# 62020CJ0144

JUDGMENT OF THE COURT (Fifth Chamber)

9 September 2021 (
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  )

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(Reference for a preliminary ruling – Rail transport – Directive 2012/34/EU – Articles 32 and 56 – Railway infrastructure charging – Independence of the infrastructure manager – Functions of the regulatory body – Concept of ‘optimal competitiveness of rail market segments’ – Exclusive right on a rail segment – Public service operator)

In Case C‐144/20,

REQUEST for a preliminary ruling under Article 267 TFEU from the administratīvā rajona tiesa (District Administrative Court, Latvia), made by decision of 26 March 2020, received at the Court on 27 March 2020, in the proceedings

AS ‘LatRailNet’,

AS ‘LatRailNet’,

VAS ‘Latvijas dzelzceļš’

VAS ‘Latvijas dzelzceļš’

v

Valsts dzelzceļa administrācija,

Valsts dzelzceļa administrācija,

THE COURT (Fifth Chamber),

composed of E. Regan, President of the Chamber, M. Ilešič, E. Juhász (Rapporteur), C. Lycourgos and I. Jarukaitis, Judges,

Advocate General: M. Campos Sánchez-Bordona,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

| – | VAS ‘Latvijas dzelzceļš’, by D. Driče, advokāte, |
| --- | --- |

–

VAS ‘Latvijas dzelzceļš’, by D. Driče, advokāte,

| – | Valsts dzelzceļa administrācija, by J. Zālītis, J. Zicāns and J. Iesalnieks, |
| --- | --- |

–

Valsts dzelzceļa administrācija, by J. Zālītis, J. Zicāns and J. Iesalnieks,

| – | the Italian Government, by G. Palmieri, acting as Agent, and by F. Sclafani, avvocato dello Stato, |
| --- | --- |

–

the Italian Government, by G. Palmieri, acting as Agent, and by F. Sclafani, avvocato dello Stato,

| – | the European Commission, initially by I. Naglis and W. Mölls, and C. Vrignon, then by C. Vrignon, acting as Agents, |
| --- | --- |

–

the European Commission, initially by I. Naglis and W. Mölls, and C. Vrignon, then by C. Vrignon, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 25 March 2021,

gives the following

Judgment

Judgment

| 1 | This request for a preliminary ruling concerns the interpretation of Article 32(1) and Article 56(2) of Directive 2012/34/EU of the European Parliament and of the Council of 21 November 2012 establishing a single European railway area (OJ 2012 L 343, p. 32). |
| --- | --- |

1

This request for a preliminary ruling concerns the interpretation of Article 32(1) and Article 56(2) of Directive 2012/34/EU of the European Parliament and of the Council of 21 November 2012 establishing a single European railway area (OJ 2012 L 343, p. 32).

| 2 | The request has been made in proceedings between AS ‘LatRailNet’ and VAS ‘Latvijas dzelzceļš’ (‘LD’) and the Valsts dzelzceļa administrācija (National Rail Administration, Latvia) concerning the challenge against two measures taken by the latter on 27 June 2018 and 7 November 2018, respectively. |
| --- | --- |

2

The request has been made in proceedings between AS ‘LatRailNet’ and VAS ‘Latvijas dzelzceļš’ (‘LD’) and the Valsts dzelzceļa administrācija (National Rail Administration, Latvia) concerning the challenge against two measures taken by the latter on 27 June 2018 and 7 November 2018, respectively.

Legal context

Legal context

Directive 2012/34

Directive 2012/34

| 3 | Recitals 19 and 76 of Directive 2012/34 state:





  ‘(19) | 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] authorises Member States and local authorities to award public service contracts which may contain exclusive rights to operate certain services. It is therefore necessary to ensure that the provisions of that regulation are consistent with the principle of opening up international passenger services to competition. |
| --- | --- | --- |

3

Recitals 19 and 76 of Directive 2012/34 state:

‘(19)

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] authorises Member States and local authorities to award public service contracts which may contain exclusive rights to operate certain services. It is therefore necessary to ensure that the provisions of that regulation are consistent with the principle of opening up international passenger services to competition.

...

| (76) | The efficient management and fair and non-discriminatory use of rail infrastructure require the establishment of a regulatory body that oversees the application of the rules set out in this Directive and acts as an appeal body, without prejudice to the possibility of judicial review. Such a regulatory body should be able to enforce its information requests and decisions by means of appropriate penalties.’ |
| --- | --- |

(76)

The efficient management and fair and non-discriminatory use of rail infrastructure require the establishment of a regulatory body that oversees the application of the rules set out in this Directive and acts as an appeal body, without prejudice to the possibility of judicial review. Such a regulatory body should be able to enforce its information requests and decisions by means of appropriate penalties.’

| 4 | Article 4 of Directive 2012/34, entitled ‘Independence of railway undertakings and infrastructure managers’, provides, in paragraph 2:
  ‘While respecting the charging and allocation framework and the specific rules established by the Member States, the infrastructure manager shall be responsible for its own management, administration and internal control.’ |
| --- | --- |

4

Article 4 of Directive 2012/34, entitled ‘Independence of railway undertakings and infrastructure managers’, provides, in paragraph 2:

‘While respecting the charging and allocation framework and the specific rules established by the Member States, the infrastructure manager shall be responsible for its own management, administration and internal control.’

| 5 | Article 7 of that directive, entitled ‘Independence of essential functions of an infrastructure manager’, provides:
  ‘1.   Member States shall ensure that the essential functions determining equitable and non-discriminatory access to infrastructure, are entrusted to bodies or firms that do not themselves provide any rail transport services. Regardless of organisational structures, this objective shall be shown to have been achieved.
  The essential functions shall be:





  (a) | decision-making on train path allocation, including both the definition and the assessment of availability and the allocation of individual train paths; and |
| --- | --- | --- |

5

Article 7 of that directive, entitled ‘Independence of essential functions of an infrastructure manager’, provides:

‘1.   Member States shall ensure that the essential functions determining equitable and non-discriminatory access to infrastructure, are entrusted to bodies or firms that do not themselves provide any rail transport services. Regardless of organisational structures, this objective shall be shown to have been achieved.

The essential functions shall be:

(a)

decision-making on train path allocation, including both the definition and the assessment of availability and the allocation of individual train paths; and

| (b) | decision-making on infrastructure charging, including determination and collection of the charges, without prejudice to Article 29(1). |
| --- | --- |

(b)

decision-making on infrastructure charging, including determination and collection of the charges, without prejudice to Article 29(1).

Member States may, however, assign to railway undertakings or any other body the responsibility for contributing to the development of the railway infrastructure, for example through investment, maintenance and funding.

