Judgment;Summary — ECLI:EU:C:2021:717
Date: 2021-09-09
Language of the case: Latvian
Court formation: Fifth Chamber
Subject matter: Transport
Procedure: Reference for a preliminary ruling
Origin: Latvia

Translation C-144/20 — 1 
Case C-144/20 
Request for a preliminary ruling 
Date lodged: 
27 March 2020 
Referring court: 
Administratīvā rajona tiesa (District Administrative Court, Riga, 
Latvia) 
Date of the decision to refer: 
26 March 2020 
Applicants: 
AS LatRailNet  
VAS Latvijas dzelzceļš 
Defendant: 
Valsts dzelzceļa administrācija (State Railway Administration) 
      
[…] 
The ADMINISTRATĪVĀ RAJONA TIESA 
(District Administrative Court) HAVING ITS SEAT IN RIGA 
ORDER 
[…] 26 March 2020 
The Administratīvā rajona tiesa 
[…] 
[composition of the court] 
[…] [information on the parties’ representatives] 
EN 
REQUEST FOR A PRELIMINARY RULING OF 26. 3. 2020 — CASE C-144/20 
 
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having examined […] the administrative-law dispute initiated by way of the action 
for annulment brought by the public limited company LatRailNet against the 
decision […] of the State Railway Administration of 27 June 2018, and the action 
brought by the public limited company governed by public law Latvijas dzelzceļš 
against the decision […] of the State Railway Administration of 7 November 
2018, 
states 
Factual background 
1. On 30 June 2017, the applicant AS LatRailNet (responsible for performing the 
essential functions of the railway infrastructure manager;  a subsidiary of VAS 
Latvijas dzelzceļš (‘Latvian Railway’)], adopted the provisions […] relating to the 
‘charging scheme’ (‘the charging scheme’; 
https://www.lrn.lv/wp-content/uploads/2020/02/LRN_CHRG_SCHEME_30_06,
2017_ENGLISH_23_12_2019.pdf). In Section II of Annex 3 to that charging 
scheme, entitled ‘Quantitative criteria for determining the mark-ups applicable in 
specific market segments’, point 3 provides that, for the market segment [‘]sab 
pak pas[’], the value of criterion Ss = 1, while the value of criterion Ss as 
applicable in other market segments is to be determined on the basis of an expert 
assessment. 
2. On 27 June 2018, the defendant, the State Railway Administration, the regulatory 
body for the railway sector, adopted a decision […] (‘the contested decision’) 
ordering the applicant to bring the charging scheme into line with Article 111(1) 
and (7) of the Dzelzceļa likums (Law on Railways), by 24 August 2018, by 
establishing criteria for assessing the mark-up applicable to the market segment 
comprised of passenger transport services within the framework of a public 
service contract in such a way as to exclude from them pre-scheduled costs 
covered by the State budget or by local authority budgets which passenger 
transport operators cannot meet out of transport revenue. 
The contested decision establishes that, in accordance with the provisions relating 
to the charging scheme, the charges for the minimum access package and for 
access to infrastructure connecting service facilities (‘the infrastructure charge’) 
are to be calculated as being the sum of the direct costs and mark-ups for a 
particular railway segment. For its part, the amount of the mark-up for a particular 
market segment is to be calculated in accordance with the formula contained in 
the charging scheme, whereby the main factor in determining the amount of the 
mark-up is the market weighting coefficient mcbs [a ratio characterizing the 
allowable level of mark-ups in market conditions of a particular market segment] 
which describes the amount of mark-up allowed in a particular market segment, 
defined as being the maximum value of the assessment criteria Cs, Vs and Ss 
[valuation criteria characterizing, respectively: the impact of different types of 
utilization of the railway infrastructure on the costs of railway infrastructure 
within a particular market segment; the productivity achieved by railway 
LATRAILNET 
 
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undertakings within a particular market segment; the optimal railway 
competitiveness within a particular market segment (charging scheme, 35.2)]. 
