Proposal for a Regulation of the European Parliament and of the Council on action by Member States concerning public service requirements and the award of public service contracts in passenger transport by rail, road and inland waterway
Date: 2000-07-26
Institutions: European Commission
Subjects: carriage of passengers, competition, contract, means of public conveyance

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Official Journal of the European Communities

C 365 E/169

Proposal for a Regulation of the European Parliament and of the Council on action by Member
States concerning public service requirements and the award of public service contracts in
passenger transport by rail, road and inland waterway

(2000/C 365 E/10)

(Text with EEA relevance)

COM(2000) 7 final (cid:14) 2000/0212(COD)

(Submitted by the Commission on 26 July 2000)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,

sustainable development, social integration, environmental
improvement and regional balance.

Having regard to the Treaty establishing the European
Community, and in particular Articles 71 and 89 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of
Committee,

the Economic and Social

Having regard to the opinion of the Committee of the Regions,

Acting in accordance with the procedure laid down in Article
251 of the Treaty,

Whereas:

(1) The development of

the highest possible standards of
public service in the provision of passenger transport by
road, rail and inland waterway is one of the primary
the common transport
Community objectives under
policy.

(2) Competent authorities in the Member States have recourse
to three main mechanisms in pursuing this objective: the
conclusion of public service contracts with operators, the
granting of exclusive rights to operators and the laying
down of minimum standards
transport
operation.

for public

(3) It is important to clarify the legal position of such mech-

anisms with respect to Community law.

concerning

(4) In relation to inland transport, Article 73 of the Treaty
refers to the discharge of certain obligations inherent in
the concept of public service. Council Regulation (EEC)
No 1191/69 of 26 June 1969 on action by Member
in the
the obligations
States
concept of a public service in transport by rail, road
and inland waterway (1) establishes a Community regu-
latory
transport,
implementing this Article of the Treaty and indicating
how competent authorities in the Member States can
ensure adequate transport services which contribute to

framework

passenger

inherent

public

for

(1) OJ L 156, 28.6.1969, p. 1; Regulation as last amended by Regu-

lation (EEC) No 1893/91 (OJ L 169, 29.6.1991, p. 1).

In the light of

(5) Many Member States have introduced legislation providing
for the award of fixed-duration exclusive rights and public
service contracts, in at least part of their public transport
market, on the basis of open, transparent and fair award
procedures.
the
application of Community rules on the freedom of estab-
lishment, and the application of Community public
procurement rules, significant progress has been made
towards Community/EEA-wide market access in public
trade between Member States has
transport. As result,
substantially developed and several public
transport
operators are now providing services in more than one
Member State.

those developments,

(6) However,

the opening of

the market on the basis of
national legislation has led to disparities in the procedures
applied and has created legal uncertainty as to the rights
of operators and the duties of competent authorities.

(7) Studies carried out on behalf of the Commission (2), and
the experience of States where competition in the public
transport sector has been in place for a number of years,
show that, with appropriate safeguards, the introduction
of regulated competition between Community operators
in this sector leads to more attractive services at lower
costs and is not likely to obstruct the performance of the
specific tasks assigned to the operators.

(8) It is important to update the Community legal framework in
order to ensure the further development of competition in
the provision of public passenger transport services and to
take into account the new legal approaches which Member
States have introduced in regulating the provision of public
passenger transport services. This is in line with the
conclusions of
the European Council of Lisbon of 28
March 2000 where the Commission, Council and the
Member States, each in accordance with their respective
powers, were asked to =speed up liberalisation in areas
such as transport>. The updating of the Community legal
framework will offer an opportunity to ensure that the
smooth opening of
guaranteed at
Community level and that basic elements of competitive
procedures in all Member States are harmonised.

the market

is

(2) =Improved structure and organisation for urban transport operations
of passengers in Europe> Isotope consortium, CEC, 1998;
=Exam-
ination of Community law relating to the public service obligations
and contracts in the field of inland passenger transport>, submitted
to the European Commission by NEA Transport research and
training, 1998.