...’

| 6 | Section 2 of Chapter IV of Directive 2012/34, entitled ‘Infrastructure and services charges’, consists of Articles 29 to 37 of that directive. |
| --- | --- |

6

Section 2 of Chapter IV of Directive 2012/34, entitled ‘Infrastructure and services charges’, consists of Articles 29 to 37 of that directive.

| 7 | Article 29 of that directive, entitled ‘Establishing, determining and collecting charges’, provides:
  ‘1.   Member States shall establish a charging framework while respecting the management independence laid down in Article 4.
  Subject to that condition, Member States shall also establish specific charging rules or delegate such powers to the infrastructure manager.
  Member States shall ensure that the network statement contains the charging framework and charging rules or indicates a website where the charging framework and charging rules are published.
  The infrastructure manager shall determine and collect the charge for the use of infrastructure in accordance with the established charging framework and charging rules.
  Without prejudice to the management independence laid down in Article 4 and provided that the right has been directly conferred by constitutional law before 15 December 2010, the national parliament may have the right to scrutinise and, where appropriate, review the level of charges determined by the infrastructure manager. Any such review shall ensure that charges comply with this Directive, the established charging framework and charging rules.
  2.   Except where specific arrangements are made under Article 32(3), infrastructure managers shall ensure that the charging scheme in use is based on the same principles over the whole of their network.
  ...’ |
| --- | --- |

7

Article 29 of that directive, entitled ‘Establishing, determining and collecting charges’, provides:

‘1.   Member States shall establish a charging framework while respecting the management independence laid down in Article 4.

Subject to that condition, Member States shall also establish specific charging rules or delegate such powers to the infrastructure manager.

Member States shall ensure that the network statement contains the charging framework and charging rules or indicates a website where the charging framework and charging rules are published.

The infrastructure manager shall determine and collect the charge for the use of infrastructure in accordance with the established charging framework and charging rules.

Without prejudice to the management independence laid down in Article 4 and provided that the right has been directly conferred by constitutional law before 15 December 2010, the national parliament may have the right to scrutinise and, where appropriate, review the level of charges determined by the infrastructure manager. Any such review shall ensure that charges comply with this Directive, the established charging framework and charging rules.

2.   Except where specific arrangements are made under Article 32(3), infrastructure managers shall ensure that the charging scheme in use is based on the same principles over the whole of their network.

...’

| 8 | Article 31 of that directive, entitled ‘Principles of charging’, provides, in the second subparagraph of paragraph 5:
  ‘Based on the experience gained by infrastructure managers, railway undertakings, regulatory bodies and competent authorities, and recognising existing schemes on noise differentiation, the Commission shall adopt implementing measures setting out the modalities to be followed for the application of the charging for the cost of noise effects including its duration of application and enabling the differentiation of infrastructure charges to take into account, where appropriate, the sensitivity of the area affected, in particular in terms of the size of population affected and the train composition with an impact on the level of noise emissions. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 62(3). They shall not result in the undue distortion of competition between railway undertakings or affect the overall competitiveness of the rail sector.’ |
| --- | --- |

8

Article 31 of that directive, entitled ‘Principles of charging’, provides, in the second subparagraph of paragraph 5:

‘Based on the experience gained by infrastructure managers, railway undertakings, regulatory bodies and competent authorities, and recognising existing schemes on noise differentiation, the Commission shall adopt implementing measures setting out the modalities to be followed for the application of the charging for the cost of noise effects including its duration of application and enabling the differentiation of infrastructure charges to take into account, where appropriate, the sensitivity of the area affected, in particular in terms of the size of population affected and the train composition with an impact on the level of noise emissions. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 62(3). They shall not result in the undue distortion of competition between railway undertakings or affect the overall competitiveness of the rail sector.’

| 9 | Article 32 of Directive 2012/34, entitled ‘Exceptions to charging principles’, provides, in paragraph 1 and the fourth subparagraph of paragraph 4:
  ‘1.   In order to obtain full recovery of the costs incurred by the infrastructure manager a Member State may, if the market can bear this, levy mark-ups on the basis of efficient, transparent and non-discriminatory principles, while guaranteeing optimal competitiveness of rail market segments. The charging system shall respect the productivity increases achieved by railway undertakings.
  The level of charges shall not, however, exclude the use of infrastructure by market segments which can pay at least the cost that is directly incurred as a result of operating the railway service, plus a rate of return which the market can bear.
  Before approving the levy of such mark-ups, Member States shall ensure that the infrastructure managers evaluate their relevance for specific market segments, considering at least the pairs listed in point 1 of Annex VI and retaining the relevant ones. The list of market segments defined by infrastructure managers shall contain at least the three following segments: freight services, passenger services within the framework of a public service contract and other passenger services.
  Infrastructure managers may further distinguish market segments according to commodity or passengers transported.
  Market segments in which railway undertakings are not currently operating but may provide services during the period of validity of the charging system shall also be defined. The infrastructure manager shall not include a mark-up in the charging system for those market segments.
  The list of market segments shall be published in the network statement and shall be reviewed at least every five years. The regulatory body referred to in Article 55 shall control that list in accordance with Article 56.
  ...
  4.   ...
  Before 16 June 2015 and following an impact assessment, the Commission shall adopt measures setting out modalities to be followed in applying the differentiation of the infrastructure charge according to a time-frame consistent with the ERTMS European Deployment Plan established under [Commission] Decision 2009/561/EC of 22 July 2009 amending Decision 2006/679/EC as regards the implementation of the technical specification for interoperability relating to the control-command and signalling subsystem of the trans-European conventional rail system (OJ 2009 L 194, p. 60)] and ensuring that it does not result in any overall change in revenue for the infrastructure manager. Those implementing measures shall adapt the modalities of the differentiation applicable to trains operating local and regional services using a limited section of the railway corridors specified in Decision 2009/561/EC. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 62(3). They shall not result in the undue distortion of competition between railway undertakings or affect the overall competitiveness of the rail sector.’ |
| --- | --- |

9

Article 32 of Directive 2012/34, entitled ‘Exceptions to charging principles’, provides, in paragraph 1 and the fourth subparagraph of paragraph 4:

‘1.   In order to obtain full recovery of the costs incurred by the infrastructure manager a Member State may, if the market can bear this, levy mark-ups on the basis of efficient, transparent and non-discriminatory principles, while guaranteeing optimal competitiveness of rail market segments. The charging system shall respect the productivity increases achieved by railway undertakings.

The level of charges shall not, however, exclude the use of infrastructure by market segments which can pay at least the cost that is directly incurred as a result of operating the railway service, plus a rate of return which the market can bear.

Before approving the levy of such mark-ups, Member States shall ensure that the infrastructure managers evaluate their relevance for specific market segments, considering at least the pairs listed in point 1 of Annex VI and retaining the relevant ones. The list of market segments defined by infrastructure managers shall contain at least the three following segments: freight services, passenger services within the framework of a public service contract and other passenger services.

Infrastructure managers may further distinguish market segments according to commodity or passengers transported.

Market segments in which railway undertakings are not currently operating but may provide services during the period of validity of the charging system shall also be defined. The infrastructure manager shall not include a mark-up in the charging system for those market segments.

The list of market segments shall be published in the network statement and shall be reviewed at least every five years. The regulatory body referred to in Article 55 shall control that list in accordance with Article 56.

...

4.   ...