Thus, if mcbs = 0, the mark-up will not apply to the market segment in question, 
but, if mcbs = 1, the maximum mark-up will apply to the market segment 
concerned. In accordance with Section II of Annex 3 to the charging scheme, 
entitled ‘Quantitative criteria for determining the mark-ups applicable in specific 
market segments’, the value of criteria Cs and Vs is 0, while the value of Ss for the 
passenger transport market is set at 1. Given that the maximum value of 
assessment criteria Cs, Vs and Ss for the passenger transport market segment is 1, 
it may be concluded that the value of the market weighting coefficient mcbs will 
also be set at 1. In accordance with the charging scheme, therefore, the mark-up 
applicable to the passenger transport market segment will automatically be at its 
maximum value whatever the market situation of the segment in question. 
Since, in accordance with the Law on Railways and with Directive 2012/34/EU of 
the European Parliament and of the Council of 21 November 2012 establishing a 
single European railway area (‘Directive 2012/34’), mark-ups are applicable only 
if the market situation allows this, and given the requirement that infrastructure 
charges must not prevent use of public-use railway infrastructure in those 
segments which can at least cover direct costs, the Administration concluded that, 
before applying the mark-up and determining the amount thereof, it was necessary 
to assess the competitiveness and solvency of the market segment in question. 
Since the charging scheme should include criteria for assessing the 
competitiveness and solvency of the passenger transport market segment, but does 
not in fact do so, and given, on the other hand, that that scheme establishes a 
procedure for determining the mark-up applicable to the passenger transport 
market segment, the effect of which is that that mark-up is always imposed at its 
maximum value, the State Railway Administration concluded that the charging 
scheme was not in conformity with Article 111(1) and (7) of the Law on Railways. 
The performance by the State Railway Administration of the role mentioned in 
[Article] 31(1), point 9, of the Law on Railways, under which it declared the 
charging scheme to be incompatible with Article 111(1) and (7) of the Law on 
Railways, also includes the obligation to adopt a decision remedying that 
situation, although the Administration enjoys some discretion with respect to the 
content of the administrative act. 
3. On 26 July 2018, the applicant AS LatRailNet brought before the Administratīvā 
rajona tiesa (District Administrative Court) an action for the annulment of the 
contested decision. 
In the application and the annex thereto, AS LatRailNet states that, in accordance 
with Article 111(1) of the Law on Railways, the development and adoption of the 
charging scheme are matters that fall within its competence. AS LatRailNet takes 
the view that the State Railway Administration, in proceeding as it did, acted ultra 
vires, which is to say that it manifestly exceeded its powers, inasmuch as, by the 
REQUEST FOR A PRELIMINARY RULING OF 26. 3. 2020 — CASE C-144/20 
 
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contested decision, it essentially imposed on AS LatRailNet an obligation to make 
changes to the charging scheme, prescribing the specific content which that 
Scheme should include. In addition, Article 131(1), point 4, of the Law on 
Railways provides that the essential functions of the public-use railway 
infrastructure manager cannot be performed by State institutions which have been 
entrusted with the task of regulating the railway transport sector. 
AS Pasažieru vilciens has been granted the exclusive right to provide public 
transport services on regional intercity rail routes up to 30 June 2031. 
Consequently, there is no competition in the provision of public transport services 
by rail. In the light of the foregoing, it is not possible for the State Railway 
Administration to perform the task of monitoring competition on the markets in 
railway services (Article 31(1), point 9, of the Law on Railways) because the 
market segment relating to the provision of public transport services by rail is not 
open to competition. Since there is no competition in the provision of public 
transport services by rail, AS LatRailNet cannot meet the Administration’s 
requirements to assess the competitiveness and solvency of the market segment 
concerned before applying the mark-up and determining the amount thereof. 
4. By order of the Administratīvā rajona tiesa (District Administrative Court) of 
13 November 2018, VAS Latvijas dzelzceļš (‘Latvian Railway’; the railway 
infrastructure manager) was invited to participate in the proceedings as an 
interested third party. 