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(9) Article 16 of the Treaty establishes the need to ensure that
services of general economic interest operate on the basis
of principles and conditions which enable them to fulfil
their missions. The development of competition should
that
therefore be accompanied by Community rules
guarantee the protection of the general interest in terms
of adequate quality and availability of public transport. In
for
securing this general
interest,
at
consumers
their
services
disposal
available.

it
and interested parties

is
to have
the

information about

important

integrated

(10) Freedom of establishment

is a basic principle of

the
common transport policy and requires that operators of
a Member State established in another Member State be
guaranteed effective access to the public transport market
of that State in a transparent way and without discrimi-
nation.

(11) The Treaty lays down specific rules with regard to
restrictions on competition. Article 86(1) of the Treaty,
in particular, obliges the Member States to adhere to
these rules with regard to public undertakings and under-
takings which have been granted exclusive rights. Article
86(2) of the Treaty subjects undertakings entrusted with
the operation of services of general economic interest to
these rules, under specific conditions.

be

treatment

the
equal
is essential

and
it
that must
in concluding public

(12) In order to ensure the application of the principle of
of
non-discrimination
to define basic
competing operators,
by
followed
procedures
common
competent
service
authorities
contracts or laying down minimum criteria for public
transport operation. According to the principles of
Community law, competent authorities are required to
apply mutual
standards and
selection criteria in implementing
proportionality of
these procedures.
In accordance with the principle of
subsidiarity, such basic common procedures should never-
theless leave it open for competent authorities in the
Member States to conclude public service contracts or
lay
transport
operation in ways that take account of specific national
or regional circumstances, whether legal or factual.

down minimum criteria

recognition of

for public

technical

(13) Studies and experience show that competitive tendering
is an effective way of
for public service contracts
achieving the benefits of competition in terms of cost,
obstructing
innovation without
efficiency
the
and
performance of
assigned to the
tasks
specific
the
operators in the general public interest.

coordination of
of 18 June 1992 relating to the
procedures for the award of public service contracts (1)
and Directive 93/38/EEC of 14 June 1993 coordinating
the procurement procedures of entities operating in the
telecommunications
water,
sectors (2). Where
those
aspects of this Regulation that deal with the requirement
for contracts to be tendered, and with the methods by
which the selection of operators should be conducted,
do not apply.

such rules

applicable,

transport

energy,

and

are

(15) Tendering of public service contracts

should not be
compulsory where safety standards in the provision of
rail services or the coordination of a metro or light rail
network would be endangered. Interested parties should
nevertheless have the opportunity to comment on plans
to award contracts in this way, in time for their views to
be taken into account. Where rail contracts awarded in
this way are fully integrated with bus services, it should be
possible for the bus services to be included in the same
contract.

(16) Tendering for public service contracts should also not be
compulsory where the contract has a low value. This
value should be higher for the tendering of a whole
network than for the tendering of a part of a network
or of a single route.

(17) Taking into account

the specific, commercially viable
nature of certain parts of the public transport market, it
should also be possible for competent authorities to
facilitate new initiatives that arise from the market and
that fill gaps not currently served by any operator, by
granting an exclusive right
to provide services on a
particular route, where this is at the operator’s request.
It is not inappropriate for this grant to be made without
tendering, provided that it is for a strictly limited period
only and is not renewable.

(18) Where authorities grant an exclusive right but where no
direct financial compensation is involved, they should be
able to grant it by means of a simplified procedure that
nonetheless provides for non-discriminatory competition
between operators.

(19) It

for

should be possible for authorities

to compensate
the cost of complying with minimum
operators
criteria for public transport operation, provided that this
compensation can be fairly calculated and is not at such a
high level that it detracts from the pressure on operators
to focus primarily on the requirements of passengers.

(14) Mandatory tendering rules for the conclusion of certain
contracts are laid down by Council Directive 92/50/EEC

(1) OJ L 209, 24.7.1992, p. 1; Directive as last amended by Directive

97/52/EC (OJ L 328, 28.11.1997, p. 1).

(2) OJ L 199, 9.8.1993 p. 84; Directive as last amended by Directive

98/4/EC (OJ L 101, 1.4.1998, p. 1).

