# EUR-Lex - 52013PC0026 - EN

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# 52013PC0026

**Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL repealing Regulation (EEC) No 1192/69 of the Council on common rules for the normalisation of the accounts of railway undertakings /* COM/2013/026 final - 2013/0013 (COD) */**

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EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

Regulation (EEC) No 1192/69 allows Member
States to compensate 36 enumerated railway undertakings for the payment of
obligations which undertakings of other transport modes do not have to support,
such as special family allowances and pensions.

When the rules for normalisation are
correctly applied, such State support is considered compatible with the
internal market and Member States are exempted from State aid notification
obligations, although Member States are required to officially publish their
compensation decisions. Today, only a few Member States rely on the Regulation
in order to justify payments of compensation.

The Regulation was adopted before the rail
market was liberalised and when rail transport in Europe was developing
primarily within national borders, with integrated companies both operating
rail services and managing rail infrastructure. In the context of this
monopolistic market, the objective of the Regulation at the time was to put railway
undertakings and undertakings active in other transport modes on an equal
competitive footing.

Since the 1990s, a series of legislative
measures (known as the railway packages) has been adopted at European level
with a view to reviving rail transport by gradually creating a single railway
area integrated at a European level. These legal acts have opened up the rail
freight and international rail passenger markets to competition and have
established, by way of Directive 2012/34/EU of the European Parliament and of
the Council of 21 November 2012 establishing a single European railway area
(recast)[1],
certain fundamental principles which include that railway undertakings shall be
managed according to principles that apply to commercial companies, that entities
responsible for the allocation of capacity and charging for rail infrastructure
shall be separate from entities which operate rail services (separation of
essential functions) and that there shall be a separation of accounts (to
prevent cross-subsidisation), that any railway undertaking licensed in
accordance with EU criteria should have access to railway infrastructure on
fair, non-discriminatory terms, and that infrastructure managers may benefit
from State financing.

Regulation (EEC) No 1192/69 is inconsistent
and incompatible with legislative measures currently in force for a number of
reasons.

i) Since railway undertakings must be
managed according to principles that apply to commercial companies, no State
compensation for insurance, pensions, or other operating expenditures is
permissible (except in the case of compensation for the provision of public
services). Not only is this principle established broadly under Treaty State
aid rules, but it is more specifically set out in the Guidelines on State aid
for railway undertakings (2008/C 184/07).

ii) The enumerated list of railway
undertakings eligible for compensation under the Regulation and the classification
in the Regulation of types of compensation that can be paid to railway
undertakings presuppose an integration of infrastructure management into the
activities of railway undertakings which is inconsistent with the principles of
separation of essential functions and separation of accounts.

iii) Regulation 1192/69 makes only 36
railway undertakings eligible for compensation. The Regulation may have made
sense when incumbent railway undertakings competed exclusively with other modes
of transport and not with other railway undertakings, however, in the context
of a liberalised market where railway undertakings compete directly with the
traditional monopolies, it is not appropriate to discriminate between different
undertakings. If financial conditions differ for railway undertakings (as a
consequence of the Regulation) new entrants are not ensured non-discriminatory
access conditions. For example, new entrants may have difficulties to attract
personnel from incumbent railway undertakings since the latter may be able to
offer more favourable pension conditions through subsidies received under the
Regulation.

Payments of compensation under Class IV of
the Regulation (the costs of level crossing facilities) are costs associated
with the functions of an infrastructure manager who, under Article 8 of Directive
2012/34/EU, may benefit from State financing. Thus while compensation payments under
Class IV of the Regulation would be compatible with existing legislation, Class
IV of the Regulation is also redundant.

Therefore, the proposed initiative to
repeal the Regulation will eliminate inconsistencies in the EU legal order and
will contribute to simplification by eliminating a legal act which is now
obsolete.