Before 16 June 2015 and following an impact assessment, the Commission shall adopt measures setting out modalities to be followed in applying the differentiation of the infrastructure charge according to a time-frame consistent with the ERTMS European Deployment Plan established under [Commission] Decision 2009/561/EC of 22 July 2009 amending Decision 2006/679/EC as regards the implementation of the technical specification for interoperability relating to the control-command and signalling subsystem of the trans-European conventional rail system (OJ 2009 L 194, p. 60)] and ensuring that it does not result in any overall change in revenue for the infrastructure manager. Those implementing measures shall adapt the modalities of the differentiation applicable to trains operating local and regional services using a limited section of the railway corridors specified in Decision 2009/561/EC. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 62(3). They shall not result in the undue distortion of competition between railway undertakings or affect the overall competitiveness of the rail sector.’

| 10 | Article 56 of Directive 2012/34, entitled ‘Functions of the regulatory body’, provides:
  ‘1.   Without prejudice to Article 46(6), an applicant shall have the right to appeal to the regulatory body if it believes that it has been unfairly treated, discriminated against or is in any other way aggrieved, and in particular against decisions adopted by the infrastructure manager or where appropriate the railway undertaking or the operator of a service facility concerning:





  (a) | the network statement in its provisional and final versions; |
| --- | --- | --- |

10

Article 56 of Directive 2012/34, entitled ‘Functions of the regulatory body’, provides:

‘1.   Without prejudice to Article 46(6), an applicant shall have the right to appeal to the regulatory body if it believes that it has been unfairly treated, discriminated against or is in any other way aggrieved, and in particular against decisions adopted by the infrastructure manager or where appropriate the railway undertaking or the operator of a service facility concerning:

(a)

the network statement in its provisional and final versions;

| (b) | the criteria set out in it; |
| --- | --- |

(b)

the criteria set out in it;

| (c) | the allocation process and its result; |
| --- | --- |

(c)

the allocation process and its result;

| (d) | the charging system; |
| --- | --- |

(d)

the charging system;

| (e) | the level or structure of infrastructure charges which it is, or may be, required to pay; |
| --- | --- |

(e)

the level or structure of infrastructure charges which it is, or may be, required to pay;

| (f) | the arrangements for access in accordance with Articles 10 to 13; |
| --- | --- |

(f)

the arrangements for access in accordance with Articles 10 to 13;

| (g) | access to and charging for services in accordance with Article 13. |
| --- | --- |

(g)

access to and charging for services in accordance with Article 13.

2.   Without prejudice to the powers of the national competition authorities for securing competition in the rail services markets, the regulatory body shall have the power to monitor the competitive situation in the rail services markets and shall, in particular, control points (a) to (g) of paragraph 1 on its own initiative and with a view to preventing discrimination against applicants. It shall, in particular, check whether the network statement contains discriminatory clauses or creates discretionary powers for the infrastructure manager that may be used to discriminate against applicants.

...

6.   The regulatory body shall ensure that charges set by the infrastructure manager comply with Section 2 of Chapter IV and are non-discriminatory. Negotiations between applicants and an infrastructure manager concerning the level of infrastructure charges shall only be permitted if these are carried out under the supervision of the regulatory body. The regulatory body shall intervene if negotiations are likely to contravene the requirements of this Chapter.

...’

Regulation No 1370/2007

Regulation No 1370/2007

| 11 | Article 2 of Regulation No 1370/2007, entitled ‘Definitions’, provides:
  ‘For the purpose of this Regulation:
  ...





  (e) | “public service obligation” means a requirement defined or determined by a competent authority in order to ensure public passenger transport services in the general interest that an operator, if it were considering its own commercial interests, would not assume or would not assume to the same extent or under the same conditions without reward; |
| --- | --- | --- |

11

Article 2 of Regulation No 1370/2007, entitled ‘Definitions’, provides:

‘For the purpose of this Regulation:

...

(e)

“public service obligation” means a requirement defined or determined by a competent authority in order to ensure public passenger transport services in the general interest that an operator, if it were considering its own commercial interests, would not assume or would not assume to the same extent or under the same conditions without reward;

| (f) | “exclusive right” means a right entitling a public service operator to operate certain public passenger transport services on a particular route or network or in a particular area, to the exclusion of any other such operator; |
| --- | --- |

(f)

“exclusive right” means a right entitling a public service operator to operate certain public passenger transport services on a particular route or network or in a particular area, to the exclusion of any other such operator;

...’

The dispute in the main proceedings and the questions referred for a preliminary ruling

The dispute in the main proceedings and the questions referred for a preliminary ruling

| 12 | On 30 June 2017, LatRailNet, as the body responsible for exercising the essential functions of infrastructure manager, within the meaning of Article 7(1) of Directive 2012/34, approved the charging system of the market segment of passenger transport services provided under a public service contract, applying to it a coefficient value of 1, the maximum increase index, whereas the criterion applicable to other segments was determined on the basis of an expert report. |
| --- | --- |

12

On 30 June 2017, LatRailNet, as the body responsible for exercising the essential functions of infrastructure manager, within the meaning of Article 7(1) of Directive 2012/34, approved the charging system of the market segment of passenger transport services provided under a public service contract, applying to it a coefficient value of 1, the maximum increase index, whereas the criterion applicable to other segments was determined on the basis of an expert report.

| 13 | On 27 June 2018, the national railway administration, as the regulatory body, within the meaning of Article 55 of Directive 2012/34, adopted a decision ordering LatRailNet to make changes to the charging system applicable to passenger transport services within the framework of a public service contract (‘the first decision at issue’). |
| --- | --- |

13

On 27 June 2018, the national railway administration, as the regulatory body, within the meaning of Article 55 of Directive 2012/34, adopted a decision ordering LatRailNet to make changes to the charging system applicable to passenger transport services within the framework of a public service contract (‘the first decision at issue’).

| 14 | The reasoning underlying that decision is that Directive 2012/34 provides that mark-ups are to be applicable only where the market permits it and in accordance with the rule that infrastructure charges must not prevent the use of public rail infrastructures for market segments likely at least to pay for the direct costs. According to the national railway administration, that means that the application of the mark-up and the determination of its amount are the subject of an evaluation of the competitiveness and profitability of the market segment concerned. |
| --- | --- |

14

The reasoning underlying that decision is that Directive 2012/34 provides that mark-ups are to be applicable only where the market permits it and in accordance with the rule that infrastructure charges must not prevent the use of public rail infrastructures for market segments likely at least to pay for the direct costs. According to the national railway administration, that means that the application of the mark-up and the determination of its amount are the subject of an evaluation of the competitiveness and profitability of the market segment concerned.

| 15 | The operative part of the first decision at issue states that the charging system should establish criteria for assessing the mark-ups applicable to the passenger transport services segment within the framework of a public service contract, to the exclusion of expenditure covered by the State budget or local authority budgets which passenger transport operators cannot cover from their own transport revenue. |
| --- | --- |

15

The operative part of the first decision at issue states that the charging system should establish criteria for assessing the mark-ups applicable to the passenger transport services segment within the framework of a public service contract, to the exclusion of expenditure covered by the State budget or local authority budgets which passenger transport operators cannot cover from their own transport revenue.

| 16 | On 26 July 2018, LatRailNet brought an action before the administratīvā rajona tiesa (District Administrative Court, Latvia) seeking annulment of that decision. |
| --- | --- |

16

On 26 July 2018, LatRailNet brought an action before the administratīvā rajona tiesa (District Administrative Court, Latvia) seeking annulment of that decision.

| 17 | In support of that action, LatRailNet claimed that the national railway authority had exceeded its powers as a regulatory authority in that it had ordered a change to the charging system and indicated the precise content to be included, when only the body responsible for exercising the essential functions of the infrastructure manager has the power to do so. |
| --- | --- |

17

In support of that action, LatRailNet claimed that the national railway authority had exceeded its powers as a regulatory authority in that it had ordered a change to the charging system and indicated the precise content to be included, when only the body responsible for exercising the essential functions of the infrastructure manager has the power to do so.

