Amended 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 (presented by the Commission pursuant to Article 250(2) of the EC Treaty)
Date: 2002-02-21
Institutions: European Commission
Subjects: State aid, award of contract, carriage of passengers, competition, competition law, contract, means of public conveyance, public service

C 151 E/146

EN

Official Journal of the European Communities

25.6.2002

Amended 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 (1)

(2002/C 151 E/07)

COM(2002) 107 final — 2000/0212(COD)

(Submitted by the Commission pursuant to Article 250(2) of the EC Treaty on 21 February 2002)

(1) OJ C 365 E, 19.12.2000, p. 169.

INITIAL PROPOSAL

AMENDED PROPOSAL

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,

Unchanged

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 the Economic and Social
Committee,

Having regard to the opinion of the Economic and Social
Committee (1),

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

Having regard to the opinion of
Regions (2),

the Committee of

the

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

Unchanged

Whereas:

(1) The development of

the highest possible standards of
public service in the provision of passenger transport
by,
the
primary Community objectives under
the Common
Transport Policy.

rail and inland waterway is, one of

road,

(1) The development of

the highest possible standards of
public service in the provision of passenger transport by
rail, road and inland waterway is, as a means of boosting
the use of sustainable forms of transport, one of the
the Common
primary Community objectives under
Transport
Policy
moreover aims to achieve a substantial shift to sustainable
transport modes. The European Council of Gothenburg of
15 and 16 June 2001 placed modal shift at the heart of
the Community's sustainable development strategy.

The Common Transport

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

(2) Many socially necessary transport services are currently
unable to operate on a commercial basis. Competent
in the Member States should be able to
authorities
intervene to secure the provision of these services. Mech-
anisms that competent authorities can use to secure the
provision of public passenger transport services include:
awarding exclusive rights to operators; granting financial
compensation to operators; and laying down general rules
for public transport operation, applicable to all operators.

___________
(1) OJ C 221, 7.8.2001, p. 31.
(2) OJ C 253, 12.9.2001, p. 9.

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INITIAL PROPOSAL

AMENDED PROPOSAL

(3) Competent authorities in the Community provide public
passenger transport services in different ways: by acting
through
themselves
companies they control, or by entrusting provision to
third parties, public or private.

indirectly

directly,

acting

by

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

anisms with respect to Community law.

(4) It is important to clarify the legal position of such mech-
anisms and ways of providing services with respect to
Community law. Competent authorities should ensure
that their actions are in compliance with the rules and
principles of
the Treaty that aim to ensure equal
treatment and fair competition between undertakings.

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
States
in the
the obligations
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
sustainable development, social integration, environmental
improvement and regional balance.

framework

passenger

inherent

public

for

concerning

(5) 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
States
in the
the obligations
concept of a public service in transport by rail, road
and inland waterway (1) establishes a Community regu-
latory
transport,
implementing that Article of the Treaty and indicating
how competent authorities in the Member States can
ensure adequate transport services which contribute to
sustainable development, social integration, environmental
improvement and regional balance.

framework

passenger

inherent

public

for

States

introduced

have
the award of

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

establishment,
public

procurement

and the

result,

rules,

States

introduced

have
the award of

legislation
(6) Many Member
fixed-duration exclusive
providing for
rights and public service contracts,
in at least part of
their public transport market, on the basis of open, trans-
parent and fair award procedures. In the light of those
developments, in the application of Community rules on
the freedom of establishment, and in the application of
Community public procurement rules, significant progress
has been made towards Community/EEA-wide market
access
trade between
Member States has substantially developed and several
public transport operators are now providing services in
more than one Member State.

in public transport. As

result,

(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) 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.

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

___________
(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).

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

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INITIAL PROPOSAL

AMENDED PROPOSAL

(7) Studies carried out on behalf of the Commission (1), 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) Studies carried out on behalf of the Commission, 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 intro-
duction of controlled competition between Community
operators in this sector leads to more attractive services
at
the
assigned to the
performance of
operators.

costs and is not
specific
the

likely to obstruct
tasks

lower

States have

introduced in regulating

(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
the
Member
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 oppor-
tunity to ensure that the smooth opening of the market is
guaranteed at Community level and that basic elements of
are
competitive procedures
harmonised.

in all Member

States

into account

and to take

(9) It is important to update the Community legal framework
in order to ensure the further development of controlled
competition in the provision of public passenger transport
services
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 at
which the Commission, Council and the Member States,
each in accordance with its 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 the
market is guaranteed at Community level and that basic
elements of competitive procedures in all Member States
are harmonised.

(10) Procedures should be based on the principle of neutrality
with regard to the rules governing property ownership
the principle of
under Article 295 of
freedom to define services of general
interest under
Article 16 of the Treaty, and the principle of propor-
tionality under Article 5 of the Treaty.

the Treaty,

(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 therefore be accompanied by Community rules
that guarantee the protection of the general
interest in
terms of adequate quality and availability of public
transport.
is
this
important for consumers and interested parties to have
at their disposal integrated information about the services
available.

In securing

interest,

general

it

(11) 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 therefore be accompanied by Community rules
that promote the protection of the general
interest in
terms of adequate availability in all regions of high-
quality, reasonably priced public transport, accessible to
people with reduced mobility and providing full social
coverage. The term ‘reduced mobility’ does not auto-
In
matically imply any form of medical
for
is
securing
at
to have
consumers
their
services
the
disposal
available.

it
and interested parties

impairment.
important

information about

this general

integrated

interest,

___________
(1) ‘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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INITIAL PROPOSAL

AMENDED PROPOSAL

(12) Environmental protection requirements should be inte-
grated into the application of this Regulation to ensure
that, when assessing the adequacy of public passenger
service networks, defining selection and award criteria,
and awarding public service contracts, competent auth-
orities
in
particular rational energy use and local, national and
those
international
concerning the emission of air pollutants, noise and
greenhouse gases.

into account,

environmental

and norms,

especially

standards

factors

take

(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.

(13) Freedom of establishment

is a basic principle of

the
common transport policy and requires that all operators
legally established in a Member State be guaranteed
effective access to the public transport market of that
State in a transparent way and without discrimination.

(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 undertakings
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.

(14) The Treaty lays down specific rules with regard to
restrictions on competition. Article 86(1) of the Treaty,
in particular, obliges Member States to adhere to those
rules with regard to public undertakings and undertakings
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.

(15) In observing the requirements of the Treaty in the public
passenger
those
sector,
requirements relating to services of general economic
interest and exclusive rights, Member States should be
able to use a range of approaches.

particular

transport

in

(16) Passenger transport markets which are deregulated and in
which there are no exclusive rights should be allowed to
functioning,
maintain their characteristics and way of
insofar as these are compatible with Treaty requirements.

(17) As an alternative to deregulation, competent authorities
should be able to choose controlled competition for
services of general economic interest. This can take the
form of competition for the award of exclusive rights; or
the assignment of particular
tasks to publicly-owned
operators in a context where other operators are also
free to provide services, but where all operators are
constrained by quality and integration requirements.