VAS Latvijas dzelzceļš takes the view that the State Railway Administration, in 
adopting the contested decision, acted beyond the limits of its competence, 
inasmuch as, in accordance with Article 31(1), point 9, of the Law on Railways, 
the Administration is competent only to verify that charging schemes are not 
discriminatory, but not to adopt the contested decision, which affects an aspect of 
the charging scheme which is not in any way potentially discriminatory. VAS 
Latvijas dzelzceļš contends that the State Railway Administration, contrary to its 
obligation under Article 131(6) of the Law on Railways to enforce the requirement 
that the independence of AS LatRailNet must be maintained, undermined the 
independence of AS LatRailNet.. 
As regards the passenger transport services market segment, VAS Latvijas 
dzelzceļš considers that it is possible to set a maximum value for criterion Ss, 
since AS Pasažieru vilciens, the sole representative of the passenger transport 
market segment, which pays VAS Latvijas dzelzceļš an infrastructure charge 
(including a mark-up) was also protected against any harm that might arise from 
the determination of that charge. 
5. On 21 August 2018, the applicant AS LatRailNet, having agreed to amend the 
charging scheme […], made those amendments, and worded the first sentence of 
point 3 of Section II of Annex 3 to the provisions [relating to the charging 
scheme] as follows: ‘the value of criterion Ss shall, in the case of all market 
segments, be determined on the basis of an expert assessment’. 
LATRAILNET 
 
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6. On 20 September 2018, VAS Latvijas dzelzceļš lodged with the State Railway 
Administration an objection to the amendments to the charging scheme. 
After examining the objection lodged by VAS Latvijas dzelzceļš, the State 
Railway Administration, on 7 November 2018, adopted a decision […] stating 
that VAS Latvijas dzelzceļš had no subjective right to seek the adoption of an 
administrative act annulling the [defendant’s] decision amending the charging 
scheme. 
On 5 December 2018, VAS Latvijas dzelzceļš brought an action for the annulment 
of the decision of the State Railway Administration of 7 November [2018]. 
By order […] of the Administratīvā rajona tiesa (District Administrative Court) of 
5 February 2019, the two sets of administrative-law proceedings were joined. 
On 19 February 2020, VAS Latvijas dzelzceļš asked that court to make a 
reference for a preliminary ruling to the Court of Justice of the European Union. 
VAS Latvijas dzelzceļš seeks clarification as to whether Article 56(2) of Directive 
[2012/34] is to 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 the railway infrastructure manager to make 
to provisions concerning the calculation of infrastructure charges amendments that 
are unrelated to discrimination against applicants. VAS Latvijas dzelzceļš also 
seeks clarification as to whether the obligation on Member States under 
Article 32(1) of Directive [2012/34] to guarantee optimal competitiveness of rail 
market segments by establishing mark-ups on infrastructure charges also applies 
to the determination of infrastructure charges in segments where there is no 
competition. 
Applicable law 
EU law 
7. Directive 2012/34, recital 19 and Articles 7, 32(1) and 56(2), and […] 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) No 1191/69 and 1107/70 (‘Regulation 
No 1307/2007’), Article 2(f). 
Latvian law 
8. Article 1, point 23, of the Law on Railways (available at: 
https://likumi.lv/doc.php?id= 47774), provides that, in that Law, the following 
terms are to be used: 
23) essential functions of an infrastructure manager: decision-making on capacity 
allocation, train path allocation, including both the definition and the assessment 
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of availability and the allocation of individual train paths, and decision-making on 
infrastructure charging, including determination and collection of charges. 
Article 11(1) of the Law on Railways provides that, after consulting applicants 
[Directive 2012/34, Article 3(19)] and the public-use railway infrastructure 
manager, the person responsible for performing the essential functions of the 
public-use railway infrastructure manager is to develop and approve a charging 
scheme in relation to the minimum access package referred to in Article 121(1) of 
that Law and in relation to access to infrastructure connecting service facilities 
and forward it to the public-use railway infrastructure manager for inclusion in the 
network statement. Other than in the specific cases provided for in Article 111(10) 
of that Law, the person responsible for performing the essential functions of a 
public-use railway infrastructure manager is to ensure that the aforementioned 
charging scheme is based on the same principles throughout the network and that 
that scheme operates in such a way that that different transport undertakings 
providing services of a similar nature in a similar part of the market pay 
equivalent and non-discriminatory charges. 