| 18 | On 21 August 2018, LatRailNet amended the charging system by providing that, in the passenger transport services segment within the framework of a public service contract, the mark-up rate would also be determined on the basis of an expert assessment. |
| --- | --- |

18

On 21 August 2018, LatRailNet amended the charging system by providing that, in the passenger transport services segment within the framework of a public service contract, the mark-up rate would also be determined on the basis of an expert assessment.

| 19 | On 20 September 2018, LD, as an infrastructure manager, lodged an objection against the amendments made to the charging system before the national railway authority, which rejected that objection by decision of 7 November 2018 (‘the second decision at issue’). |
| --- | --- |

19

On 20 September 2018, LD, as an infrastructure manager, lodged an objection against the amendments made to the charging system before the national railway authority, which rejected that objection by decision of 7 November 2018 (‘the second decision at issue’).

| 20 | LD brought an action before the administratīvā rajona tiesa (District Administrative Court) against the second decision at issue and that court joined the proceedings concerning the application for annulment of the first decision at issue to the proceedings relating to the second decision at issue. |
| --- | --- |

20

LD brought an action before the administratīvā rajona tiesa (District Administrative Court) against the second decision at issue and that court joined the proceedings concerning the application for annulment of the first decision at issue to the proceedings relating to the second decision at issue.

| 21 | LD claimed, in essence, that the national railway authority, as a regulatory body, was not competent to amend the charging system, since its competence is linked with the existence of discrimination in connection with the charging system |
| --- | --- |

21

LD claimed, in essence, that the national railway authority, as a regulatory body, was not competent to amend the charging system, since its competence is linked with the existence of discrimination in connection with the charging system

| 22 | That, in its submission, is not the position in the main proceedings, since the railway operator concerned was granted the exclusive right to provide public intercity rail transport services until 30 June 2031 and since Article 32(1) of Directive 2012/34, the purpose of which is to guarantee optimal competitiveness, is not applicable to market segments on which there is no competition. |
| --- | --- |

22

That, in its submission, is not the position in the main proceedings, since the railway operator concerned was granted the exclusive right to provide public intercity rail transport services until 30 June 2031 and since Article 32(1) of Directive 2012/34, the purpose of which is to guarantee optimal competitiveness, is not applicable to market segments on which there is no competition.

| 23 | The administratīvā rajona tiesa (District Administrative Court) observes that Article 56 of Directive 2012/34 provides that the regulatory body is to act on its own initiative, with a view to preventing discrimination between applicants, which, moreover, has been confirmed by the consistent case-law of the Court of Justice. |
| --- | --- |

23

The administratīvā rajona tiesa (District Administrative Court) observes that Article 56 of Directive 2012/34 provides that the regulatory body is to act on its own initiative, with a view to preventing discrimination between applicants, which, moreover, has been confirmed by the consistent case-law of the Court of Justice.

| 24 | In addition, Articles 4 and 7 of that directive establish the independence of the infrastructure manager and its essential functions, which has led the Court to rule that such a manager must have a certain discretion that allows it to adopt at least decisions embodying choices and assessments relating to the factors on the basis of which the calculation is made. |
| --- | --- |

24

In addition, Articles 4 and 7 of that directive establish the independence of the infrastructure manager and its essential functions, which has led the Court to rule that such a manager must have a certain discretion that allows it to adopt at least decisions embodying choices and assessments relating to the factors on the basis of which the calculation is made.

| 25 | The administratīvā rajona tiesa (District Administrative Court) also observes that Article 32(1) of Directive 2012/34 provides that the application of mark-ups in specific market segments must be assessed by evaluating, in particular, their effects in the market segment comprised of passenger transport services within the framework of a public service contract, taking account, therefore, of the competitiveness of that segment. In addition, while recital 19 of that directive makes reference to the market segments provided under a public service contract, that directive does not create an exception to the evaluation of competitiveness for that type of market segment. |
| --- | --- |

25

The administratīvā rajona tiesa (District Administrative Court) also observes that Article 32(1) of Directive 2012/34 provides that the application of mark-ups in specific market segments must be assessed by evaluating, in particular, their effects in the market segment comprised of passenger transport services within the framework of a public service contract, taking account, therefore, of the competitiveness of that segment. In addition, while recital 19 of that directive makes reference to the market segments provided under a public service contract, that directive does not create an exception to the evaluation of competitiveness for that type of market segment.

| 26 | The referring court considers that, under Article 32(1) and Article 56(2) of Directive 2012/34, the regulatory body can act on its own initiative only to prevent any discrimination vis-à-vis applicants and that when it determines the amount of mark-ups for the passenger transport services segment within the framework of a public service contract, it must, inter alia, examine the competitiveness of that segment. |
| --- | --- |

26

The referring court considers that, under Article 32(1) and Article 56(2) of Directive 2012/34, the regulatory body can act on its own initiative only to prevent any discrimination vis-à-vis applicants and that when it determines the amount of mark-ups for the passenger transport services segment within the framework of a public service contract, it must, inter alia, examine the competitiveness of that segment.

| 27 | However, the referring court has doubts as regards that interpretation. |
| --- | --- |

27

However, the referring court has doubts as regards that interpretation.

| 28 | In those circumstances the administratīvā rajona tiesa (District Administrative Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:





  ‘(1) | Must Article 56(2) of Directive 2012/34 be interpreted as meaning that it confers on the regulatory body the power to adopt on its own initiative a decision ordering the undertaking performing the essential functions of a railway infrastructure manager, as mentioned in Article 7(1) Directive 2012/34, to make to provisions relating to the calculation of infrastructure charges (the charging system) certain amendments that are unrelated to discrimination against applicants? |
| --- | --- | --- |

28

In those circumstances the administratīvā rajona tiesa (District Administrative Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1)

Must Article 56(2) of Directive 2012/34 be interpreted as meaning that it confers on the regulatory body the power to adopt on its own initiative a decision ordering the undertaking performing the essential functions of a railway infrastructure manager, as mentioned in Article 7(1) Directive 2012/34, to make to provisions relating to the calculation of infrastructure charges (the charging system) certain amendments that are unrelated to discrimination against applicants?

| (2) | If the first question is answered in the affirmative, is the regulatory body empowered to set out, in that decision, the conditions that must be laid down by such amendments, for example by laying down an obligation to exclude from the criteria for determining infrastructure charges pre-scheduled costs covered by the State budget or by local authority budgets which passenger transport operators cannot meet out of transport revenue? |
| --- | --- |

(2)

If the first question is answered in the affirmative, is the regulatory body empowered to set out, in that decision, the conditions that must be laid down by such amendments, for example by laying down an obligation to exclude from the criteria for determining infrastructure charges pre-scheduled costs covered by the State budget or by local authority budgets which passenger transport operators cannot meet out of transport revenue?

| (3) | Must Article 32(1) of Directive 2012/34 be interpreted as meaning that the obligation imposed on Member States in that paragraph to guarantee optimal competitiveness of rail market segments, by establishing mark-ups on infrastructure charges, also applies to the determination of infrastructure charges in market segments where there is no competition because, for example, in the market segment concerned, transport is delivered exclusively by a single rail operator which has been given the exclusive right under Article 2(f) of Regulation No 1370/2007 to provide transport in that market segment?’ |
| --- | --- |

(3)

Must Article 32(1) of Directive 2012/34 be interpreted as meaning that the obligation imposed on Member States in that paragraph to guarantee optimal competitiveness of rail market segments, by establishing mark-ups on infrastructure charges, also applies to the determination of infrastructure charges in market segments where there is no competition because, for example, in the market segment concerned, transport is delivered exclusively by a single rail operator which has been given the exclusive right under Article 2(f) of Regulation No 1370/2007 to provide transport in that market segment?’