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INITIAL PROPOSAL

AMENDED PROPOSAL

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

be

rules

treatment

laying down general

the
equal
is essential

and
it
that must
in concluding public

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

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

specific

(19) Studies and experience show that competitive tendering
for public service contracts can in many cases be an
effective way of achieving the benefits of competition in
innovation without
terms of
obstructing
tasks
specific
the
assigned to the operators in the general public interest.

cost,
and
efficiency
the performance of

(14) Mandatory tendering rules for the conclusion of certain
contracts are laid down by Council Directive 92/50/EEC
of 18 June 1992 relating to the
coordination of
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
water,
telecommunications
sectors (2).

transport

energy,

and

(20) Mandatory tendering rules for the conclusion of certain
contracts are laid down by Council Directive 92/50/EEC
of 18 June 1992 relating to the
coordination of
procedures for the award of public service contracts (1),
Directive 93/36/EEC of 14 June 1993 coordinating
procedures for the award of public supply contracts (2),
Directive 93/37/EEC of 14 June 1993 concerning the
coordination of procedures
the award of public
works contracts (3) and Directive 93/38/EEC of 14 June
1993 coordinating the procurement procedures of entities
operating in the water, energy, transport and telecom-
munications sectors (4).

for

(14) Where such rules are applicable, 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.

(21) Where the mandatory tendering rules in these directives
are applicable, 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.

___________
(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).

___________
(1) OJ L 209, 24.7.1992, p. 1; Directive as

last amended by
Commission Directive 2001/78/EC (OJ L 285, 29.10.2001, p. 1).
(2) OJ L 199, 9.8.1993, p. 1; Directive as last amended by Commission

Directive 2001/78/EC (OJ L 285, 29.10.2001, p. 1).

(3) OJ L 199, 9.8.1993, p. 54; Directive as

last amended by
Commission Directive 2001/78/EC (OJ L 285, 29.10.2001, p. 1).
last amended by
Commission Directive 2001/78/EC (OJ L 285, 29.10.2001, p. 1).

(4) OJ L 199, 9.8.1993, p. 84; Directive as

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INITIAL PROPOSAL

AMENDED PROPOSAL

(22) Where the tendering rules in these directives are not
compulsorily applicable, this Regulation should apply in
full.

(23) The tendering rules in those directives do not have to be
applied to public service concessions. To help competent
authorities apply this Regulation correctly, it is therefore
necessary to define
service
concessions as it relates to public passenger transport.
the Commission's
Taking into account
interpretative
under Community
communication
concessions
law (1), a concession consists of
the award to an
to exploit a particular service,
the right
operator of
together with the associated economic risk.

concept of public

the

on

(24) The tendering rules in those directives do not have to be
applied when a competent authority decides to entrust an
operator forming part of the same administration with the
supply of services. They do not have to be applied when a
competent authority decides to entrust with the supply of
services an operator over which it exercises a control
which is similar to that which it exercises over its own
departments and which, at the same time, carries out the
essential part of
controlling
authority or authorities. They do not have to be applied
to public service contracts which concern exclusively
heavy rail, metro or inland waterway services, and not
bus or light rail services.

activities with the

its

(25) The

rules

to be

tendering

in Directives 92/50/EEC and
93/38/EEC do not have
applied when an
authority awards a contract to an operator on the basis
of certain exclusive rights, provided that the exclusive
right is compatible with the Treaty and the operator is
itself a State, a regional or
local authority, a body
governed by public law or an association formed by
one or more of such authorities or bodies.

(26) The tendering rules in Directive 93/38/EEC do not have
to be applied when an authority awards a contract to an
operator which is affiliated, as defined in that Directive, to
the competent authority.

___________
(1) OJ L 121, 29.4.2000, p. 2.

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INITIAL PROPOSAL

AMENDED PROPOSAL

(27) Certain rail services in Member States are operated mainly
for reasons of historical preservation or recreation. They
include certain services which use steam-powered loco-
motives, narrow track gauges or lines not connected to
the public rail network. Even though they may receive
these
incidental
operations
than the
transport and should
provision of public passenger
therefore not be affected by rules and procedures
applying to public service requirements.

financial support
clearly have

from public bodies,

a purpose other

(15) Tendering of public service contracts should not be
compulsory where safety standards in the provision of
rail services.

(28) Tendering of public service contracts should not be
compulsory where safety standards would be endangered
in the provision of heavy rail services.

(15) or the coordination of a metro or light rail network

would be endangered.

(29) Tendering should also not be compulsory where the
features of a metro
complexity or specific technical
network make it
impossible to tender single lines or
groups of lines without the likelihood of the incumbent
operator becoming the only realistic tenderer and thereby
establishing a de facto monopoly.

(30) Where authorities consider that the savings that could
reasonably be anticipated from awarding a contract for
the provision of metro or light rail services following a
competitive procedure would be outweighed by additional
costs, tendering should similarly not be compulsory. In
assessing this, competent authorities should be able to
take into account the cost of maintaining coordination
between the operator and the manager of
the infra-
structure; the cost of maintaining coordination between
the operator and the authority; and the costs of tendering
and managing the contract. This condition will normally
be considered to be fulfilled where the operating costs of
the operator to whom direct award will be made are
operators,
of
compatible with
including in particular those whose contracts have been
awarded by competitive tender.

comparable

those

(15) Interested parties should nevertheless have the oppor-
tunity 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 inte-
grated with bus services, it should be possible for the bus
services to be included in the same contract.

Deleted

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AMENDED PROPOSAL

(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.

(31) Tendering for public service contracts should likewise not
be compulsory where the contract has a low value. This
value should be higher for the tendering of a whole
network.

(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.

(32) Taking into account

the specific, commercially viable
nature of certain parts of the public transport market,
competent authorities should be empowered 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 and does
not require financial compensation for operating cost
losses. 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.

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

nonetheless

provides

for

that

public

administration

(34) 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
the
competent authority. Any other arrangement, by not
applying these provisions to cases where the State acts
in an entrepreneurial capacity, would not ensure the
non-discriminatory application of Community law. The
approach should not, however,
application of
prevent the continuation of competent authorities' role
in providing transport
themselves or
through operators that they control, where this is in the
public interest.

services, either

acting

this

as

is

(35) Competent authorities that provide bus services them-
selves, or through operators that they control, should be
permitted to continue these arrangements until the end of
a long transitional period.

(36) Moreover, beyond the end of

the transitional period,
competent authorities should be able to make proposals
to the Commission for the continuation of the direct
services, and to provide financial
provision of bus
compensation to ensure
socially
the provision of
necessary services, without the need for a competitive
tendering procedure, provided that other operators are
able to offer supplementary services within the limitations
required by non-discriminatory general rules.

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(37) However,

if an authority wishes,

for transport policy
reasons,
to exclude all other operators from offering
transport services in the same area, this should be done
in a way that minimises the restriction of competition. A
fair competitive tendering procedure for the award of an
exclusive right would normally be considered to satisfy
this requirement.

