# EUR-Lex - 52013DC0034 - EN

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# 52013DC0034

**REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS on the implementation of the provisions of Directive 2007/58/EC on the opening of the market of international rail passenger transport accompanying the Communication to the Council and the European Parliament on the fourth Railway Package /* COM/2013/034 final */**

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REPORT FROM THE COMMISSION TO THE
EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE
AND THE COMMITTEE OF THE REGIONS

on the implementation of the provisions of
Directive 2007/58/EC on the opening of the market of international rail
passenger transport

accompanying the Communication to the
Council and the European Parliament on the fourth Railway Package

(Text with EEA relevance)

1.           Introduction

On 23 October 2007, the European Parliament
and the Council adopted 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[1]
(hereinafter: the Directive). All railway undertakings having a valid licence
and the required safety certificates were given the right to operate
international rail passenger services, including the possibility of carrying
passengers on national sub-routes (cabotage) as from 1 January 2010. A deadline
of 1 January 2012 was set for Member States for which the share of
international carriage of passengers by train constituted more than half of the
passenger turnover of railway undertakings in their territory (the only Member
State to meet that criterion was Luxembourg). The obligations for transposition
and implementation of the Directive do not apply to Cyprus and Malta for as long as no railway system is established within their territory.

In order to protect the interests of railway
undertakings carrying out national services covered by a public service
contract (PSC), the Directive provides for the possibility of imposing certain
limitations on opening up the market of international rail passenger transport.
Member States may limit the rights to introduce new international services

·
where the principal purpose of the new service
is not international;

·
where a new international service would
compromise the economic equilibrium of services provided under PSC;

·
as a result of time-limited exclusive rights
granted before the Directive came into force;

·
where the service transits the European Union.

Furthermore, the Directive allows for a
charge to be levied on the operator of a new international passenger service to
finance public service obligations. However, this levy has to be imposed in
accordance with the principles of fairness, transparency, non-discrimination
and proportionality, without endangering the economic viability of the service
on which it is imposed.

The Directive does not concern services
between a Member State and a third country[2].
As a certain number of Member States (Germany, Italy, Sweden and the United
Kingdom) had already taken steps to open their rail passenger markets prior to
the adoption of any formal obligation at EU level, the Directive also made
clear that Member States where market opening had already taken place were not
obliged to grant before 1 January 2010 the right to operate new international
passenger services to railway undertakings and their subsidiaries licensed in a
Member State where access rights of a similar nature were not granted[3].

According to
Article 10 (9) of the Directive, the Commission shall submit to the European
Parliament, the Council, the European Economic and Social Committee and the
Committee of the Regions a report on the implementation of the provisions
regarding the opening of the international rail passenger transport market. The
Commission hereby submits its report to the institutions mentioned in order to
fulfil this obligation.

The Directive
also requires the report to assess the development of the market, including the
state of the preparation of further liberalisation and to analyse the different
models for organising this market and the impact of the Directive on public service
contracts and their financing. The present report shows that the implementation
of the Directive resulted in very few new services launched so far and makes an
attempt to analyse the reasons for that. Given the fact that there are a
minimal number of new services, their impact on PSO financing is negligible.
The state of the preparation of a further market opening and the different
models for organising this market are analysed in the impact assessment linked
to the legislative proposal on amending Directive 91/440/EEC.

In the following
sections, first we analyse the legal implementation of the provisions of the
Directive that are relevant for the opening of the international rail passenger
market by Member States. After that, we examine the practical impact the
Directive had on the rail market and the reasons which may explain why several
positive effects expected have failed to appear so far.

2.           Legal
implementation of the provisions of the Directive relevant for the opening of
the international rail passenger market

The deadline for transposing the
Directive was 4 June 2009. By that date, none of the Member States had notified
transposition. While some of them did during the following two months, the
Commission opened infringement procedures against 19 Member States on 31 July
2009 for failing to notify the measures taken to transpose the Directive. On 3
June 2010, the Commission submitted a reasoned opinion to 4 Member States for
the same reason. All Member States have notified transposition since.