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(20) The provisions of this Regulation applicable to operators
should also apply in those cases where public transport
services are provided by a public administration which
does not have a legal personality distinct from that of
the public administration that is acting as the competent
authority. Any other arrangement, by not applying these
provisions to cases where the State acts in an entrepre-
neurial capacity, would not ensure the non-discriminatory
application of Community law.

(25) Regulation (EEC) No 1191/69 provides that operating
costs and revenues, overheads, assets and liabilities
relating to the fulfilment of public service requirements
need to be accounted for separately. This requirement
should be retained, in a modernised form, in particular
to ensure that authorities obtain value for money from
public expenditure and that payments made by way of
compensation are not misused to distort competition.

(21) Studies and experience show that where services are
provided under public service contracts whose duration
is limited to five years, the performance of the specific
tasks assigned to the operators need not be obstructed. To
minimise the distortion of competition while protecting
the quality of services, public service contracts should
therefore,
normally,
duration.
longer periods may be necessary where the
However,
operator
railway
has
rolling-stock or other vehicles that are tied to specific,
geographically defined transport services and that have
long payback periods.

infrastructure,

limited

invest

this

be

to

to

in

(22) In accordance with the principle of non-discrimination,
competent authorities should ensure that public service
contracts do not cover a wider geographical area than is
required by the general interest and in particular, by the
need to provide integrated services to significant groups of
passengers who habitually use more than one link in the
public transport network during the same journey.

(23) Where it

interest,

is appropriate for competent authorities,

in
to protect employees in
pursuing the general
situations where the conclusion of a public service
contract may lead to a change of operator, they should
have the power to require operators to apply the relevant
provisions of Council Directive 77/187/EEC of 14
February 1977 on the approximation of the laws of the
Member States relating to the safeguarding of employees’
rights in the event of transfers of undertakings, businesses
or parts of businesses (1).

(24) It is necessary that the procedures introduced according to
appeals
transparent
this Regulation are
procedures against decisions of the competent authorities
are in place. Authorities should also keep records of their
decisions for a period of ten years, in line with the limi-
tation period laid down in Article 15 of Council Regu-
lation (EC) No 659/1999 on State aid procedures (2).

that

and

(26) Compensation payments which exceed the net costs
incurred by an operator as a result of fulfilling a public
service requirement are liable to be examined under
Community rules on State aids. It is therefore appropriate
for the Community to lay down rules establishing when
compensation may be considered not
to be excessive.
Competitive tendering for the conclusion of contracts is
an efficient way of ensuring that compensation is not
excessive, provided that
the tendering
the results of
reflect fair and realistic market conditions.

(27) Regulation (EEC) No 1191/69 exempts compensation paid
pursuant to its provisions from the State aid notification
procedure laid down in Article 88(3) of the Treaty; this
Regulation establishes new and detailed provisions,
designed for
the public
the specific circumstances of
including modernised
passenger
requirements
to ensure that
separate accounting,
compensation is compatible with Community State aid
rules; in addition, it establishes new detailed procedures
permitting the Commission to monitor these payments. It
is therefore appropriate to continue to exempt compen-
sation paid pursuant to the provisions of this Regulation
from the State aid notification procedure.

transport
for

sector,

(28) With a view to improving the operation of this Regulation
in the light of experience, the Commission should report
on the
impact of Community legislation and the
application of this Regulation.

(29) As competent authorities

in the Member States and
operators will need time to adjust to the provisions of
this Regulation, provision should be made for the use of
transitional arrangements.

(30) As a result of the Community’s international obligations,
access to the public transport markets of the Member
States has,
in some circumstances, been granted to
certain third-country operators; this Regulation does not
restrict this access.

(1) OJ L 61, 5.3.1977, p. 26; Directive as amended by Directive

98/50/EC (OJ L 201, 17.7.1998, p. 88).

(2) OJ L 83, 27.3.1999, p. 1.

(31) Regulation (EEC) No 1191/69 is superseded by this Regu-

lation and should therefore be repealed.