Article 11(2) of the Law on Railways provides that the charges for the minimum 
access package referred to in Article 121(1) of that Law and for access to 
infrastructure connecting service facilities are to be determined on the basis of the 
direct costs of operating the rail service and in accordance with the provisions of 
paragraphs (3) and (4) of that article and Article 111 of that Law. 
Article 111(1) of the Law on Railways establishes that, in order to obtain full 
recovery of the costs incurred by the public-use railway infrastructure manager, 
the person responsible for performing the essential functions of the public-use 
railway infrastructure manager may, if the market can bear this, levy mark-ups on 
the charges for the minimum access package referred to in Article 121(1) of that 
Law and for access to infrastructure connecting service facilities. 
Article 111(2) of the Law on Railways provides that, before applying the mark-
ups, the person responsible for performing the essential functions of the public-use 
railway infrastructure manager is to evaluate their relevance in at least the 
following market segments and choose the most important of them: (1) passenger 
and freight services. 
Article 111(7) of the Law on Railways provides that the mark-ups are to be 
applied on the basis of efficient, transparent and non-discriminatory principles, 
while guaranteeing optimal competitiveness of railways and taking into account 
the productivity increases achieved by railway undertakings. The level of charges 
is not to exclude the use of public-use railway infrastructure by market segments 
which can pay at least the direct costs, plus a rate of return which the market can 
bear. 
Article 31(1)(9) of the Law on Railways provides that the State Railway 
Administration is to perform the following functions: 
LATRAILNET 
 
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9) monitoring the competitive situation in the rail services markets, in particular in 
the high-speed passenger transport services market, and the activities of the 
public-use railway infrastructure manager, the person responsible for performing 
the essential functions of the public-use railway infrastructure manager and the 
service facility operator in the areas referred to in point 8(a), (b), (c), (d), (e), (f), 
(g), (h), (i) and (j), without prejudice to the powers of the authority responsible for 
enforcing the law governing competition in the rail services markets. It must, on 
its own initiative and with a view to preventing discrimination against applicants, 
control the elements referred to in point 8(a), (b), (c), (d), (e), (f), (g), (h), (i) and 
(j), and, in particular, check whether the network statement contains 
discriminatory clauses or creates discretionary powers for the public-use railway 
infrastructure manager, the person responsible for performing the essential 
functions of the public-use railway infrastructure manager or the service facility 
operator that may be used to discriminate against applicants. 
Reasons for the existence of doubts as to the interpretation of EU law 
9. By the contested decision, the State Railway Administration, in its capacity as 
regulatory body, compelled the person responsible for performing the functions of 
the railway infrastructure manager to amend the criterion for calculating the mark-
up applicable to the market segment comprised of passenger services within the 
framework of a public service contract, as provided for in the charging scheme. 
The regulatory body based the adoption of that decision on Article 31(1), point 9, 
of the Law on Railways, which provides that the regulatory body must perform 
the following functions: monitor the competitive situation in the rail services 
market and, on its own initiative and with a view to preventing discrimination 
against applicants, control the elements referred to in point 8(a), (b), (c), (d), (e), 
(f), (g), (h), (i) and (j) of [Article 31(1)]. 
Article 56 of Directive 2012/34 defines the ‘functions of the regulatory body’ and 
provides, in paragraph 2, that the regulatory body is to have the power to monitor 
the competitive situation in the rail services markets and is, in particular, to 
control points (a) to (g) of paragraph 1 on its own initiative and with a view to 
preventing discrimination against applicants. 
It may be inferred from this that the regulatory body has the power to act on its 
own initiative only with a view to preventing discrimination against applicants. 
10. The case-law of the Court of Justice of the European Union has recognised the 
discretion available to the railway infrastructure manager (in this case, the person 
responsible for performing the essential functions of the railway infrastructure 
manager) with respect to the content of the charging scheme; the functions of the 
regulatory body, however, are confined exclusively to verifying that that scheme 
is not discriminatory (judgments of the Court of Justice of 28 February 2013, 
Commission v Spain, C-483/10, EU:C:2013:114, paragraph 44; of 28 February 
2013, Commission v Germany, C-556/10, EU:C:2013:116, paragraph 82; and of 
9 November 2017, CTL Logistics, C-489/15, EU:C:2017:834, paragraph 85). 
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11. Articles 4 and 7 of Directive 2012/34 provide for the independence of the railway 
infrastructure manager and its essential functions. 