(38) In the case of heavy rail, however, Council Directive
91/440/EEC (1) of 29 July 1991 on the development of
the Community's railways requires railway undertakings
to be managed independently of the State. It therefore
rules out the direct provision of heavy rail services by
public authorities.

(39) Competent

are

authorities

publicising

responsible

the network

for network
management; that is, activities, other than the supply of
public passenger transport to passengers, that contribute
to the provision of a network of
integrated public
passenger transport services. These activities may include
laying down general rules for public passenger transport
operation;
and providing
information for users and potential users; coordinating
service timetables; designing and administering integrated
reim-
ticketing schemes,
bursement between operators; coordinating or providing
security and inspection arrangements; organising services
to react to short-term changes in demand or disruptions;
providing or managing infrastructure; or providing rolling
stock. Authorities should be permitted to carry out these
functions themselves, to delegate them to publicly-owned
operators or other agencies, or to include some or all of
them in contracts awarded by way of a competitive
procedure.

including arrangements

for

(19) It

should be possible for authorities

to compensate
operators for
the cost of complying with minimum
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.

fairly

(40) Authorities should be permitted to compensate operators
not only for the cost of complying with general rules for
public transport operation, but also for the costs or
income losses arising from activities that boost the use
made of public transport, provided that this compensation
accompanied by
can be
requirements that place pressure on operators to focus
primarily on the requirements of passengers. In order to
ensure transparency, simplified contract award procedures
and the direct award of exclusive rights for innovative
services should only be used if the amount of compen-
sation payable for compliance with general rules is small
in relation to the total value of the service.

calculated

and is

___________
(1) OJ L 237, 24.8.1991, p. 25; Directive as last amended by Directive
2001/12/EC of the European Parliament and of the Council (OJ L
75, 15.3.2001, p. 1).

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INITIAL PROPOSAL

AMENDED PROPOSAL

(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
the
competent authority. Any other arrangement, by not
applying these provisions to case where the State acts
in an entrepreneurial capacity, would not ensure the
non-discriminatory application of Community law.

administration

public

acting

that

as

is

(41) Passengers and the wider community should have the
opportunity to comment on plans to directly award
contracts, in time for their views to be taken into account.

(42) Where a competent authority proposes

to award a
contract without competition, potential operators who
would thereby be excluded from tendering for services
alternative
should have
the authority
proposals.
should consider
in writing for
accepting or rejecting it.

the opportunity
If such a proposal

it and give reasons

to make

is made,

in terms of attracting passengers

(43) In order to protect the interests of passengers and the
wider public interest, operators that receive contracts by
direct award should have to justify the trust placed in
them in particular by regularly demonstrating that their
performance
and
carrying out their services with the support of public
money is in line with that of comparable operators and
the operator's own previous performance. Under-
the
performance
operator
service
is
requirements laid on them or whether an alternative
arrangement would achieve better results for passengers
and for the wider public interest.

should call
successfully fulfilling the public

into question whether

(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
normally, therefore, be limited to this duration

(44) Where authorities are faced with the risk of a breakdown
in the provision of services, they should have the power
to put in place short-term emergency measures pending
the award of a new public service contract.

in terms of

(45) Studies and experience show that there are disadvantages
to public service contracts that are either too short or too
long in duration. Contracts of short duration can create
continuity of provision,
problems
the
investment and stability of staffing. Contracts of
long
duration can lead to the closing of the market for a
longer period than is necessary, entailing a diminishing
effect on the benefits of
competitive pressure. To
minimise the distortion of competition while protecting
the quality of services, public service contracts should
normally, therefore, be limited to no more than eight
years for bus services and fifteen years for rail and
inland waterway services. This will give the competent
authorities the flexibility required for adapting contract
periods to local circumstances.

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longer periods may be necessary where the
(21) 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,

invest

to

in

(46) However, provision may be necessary for longer contracts
where the operator has to invest in infrastructure, railway
rolling-stock or other vehicles that are tied to specific,
geographically defined transport services and that have
payback periods
standard contract
that
period. Alternatively, competent authorities should be
permitted to set up leasing schemes for vehicles and
indemnity
rolling
arrangements that do not give an advantage to either an
incumbent or an incoming operator.

non-discriminatory

longer

stock

the

or

(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
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.

Deleted

that

should
authorities

provisions
passengers

protect
contain
(47) Contracts
competent
from poor
and
performance by operators. They should if necessary also
contain incentives to operators to improve the service
to
provided to the public. Contracts may be subject
variation in line with provisions agreed by the contracting
parties but, in order to ensure transparency, increases in
the value of the contract should not be excessive.

(48) The integration of services across the boundaries of
competent authorities is of significant
importance to
passengers who need to use services for which more
than one operator or authority is responsible. Within
Member States, national rules or procedures can ensure
that authorities work in co-operation. Where neigh-
bouring authorities are separated by a national border,
there is no authority competent to ensure that such auth-
orities work in co-operation.
such
achieved bilaterally. However,
co-operation can be
where this is not
the case, an authority should be
empowered to make proposals for the extension of its
integrated systems to a second authority, and for there
to be a presumption that these proposals will be accepted
unless the second authority has good reason for rejection.

In many cases

(23) Where it

interest,

is appropriate for competent authorities,

in
pursuing the general
to protect employees in
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
14 February 1977 on the approximation of the laws of
the Member States
safeguarding of
employees' rights in the event of transfers of undertakings,
businesses or parts of businesses (1).

relating to the

77/187/EEC

of

(49) Where it

interest,

is appropriate for competent authorities,

in
pursuing the general
to protect employees in
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 2001/23/EC of 12 March
2001 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 undertakings or businesses (1).

___________
(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).

___________
(1) OJ L 82, 22.3.2001, p. 16.

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collective

(50) In giving effect to this Regulation, competent authorities
should ensure that all operators comply fully with the
social obligations established by relevant European and
law and with the provisions of any generally-
national
applicable
be
agreements. These
applied without discrimination. It is also appropriate for
competent authorities to be able to require operators
awarded public service contracts to comply with other
social obligations, including those laid down in collective
agreements in force in the place where the services are to
be provided, provided
are
that
compatible with Community law.

those obligations

should

(51) Competent authorities may require all operators providing
services in their territory to be established in the Member
State to which that authority belongs, except where
Community law provides otherwise. Operators should
meet all the licensing requirements of the Member State.
In order to ensure non-discrimination, operators should
not be excluded from tendering procedures because they
are not yet established in the Member State or have not
yet obtained the necessary licences.

(52) The provisions of

to

that

small

ensure

authorities

this Regulation should permit
and
competent
to
medium-sized enterprises have
continue to secure market
transport
services. This should be achieved in particular through
limiting contracts to proportionate geographical size and
through implementing measures that control the devel-
opment of oligopoly in markets open to controlled
competition.

the opportunity

in local

shares

(53) The tendering of high-value contracts requires competent
to define and describe complex systems.
authorities
empowered, when
authorities
Therefore,
awarding such contracts, to negotiate details with some
or all of the potential operators after tenders have been
submitted. This process should be non-discriminatory.

should be

(54) It is necessary that the procedures introduced under this
Regulation are transparent and that appeals procedures
are
against decisions of
available. 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 (1).

competent

authorities

the

(24) It is necessary that the procedures introduced according to
this Regulation are
appeals
transparent
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 (1).

that

and

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

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

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(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.