2.           RESULTS OF CONSULTATIONS WITH THE
INTERESTED PARTIES AND IMPACT ASSESSMENTS

2.1         Consultation

The Commission requested information from
Member States about application of the Regulation in May 2010 and in June 2011.
Responses revealed that between 2007 and 2010 a majority of Member States had
not received applications from railway undertakings and had not made payments
of compensation under the Regulation. A majority of Member States indicated
they saw no ongoing need for the Regulation and some explicitly expressed their
support for repeal or their opinion that the Regulation is obsolete or out of
date. Some Member States were in favour of maintaining relevant classes in the
Regulation, however given that compensation payments under all classes except
Class IV are incompatible with other legislation, this is an option that cannot
be pursued. Other Member States were indifferent or expressed no opinion on the
ongoing need for the Regulation. Only three Member States (Belgium, Germany and
Ireland) declared that they used the Regulation as a legal basis for payments
of compensation during the period 2008-2010.

Compensation payments in
2010 (estimated or actual) under Regulation 1192/69 as reported by MS (€
millions)

|| Class I Loss or injury at work || Class III Pensions || Class IV Level Crossings || Total

Belgium || (0.322) || - || - || (0.322)

Germany || - || - || 72.8 || 72.8

Ireland || - || 24.1 || 4.2 || 28.3

Total || (0.322) || 24.1 || 77.0 || 100.8

The Commission was also recently informed
by Poland of compensation payments to PKP PLK (under Class IV) for the year
2012 in the order of €7.9 million.

Only three classes of compensation are
applied by Member States today (I, III and IV). Certain classes of compensation
under the Regulation are no longer in force (V through VIII). None of the
remaining classes of compensation (II and IX through XV) are applied.

Except in the case of compensation for the
provision of public services, payment by the State to railway undertakings of
compensation is incompatible with the principles of management of railway
undertakings according to principles that apply to commercial companies and EU
rules on State aid, separation of accounts, and non-discriminatory access to
railway infrastructure. Class IV of the Regulation is redundant given that
compensation payments by the State for the functions of infrastructure managers
can already be made under Directive 2012/34/EU. Reducing the number of classes
in the Regulation to those which are in line with existing legislation would
have the same effect as the repeal option – eliminating incompatible classes
yet leaving the possibility for Member States to provide the infrastructure
manager with financing consistent with its functions, including costs
associated with level crossing facilities.

2.2         Impacts of the repeal

On the basis of the data provided by Member
States, it can be concluded that the impact of a repeal of the Regulation would
be very minimal.

Class I

Between 2008 and 2010, Belgium received
applications from SNCB Holding under Class I (payments which railway
undertakings are obliged to make but which for the rest of the economy are
borne by the State, including payments in respect of loss or injury resulting
from accidents at work). In 2010, a negative compensation balance of €0.323
million was calculated under the Regulation, to be paid back by SNCB Holding to
the Belgian State.

The impact of a repeal of Regulation
1192/69 would be negligible as regards Class I compensation payments. SNCB
would have to join the existing private accident insurance system and Belgium
has indicated that it is considering this option. Any costs associated with
switching systems would be more than offset by the elimination of
administrative burdens associated with the annual receipt of applications and
calculations of compensation under the Regulation.

Class III

Between 2008 and 2010, Ireland made
payments to CIE under Class III (payments in respect of retirement and other
pensions borne by railway undertakings on terms different from those applicable
to other transport undertakings). In 2010, Class III compensation to CIE
amounted to €24.1 million.

The impact of a repeal of Regulation
1192/69 would be minimal as regards Class III compensation payments. Pension
payments to CIE related to labour costs associated with infrastructure
management can be justified by Article 8 of Directive 2012/34/EU as financing
for functions of an infrastructure manager. Pension payments to CIE related to
labour costs associated with public service obligations, can be justified as
compensation for the discharge of public service obligations defined in
accordance with Regulation 1370/2007 and be exempted from the State aid
notification requirement. (Currently 100% of all rail passenger operations are
under public service obligation). Pension payments to CIE for labour costs
associated with rail operations that do not fall under public service
obligations (in other words, freight services) would be subject to State aid
notification. Freight activities are estimated to represent around 5.2% of
CIE's rail operation activities – this translates roughly to 3.4% of its
employees. Thus, less than €1 million of pension related payments to CIE are
associated with rail freight activities. Only these payments to CIE (and
payments to CIE related to rail passenger operations not under PSO – of which
there currently are none) would be subject to State aid notification rules.