The case-law of the Court of Justice of the European Union has recognised that 
the railway infrastructure manager is competent to determine and collect charges 
(judgment of the Court of Justice of 11 July 2013, Commission v Czech Republic, 
C-545/10,EU:C:2013:509, paragraphs 33 and 34). The Court has also held that the 
discretion available to the railway infrastructure manager must be such as to 
enable it to adopt, at the very least, decisions involving choices and assessments 
as to the factors or parameters on which calculations are to be based (judgments of 
the Court of Justice of 28 February 2013, Commission v Spain, C-483/10, 
EU:C:2013:114, paragraph 44, and of 28 February 2013, Commission v Germany, 
C-556/10, EU:C:2013:116, paragraph 82). 
VAS Latvijas dzelzceļš considers that the discretion enjoyed by the person 
performing the essential functions of the railway infrastructure manager, 
recognised by the Court of Justice of the European Union, may exist only if the 
functions of the regulatory body are limited to assessing possible discrimination. 
Otherwise, if the regulatory body’s powers were extended, those two functions 
would merge, thus empowering the regulatory body to influence (and, effectively, 
to determine) the content of charging schemes. This would undermine the 
discretion enjoyed by the person responsible for performing the essential functions 
of the railway infrastructure manager and make it impossible for it to act with the 
independence which the Court of Justice of the European Union has recognised it 
as enjoying. 
12. The market segment in respect of which the contested decision imposed the 
obligation to amend the charging scheme is passenger transport services within 
the framework of a public service contract, which, in Latvia, are provided by AS 
Pasažieru vilciens. That company is the only operator in that market segment, to 
the exclusion of all competition. 
Article 32 of Directive 2012/34, which provides for exceptions […] to charging 
principles, provides in paragraph 1 that, 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. As regards the level of mark-ups, Article 32(1) of Directive 
2012/34 provides that the application of mark-ups in specific market segments 
must be assessed, in particular, by evaluating their effects in the market segment 
comprised of passenger transport within the framework of a public service 
contract. Consequently, the provisions of Directive 2012/34 state that, in 
determining the level of mark-ups for the market segment comprised of passenger 
transport within the framework of a public service contract, account must be taken 
of, inter alia, the competitiveness of that segment. 
LATRAILNET 
 
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Recital 19 of Directive 2012/34 makes reference to Regulation No 1370/2007 and 
states that the provision of the aforementioned service under Regulation 
No 1307/2007 may entail the conferment of exclusive rights, thus fundamentally 
excluding any kind of competition. Nonetheless, Directive 2012/34 does not 
create for that market segment any exceptions to the requirement to evaluate the 
competitiveness of the market segment. 
13. In the light of the aforementioned rulings of the Court of Justice of the European 
Union, this [referring] court considers that a prima facie analysis of the legislative 
framework indicates that the regulatory body has the power to act on its own 
initiative only with a view to preventing discrimination against applicants, and, in 
addition, that, for the purposes of determining the amount of the mark-up 
applicable to the market segment comprised of passenger transport within the 
framework of a public service contract, it is important to take into account, inter 
alia, the competitiveness of that segment. 
Given that the referring court has doubts about the interpretation of Articles 32(1) 
and 56(2) of Directive [2012/34], it considers it necessary to make a reference for 
a preliminary ruling to the Court of Justice of the European Union. The 
proceedings in this case must therefore be stayed until such time as the Court of 
Justice gives a ruling on the questions referred.  
In accordance with Article 267 of the Treaty on the Functioning of the European 
Union, […] [reference to national procedural provisions], this court 
hereby decides 
To refer the following questions to the Court of Justice of the European Union 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) of that 
directive, to make to provisions relating to the calculation of infrastructure 
charges (the charging scheme) 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? 
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 
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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?  
To stay the proceedings pending a ruling from the Court of Justice of the 
European Union. 
[…] [signatures]