(55) 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
in a modernised and reinforced
should be retained,
form,
to ensure that authorities obtain
in particular
value for money from public expenditure and that
compensation are not
payments made by way of
misused to distort competition.
is appropriate to
accept a reasonable profit as part of an operator's costs.
Competent authorities should be permitted to require
guarantees from operators and for these guarantees to
third parties,
be provided where
provided that in doing so the operator or third party is
not misusing funds provided to it by a public body for a
different purpose.

appropriate

by

It

(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
the tendering
the results of
excessive, provided that
reflect fair and realistic market conditions.

(56) 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 aid. 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
the tendering
the results of
excessive, provided that
reflect fair and realistic market conditions.

(27) Regulation (EEC) No 1191/69 exempts compensation
paid pursuant to its provisions from the State aid notifi-
cation procedure laid down in Article 88(3) of the Treaty;
this Regulation establishes new and detailed provisions,
designed for the specific circumstances of
the public
passenger
including modernised
to ensure that
requirements
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.

sector,
for separate accounting,

transport

(57) Regulation (EEC) No 1191/69 exempts compensation
paid pursuant to its provisions from the State aid notifi-
cation procedure laid down in Article 88(3) of the Treaty;
this Regulation establishes new and detailed provisions,
designed for the specific circumstances of
the public
passenger
including modernised
to ensure that
requirements
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.

sector,
for separate accounting,

transport

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

(58) With a view to improving the operation of this Regu-
lation in the light of experience, the Commission should
report on the application of this Regulation. In order to
comply with this requirement,
it will be necessary for
Member States to provide the Commission with certain
information.

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AMENDED PROPOSAL

(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.

(59) 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. Moreover,
there should be
provision for long transitional arrangements for existing
bus services provided directly by an authority or an
operator that it controls.

(60) During the transitional period, it is likely that competent
authorities will apply the provisions of this Regulation at
different times. It could therefore be possible, during that
period,
for operators originating in markets not yet
affected by the provisions of this Regulation to tender
that had been opened to
for contracts
stage. To avoid
controlled competition at an earlier
imbalance
transport
market, competent authorities should be able to refuse
tenders from undertakings operating in markets that will
be opened in future but are not yet open, provided that
this is applied without discrimination and decided in
advance of a call for tenders.

in the opening of

in markets

the public

(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

(61) 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. Where the terms of these agreements
permit operators from third countries to establish them-
selves in the Member States,
those operators should
comply with the legal provisions applicable in the
territory in which the service is
to be performed,
relating to workforce, materials
including obligations
and management. This Regulation should not grant any
additional rights to third country operators.

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

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

lation and should therefore be repealed.

lation and should therefore be repealed.

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,

provision regarding

the

a

includes

(63) Council Regulation (EEC) No 1107/70 of 4 June 1970 on
the granting of aids 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
entry into force of new
expressly anticipates
Community rules,
is now redundant and should be
deleted,

provision regarding

the

a

HAVE ADOPTED THIS REGULATION:

Unchanged

___________
(1) OJ L 130, 15.6.1970, p. 1; Regulation as last amended by Regu-

___________
(1) OJ L 130, 15.6.1970, p. 1; Regulation as last amended by Regu-

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

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

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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
inland waterway.
It lays down the conditions under which
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
had to the pursuit of
legitimate public service objectives
within a framework of regulated competition.

the cost of

rights

for

AMENDED PROPOSAL

Purpose and scope

as part of

1.
The purpose of this Regulation is to improve the effi-
ciency and attractiveness of public passenger transport in the
an integrated transport policy
Community
committed to sustainable mobility, with due consideration for
town planning, regional development and the environment,
and to promote legal certainty for competent authorities' inter-
ventions in public passenger transport.

2.
This Regulation shall apply to national and international
operation of public passenger transport by rail, road and inland
waterway. It lays down the conditions under which competent
authorities may compensate transport operators for the cost of
fulfilling public service requirements and under which they
may grant exclusive rights
the operation of public
passenger transport.

for

3.
This Regulation shall not apply to rail services whose
principal purpose is historic preservation and the provision
of recreational facilities.

Article 2

Unchanged

Relationship to public procurement law

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

This Regulation shall be without prejudice to the obligations
on competent
authorities which flow from Directives
92/50/EEC, 93/36/EEC, 93/37/EEC and 93/38/EEC.

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.

Where one of those Directives makes the tendering of a public
service contract mandatory, Articles 4a(1), 6(a), 7, 7a, 7b, 8,
12, 13(1) and (2), 14 and 17(7) of this Regulation shall not
apply to the award of that contract.

The provisions of this Regulation shall apply in full to the
including all
award of all other public service contracts,
public service concessions.

Article 3

Definitions

Unchanged

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;

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

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

following a procedure

operator
operator can participate;

Unchanged

(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
contract; by a single body of
single public
employees having the same contractual status; included in
a single operating account; and having a single information
service, ticketing scheme and timetable;

service

(d) ‘inland waterway’ means rivers, canals and lakes suitable for

the passage of vessels;

(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;

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

(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
in
operator will have received on account of the asset,
particular from passengers and from public authorities;

(f)

‘payback period’ means the period during which it
is
estimated, using appropriate discount rates, that the cost
of an asset to an operator, taking into account the risks
involved in the investment and 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) ‘people with reduced mobility’ means anyone who has a
particular difficulty when using public transport, including
elderly people, disabled people, people with sensory
and wheelchair users, pregnant women,
impairment
people accompanying small children or people with
heavy or cumbersome baggage;

(g) ‘public passenger transport’ means transport offered to the

(h) ‘public passenger transport’ means transport offered to the

general public on a continuing basis;

general public on a continuing basis;

(i)

‘public service concession’ means a public service contract
that grants an operator the right to exploit a particular
risk.
service,
Consequently:

associated economic

together with the

(i) most of the operator's remuneration is obtained from

users, particularly by charging fees;

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AMENDED PROPOSAL

(ii) the operator bears most of the financial consequences
of changes in tariffs and of fluctuations in the number
of users;

(iii) where the authority sets maximum tariffs, the operator

has a discretion to set tariffs below that level;

(iv) where the authority sets minimum levels of service, the
operator has a discretion to provide higher levels of
service;

(h) ‘public service contract’ means any legally enforceable
agreement between a
and an
operator for the fulfilment of public service requirements.

competent

authority

(j)

‘public service contract’ means any legally enforceable
agreement
and an
operator for the fulfilment of public service requirements.

between a

competent

authority

the purposes of

For
contract is also:

this Regulation, a public service

Unchanged

(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

(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

(ii) the terms that are attached to a decision, taken by a
competent authority, to entrust the supply of services
to an operator forming part of the same public admin-
istration, or an operator over which the authority
exercises a control which is similar to that which it
exercises over its own departments and which, at the
same time, carries out the essential parts of its activities
by order of the authority;

(i)

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

(k) ‘public service requirement’ means a requirement adopted
by a competent authority in order to secure adequate
public passenger transport services;

(j)

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.