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includes

(32) Council Regulation (EEC) No 1107/70 of 4 June 1970 on
the grant of aid for transport by rail, road and inland
waterway (1),
reim-
bursement for the discharge of obligations arising from
the provision of a public service. That provision, which
expressly anticipates
entry into force of new
Community rules,
is now redundant and should be
deleted,

a provision regarding

the

HAVE ADOPTED THIS REGULATION:

CHAPTER I

SCOPE AND DEFINITIONS

Article 1

Scope

This Regulation shall apply to national and international
operation of public passenger transport by rail, road and
It lays down the conditions under which
inland waterway.
competent authorities may compensate transport operators
fulfilling public service requirements and
for
under which they may grant
the
exclusive
operation of public passenger transport, due regard being
legitimate public service objectives
had to the pursuit of
within a framework of regulated competition.

the cost of

rights

for

(c) =exclusive right> means the entitlement on the part of an
operator to operate a particular type of passenger transport
services on a particular route or network or in a particular
area, to the exclusion of other potential operators;

(d) =integrated services> means rail and bus services provided
together, directly by an operator, under the terms of a
single public
contract; by a single body of
employees having the same contractual status; included in
a single operating account; and having a single information
service, ticketing scheme and timetable;

service

(e) =operator> means an undertaking that provides public
passenger transport services and that is established under
public or private law; or a part, which provides public
passenger transport services, of a public administration;

(f)

=payback period> of an asset for an operator means the
period during which it
is estimated, using appropriate
discount rates, that the cost of the asset to the operator,
net of any resale value, will exceed the net income that the
operator will have received on account of the asset,
in
particular from passengers and from public authorities;

(g) =public passenger transport> means transport offered to the

general public on a continuing basis;

Article 2

Relationship to public procurement law

This Regulation shall be without prejudice to the obligations
authorities which flow from Directives
on competent
92/50/EEC and 93/38/EEC.

(h) =public service contract> means any legally enforceable
agreement between a
an
operator for the fulfilment of public service requirements.
this Regulation, a public service
For
contract is also:

the purposes of

competent

authority

and

Where either of those Directives makes the tendering of a
public service contract mandatory, Articles 6(1), 7, 8, 12,
13(1), 13(2) and 14 of this Regulation shall not apply to the
award of that contract.

(i) an agreement that is embodied in a legally enforceable
decision, undertaken with an operator’s prior consent,
through which a competent authority entrusts
the
operator with the supply of services, or

Article 3

Definitions

For the purposes of this Regulation, the following definitions
shall apply:

(a) =competent authority> means any State body with the power
to intervene in public passenger transport markets, or any
other body to which such a State power has been assigned;

(b) =direct award> means the award of a contract to a given
in which no other

following a procedure

operator
operator can participate;

(1) OJ L 130, 15.6.1970, p. 1, Regulation as last amended by Regulation

(EC) No 543/97 (OJ L 84, 26.3.1997, p. 6).

(i)

(j)

(ii) the terms that are attached to a decision taken by a
competent authority, to entrust an operator forming
part of
the same public administration with the
supply of services;

=public service requirement> means a requirement adopted
by a competent authority in order to secure adequate
public passenger transport services;

service,

transport

=value> of a public passenger
route,
contract, compensation scheme or market means the total
remuneration, net of VAT, received by the operator or
operators,
including in particular financial compensation
from the public sector and any income from passengers
that
is not passed on to the competent authority in
question.

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CHAPTER II

ENSURING THE QUALITY OF PUBLIC PASSENGER
TRANSPORT

Article 4

1.
In applying this Regulation, competent authorities shall
secure adequate public passenger transport services that are of
high quality and availability, by concluding public service
contracts in accordance with Chapter III or by laying down
minimum criteria for public passenger transport operation in
accordance with Chapter IV.

In assessing the adequacy of public passenger transport
2.
services,
in defining selection and award criteria, and in
awarding public service contracts, competent authorities shall
take into account at least the following criteria:

(a) consumer protection factors including the accessibility of
the services, in terms of their frequency, speed, punctuality,
the network and the service
reliability,
information that is provided;

the extent of

handicap. The only charge they shall make shall be to cover the
marginal administrative cost of providing the information.

