on to publish medium to long-term railway sector development strategies based on sustainable financing of the railway system in order to allow response to future mobility needs. These commitments should attract new actors to the market and allow for the developing of new services. 

Rail-related services

Rail-related services have to be modernised by: first, introducing independence requirements for the management of service facilities and for rail transport provision in order to reduce conflicts of interest between rail-related service providers and incumbent railway undertakings and secondly, laying down ‘use-it-or-lose-it’ provisions which require rail-related facilities which are not in use to be made available by their owners to other interested parties. 

Cross-border agreements

The Commission proposal clarifies the general principles applying to cross-agreements between rail undertakings, between Member States and between Member States and third countries. The Commission has to be notified of these agreements, verify their compliance with the Directive and decide whether they may continue to apply.

Market monitoring

The Commission will be responsible for the rail market monitoring which covers rail infrastructure investments, price developments and quality of rail transport services and public service obligations for rail passenger transport. When carrying out its monitoring tasks, the Commission has to closely cooperate with Member States and representatives of the sectors concerned.

Network Statement Publication

The proposed provisions clarify the appropriate way for publication of network statements which infrastructure managers have to develop. These network statements set out the nature and conditions for access to the infrastructure and service facilities available to the railway undertakings.

Information on charging systems

The new provisions aim to enhance transparency in the use of State funds by requiring Member States’ charging frameworks and rules to be published in network statements. Whenever charging decisions of infrastructure managers have an impact on other infrastructure associate, the charge for the use of the relevant infrastructure has to occur at international level.

Contracts between competent authorities and infrastructure managers

The Commission lays down new provisions regarding the process for developing and managing contractual agreements between the national competent authorities and infrastructure managers as regards infrastructure costs and access charges. An independent assessment has to be carried out by regulatory bodies in order to avoid railway undertakings of using their political strength to influence the agreements.

Principles of charging

The principles of charging are reviewed in order to introduce a differentiation of track access charges based on the noise emission characteristics of the rolling stock making up the train. In addition, service providers have to provide information on charges for rail-related services to be published by infrastructure managers in their network statement.

Exceptions to charging principles

The Commission proposes the introduction of common criteria for identifying market segments on which services might be able to pay mark-ups. Trains equipped with the European Train Control System (ETCS) operating on lines equipped with national command control and signaling system enjoy temporary reduced infrastructure maintenance costs.

Cooperation between infrastructure managers

The proposed changes include new measures to make sure that infrastructure managers cooperate to enable mark-ups and performance schemes to be applied. Moreover, the new provisions ensure that infrastructure managers cooperate for the setting of charging systems on more than one network.

Regulatory bodies

The Commission makes it clear that the current provisions on the independence of regulatory bodies are insufficient. Accordingly, it proposes to change them stipulating clearly that regulatory bodies must be independent from any other public authority in particular from those exercising ownership rights of the incumbent railway undertaking. 

Functions of the regulatory body

In order to improve the regulatory supervision of the market the new provisions proposed by the Commission extend the competencies of regulatory bodies. Their competences will include decisions related to access to and charging for rail-related services, the verification of the compliance of railway undertakings with accounting separation provisions and for the sake of effectiveness of regulatory bodies’ operations they have to be provided with ‘regulatory accounts’ which are cost-accounting data provided by infrastructure managers.  

Cooperation between regulatory bodies

National regulatory bodies will have to cooperate closely and exchange information as regards the adoption of decisions on access or charging issues relating to international services. The interaction of regulatory bodies aims to provide for a coordinated decision-making across the Union.

Classification of rail-related services

The Commission proposes to add the use of electrical supply equipment for the traction current as part of the minimum access package of the services to be supplied to the railway undertakings. The obligation to present separately the charges for using the electrical supply equipment and for traction current aims at providing more transparency in the costs of network operation.

Content of the network statement

The Commission proposal sets out detailed provisions stipulating the content of network statements to be provided by infrastructure managers. These have to include: a template form for capacity requests, detailed information about international path allocation procedures, information relating to railway license and rail safety certificate applications, information about procedures for dispute resolution and appeal relating to market access and information on access to rail-related service facilities.

Contractual agreements

The content, scope and functioning of contractual agreements is clarified by the Commission in the current proposal. The new provisions stimulate the introduction of long-term strategies sketching user-oriented performance targets for the development of railways.

Infrastructure costs and charges requirements

Infrastructure costs and charges requirements have to include: the costs that must not be included in the calculation of direct costs of the minimum access package and track access services and the criteria for identification of market segments on which services might be able to pay mark-ups, the requirements for differentiation of track access charges based on the noise emission characteristics, how infrastructure managers will define market segments to evaluate the possibility of introducing mark-ups, and the main characteristics and general principles of performance regimes.

Regulatory accounts

The proposal includes a common standardized format for the submission of regulatory accounts. This should facilitate the regulatory bodies’ supervisory activities which will be in a better position to analyse infrastructure managers’ information.