(l)

‘value’ of a service, route, contract, compensation scheme
or market for public passenger transport 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

AMENDED PROPOSAL

Unchanged

ENSURING THE QUALITY OF PUBLIC PASSENGER
TRANSPORT

Article 4

In applying this Regulation, competent authorities shall
1.
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.

Competent authorities' duties

In applying this Regulation, competent authorities shall aim to
secure adequate consumer-oriented public passenger transport
that are of high quality and reasonably priced,
services
providing
social
continuity,
coverage, by concluding public service contracts in accordance
with Chapter III or by laying down general rules for public
passenger transport operation in accordance with Chapter IV.

integration,

and full

safety

Article 4a

Criteria

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:

In assessing the adequacy of public passenger transport
1.
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

(a)

the overall quality of the service provided to consumers
and specific consumer protection factors including the
accessibility of the services in terms of their frequency,
speed, punctuality, reliability, the extent and capacity of
the network and the service information that is provided;

(b)

the level of tariffs for different groups of users and the
transparency of tariffs;

(b)

the level of tariffs for different groups of users set by the
authority or operator and the transparency of tariffs;

(c)

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

(c)

integration between different transport services, including
integration of information, ticketing, timetables, consumer
rights and the use of interchanges,
including integration
between different operators and with services for which
neighbouring authorities are responsible;

(d) accessibility for people with reduced mobility;

Unchanged

(e)

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

(e)

(f)

environmental factors, including rational use of energy and
local, national and international standards and norms,
notably those pertaining to the emission of air pollutants,
noise and global warming gases;

the specifications and condition of the vehicles, vessels and
rolling stock, infrastructure, and other assets to be used in
the provision of the service, and the arrangements for the
maintenance and renewal of those assets;

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AMENDED PROPOSAL

(f)

the balanced development of regions

(g)

the balanced development of regions, including integration
between local,
transport
systems;

and long-distance

regional

(g)

the transport needs of people living in less densely
populated areas;

(h)

the transport needs of people living in less densely
populated areas;

(i)

the transport needs of people living in border regions
including the
integration across national borders of
information, timetables, ticketing and services in general;

(h) passenger health and safety;

(j)

safety and health of employees and passengers;

(i)

the qualifications of the staff and;

(k)

the qualifications of the staff and the internal
provided by operators;

training

(l)

the pay and other employment and social conditions that
are in force in the Member State, region or locality in
including any
which the services are to be performed,
specific conditions that the authority itself has agreed to
apply;

(j)

how complaints are handled, disputes between passengers
and operators are resolved and service shortfalls are
redressed

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

(n)

the cost of providing the services.

For the purposes of point (i) of paragraph 1, competent
2.
authorities responsible for local and regional public passenger
transport services,
information services, or ticketing schemes
on one side of a national border may make proposals to
extend these services and schemes to areas on the other side
of the border.

Competent authorities receiving such proposals shall consider
them, and shall inform the Commission if they reject them.

Article 4b

Passenger information

in accessible

Operators of public passenger transport services shall make
formats and within a reasonable
available
timescale, on request, complete and up to date information
about
the services' accessibility for people with reduced
mobility, their timetables and their tariffs. The only charge
they shall make shall be to cover the marginal administrative
cost of providing the information.

available on request,

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

the services'

timetables,

complete

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CHAPTER III

PUBLIC SERVICE CONTRACTS

AMENDED PROPOSAL

Unchanged

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.

Article 6

Award of public service contracts

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

Where public service contracts are required to be granted
under the provisions of Article 5, 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
including in particular the
public service contract relates,
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
longer
the
contract may take into account the payback period where:

the duration of

(a) Contracts shall be put out

in
accordance with Article 12, except as provided for in
Articles 7, 7b and 8.

for competitive tender

(b) Contracts

shall provide

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

the operator

(c) Contracts shall be limited in time and shall

last for no
longer than eight years for bus services and fifteen years
the
rail and inland waterway services. However,
for
duration of
the
the contract may take into account
payback period if:

(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

(i) the

responsible

the operator

for
contract makes
light rail or metro rolling-stock,
providing heavy rail,
other vehicles of a particularly technically advanced
nature, vessels, or infrastructure, provided that such
assets are
tied to specific, geographically defined
transport services; and

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

is longer than five years

(ii) those assets have a payback period for the operator that
is longer than the duration of the contract otherwise
permitted under the provisions of this paragraph.

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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.

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

(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

Services subject to contracts may, at the same time, be the
subject of financial compensation for the cost of complying
with general rules in accordance with Chapter IV.

Article 6a

Contents of public service contracts

1.

Public service contracts shall

In particular,

the
they shall

and the performance of

(a) require operators to furnish competent authorities with the
their
information necessary to monitor and evaluate
transport
performance
network as a whole.
require
operators to furnish competent authorities, on an annual
basis, with information on the services provided, the tariffs
charged, the number of passengers carried, the number of
complaints received, and any safety-related problems or
incidents. This information shall be provided separately
for each route. However neighbouring routes may be
the
grouped together
than
group has
EUR 3 000 000;

this purpose provided that

for
an aggregate

annual value of

less

(b) contain provisions to ensure the maintenance of any public
including tunnels,
assets made available to operators,
railway infrastructure, bus and rail stations and inter-
changes, depots, workshops, vehicles, vessels and rolling
stock. They shall, in particular, specify the obligations of
the operator, the competent authority and other agencies
regarding the maintenance of these assets;

(c) clearly specify the penalties that shall be applied in the
event of failure to comply with the requirements set out
in the contract, and the timetable and procedure for
applying them. These penalties may include premature
termination of the contract; and

(d) not cover a wider geographical area than is required by the
general interest, and, in particular, by the need to provide
services to significant groups of passengers who habitually
use more than one link in the public transport network
during the same journey.

2.
Contracts may include a system of bonuses and penalties
based on the operator's performance as measured by quanti-
tative data, customer surveys,
independent monitoring and
inspection or other means. Contracts may also provide for
guarantees from the operator or third parties.

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3.
Contracts may make provision for the negotiation or
imposition of changes to their content. If such changes lead
to higher financial compensation or new exclusive rights, the
competent authority shall however initiate a new contract
award procedure in accordance with the provisions of this
Regulation if the cumulative annual value of all such changes
exceeds one fifth of the annual value of the services covered by
the original contract.

The content of contracts shall not be changed unless their

4.
terms provide for this.

Article 7

Unchanged

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
if
rail, metro or
national or international rail safety standards could not be
met in any other way.

services

light

rail

for

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

to Article 7a,

Competent authorities may decide, on a case-by-case
2.
basis and subject
to directly award public
service contracts for metro services either to themselves or to
an operator they control if:

to Article 7a,

(a) the size or technical uniqueness of the system means that
the incumbent operator would have a significant advantage
under competitive tendering; or

(b) this is conducive to greater efficiency in the use of public

money or publicly financed assets.