CHAPTER III

PUBLIC SERVICE CONTRACTS

Article 5

Compulsory use of public service contracts

A public service contract shall be concluded for the payment of
financial compensation for the cost of complying with
all
public service requirements,
including compensation taking
the form of the use of assets where such use will be charged
below market rates, but excluding compensation paid for
compliance with general rules for public passenger transport
operation in accordance with Article 10.

A public service contract shall also be concluded for the award
of all exclusive rights.

(b) the level of tariffs for different groups of users and the

Article 6

transparency of tariffs;

(c) integration between different transport services, including
integration of information, ticketing, timetables, consumer
rights and the use of interchanges;

(d) accessibility for people with reduced mobility;

(e) environmental factors, including local, national and inter-
national standards for the emission of air pollutants, noise
and global warming gases;

(f)

the balanced development of regions;

(g) the transport needs of people living in less densely

populated areas;

(h) passenger health and safety;

(i)

the qualifications of the staff; and

Award of public service contracts

Where public service contracts are granted under this Regu-
lation, they shall comply with the following requirements:

(a) Contracts shall be put out for competitive tender, except as

provided for in Articles 7 and 8.

(b) Contracts shall provide that the operator is responsible, at
least, for the cost of supplying the services to which a
public service contract relates, including in particular the
costs of staffing; energy; and the maintenance and repair of
vehicles and rolling-stock.

(c) Contracts shall be limited in time and shall
than five years. However,

last for no
the
longer
contract may take into account the payback period, where:

the duration of

(i) the

the operator

contract makes

for
providing railway rolling-stock, other vehicles of a
infra-
particularly technically advanced nature, or
structure, provided that
tied to
specific, geographically defined transport services, and

such assets

responsible

are

(j) how complaints are handled, disputes between passengers
and operators are resolved and service shortfalls are
redressed.

(ii) those assets have a payback period for the operator that

is longer than five years.

available,

Operators of public passenger transport services shall
3.
and
up-to-date
make
information about
their tariffs and
their accessibility for people with different types of mobility

on
request,
the services’

complete
timetables,

In such cases, the contract shall also take into account the
relative economic importance of the value of the assets in
question in comparison with the total estimated value of
the services covered by the contract.

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(d) Contracts shall

require operators to furnish competent
authorities, on an annual basis and separately for each
route, with information on the services provided,
the
tariffs charged and the number of passengers carried and
complaints received.

No service may be the subject of the direct award of a public
service contract under the terms of
the first subparagraph
more than once.

Article 7

Direct award of public service contracts

1.
Competent authorities may decide, on a case-by-case basis
and subject to paragraph 3, to directly award public service
contracts for rail, metro or light rail services if national or
international rail safety standards could not be met in any
other way.

Competent authorities may decide, on a case-by-case
2.
basis and subject
to paragraph 3, to directly award public
service contracts for metro or light rail services if any other
arrangement would entail additional costs for maintaining
coordination between the operator and the manager of the
those costs would not be offset by
infrastructure, and if
additional benefits.

3.
Competent authorities intending to award a contract
the provisions of paragraph 1 or 2 above shall
under
publish, at least one year beforehand and in accordance with
Article 13, their preliminary decision to do so and the evidence
and analysis on which they have based this preliminary
decision.

4. Where an operator, on the date on which this Regulation
enters into force, directly provides integrated services, and
where the conditions in paragraph 1 or 2 are fulfilled, the
competent authority may include the operator’s non-rail
services, including bus services in the public service contract
that will be directly awarded to the operator, provided that the
Member State in question gives its approval and informs the
this, with reasoned justification including
Commission of
appropriate comparative performance indicators.

Competent authorities may decide, on a case-by-case
5.
basis, to directly award public service contracts for services
than
with an estimated average
its
EUR 400 000.
public
service
service
it may decide to directly award this public service
contract,
contract provided that
it has an estimated average annual
value of less than EUR 800 000.

If a competent authority incorporates all

annual value of

single public

requirements

in a

less

Article 8

Award of public service contracts

following quality

comparison

A competent authority may, without tendering, award a public
service contract for a service that is limited to an individual
route and that will not be subject to financial compensation
under the terms of any public service contract, provided that:

(a) a notice has been published inviting proposals; and

(b) on that basis the authority has selected, by means of a
comparison of the quality of the proposals received, the
operator or operators that will provide the best service to
the public.