Consideration of the questions referred

Consideration of the questions referred

The first question

The first question

| 29 | Although the first question concerns only the interpretation of Article 56(2) of Directive 2012/34, it must be recalled that, in the procedure laid down in Article 267 TFEU for cooperation between national courts and the Court of Justice, it is for the latter to provide the referring court with an answer which will be of use to it and enable it to determine the case before it and, with this in mind, the Court may have to reformulate the questions. In order to provide such a useful answer, the Court may decide to take into consideration rules of EU law to which the national court has made no reference in the wording of its question (judgment of 27 January 2021, De Ruiter, C‐361/19, EU:C:2021:71, paragraphs 22 and 23 and the case-law cited). |
| --- | --- |

29

Although the first question concerns only the interpretation of Article 56(2) of Directive 2012/34, it must be recalled that, in the procedure laid down in Article 267 TFEU for cooperation between national courts and the Court of Justice, it is for the latter to provide the referring court with an answer which will be of use to it and enable it to determine the case before it and, with this in mind, the Court may have to reformulate the questions. In order to provide such a useful answer, the Court may decide to take into consideration rules of EU law to which the national court has made no reference in the wording of its question (judgment of 27 January 2021, De Ruiter, C‐361/19, EU:C:2021:71, paragraphs 22 and 23 and the case-law cited).

| 30 | In application of that case-law, it must be stated that, for the purpose of answering that question, account must also be taken of the other functions of the regulatory body set out in Article 56 of that directive, in particular of paragraphs 6 and 9 of Article 56. |
| --- | --- |

30

In application of that case-law, it must be stated that, for the purpose of answering that question, account must also be taken of the other functions of the regulatory body set out in Article 56 of that directive, in particular of paragraphs 6 and 9 of Article 56.

| 31 | Consequently, the first question must be reformulated as seeking, in essence, to ascertain whether Article 56 of Directive 2012/34 must be interpreted as conferring on the regulatory body the power to adopt, on its own initiative, a decision requiring the undertaking exercising the essential functions of the railway infrastructure manager, referred to in Article 7(1) thereof, to make certain amendments to the infrastructure charging system, even though that system does not entail discrimination vis-à-vis applicants. |
| --- | --- |

31

Consequently, the first question must be reformulated as seeking, in essence, to ascertain whether Article 56 of Directive 2012/34 must be interpreted as conferring on the regulatory body the power to adopt, on its own initiative, a decision requiring the undertaking exercising the essential functions of the railway infrastructure manager, referred to in Article 7(1) thereof, to make certain amendments to the infrastructure charging system, even though that system does not entail discrimination vis-à-vis applicants.

| 32 | It must be observed, first, that the first sentence of Article 56(6) provides that ‘the regulatory body shall ensure that charges set by the infrastructure manager comply with Section 2 of Chapter IV and are non-discriminatory’. |
| --- | --- |

32

It must be observed, first, that the first sentence of Article 56(6) provides that ‘the regulatory body shall ensure that charges set by the infrastructure manager comply with Section 2 of Chapter IV and are non-discriminatory’.

| 33 | Section 2 of Chapter IV of Directive 2012/34 contains the rules on charging and charges. |
| --- | --- |

33

Section 2 of Chapter IV of Directive 2012/34 contains the rules on charging and charges.

| 34 | Therefore, it follows from Article 56(6) of that directive, therefore, that the regulatory body is competent to evaluate the compliance of charges set by the infrastructure manager with the provisions of that directive without that review being limited to an assessment of whether those charges may be discriminatory. |
| --- | --- |

34

Therefore, it follows from Article 56(6) of that directive, therefore, that the regulatory body is competent to evaluate the compliance of charges set by the infrastructure manager with the provisions of that directive without that review being limited to an assessment of whether those charges may be discriminatory.

| 35 | Second, it follows from Article 56(9) of Directive 2012/34 that the regulatory body is, where appropriate, to decide on its own initiative on appropriate measures to correct discrimination against applicants, market distortion and any other undesirable developments in these markets, in particular with reference to paragraph 1(a) to (g) of Article 56. Since Article 56(1)(d) refers specifically to the charging scheme, Article 56(9) therefore confers on the regulatory body the possibility to oversee on its own initiative, in the context of such a charging scheme, any infringement of the provisions of Directive 2012/34 and not only those linked with situations of discrimination between applicants. |
| --- | --- |

35

Second, it follows from Article 56(9) of Directive 2012/34 that the regulatory body is, where appropriate, to decide on its own initiative on appropriate measures to correct discrimination against applicants, market distortion and any other undesirable developments in these markets, in particular with reference to paragraph 1(a) to (g) of Article 56. Since Article 56(1)(d) refers specifically to the charging scheme, Article 56(9) therefore confers on the regulatory body the possibility to oversee on its own initiative, in the context of such a charging scheme, any infringement of the provisions of Directive 2012/34 and not only those linked with situations of discrimination between applicants.

| 36 | That conclusion is supported by recital 76 of Directive 2012/34, which states, in particular, that generally the regulatory body oversees the application of the rules set out in that directive. |
| --- | --- |

36

That conclusion is supported by recital 76 of Directive 2012/34, which states, in particular, that generally the regulatory body oversees the application of the rules set out in that directive.

| 37 | Furthermore, that power of the regulatory body is not subject to a complaint being lodged or an action being brought and may thus be exercised on the regulatory body’s own initiative. |
| --- | --- |

37

Furthermore, that power of the regulatory body is not subject to a complaint being lodged or an action being brought and may thus be exercised on the regulatory body’s own initiative.

| 38 | Consequently, the answer to the first question is that Article 56 of Directive 2012/34 must be interpreted as meaning that it confers on the regulatory body the power to adopt, on its own initiative, a decision requiring the undertaking exercising the essential functions of the railway infrastructure manager, referred to in Article 7(1) of that directive, to make certain amendments to the infrastructure charging system, even though that system does not entail discrimination vis-à-vis applicants. |
| --- | --- |

38

Consequently, the answer to the first question is that Article 56 of Directive 2012/34 must be interpreted as meaning that it confers on the regulatory body the power to adopt, on its own initiative, a decision requiring the undertaking exercising the essential functions of the railway infrastructure manager, referred to in Article 7(1) of that directive, to make certain amendments to the infrastructure charging system, even though that system does not entail discrimination vis-à-vis applicants.

The second question

The second question

| 39 | By its second question, the referring court asks, in essence, whether Article 56 of Directive 2012/34 must be interpreted as meaning that a regulatory body, when ordering the undertaking exercising the essential functions of the railway infrastructure manager to make amendments, may set out conditions that must be laid down by those amendments and, specifically, whether it may require that pre-scheduled costs covered by the State budget or by local authority budgets which the passenger rail undertakings cannot meet out of transport revenue be excluded from the criteria for determining infrastructure charges. |
| --- | --- |

39

By its second question, the referring court asks, in essence, whether Article 56 of Directive 2012/34 must be interpreted as meaning that a regulatory body, when ordering the undertaking exercising the essential functions of the railway infrastructure manager to make amendments, may set out conditions that must be laid down by those amendments and, specifically, whether it may require that pre-scheduled costs covered by the State budget or by local authority budgets which the passenger rail undertakings cannot meet out of transport revenue be excluded from the criteria for determining infrastructure charges.

| 40 | It must be observed that this question consists of two parts. The referring court, first, asks whether the regulatory body’s decision may impose, in a general manner, specific content that the required amendment must include and, second, actually identifies a specific measure and asks whether that measure may be imposed by the regulatory body. |
| --- | --- |

40

It must be observed that this question consists of two parts. The referring court, first, asks whether the regulatory body’s decision may impose, in a general manner, specific content that the required amendment must include and, second, actually identifies a specific measure and asks whether that measure may be imposed by the regulatory body.

| 41 | It must be observed that Article 4(1) of Directive 2001/14/EC of the European Parliament and of the Council of 26 February 2001 on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification (OJ 2001 L 75, p. 29) contained provisions which, like those of Article 29(1) of Directive 2012/34 and those of Article 4(2) of Directive 2012/34, to which Article 29(1) refers, related to the management independence of the infrastructure manager. In that regard, the Court has repeatedly held that, in order to ensure such independence, the infrastructure manager must, within the charging framework established by the Member States, be given a certain latitude in determining the amount of the charges so as to enable it to use that flexibility as a management tool (see, to that effect, judgment of 11 July 2013, Commission v Czech Republic, C‐545/10, EU:C:2013:509, paragraph 35 and the case-law cited). |
| --- | --- |

41

It must be observed that Article 4(1) of Directive 2001/14/EC of the European Parliament and of the Council of 26 February 2001 on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification (OJ 2001 L 75, p. 29) contained provisions which, like those of Article 29(1) of Directive 2012/34 and those of Article 4(2) of Directive 2012/34, to which Article 29(1) refers, related to the management independence of the infrastructure manager. In that regard, the Court has repeatedly held that, in order to ensure such independence, the infrastructure manager must, within the charging framework established by the Member States, be given a certain latitude in determining the amount of the charges so as to enable it to use that flexibility as a management tool (see, to that effect, judgment of 11 July 2013, Commission v Czech Republic, C‐545/10, EU:C:2013:509, paragraph 35 and the case-law cited).

| 42 | That independence of the railway infrastructure manager in determining the amount of the charges has been recognised by the Court both in the infrastructure manager’s relationship with the Member State concerned (judgments of 28 February 2013, Commission v Spain, C‐483/10, EU:C:2013:114, paragraph 44, and of 3 October 2013, Commission v Italy, C‐369/11, EU:C:2013:636, paragraphs 45 and 46) and in the relationship between the infrastructure manager and the railway undertakings (see, to that effect, judgment of 28 February 2013, Commission v Hungary, C‐473/10, EU:C:2013:113, paragraph 79). |
| --- | --- |

42

That independence of the railway infrastructure manager in determining the amount of the charges has been recognised by the Court both in the infrastructure manager’s relationship with the Member State concerned (judgments of 28 February 2013, Commission v Spain, C‐483/10, EU:C:2013:114, paragraph 44, and of 3 October 2013, Commission v Italy, C‐369/11, EU:C:2013:636, paragraphs 45 and 46) and in the relationship between the infrastructure manager and the railway undertakings (see, to that effect, judgment of 28 February 2013, Commission v Hungary, C‐473/10, EU:C:2013:113, paragraph 79).

| 43 | While such management independence also applies to the regulatory body, it must however be stated that that independence is to be assessed in the light of the balances which the EU legislature intended to establish between the infrastructure manager, in particular in the exercise of the essential functions referred to in Article 7(1) of Directive 2012/34, and the other entities on which that directive confers powers. |
| --- | --- |

43

While such management independence also applies to the regulatory body, it must however be stated that that independence is to be assessed in the light of the balances which the EU legislature intended to establish between the infrastructure manager, in particular in the exercise of the essential functions referred to in Article 7(1) of Directive 2012/34, and the other entities on which that directive confers powers.

| 44 | Thus, the Court has held that Article 29(1) of that directive establishes a division of powers between Member States and the infrastructure manager with regard to charging schemes. It is for the Member States to draw up a framework for levying charges, while the determination of the charge and collection fall, in principle, to the infrastructure manager (see, by analogy, judgment of 9 November 2017, CTL Logistics, C‐489/15, EU:C:2017:834, paragraph 78 and the case-law cited). |
| --- | --- |

44

Thus, the Court has held that Article 29(1) of that directive establishes a division of powers between Member States and the infrastructure manager with regard to charging schemes. It is for the Member States to draw up a framework for levying charges, while the determination of the charge and collection fall, in principle, to the infrastructure manager (see, by analogy, judgment of 9 November 2017, CTL Logistics, C‐489/15, EU:C:2017:834, paragraph 78 and the case-law cited).

| 45 | Likewise, as is apparent from the answer to the first question, the power to oversee lawfulness which Article 56 of Directive 2012/34 attributes to the regulatory body is an aspect of the allocation of powers provided for in that directive between that regulatory body and the infrastructure manager. It cannot therefore be considered that the exercise of that oversight of lawfulness undermines the independence of the infrastructure manager which that directive guarantees (see, to that effect, judgment of 3 October 2013, Commission v Italy, C‐369/11, EU:C:2013:636, paragraph 46). Thus, in exercising that power of oversight, the regulatory body is authorised to indicate to the undertaking exercising the essential functions of the railway infrastructure manager the amendments that have to be made to the charging system in order to remedy the incompatibilities between that system and the requirements laid down in Directive 2012/34. |
| --- | --- |

45

Likewise, as is apparent from the answer to the first question, the power to oversee lawfulness which Article 56 of Directive 2012/34 attributes to the regulatory body is an aspect of the allocation of powers provided for in that directive between that regulatory body and the infrastructure manager. It cannot therefore be considered that the exercise of that oversight of lawfulness undermines the independence of the infrastructure manager which that directive guarantees (see, to that effect, judgment of 3 October 2013, Commission v Italy, C‐369/11, EU:C:2013:636, paragraph 46). Thus, in exercising that power of oversight, the regulatory body is authorised to indicate to the undertaking exercising the essential functions of the railway infrastructure manager the amendments that have to be made to the charging system in order to remedy the incompatibilities between that system and the requirements laid down in Directive 2012/34.

| 46 | However, in that regard, the regulatory body’s decisions can be based only on infringement of the provisions of Section 2 of Chapter IV of Directive 2012/34 or on breach of the principle of non-discrimination. The regulatory body is not authorised to compel the undertaking exercising the essential functions of railway infrastructure manager to submit to its appraisal of appropriateness, since, if it were to so, the regulatory body would undermine the latitude which the infrastructure manager must be given, as was noted in paragraph 41 of the present judgment. |
| --- | --- |

46

However, in that regard, the regulatory body’s decisions can be based only on infringement of the provisions of Section 2 of Chapter IV of Directive 2012/34 or on breach of the principle of non-discrimination. The regulatory body is not authorised to compel the undertaking exercising the essential functions of railway infrastructure manager to submit to its appraisal of appropriateness, since, if it were to so, the regulatory body would undermine the latitude which the infrastructure manager must be given, as was noted in paragraph 41 of the present judgment.

| 47 | Therefore, the answer to the first part of the second question is that Article 56 of Directive 2012/34 must be interpreted as meaning that the conditions to be introduced into a charging system that the regulatory body is authorised to require of the undertaking exercising the essential functions of railway infrastructure manager must be based on infringement of Directive 2012/34 and be limited to remedying situations of incompatibility, and cannot include appraisals of appropriateness by the regulatory body that would undermine the latitude enjoyed by the infrastructure manager. |
| --- | --- |

47

Therefore, the answer to the first part of the second question is that Article 56 of Directive 2012/34 must be interpreted as meaning that the conditions to be introduced into a charging system that the regulatory body is authorised to require of the undertaking exercising the essential functions of railway infrastructure manager must be based on infringement of Directive 2012/34 and be limited to remedying situations of incompatibility, and cannot include appraisals of appropriateness by the regulatory body that would undermine the latitude enjoyed by the infrastructure manager.

| 48 | By the second part of the second question, the referring court makes reference to an actual specific aspect of the charging which the regulatory body may be authorised to require. |
| --- | --- |

48

By the second part of the second question, the referring court makes reference to an actual specific aspect of the charging which the regulatory body may be authorised to require.

| 49 | It must be observed that the request for a preliminary ruling contains no information concerning the nature of the costs covered by the State budget or by local authority budgets that would be excluded from the criteria for determining infrastructure charges. In any event, the compensation for providing a public service that is granted to a rail undertaking cannot be considered an infrastructure charge. |
| --- | --- |

49

It must be observed that the request for a preliminary ruling contains no information concerning the nature of the costs covered by the State budget or by local authority budgets that would be excluded from the criteria for determining infrastructure charges. In any event, the compensation for providing a public service that is granted to a rail undertaking cannot be considered an infrastructure charge.

| 50 | Under Article 29(1) of Directive 2012/34, Member States are to establish a charging framework while respecting the infrastructure management independence. Subject to that condition, Member States are also to establish specific charging rules or delegate such powers to the infrastructure manager. |
| --- | --- |

50

Under Article 29(1) of Directive 2012/34, Member States are to establish a charging framework while respecting the infrastructure management independence. Subject to that condition, Member States are also to establish specific charging rules or delegate such powers to the infrastructure manager.

| 51 | The case file before the Court contains no information to the effect that the Member State has established such specific charging rules. It is apparent, subject to verification by the referring court, that that responsibility was entrusted to the undertaking exercising the essential functions of the railway infrastructure manager. |
| --- | --- |

51

The case file before the Court contains no information to the effect that the Member State has established such specific charging rules. It is apparent, subject to verification by the referring court, that that responsibility was entrusted to the undertaking exercising the essential functions of the railway infrastructure manager.

| 52 | In that situation, the relationship between the regulatory body and the undertaking exercising those essential functions is determined by the principles set out in paragraph 47 of the present judgment. |
| --- | --- |

52

In that situation, the relationship between the regulatory body and the undertaking exercising those essential functions is determined by the principles set out in paragraph 47 of the present judgment.

| 53 | In those circumstances, the answer to the second part of the second question does not need an additional interpretation of those principles, but requires that they are applied by the national court. |
| --- | --- |

53

In those circumstances, the answer to the second part of the second question does not need an additional interpretation of those principles, but requires that they are applied by the national court.

| 54 | The Court has already held that it must be recalled that ‘Article 267 TFEU is based on a clear separation of functions between the national courts and the Court, in the context of which it is for the Court to interpret EU law and for the referring court to apply the law as thus interpreted to the facts at issue in the main proceedings’ (order of 19 December 2019, Bezirkshauptmannschaft Hartberg-Fürstenfeld, C‐645/18, not published, EU:C:2019:1108, paragraph 20 and the case-law cited). |
| --- | --- |

54

The Court has already held that it must be recalled that ‘Article 267 TFEU is based on a clear separation of functions between the national courts and the Court, in the context of which it is for the Court to interpret EU law and for the referring court to apply the law as thus interpreted to the facts at issue in the main proceedings’ (order of 19 December 2019, Bezirkshauptmannschaft Hartberg-Fürstenfeld, C‐645/18, not published, EU:C:2019:1108, paragraph 20 and the case-law cited).

| 55 | Consequently, there is no need for the Court to answer the second part of the second question. |
| --- | --- |

55

Consequently, there is no need for the Court to answer the second part of the second question.

The third question

The third question

| 56 | By its third question, the referring court asks, in essence, whether Article 32(1) of Directive 2012/34 must be interpreted as meaning that it applies, including as regards the criterion of optimal competitiveness of rail market segments, to rail market segments where there is no competition, in particular where they are operated by a public service operator which, under a public service contract, has been granted an exclusive right within the meaning of Article 2(f) of Regulation No 1370/2007. |
| --- | --- |

56

By its third question, the referring court asks, in essence, whether Article 32(1) of Directive 2012/34 must be interpreted as meaning that it applies, including as regards the criterion of optimal competitiveness of rail market segments, to rail market segments where there is no competition, in particular where they are operated by a public service operator which, under a public service contract, has been granted an exclusive right within the meaning of Article 2(f) of Regulation No 1370/2007.

| 57 | It must be observed, as the Advocate General noted in essence in points 38 to 44 of his Opinion, that the concept of ‘competitiveness’, referred to in Article 32(1) of Directive 2012/34, must be distinguished from the concept of ‘competition’, and that the provisions in which the first of those terms is found must be interpreted in the light of that specific concept. |
| --- | --- |

57

It must be observed, as the Advocate General noted in essence in points 38 to 44 of his Opinion, that the concept of ‘competitiveness’, referred to in Article 32(1) of Directive 2012/34, must be distinguished from the concept of ‘competition’, and that the provisions in which the first of those terms is found must be interpreted in the light of that specific concept.

| 58 | That distinction is apparent from the wording of the provisions of Directive 2012/34. The word ‘competitiveness’ is used, in Chapter IV of that directive, on the levying of charges for the use of railway infrastructure and the allocation of railway infrastructure capacity, first, in the second subparagraph of Article 31(5) thereof, that provides that the implementing acts adopted by the Commission setting out the modalities to be followed for the application of the charging for the cost of noise effects ‘shall not result in the undue distortion of competition between railway undertakings or affect the overall competitiveness of the rail sector’ and, on the other hand, in Article 32(4), fourth subparagraph, which provides that the implementing acts defining the modalities to be followed to put in place the differentiation of infrastructure charges ‘shall not result in the undue distortion of competition between railway undertakings or affect the overall competitiveness of the rail sector’. |
| --- | --- |

58

That distinction is apparent from the wording of the provisions of Directive 2012/34. The word ‘competitiveness’ is used, in Chapter IV of that directive, on the levying of charges for the use of railway infrastructure and the allocation of railway infrastructure capacity, first, in the second subparagraph of Article 31(5) thereof, that provides that the implementing acts adopted by the Commission setting out the modalities to be followed for the application of the charging for the cost of noise effects ‘shall not result in the undue distortion of competition between railway undertakings or affect the overall competitiveness of the rail sector’ and, on the other hand, in Article 32(4), fourth subparagraph, which provides that the implementing acts defining the modalities to be followed to put in place the differentiation of infrastructure charges ‘shall not result in the undue distortion of competition between railway undertakings or affect the overall competitiveness of the rail sector’.

| 59 | Accordingly, that concept of ‘competitiveness’ relates not to competition between railway undertakings but to the competitiveness of the rail sector, considered in relation to other modes of transport. |
| --- | --- |

59

Accordingly, that concept of ‘competitiveness’ relates not to competition between railway undertakings but to the competitiveness of the rail sector, considered in relation to other modes of transport.

| 60 | It follows that the ‘optimal competitiveness of rail market segments’, as provided for in Article 32(1) of Directive 2012/34, must also be taken into account in the case of market segments where there is no competition, in particular where the segment concerned is operated by a public service operator which, under a public service contract, has been granted an exclusive right, within the meaning of Article 2(f) of Regulation No 1370/2007. |
| --- | --- |

60

It follows that the ‘optimal competitiveness of rail market segments’, as provided for in Article 32(1) of Directive 2012/34, must also be taken into account in the case of market segments where there is no competition, in particular where the segment concerned is operated by a public service operator which, under a public service contract, has been granted an exclusive right, within the meaning of Article 2(f) of Regulation No 1370/2007.

| 61 | That interpretation is confirmed, moreover, by the fact that the third subparagraph of Article 32(1) of Directive 2012/34 expressly provides that the list of market segments defined by infrastructure managers to enable the relevance of the charging mark-ups to be evaluated must take account of passenger services within the framework of a public service contract, which, as recital 19 of that directive states, may, in application of Regulation No 1370/2007, ‘contain exclusive rights to operate certain services’. |
| --- | --- |

61

That interpretation is confirmed, moreover, by the fact that the third subparagraph of Article 32(1) of Directive 2012/34 expressly provides that the list of market segments defined by infrastructure managers to enable the relevance of the charging mark-ups to be evaluated must take account of passenger services within the framework of a public service contract, which, as recital 19 of that directive states, may, in application of Regulation No 1370/2007, ‘contain exclusive rights to operate certain services’.

| 62 | In that regard, as the Advocate General has observed, in essence, in points 58 to 61 of his Opinion, the fact that a public service operator fulfils a public service obligation, within the meaning of Article 2(e) of Regulation No 1370/2007, and on that basis is granted an exclusive right on a rail segment does not preclude the operation of that segment from achieving a certain degree of profit which thus gives rise to the application of mark-ups. |
| --- | --- |

62

In that regard, as the Advocate General has observed, in essence, in points 58 to 61 of his Opinion, the fact that a public service operator fulfils a public service obligation, within the meaning of Article 2(e) of Regulation No 1370/2007, and on that basis is granted an exclusive right on a rail segment does not preclude the operation of that segment from achieving a certain degree of profit which thus gives rise to the application of mark-ups.

| 63 | Having regard to the foregoing considerations, the answer to the third question is that Article 32(1) of Directive 2012/34 must be interpreted as meaning that it applies, including with regard to the criterion of optimal competitiveness of rail market segments, to rail market segments where there is no competition, in particular where they are operated by a public service operator which, under a public service contract, has been granted an exclusive right, within the meaning of Article 2(f) of Regulation No 1370/2007. |
| --- | --- |

63

Having regard to the foregoing considerations, the answer to the third question is that Article 32(1) of Directive 2012/34 must be interpreted as meaning that it applies, including with regard to the criterion of optimal competitiveness of rail market segments, to rail market segments where there is no competition, in particular where they are operated by a public service operator which, under a public service contract, has been granted an exclusive right, within the meaning of Article 2(f) of Regulation No 1370/2007.

Costs

Costs

| 64 | Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. |
| --- | --- |

64

Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

| | On those grounds, the Court (Fifth Chamber) hereby rules: |
| --- | --- |

On those grounds, the Court (Fifth Chamber) hereby rules:

| | 1. | Article 56 of Directive 2012/34/EU of the European Parliament and of the Council of 21 November 2012 establishing a single European railway area must be interpreted as meaning that it confers on the regulatory body the power to adopt, on its own initiative, a decision requiring the undertakings exercising the essential functions of the railway infrastructure manager, referred to in Article 7(1) thereof, to make certain amendments to the infrastructure charging system, even though it does not entail discrimination vis-à-vis applicants. |
| --- | --- | --- |

1.

1.

Article 56 of Directive 2012/34/EU of the European Parliament and of the Council of 21 November 2012 establishing a single European railway area must be interpreted as meaning that it confers on the regulatory body the power to adopt, on its own initiative, a decision requiring the undertakings exercising the essential functions of the railway infrastructure manager, referred to in Article 7(1) thereof, to make certain amendments to the infrastructure charging system, even though it does not entail discrimination vis-à-vis applicants.

Article 56 of Directive 2012/34/EU of the European Parliament and of the Council of 21 November 2012 establishing a single European railway area must be interpreted as meaning that it confers on the regulatory body the power to adopt, on its own initiative, a decision requiring the undertakings exercising the essential functions of the railway infrastructure manager, referred to in Article 7(1) thereof, to make certain amendments to the infrastructure charging system, even though it does not entail discrimination vis-à-vis applicants.

| | 2. | Article 56 of Directive 2012/34 must be interpreted as meaning that the conditions to be introduced into a charging system that the regulatory body is authorised to require of the undertaking exercising the essential functions of railway infrastructure manager must be based on infringement of Directive 2012/34 and be limited to remedying situations of incompatibility, and cannot include appraisals of appropriateness by the regulatory body that would undermine the latitude enjoyed by the infrastructure manager. |
| --- | --- | --- |

2.

2.

Article 56 of Directive 2012/34 must be interpreted as meaning that the conditions to be introduced into a charging system that the regulatory body is authorised to require of the undertaking exercising the essential functions of railway infrastructure manager must be based on infringement of Directive 2012/34 and be limited to remedying situations of incompatibility, and cannot include appraisals of appropriateness by the regulatory body that would undermine the latitude enjoyed by the infrastructure manager.

Article 56 of Directive 2012/34 must be interpreted as meaning that the conditions to be introduced into a charging system that the regulatory body is authorised to require of the undertaking exercising the essential functions of railway infrastructure manager must be based on infringement of Directive 2012/34 and be limited to remedying situations of incompatibility, and cannot include appraisals of appropriateness by the regulatory body that would undermine the latitude enjoyed by the infrastructure manager.

| | 3. | Article 32(1) of Directive 2012/34 must be interpreted as meaning that it applies, including with regard to the criterion of optimal competitiveness of rail market segments, to rail market segments where there is no competition, in particular where they are operated by a public service operator which, under a public service contract, has been granted an exclusive right, within the meaning of Article 2(f) of 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. |
| --- | --- | --- |

3.

3.

Article 32(1) of Directive 2012/34 must be interpreted as meaning that it applies, including with regard to the criterion of optimal competitiveness of rail market segments, to rail market segments where there is no competition, in particular where they are operated by a public service operator which, under a public service contract, has been granted an exclusive right, within the meaning of Article 2(f) of 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.

Article 32(1) of Directive 2012/34 must be interpreted as meaning that it applies, including with regard to the criterion of optimal competitiveness of rail market segments

to rail market segments where there is no competition, in particular where they are operated by a public service operator which, under a public service contract, has been granted an exclusive right, within the meaning of Article 2(f) of 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

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[Signatures]

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  *1
  )	Language of the case: Latvian.

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