2.
Competent authorities may decide, on a case-by-case
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
infrastructure, and if
those costs would not be offset by
additional benefits.

to Article 7a,

Competent authorities may decide, on a case-by-case
3.
basis and subject
to directly award public
service contracts for light rail services either to themselves or
to an operator they control
if this is conducive to greater
efficiency in the use of public money or publicly financed
assets.

Competent authorities intending to award a contract
3.
under
the provisions of paragraph 1 or 2 above shall
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.

Deleted

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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.

5.
Competent authorities may decide, on a case-by-case
basis, to directly award public service contracts for services
than
with an estimated average
its
EUR 400 000.
service
service
public
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

single public

requirements

value of

annual

in a

less

4.
Competent authorities may decide, on a case-by-case
basis, to directly award public service contracts for services
having an estimated average annual value of
than
EUR 1 000 000. If a competent authority incorporates all its
public service requirements in a single public service contract,
it may decide to directly award this public service contract
provided that
it has an estimated average annual value of
less than EUR 3 000 000.

less

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

Competent authorities shall not split up contracts or networks
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.

If an operator proposes a new initiative that will provide
5.
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.

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.

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

6.
All financial compensation under the terms of directly
awarded contracts shall comply with the rules in Article 16
and Annex I.

Article 7a

Safeguards for directly awarded contracts

Competent authorities

intending to directly award a
1.
contract under the provisions of Article 7(1), (2) or (3) shall
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.

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In the case of contracts to be directly awarded in
2.
(2) or (3),
accordance with the provisions of Article 7(1),
six months
other potential operators may, during the
following publication in accordance with paragraph 1, submit
to the competent authority an alternative offer to challenge the
results previously achieved by the operator to whom the direct
award is intended to be made, and to propose alternative ways
to achieve the objectives of the new contract. The competent
authority shall consider these offers and publish in accordance
with Article 13 its reasons for its decision to accept or reject
them.

Competent authorities shall ensure the efficiency and
directly
included

3.
effectiveness of
awarded under Article 7(1), (2) or (3).

in contracts

services

To this end, they shall, in particular:

(a) review, at least once every five years, trends in the unit
costs and usage rates of these services in relation to the
standards of
operator's
performance
and the
performance of comparable services provided by other
operators;

performance,
as

own previous

a whole

industry

in the

(b) assess the results of the review and decide whether they
justify the decision to award the
contract without
competition or whether there is clear evidence of significant
underperformance;

(c) in cases of clear evidence of significant underperformance,
decide on the steps they will themselves take to bring about
an improvement of performance and require the operator,
under the terms of the contract, to do the same;

(d) undertake a new review of cases referred to in point (c)
within three years of the initial review. If this new review
does not find clear evidence of a significant improvement
in performance, the authority shall terminate the contract.
It may only award a new contract for the relevant services
following a competitive tendering procedure in accordance
with Article 12;

(e) publish, in accordance with Articles 13(1) and (2),

(i) the information referred to in Article 13(3);

(ii) the results of the reviews;

(iii) their assessment of the results;

(iv) their own plans, and those of the operator, to improve
performance in cases of significant underperformance.

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Article 7b

Emergency Action

A competent authority may take emergency action to secure
the provision of adequate public passenger transport services if:

(a) no tenders that meet the specified requirements have been

submitted in response to an invitation to tender;

(b) a judicial decision or a decision of an appeal body
concerning the award of a contract prevents a new
contract being put
in place in accordance with the
provisions of this Regulation prior to the expiry of the
existing arrangements;

(c) an operator's consistent failure to meet the standards laid
the

down in a public service
provisions of the contract, to its premature termination;

leads, under

contract

(d) an operator cannot

fulfil the terms of a public service

contract because of insolvency; or

(e) an operator intends to discontinue the provision of a
service that is not the subject of a public service contract.

Competent authorities may require operators to give them up
to six months notice before discontinuing the provision of any
public passenger transport service they operate.

The emergency action shall take the form of the direct award
or agreed extension of a public service contract.

through emergency
The award or extension of a contract
action shall be for no longer than the competent authority
needs in order to organise a new contract award procedure
in accordance with the provisions of this Regulation, and for
one year at the most, except where emergency action has been
taken under subparagraph (a) and the new award procedure
once
specified
requirements.

again elicits no tenders

that meet

the

Article 8

Unchanged

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,

1.
A competent authority may, without tendering, award a
public service contract for a service that is limited to an indi-
vidual route and that will not be subject to financial compen-
sation under the terms of any public service contract, provided
that, following the procedures in Article 12:

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

Unchanged

(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.

2.
An operator awarded a contract under the terms of
Article 7(5) or paragraph 1 may receive compensation for
complying with general rules that have been laid down in
accordance with Article 10 and affect the services covered by
the contract. In any one year, the amount of this compensation
shall be no more than one-fifth of the value of the services
covered by the contract.

Article 9

Unchanged

Safeguards

Safeguards for authorities

1.
a competent authority may require the selected operator
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
the services covered by the
more than half
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 value of the relevant market
for public passenger transport services.

1.
In order to ensure that alternative potential providers of
public transport services have a chance to remain in existence
or that the implementation of controlled competition does not
prevent the participation of small and medium enterprises, a
competent authority may require the selected operator to
award subcontracts, for a defined proportion of the services
covered by the contract, to third parties to which neither the
competent authority nor
is affiliated. This
to subcontract may not extend to more than
requirement
half the value of the services covered by the contract. The
competent authority shall not nominate the subcontractors.

the operator

2.
A competent authority may decide not to award public
service contracts to any operator that already has or would, as
a consequence, have more than a quarter of the value of the
relevant market
services.
for public passenger
Member States may, in particular, lay down for the purposes
of this provision that:

transport

(a) for light rail, metro, inland waterway and local and regional
the relevant market shall be the regional

bus services,
market for public passenger transport; and

(b) for heavy rail and longer distance bus services, the relevant
market shall be the national market for that mode of public
passenger transport.

This paragraph shall be without prejudice to the right of
competent authorities to decide to award contracts for the
whole of the territory for which they are responsible to a
single operator, subject to the provisions of Article 6a(1)(d).

This paragraph shall be without prejudice to the procedures
and decisions of Community and Member State competition
authorities.

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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.

3.
A competent authority may require the selected operator
to offer to staff previously engaged in providing the services
they would have enjoyed if a transfer had
the rights that
occurred within the meaning of Directive 2001/23/EC. The
authority shall list the staff and give details of their contractual
rights.

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

competent

authorities

authorities

competent

awarding public

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. Competent
authorities may require potential operators to apply for a
licence and to comply with any other reasonable requests to
demonstrate that they are in a position to obtain the requisite
licences. Competent authorities
time
between the award of contracts and the service commencement
date for the selected operator to establish itself and obtain any
necessary licence.

shall allow sufficient

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.