Article 9

Safeguards

A competent authority may require the selected operator
1.
to award subcontracts, for a defined proportion of the services
covered by the contract, to third parties to which it is not
affiliated. This requirement to subcontract may not extend to
more than half
the services covered by the
contract.

the value of

2.
A competent authority may decide not to award public
service contracts to any operator that would, as a consequence,
have more than a quarter of the relevant market for public
passenger transport services.

3. Where a public service contract includes an exclusive
right,
the competent authority may require the selected
operator to offer to staff previously engaged in providing the
services the rights that they would have enjoyed if a transfer
had occurred within the meaning of Directive 77/187/EEC. The
authority shall list the staff and give details of their contractual
rights.

No requirement for a given amount of services shall be split up
in order to avoid tendering.

If an operator proposes a new initiative that will provide
6.
a service where none exists,
the competent authority may
award the exclusive right to provide this new service directly
to that operator, provided that the service will not be subject to
financial compensation under the terms of any public service
contract.

Competent authorities may require the selected operator
4.
to establish itself
in the Member State in question, except
where Community legislation adopted pursuant to Article 71
the Treaty lays down the freedom to provide services.
of
However,
service
contracts shall not discriminate against potential operators
established in other Member States on the grounds that they
are not yet established in the Member State in question or have
not yet been granted a licence to operate services.

awarding public

authorities

competent

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5. Where competent authorities apply any of the conditions
in paragraphs 1 to 4, they shall inform potential operators of
all the relevant details at the start of the public service contract
award procedure.

CHAPTER IV

MINIMUM CRITERIA FOR PUBLIC PASSENGER TRANSPORT
OPERATION

Article 10

Without prejudice to public service contracts concluded in
accordance with Chapter III, competent authorities may lay
down general rules or minimum criteria to be adhered to by
all operators. Those rules or criteria shall be applied without
discrimination to all transport services of a similar character in
the geographical area for which the authority is responsible.
Such general rules or minimum criteria may include compen-
sation for the cost of complying with them, provided that:

(a) if the rule or criterion limits tariffs,
certain categories of passengers;

it does so only for

(b) in any one year,

compensation for
the amount of
complying with general rules or minimum criteria that is
received by any operator in the area covered by the rule or
criterion in question shall be no more than one-fifth of the
value of that operator’s services in that area; and

(c) compensation

is

available

to

all

operators

on

a

non-discriminatory basis.

CHAPTER V

PROCEDURAL ISSUES

Article 11

Notification

(a) selection criteria, taking into account the criteria in Article
4(2), that define the authority’s minimum requirements;

(b) award criteria, taking into account the criteria in Article
4(2), that define the grounds on which the authority will
choose among offers meeting the selection criteria; and

(c) technical

specifications

the public service
requirements that the contract will cover and identifying
any assets to be placed at the disposal of the successful
tenderer with the relevant terms and conditions.

setting out

There shall be an interval of at least 52 days between the
despatch of the call for tenders and the latest date for receipt
of tenders.

Competent authorities shall

4.
which they supply to potential operators
information they hold, under
contracts, about operators’ services,
passengers during the previous five years.

include in the information
relevant
the terms of public service
tariffs and numbers of

the

Article 13

Transparency

1.
Notices, decisions and preliminary decisions made in
accordance with this Regulation shall be published in an
appropriate manner, stating,
in the case of decisions and
preliminary decisions, the reasons on which they are based.

2.
Competent authorities shall send to the Office for Official
Publications of the European Communities, by the most appro-
priate channels, notices and decisions relating to public service
contracts and compensation schemes having an estimated
respectively, EUR 400 000 or more, or
annual value of,
EUR 800 000 or more, for publication in the Official Journal
of the European Communities.

Compensation paid in accordance with this Regulation shall be
exempt from the notification procedure laid down in Article
88(3) of the Treaty.

The higher threshold value cited in the first subparagraph shall
apply only if a competent authority has incorporated all
its
public service requirements in a single public service contract.