Class IV

Ireland, Germany and Poland have made
payments under Class IV (costs of level crossing facilities). In 2010 Ireland made
payments to CIE of € 4.2 million under Class IV. Estimated payments under Class
IV from Germany to DB Netz AG and Usedomer Bäderbahn GmbH were in the order of
€72.8 million for 2010, of which less than 0.5% went to Usedomer Bäderbahn. For
the year 2012 Poland will make compensation payments under Class IV to PKP PLK
in the order of € 7.9 million.

The impact of a repeal of Regulation
1192/69 would be negligible as regards Class IV compensation payments. Payments
to CIE, DB Netz and PKP PLK would be covered by Article 8 of Directive 2012/34/EU
as financing for functions of an infrastructure manager. These payments can
continue to be made after a repeal of the Regulation and the administrative
formalities related to application of the Regulation, such as handling annual
applications for normalisation from undertakings, assessing financial burden or
benefit, determining the amount of compensation, adequately preparing decisions
taken in pursuance of the provisions of the Regulation and officially publishing
those decisions, would be eliminated. Payments to Usedomer Bäderbahn, which are
minimal, would be subject to State aid notification rules.

3.           LEGAL ELEMENTS OF THE PROPOSAL

The proposal consists of a repeal of
Regulation (EEC) No 1192/69.

2013/0013 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

repealing Regulation (EEC) No 1192/69 of
the Council on common rules for the normalisation of the accounts of railway
undertakings

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Articles 91 and 109
thereof,

Having regard to the proposal from the
European Commission,

After transmission of the draft legislative
act to the national Parliaments,

Having regard to the opinion of the
European Economic and Social Committee[2],

Having regard to the opinion of the
Committee of the Regions[3],

Acting in accordance with a ordinary legislative
procedure,

Whereas:

(1)
Regulation (EEC) No 1192/69 allows Member States
to compensate 36 enumerated railway undertakings for the payment of obligations
which undertakings of other transport modes do not have to support. Correct
application of the rules for normalisation results in Member States being
exempted from State aid notification obligations.

(2)
A series of legislative measures has been
adopted at European level, opening up the rail freight and international rail
passenger markets to competition and establishing, by way of Directive 2012/34/EU
of the European Parliament and of the Council of 21 November 2012
establishing a single European railway area (recast), certain fundamental
principles which include that railway undertakings shall be managed according
to principles that apply to commercial companies, that entities responsible for
the allocation of capacity and charging for rail infrastructure shall be
separate from entities which operate rail services and that there shall be a
separation of accounts, that any railway undertaking licensed in accordance
with EU criteria should have access to railway infrastructure on fair,
non-discriminatory terms, and that infrastructure managers may benefit from
State financing.

(3)
Regulation (EEC) No 1192/69 is inconsistent and
incompatible with legislative measures currently in force. In particular, in
the context of a liberalised market where railway undertakings compete directly
with the enumerated railway undertakings, it is no longer appropriate to
discriminate between these two groups of different undertakings.

(4)
As a consequence, it is appropriate to repeal
Regulation (EEC) No 1192/69 to eliminate inconsistencies in the EU legal order
and this will contribute to simplification by eliminating a legal act which is
now obsolete.

HAVE ADOPTED THIS REGULATION:

Article 1

Regulation (EEC) No 1192/69 is repealed.

Article 2

This Regulation shall enter into force on
the day following that of its publication in the Official Journal of the
European Union.

This Regulation shall be binding
in its entirety and directly applicable in all Member States.

Done at Brussels,

For the European Parliament                       For
the Council

The President                                                 The
President

[1]               OJ L 343, 14.12.2012, p. 32.

[2]               OJ C , , p. .

[3]               OJ C , , p. .