Unchanged

CHAPTER IV

MINIMUM CRITERIA FOR PUBLIC PASSENGER TRANSPORT
OPERATION

GENERAL RULES FOR PUBLIC PASSENGER TRANSPORT
OPERATION

Article 10

Unchanged

1. Without prejudice to public service contracts concluded
in accordance with Chapter III, competent authorities may lay
down general rules 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.

1.
Competent authorities may lay down general rules to be
adhered to by all operators. These rules shall be applied
without discrimination to all transport services of a similar
character in the geographical area for which the authority is
responsible.

2.

General rules may include:

(a) requirements for operators to use vehicles, vessels, rolling
stock or
infrastructure that meet defined standards of
quality, environmental impact, accessibility or appearance;

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(b) requirements

for operators to participate in integrated

systems of ticketing, timetabling or information; or

(c) restrictions,

applied without

between
operators, on the total number of vehicles using a
particular section of road, for reasons of public safety or
environmental protection.

discrimination

General rules may lay down tariff obligations, setting

3.
maximum tariffs for some or all trips.

2.
Such General rules or minimum criteria may include
compensation for the cost of complying with them, provided
that:

4.
General rules may include compensation for the cost of
complying with them, calculated in accordance with Article 16
and Annex I, provided that:

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

it does so only for

(a) compensation

is

available

to

all

operators

on

a

(b) in any one year,

the amount of compensation for
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;

non-discriminatory basis;

and

(b) the general rule in question refers to quality and reliability
standards for the services it affects, and to appropriate
penalties that shall be imposed on operators that fail to
comply with these standards.

CHAPTER V

Unchanged

PROCEDURAL ISSUES

Article 11

Notification

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

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

In the case of competitive tendering, the procedure shall

3.
include:

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

(a) selection criteria, taking into account the criteria in Article
4a(1), that define the authority's minimum requirements;

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(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

(b) award criteria, taking into account the criteria in Article
4a(1), 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

include in the information
4.
which they supply to potential operators
relevant
information they hold, under the terms of public service
contracts, about operators' services,
tariffs and numbers of
passengers during the previous five years.

the

Unchanged

5.
Competent authorities shall require potential operators to
describe how they plan to provide the services being tendered
for, including the deployment of personnel and assets.

6.
In the case of tenders for contracts having an estimated
annual value of more than EUR 3 000 000, competent auth-
orities may negotiate with potential operators on the tenders
they have submitted. Authorities may not, as a result of post-
in relation to the
tender negotiations, accept an offer that,
award criteria referred to in paragraph 3(b), is less favourable
than an offer that was submitted by any other tenderer and
that complies with the selection criteria referred to in
paragraph 3(a).

Article 13

Transparency

Unchanged

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

Calls for tender,

1.
invitations for proposals under quality
comparison procedures, information on new general rules and
associated compensation payments, preliminary decisions to
directly award contracts as required by Article 7a(1), and
other notices and decisions made in accordance with this Regu-
lation shall be published in an appropriate manner, stating, in
the case of decisions and preliminary decisions, the reasons on
which they are based.

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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
annual value of,
respectively, EUR 400 000 or more, or
EUR 800 000 or more, for publication in the Official Journal
of the European Communities.

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
annual value of, respectively, EUR 1 000 000 or more, and
EUR 3 000 000 or more,
for publication in the Official
Journal of the European Communities.

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.

Unchanged

3.

Competent authorities shall make available on request:

(a) the terms of any public service contracts

they have

awarded;

(a) the terms of any public service contracts they have awarded
including, for directly awarded contracts, the manner in
which compensation is calculated in accordance with
Article 16 and Annex I;

(b) the terms of any general

rules
operation they have laid down, and

for public transport

(b) the terms of any general

for public transport
operation they have laid down, including details of tariff
obligations and the method for determining the rate of
compensation; and

rules

(c) the information they hold, under the terms of public
tariff and,

service contracts, about operators'
numbers of passengers.

services,

(c) the information they hold, under the terms of public
tariffs,
trend in the

service
numbers of passengers and the general
quality of service.

operators'

contracts,

services,

about

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

Unchanged

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

5. Member States shall forward to the Commission, by the
end of the month of June in every even-numbered year:

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

awarded,

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

contracts

awarded

between

and

(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

(b) a summary of the scope and content of the general rules
that were in force during the previous two calendar years
and for which compensation was provided, and of
the
amount of compensation paid;

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(c) the findings of any performance reviews conducted under
the provisions of Article 7a(3) during the previous two
calendar years.

6.
For the purposes of policy analysis and review, including
the report laid down in Article 19(2), the summary referred to
in paragraph 5, subparagraph (a) shall provide details of:

(a) usage levels;

(b) customer satisfaction;

(c) workforce numbers and changes in working patterns and

employment conditions; and

(d) the cost of providing the services, distinguishing between:

(i) financial compensation provided under the terms of this
including compensation for compliance

Regulation,
with general rules; and

(ii) any other

investment,
relevant private or public
including investment in infrastructure, vehicles, vessels
and rolling stock, that is not covered by the terms of
this Regulation.

Article 14

Appeals

Unchanged

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.

1. Member States shall ensure that operators and other
interested parties have the right
to a public or
judicial body against decisions and preliminary decisions of
competent authorities under this Regulation.

to appeal

in its organisation,
2.
This body shall be independent,
from of any
funding legal structure and decision making,
authority concerned and from any operator
competent
involved and shall have the power
relevant
information from any relevant party, take binding decisions
and award damages.

to request

2.
The body referred to in paragraph 1 shall be independent
of any competent authority concerned and operators involved
and shall have the power to request relevant information from
any relevant party, take binding decisions and award damages.

Appeal bodies

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

two months

3. Where the body is not judicial in character, its decisions
shall be subject to judicial review.

Subject to paragraph 5, decisions of appeal bodies shall

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

The provisions for the implementation of the appeals

4.
procedure shall be determined by the Member States.

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

For cross-border

5.
the competent authorities
involved shall agree on the appeal body that shall have juris-
diction.

services,

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Article 15

Unchanged

Accounting provisions

Services subject

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

accounting purposes

activity for

2.
Individual contracts directly awarded under Articles 7(1),
(2) or (3), and any contracts with an annual value of more than
EUR 3 000 000,
separate
accounting division.

each be operated as

shall

a

Each accounting division shall meet

2.
conditions:

the

following

Each accounting division shall meet

3.
conditions:

the

following

(a) the operating accounts shall be separate;

Unchanged

(b) the proportions of overheads,

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

assets

(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.

(d) for each activity, expenditure shall be balanced by the
aggregate of the operating revenue from the services in
question and payments from public authorities in compen-
service
sation for
requirements
any possibility of
transfer from or to another activity. This compensation
may allow for a reasonable profit for the operator.

in question, without

fulfilling the public

cost of

the

rules

Operators receiving compensation for compliance with
4.
transport operation in accordance with
general
for
identify separately the
in their accounts,
Article 10 shall,
rule in
in complying with the general
they incur
costs
question;
the additional revenue they earn as a result of
complying with the rule; and the compensation paid. The
compensation paid and the additional revenue earned shall
balance the costs incurred, without any possibility of transfer
from or to an activity not subject to the rule in question. This
compensation may allow for a reasonable profit
the
operator.

for

5.
Operators of services for which the contract was directly
awarded under the terms of Article 7(1), (2) or (3) or Article
17(3) shall make their accounts public in a form which permits
verification of their compliance with the provisions of this
Article and with Articles 7a(1) and (3), 8(2) and 16.

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Unchanged

INITIAL PROPOSAL

CHAPTER VI

FINAL PROVISIONS

Article 16

Compensation

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

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.

into force,

Public service contracts awarded, before this Regulation
1.
following a procedure consistent with
enters
Directives 92/50/EEC, 93/36/EEC, 93/37/EEC or 93/38/EEC,
or any other fair competitive procedure, may last
for the
period laid down in the contract, provided that this is finite
and reasonable.

2.
A competent authority that provided a given bus service
itself, or through an operator it controls, before this Regulation
entered into force, may continue to provide this service,
without a competitive award procedure, during the eight
years following the Regulation's entry into force.

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.

Member States shall take the necessary measures to ensure that
schemes, contracts or arrangements implemented otherwise
than in compliance with the provisions of
this Regulation
cease to be valid.

for a contract

In exceptional circumstances, without prejudice to the
3.
in Article 5 and the rules on
requirement
to the prior
contract duration in Article 6(c), and subject
approval of
the Commission, competent authorities may
extend the time limit referred to in paragraph 2, provided that:

(a) they apply Article 7a;

(b) the contract does not award an exclusive right;

(c) any compensation for

tariff obligations

is applied in

accordance with Article 10.

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4. Without prejudice to paragraphs 1, 2 and 3, each
competent authority shall ensure that:

(a) at least half of its public service contracts, by value, have
been awarded in accordance with the provisions of this
Regulation within four years of
the Regulation's entry
into force; and

(b) all its public service contracts within eight years.

In applying the provisions and calculating the proportions
referred to in the first sub-paragraph 2, competent authorities
shall take no account of either public service contracts that
have been directly awarded after 1 February 2003 in
accordance with the provisions of Articles 7(1), 7(2), 7(3)
and 7(4), or contracts subject to the provisions of paragraphs
1, 2 and 3.

5. 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

to ensure that

5. Member States and competent authorities shall take the
necessary measures
schemes, contracts or
implemented otherwise than in compliance
arrangements
with the provisions of
than those
this Regulation, other
referred to in paragraph 1, cease to be valid in time to
permit competent authorities to comply with the provisions
of paragraphs 2 and 4.

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

Until

6.
the date on which the schemes, contracts and
arrangements referred to in paragraph 4 cease to be valid,
each of them shall continue to be subject to those provisions
of Regulation (EEC) No 1191/69 that applied to it before this
Regulation entered into force.

7.
Competent authorities may, during the transition periods
defined in paragraph 4, exclude operators that are the bene-
ficiary of exclusive rights or financial compensation for the
operation of public transport
services, awarded otherwise
than in accordance with the provisions of this Regulation,
from participating in contract award procedures.

When competent authorities apply the first subparagraph, they
shall do so without discrimination, shall exclude all potential
operators fulfilling this condition, and shall
inform potential
operators of their decision at the start of the public service
contract award procedure.

They shall inform the Commission of their intention to apply
this provision at least two months before the call for tenders or
request for proposals under the quality comparison procedure
is published.

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AMENDED PROPOSAL

Operators shall be exempted from the provisions of the first
subparagraph if they can demonstrate that the value of the
public transport services that they operate in accordance with
this Regulation exceeds the value of those that are the subject
of
compensation awarded
financial
otherwise than in accordance with this Regulation.

rights or

exclusive

Article 18

Unchanged

Operators from third countries

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 Commission.

For the purposes of this Regulation and without prejudice to
Article 9(4), operators from third countries party to agreements
with the Community that give operators from those countries
the right to establish themselves in the Member States shall be
treated as Community undertakings.

Article 19

Unchanged

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.

1. Member States shall consult the Commission on any laws,
regulations or administrative provisions that are necessary for
the application 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
exemptions established in Article 7.

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 quantitative and qualitative
consequences for passengers, staff, public authorities and the
communities they serve, and shall propose amendments to the
Regulation if necessary. The report shall
include an exam-
ination of
the exemptions established in
the operation of
Article 7.

Article 20

Unchanged

Repeal and amendment

Regulation (EEC) No 1191/69 is repealed.

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

1.

2.

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.

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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
the
public service contract awarded by competitive tendering,
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.

1. The rules in this Annex apply to all financial compensation awarded
for the fulfillment of public service requirements in accordance with
this Regulation, other than those awarded following competitive
tendering. This includes compensation paid for compliance with
general rules in accordance with Article 10. The rules do not
apply to exceptions from some or all of the financial effect of an
excise duty on fuels.

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

2. The amount of compensation shall not exceed the difference
between the extra cost to the operator of providing the service
and the extra income earned by the operator from the service,
taking into account the operator's activities as a whole, including
profitable services.

(ii) the effects of fulfilling the public service requirement on the
income

earned minus

income

income

(extra

operator's
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.

3. The following may be included in the calculation of the extra cost

to the operator:

(i) the additional direct costs associated with fulfilling the public

service requirement;

(ii) a proportionate share of the operator's overheads, assets and

liabilities drawn on in providing the service;

(iii) a reasonable profit;

(iv) any income foregone as a result of the application of the public

service requirement.

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.

4. The following shall be included in the calculation of the extra

income earned by the operator:

(i) additional income earned by the operator from passenger fares
and other activities directly connected to the service such as
advertising and on-board refreshment facilities;

(ii) any costs avoided through the provision of the service.

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.

5. In the case of compensation for tariff obligations laid down in
accordance with Article 10(3) that affect most or all trips, compen-
sation shall be paid at the same rate per trip to all operators of
services that have a similar character. This rate shall be based on an
estimate of the obligation's average financial effect on all operators
affected by it.

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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

(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.

calculation of

the benchmark
The
consideration of trends affecting the relevant transport market.

should take due

case

6. Costs resulting from the fulfillment 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. Contracts and
schemes may, however,
include procedures for the adjustment of
the amount of compensation based on specific predetermined
factors or circumstances. 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
in the absence of this
compensation, fulfil the requirement or would not fulfil it to the
same extent or under the same conditions.

interests, would not,

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
include effects on other parts of the network.
fulfilled, but shall

Deleted

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 other 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
exeption that the contract or scheme may provide for the amount
of compensation to be adjusted based on predetermined factors.
in any case remain fixed for a
Compensation amounts shall
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
in the absence of this
its own commercial
compensation, fulfil the requirement or would not fulfil it to the
same extent or under the same conditions.

interests, would not,

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ANNEX II

Deleted

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.