Article 12

Award procedures

1.
The procedure adopted for competitive tendering or
quality comparison shall be fair, open and non-discriminatory.

The procedure shall

2.
with Article 13.

include publication in accordance

3.

Competent authorities shall make available, on request:

(a) the terms of any public service contracts

they have

awarded;

(b) the terms of any general

rules
operation they have laid down; and

for public transport

In the case of competitive tendering, the procedure shall

3.
include:

(c) the information they hold, under
service contracts, about operators’
numbers of passengers.

the terms of public
tariffs and
services,

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Authorities shall keep, for at least ten years, a record of
4.
every public service contract award procedure sufficient
to
permit them to justify their decisions at a later date. They
shall make
available, on request by interested parties,
summaries of these records.

separate activity for accounting purposes and shall be operated
as a separate accounting division, distinct
from any other
activities in which the undertaking engages, whether or not
those activities are related to passenger transport.

5. Member States shall forward to the Commission, by the
end of the month of March each year:

(a) a summary for the previous year of the number, estimated
the public service contracts that
value and duration of
competent
distinguishing
have
authorities
between rail, bus and inland waterway services and
between contracts awarded following tendering, quality
comparison and direct award; and

awarded,

(b) a summary of the scope and content of the general rules or
minimum criteria that were in force during the previous
year and for which compensation was provided, and of the
amount of compensation paid.

Article 14

Appeals

1. Member States shall ensure that operators and other
interested parties have the right to appeal to a public body
against decisions and preliminary decisions of competent auth-
orities under this Regulation. This body shall be independent,
in its organisation,
structure and decision-
making, from any competent authority concerned and from
any operator.

funding,

legal

2.
Appeal bodies shall have the power to request relevant
information from competent authorities, undertakings and any
third party involved within the Member State concerned. This
information shall be supplied without undue delay.

Appeal bodies

3.
shall be required to determine any
complaints and to take action to remedy the situation within
from receipt of all
a maximum period of
information.

two months

Each accounting division shall meet

2.
conditions:

the

following

(a) the operating accounts shall be separate;

(b) the proportions of overheads,

liabilities
pertaining to each activity shall be attributed according to
their actual use;

assets

and

(c) the cost accounting principles according to which separate

accounts are maintained shall be clearly established;

(d) for each activity, expenditure shall be balanced by operating
revenue from the services in question and payments from
public authorities in compensation for the cost of fulfilling
the public service requirements in question, without any
possibility of transfer to another activity.

3.
Operators receiving compensation for compliance with
minimum criteria for transport operation in accordance with
Article 10 shall, in their accounts, identify separately the costs
they incur in complying with the general rule or criteria in
question;
the additional revenue they earn as a result of
complying with the rule or criteria; and the compensation
paid. The compensation paid and the additional
revenue
earned shall balance the costs incurred, without any possibility
of transfer to an activity not subject to the rule or criteria in
question.

CHAPTER VI

FINAL PROVISIONS

Article 16

Compensation

Subject to paragraph 5, decisions of appeal bodies shall

4.
be binding on all parties covered by such decisions.

5. Member States shall take measures necessary to ensure
that decisions taken by appeal bodies are subject to judicial
review.

Except in the case of public service contracts awarded through
competitive tendering, competent authorities
shall on no
account provide more compensation or apply less stringent
procedures than are required by the rules in Annex I.

Article 17

Transitional measures

Article 15

Accounting provisions

Services subject

1.
to public service contracts concluded
with a particular competent authority shall be treated as a

1. Member States shall
take the necessary measures to
ensure that schemes, contracts or arrangements implemented
otherwise than in compliance with the provisions of this Regu-
lation cease to be valid within three years of its entry into
force.

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2. Where an operator, on the date on which this Regulation
enters into force, is required by the terms of a public service
contract to invest in rail infrastructure, and where the payback
period of this infrastructure still has more than three years to
run, the competent authority may add up to three years to the
transitional period of three years fixed in paragraph 1, taking
into account this payback period and the relative economic
importance of the assets in question in comparison with the
total estimated value of the services covered by the contract.