Late and inadequate transposition of
previous railway packages may have a negative impact on the practical
implementation of the provisions of the Directive as well. At the moment, there
are 12 infringement cases for inadequate transposition of the First Railway
Package before the European Court of Justice and the Commission sent reasoned
opinions in similar cases to 4 other Member States. Those infringement
procedures concern, among others:

·
insufficient safeguards to guarantee the
independence of the infrastructure manager from the railway holding and its
transport affiliates in the exercise of essential functions;

·
insufficient incentives for the infrastructure
manager to reduce costs and level of access charges;

·
access charges set at higher levels than direct
costs without justification that the market can bear this;

·
insufficient independence of the regulatory body
from the incumbent[4]
railway undertaking, the infrastructure manager or the ministry that controls
the incumbent railway undertaking;

·
insufficient powers of the regulatory body to
take and enforce the necessary decisions.

Besides, in September 2011, the Commission
initiated infringement proceedings against France and the United Kingdom for insufficient transposition of the First Railway Package in respect of
Channel Tunnel traffic.

The reasons for which the Commission opened
the infringement procedures mentioned are relevant for access to the
international rail passenger market as well. One of the positive consequences
of infringement procedures is, however, a significant strengthening of the
powers of the regulatory bodies that is crucial for increasing competition
(only three of the sixteen ongoing infringement procedures mentioned still
concern regulatory body powers).

Article 10 (3a) allows any railway
undertaking established in a Member State that has obtained a licence and the
necessary safety certificates to access the infrastructure of all Member States
in order to operate an international passenger service within the EU. The
Directive authorises new market entrants to pick up and set down passengers at
any station located on the international route, including stations located in
the same Member State (cabotage). Cabotage rights should be "focused on
stops that are ancillary to the international route"[5] and the introduction should
concern services whose principal purpose is to carry passengers between
stations located in different Member States. Regulatory bodies shall determine
whether the principal purpose of a service is to carry passengers travelling on
an international journey. They should not act on their own initiative but
following a request from the relevant competent authorities and/or interested
railway undertakings.

Since the need for guidance from the
Commission on how to implement this provision emerged from a survey on the
implementation of the Directive by Commission services at the end of 2009 and
subsequent discussions with representatives of Member States and rail sector
associations, on 28 December 2010 the Commission published an interpretative
communication on certain provisions of the Directive[6]. This communication confirms
that while determining the principal purpose of a service, regulatory bodies
must act independently. This implies that their decision cannot be
preconditioned or predetermined by instructions received from any other public
authorities under national law. The regulatory bodies should verify the
principal purpose of the service case by case.

In the framework of the recast of the First
Railway Package, EU co-legislators decided to charge the Commission with the
adoption of implementing acts setting out the details of the procedure and
criteria to assess the nature of a service (principal purpose test), within 18
months after transposition of the Directive establishing a Single European
Railway Area (by 2015).[7]

Estonia and Sweden apply no restrictions on commercial rail services, thus, they did not introduce any
provision in their national legislation on determining the principal purpose of
a service. In all other Member States but one (Finland), there are provisions
in national legislation to authorise the regulatory body to examine the
principal purpose of new international services applied for. Some Member States
intend to use an approach based on purely quantitative thresholds (for the
length of the route to be outside of the Member State, for the number of
passengers making an international journey, for a part of turnover to come from
international passengers) while in several other Member States the decision-making
process and the methodology to be used have not been published. Finally, some
Member States seem to have given the right to request a principal purpose test
to market players not listed in the Directive (typically, the infrastructure
manager). The Commission is analysing these cases for compliance with the
Directive.

Member States may exclude from the scope of
this Directive any railway service carried out in transit through the Union which begins and ends outside the EU territory[8].
Four Member States (Bulgaria, Greece, Lithuania and Romania) have chosen to use
this opportunity which seems to be irrelevant for the others for geographical
reasons.

Since introducing new services with
cabotage rights on a route covered by PSC may have implications for the organisation
and financing of public service obligations, in accordance with Article 10
(3b), Member States may limit the right of access on services between a place
of departure and a destination which are covered by one or more PSC conforming
to EU legislation[9]
if the new international services could compromise their economic
equilibrium. The interpretative communication of the Commission underlines
that this limitation is optional. Regulatory bodies cannot act on their own
initiative but only following a request by the entities listed in the
Directive.

The Directive does not specify the forms
such limitations can take but for instance, restrictions on the number or
frequency of stops, exclusion of certain stops, reduction of train service
frequency are possible options beyond the full exclusion of cabotage.

Assessments and decisions of regulatory
bodies should be coordinated. Beyond exchanging information and, where
relevant, coordination of principles and practice of assessment in individual
cases, recital (17) invites the regulatory bodies to develop guidelines based
on their experience.

The interpretative communication makes
clear that the economic equilibrium test is independent from the principal
purpose test: they can be run together but one cannot be considered a
prerequisite for the other. It also underlines that the assessment should be
limited to the points mentioned in the request received.

For transparency and non-discrimination,
the methodology used to determine whether the economic equilibrium of a PSC is
compromised by a new international service should be published.

In response to a questionnaire sent out in
2012 by Commission services, 11 Member States declared that they do not limit
cabotage rights. Several Member States having chosen to make use of this option
have not published the decision-making process and the methodology to be used.
In some other Member States, rather strict criteria seem to be included in
national legislation. In at least one Member State, the economic equilibrium
test has to be preceded by a principal purpose test, even in the case where
there has been no request for that. The Commission is analysing these cases for
compliance with the Directive.

However, while Member States seem to have
difficulties with the transposition of the provisions of Article 10 (3a) and
(3b), in fact there is only one practical example of using them to limit
cabotage rights. In Italy (one of the few Member States where the
decision-making process and the methodology to be used have been published on
the website of the regulatory body), in the case of an application submitted by
the Italian private operator LeNord S.p.A. in cooperation with the German
incumbent DB and the Austrian incumbent ÖBB for the operation of several routes
linking the three Member States, the regulatory body decided to apply a partial
limitation of cabotage rights on the basis that they would compromise the
economic equilibrium of several regional PSC. The decision was suspended by the
regulatory body itself in order to assure the transport of passengers who had
already bought their tickets. On the basis of a reconfiguration of
international passenger services requested, the regulatory body lifted all
cabotage limitations and the railway undertakings are currently operating daily
services from Munich through the Brenner to three destinations in Italy (Venice, Bologna and Verona).

In the framework of the recast of the First
Railway Package, EU co-legislators decided to charge the Commission with the
adoption of implementing acts setting out the details of the procedure and
criteria to assess the impact of a new service on PSC, within 18 months after
transposition of the Directive establishing a Single European Railway Area (by
2015).[10]

In accordance with Article 10 (3c), Member
States may also limit cabotage rights where an exclusive right to transport
passengers between the relevant stations has been granted under a concession
contract awarded before the entry into force of the Directive (4 December
2007) on the basis of a fair competitive tendering procedure and in accordance
with the relevant principles of EU law. This limitation may continue for the
original duration of the contract, or 15 years, whichever is the shorter.

The only Member State where such a limitation is in use is the Netherlands, on the line
Amsterdam-Roosendaal for a period of 15 years. This concerns cabotage on the
new high-speed line HSL Zuid which has connected Schiphol Airport with Antwerp in Belgium since 2009 where domestic transport is reserved for the operator High
Speed Alliance (a joint venture between the incumbent NS and the national
airline KLM).

Article 10 (3e)
stipulates that the decisions regarding limitations on the basis of a
concession contract or the economic equilibrium of PSC being compromised have
to be subject to judicial review.

According to the
information available to the Commission, this is provided for in the national
legislation of all Member States that make use of those possibilities. In most
cases, that does not require specific legislation but is in line with general
provisions concerning judicial review of decisions of authorities. However,
given the fact that there have been almost no decisions to be questioned, there
has been no practical test of those provisions applied for the opening of the
international rail passenger market.

According to
Article 10 (3f), Member States may authorise the authority responsible for rail
passenger transport to impose a levy on railway undertakings providing
cabotage services in a fair, transparent and non-discriminatory way.

Seven Member
States (Bulgaria, Greece, Hungary, Italy, Romania, Slovenia and Slovakia) have decided to include this possibility in their national legislation. However,
such a levy has never been imposed on any railway undertaking.

3.           New
services operated on the basis of the Directive

Although the essential legal requirements
of the Directive regarding the opening of the market for new international
services with cabotage have been met, such services are rarely seen at the moment
in Europe.

Since December 2010, Italian private
operator LeNord together with German incumbent DB and Austrian incumbent ÖBB
has been providing for services from Germany through Austria to Italy linking
Munich – Brenner – Verona (1 pair of trains a day), Munich – Brenner – Venice
and Munich – Brenner – Bologna (2 pairs of trains a day for both). Since
December 2011, another railway undertaking based in Italy (Società Viaggiatori
Italia S.r.l.) controlled by French incumbent SNCF has been operating new
services linking Paris – Modane – Milan (3 pairs of trains a day), while
Italian incumbent Trenitalia and the French-based private operator Veolia
Transdev have been running a night train linking Venice to Paris via
Switzerland under the brand name thello. This is the first service in
the long-distance rail passenger market in France which is not operated by or
in cooperation with SNCF.

In 2010, Swedish incumbent SJ started to
offer services from Sweden to Denmark with cabotage between Copenhagen and Odense; however, the latter part of the service was stopped one year later.

An atypical international service on what
seems to be a niche market is the Berlin Night Express, a night train service
linking Malmö and Berlin three times a week from late March to early November,
operated by Veolia and GVG Verkehrsorganisation GmbH.

It is worth mentioning that when DB
withdraws from the cooperation for international high-speed transport with SNCF
and Belgian incumbent SNCB as planned, Thalys will become a further competitor
in the long-distance market, especially on the Aachen-Köln-Essen route. Thalys
has extended its trains from Paris to Köln into the Ruhr area since 2011. DB
has also announced its plans to introduce InterCityExpress services from
Frankfurt to London through the Channel Tunnel.

The principal purpose of the services
operated by the Austrian private operator WESTbahn (a company in which SNCF has
a 26% stake) from Vienna to Salzburg and to Freilassing at the German side of
the border seems to be domestic transport.

Cross-border regional services covered by
PSC such as passenger transport from Enschede in the Netherlands to Münster and
 Dortmund in Germany are to be distinguished from open access international
services provided under the Directive.

4.           Reasons
for the minor impact the implementation of the Directive has had on the market

Several barriers may be identified that
prevent new entrants (including incumbent railway undertakings licensed in
another Member State) from offering international services on the basis of the
Directive. Late and, in some cases, restrictive implementation of the Directive
and persistent discriminations in access to infrastructure and to rail-related
services which resulted in the infringement procedures concerning the implementation
of the First Railway Package do have a negative impact on the market.

There are few international destinations
with traffic flows strong enough to enable operators to introduce economically
viable new services. In particular, niche markets like night train services
(that are being ousted by faster day services by rail or other modes of
transport) offer few opportunities for a profitable service. It is also quite
difficult to integrate the new international services in the domestic timetable
to provide for appropriate connections.

The experience from opening the rail
freight market also shows that new operators (even subsidiaries of incumbent
railway undertakings in other Member States) prefer domestic services to
international ones as traffic flows are larger and domestic traffic is easier
to organise (only one infrastructure manager is involved, there are no
linguistic issues, etc.).

Stakeholders interested in international
services refer to the following access barriers:

·
administrative barriers: difficulties in
obtaining a safety certificate or vehicle authorisation (in several cases,
extremely long times to produce a decision);

·
information barriers: difficulties in getting
information and poor quality of information relating to administrative issues
mentioned above;

·
operational barriers: need for staff speaking
all official languages along the route, volatility of infrastructure charges,
access to operational facilities and services, difficulties to align train
paths in domestic timetables to get suitable international paths, lack of the
inter-availability of tickets;

·
access to sales channels: difficulties to use
existing sales facilities on a fair and non-discriminatory basis or to rent
space in stations to set up their own ticket sales offices or even getting
their publicity displayed (according to a study, the Czech Republic, Portugal,
Denmark and the United Kingdom were the only Member States in 2011 in which all
sales facilities in rail passenger transport were available to external railway
undertakings with no restrictions[11]).

Established forms of cooperation between
incumbents (which, contrary to new entrants, enjoy network effects and a
dominant position on their national markets) can also be an obstacle, not just
for new entrants who have difficulties in finding a profitable market segment
to start their own services but also for incumbents considering changing
strategies and entering the market of another Member State on their own.

Inadequate financing of railway
infrastructure in certain Member States leads to the inevitable deterioration
of service quality and to the need to withdraw international services that have
become non-competitive with other modes of transport.

High-speed rail has been the success story
of railway transport and indeed high-speed services between major cities offer
the greatest traffic flows and, therefore, a real potential to introduce new
services (DB plans to run its own InterCityExpress trains from Frankfurt to
London or the recently introduced new services between Frankfurt and Marseille
in cooperation of SNCF and DB can confirm that). However, they need specialised
rolling stock and, therefore, high investment, and may run against special
safety barriers in certain markets like the Channel Tunnel where the special safety
regulation based on vehicle standards different from the Europe-wide TSI has
been an obstacle for DB to use its own ICE train sets.

Framework conditions for different modes of
transport do not provide for a level playing field either: in some Member
States, international trains are subject to VAT and/or to fuel excise duty
while aviation is not.

Finally, the negative overall economic
climate since 2008 and the low reaction of the rail sector to regulatory
changes (linked to high investment needs and the long duration of use of
railway assets) have to be taken into account.

Some of the barriers listed in this report
have been addressed by the European co-legislators during the recast of the
First Railway Package that resulted in the adoption of the Directive
establishing a Single European Railway Area (access to facilities and services,
improved stability in infrastructure financing, shorter deadlines for
administrative decisions). With harmonisation of safety certificates and
vehicle authorisations, the Commission proposes to eliminate other administrate
barriers in the framework of the Fourth Railway Package.

5.           Conclusions

International rail passenger services
including cabotage rights have been liberalised in the EU by Directive
2007/58/EC as from 1 January 2010 (except Luxembourg where this deadline was
postponed to 1 January 2012). Although all Member States were delayed as
regards transposition, by now all of them have taken national legislative
measures to comply with the Directive.

As for practical implementation, the
interpretation of the provisions concerning the principal purpose of a rail
service and the economic equilibrium of services under PSC being compromised
proved to be the most difficult for Member States. In this field, the Commission
will adopt implementing acts on the basis of the Directive establishing a
Single European Railway Area.

Several Member States decided not to use
any of the options provided by the Directive to limit new international
services or cabotage rights. Even where the possibility to limit cabotage is
granted by national law, practical application of those provisions remains
minimal. Concession-based limitation seems to be the most efficient of the
safeguard clauses to protect the interests of operators providing services on a
route that may be interesting for cabotage; however, it is used in one Member State only.

Despite the establishment of the relevant
national legal framework in all Member States concerned, there are few examples
of new international services operated on the basis of the Directive. When
trying to enter the international rail passenger market, new operators are
often facing barriers linked to inadequate implementation of previous railway
packages or loopholes in previous EU legislation. Infringement procedures, the
recast of the First Railway Package and the present proposals for the Fourth
Railway Package are expected to contribute to the solution of these problems.

However, even in case of elimination of all
those barriers we cannot expect a rapid growth of new international rail
passenger services as most segments of the international rail passenger market
are barely profitable and therefore unattractive for operators. It is much
easier to organise domestic passenger transport and in Member States that have
opened their domestic passenger market for competition, there are many more new
entrants than in the international market. The liberalisation of rail freight
services has produced a similar picture. It should also be noted that in
passenger transport, competition seems to be the greatest for local and
regional services under PSC in case of competitive tendering.

Thus, the analysis of the experience gained
from the opening of the international rail passenger market since 2010 seems to
confirm that new international services are likely to spread from domestic
market opening rather than the other way round. For instance, domestic market
opening would enable international service operators to develop feeder services
that would improve the viability of international services. The Commission's
proposals to open up domestic rail passenger markets and to expand competitive
tendering in the framework of the Fourth Railway Package should give a boost to
the development of international services.

[1]               OJ L 315 of 3.12.2007.

[2]               Recital (4) of Directive 2007/58/EC.

[3]               Article 10 (3d).

[4]               An incumbent is a (former) state railway undertaking
which had a dominant position on the market prior to liberalisation.

[5]               Recital (8) of Directive 2007/58/EC.

[6]               OJ C 353 of 28.12.2010, pp. 1-6.

[7]               Article 10 (4) of the Directive establishing a Single
European Railway Area, adopted by the European Parliament on 3 July 2012 and by
the Council on 29 October 2012.

[8]               Article 2 (4) of Directive 91/440/EEC as amended by
Directive 2007/58/EC.

[9]               Regulation (EC) No 1370/2007 of the European
Parliament and of the Council of 23 October 2007 on public passenger transport
services by rail and by road and repealing Council Regulations (EEC) Nos
1191/69 and 1107/70.

[10]             Article 11 (4) of the Directive
establishing a Single European Railway Area.

[11]                http://www.deutschebahn.com/site/shared/en/file__attachements/position__papers/study__rail__liberalisation__index__2011__complete__version.pdf,
p. 70.