Until

3.
the date on which the schemes, contracts and
arrangements referred to in paragraphs 1 and 2 cease to be
to those
valid, each of
provisions of Regulation (EEC) No 1191/69 that applied to it
before this Regulation entered into force.

them shall continue to be subject

Article 18

Operators from countries listed in Annex II

For the purposes of this Regulation and without prejudice to
Article 9(4), operators from the countries listed in Annex II
shall be treated as Community companies, in accordance with
the terms and conditions of the agreement between each such
country and the Community. The Commission shall update the
Annex, as changes in the Community’s international obli-
gations require, by publishing a notice in the =L> series of the
Official Journal of the European Communities.

Article 19

Monitoring by Commission

1. Member States shall consult the Commission on any laws,
regulations or administrative provisions that are necessary for
the implementation of this Regulation.

2.
The Commission shall prepare a report within five years
of its entry into force on how this Regulation has been applied
in the Member States, and the consequences for passengers,
and shall propose amendments to the Regulation if necessary.
The report shall include an examination of the operation of the
exemption established in Article 7(4).

Article 20

Repeal and amendment

1.

2.

Regulation (EEC) No 1191/69 is repealed.

Article 3(2) of Regulation (EEC) No 1107/70 is deleted.

Article 21

Entry into force

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

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

Rules governing compensation in the absence of competitive tendering

ANNEX I

1. Where a competent authority compensates an operator financially for fulfilling a public service requirement in
accordance with this Regulation, and where the compensation is not derived from a public service contract
awarded by competitive tendering, the amount of this compensation shall not exceed the net financial effect of
fulfilling the public service requirement as calculated in accordance with the rules in this Annex.

2. The net financial effect shall be the sum of:

(i) the effects of fulfilling the public service requirement on the operator’s expenditure (costs avoided minus extra

expenditure incurred); and

(ii) the effects of fulfilling the public service requirement on the operator’s income (extra income earned minus

income foregone).

3. The net financial effect shall be determined taking into account the effects of fulfilling the public service requirement

on the operator’s activities as a whole.

4. The net financial effect shall be calculated by comparing the situation in which the public service requirement is
fulfilled with the situation that would have occurred if the requirement had not been fulfilled and the operation of
the services affected by the requirement had instead been determined on a commercial basis.

5. For the situation that would have occurred if the public service requirement had not been fulfilled (the benchmark

case) estimates of tariff rates, passenger figures, and costs should be calculated.

6. The benchmark case may be calculated:

(i) by using data on the situation before the operator began to fulfil the public service requirement, if circumstances
have not changed to a degree that makes it an unreliable guide to present-day tariff rates, passenger figures, and
costs; or

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(ii) by comparison with data for comparable services that are operated on a commercial basis; or

(iii) by estimating costs and demand for the services.

The calculation of the benchmark case should take due consideration of trends affecting the relevant transport
market.

7. Calculation of the effects on revenues of fulfilling a public service requirement shall take into account, in particular,
changes in tariffs and in passenger figures. The calculation shall take into account the effect of fulfilling the
requirement, and the resulting changes in the quality, quantity and price of services supplied, on the demand for
transport services. This assessment shall not be limited to the impact on the segment of the network on which the
requirement is directly fulfilled, but shall include effects on other parts of the network.

8. Calculation of the effects on costs of fulfilling a public service requirement shall be analogous to the calculation of
the effects on revenues. Where the requirement covers only some of the services that an operator provides, joint
costs such as overheads shall be allocated between these services and the others in proportion to the value of each set
of services.

9. Costs resulting from the fulfilment of public service requirements shall be calculated on the basis of efficient

management of the operator and the provision of transport services of an adequate quality.

The amount of compensation shall be fixed in advance for the duration of the contract or compensation scheme,
with the exception that the contract or scheme may provide for the amount of compensation to be adjusted based on
predetermined factors. Compensation amounts shall in any case remain fixed for a period of at least one year.

Compensation for complying with public service requirements may only be given where the operator in question, if
it were considering its own commercial
fulfil the
requirement or would not fulfil it to the same extent or under the same conditions.

in the absence of this compensation,

interests, would not,

ANNEX II

Countries from which operators shall be treated as Community companies for the purposes of this Regulation
in accordance with Article 18

Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia.