Opinion of the European Economic and Social Committee on the Revised proposal for a Regulation of the European Parliament and of the Council on public passenger transport services by rail and by road (COM(2005) 319 final — 2000/0212 (COD))
Date: 2006-05-18
Institutions: European Economic and Social Committee
Subjects: carriage of passengers, provision of services, public service, rail transport, road transport

C 195/20

EN

Official Journal of the European Union

18.8.2006

Opinion of the European Economic and Social Committee on the Revised proposal for a Regu-
lation of the European Parliament and of the Council on public passenger transport services by rail
and by road

(COM(2005) 319 final — 2000/0212 (COD))

(2006/C 195/06)

On 30 September 2005 the Council decided to consult the European Economic and Social Committee,
under Articles 71 and 89 of the Treaty establishing the European Community, on the abovementioned
proposal.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for
preparing the Committee's work on the subject, adopted its opinion on 2 May 2006. The rapporteur was
Mr Buffetaut and the co-rapporteur was Mr Ott.

At its 427th plenary session, held on 17 and 18 May 2006 (meeting of 18 May), the European Economic
and Social Committee adopted the following opinion by 63 votes to one with 12 abstentions.

1. Conclusions and recommendations

— confirmation of

the precedence of

the regulation over

public procurement law when the operator assumes a risk.

1.1
The European Economic and Social Committee feels
that the proposal for a regulation on public passenger transport
services by rail and road submitted by the Commission is an
improvement on previous versions in terms of the option for
direct award of contracts.

1.3
In that context the Committee expressly endorses the
obligation to draw up contracts and the balance struck between
the competitive tendering and direct award options as condu-
cive to the necessary transparency and improved quality of
services within a competitive system.

However,

legal
1.2
security desired by organising authorities and operators, certain
points still need to be clarified:

in order to achieve the objective of

— specific implementation of the geographical

limitation on
public transport activity and specific clauses on non-distor-
tion of competition in the event of direct award to a local
government-controlled operator;

— derogation from the general principles for the direct award
of rail transport contracts, which seems legally unjustified
and which should at least be better managed;

— a return to the spirit of the proposal for a regulation of
February 2002 (1) with regard to the quality of service and
compliance with social legislation, without calling the subsi-
diarity principle into question;

— clarification of the reciprocity system during the transitional

period;

— possibility of extending the duration of contracts, on an
exceptional basis, beyond the limits originally set when the
investment burden or amortisation periods warrant this;

— clearer definition of regional and long-distance transport;

— application of

transport
contracts involving public service obligations or granting
exclusive rights;

regulation to all public

the

(1) COM(2000) 7 final -2003/0212 (COD), as amended by COM(2002)

107 final.

The Committee would like to see the provisions of the

1.4
regulation apply to all public service transport contracts.

In the context of the balance struck between competitive
1.5
tendering and direct award to an internal operator
the
Committee declares itself in favour of restricting activity to a
particular area to prevent distortions of competition and safe-
guard freedom of choice for local authorities and fair condi-
tions for controlled competition.

1.6
In the event of direct award to an internal operator, the
Committee would like to see a clearly defined and controlled
margin of flexibility retained, where,
in the interests of the
unity of the networks and the integration of transport services,
services need to be extended to neighbouring and/or adjacent
areas administered by a different authority from that which
awarded the public service transport contract.

The Committee

1.7
for minor
contracts and in order to ensure the continuity of services are
warranted.

that derogations

feels

1.8
The Committee questions the option of direct award of
public service rail transport contracts both to traditional and
new operators, without laying down any precise rules ensuring
fair competition of the kind applied to internal operators, thus
giving rise to legal uncertainty and distortions of competition.

18.8.2006

EN

Official Journal of the European Union

C 195/21

1.9
The Committee considers that the principles of transpar-
ency, equal treatment and quality and efficiency of public rail
transport can be better guaranteed only if the same rules are
applied as to local road transport.

2.6
It also noted with satisfaction that ‘henceforth equality
of opportunity and competition between all types of enterprise,
irrespective of their legal form, will be achieved through legal
and accounting transparency’ (5).

1.10
The Committee calls for a return to the spirit of the
2002 proposal for a regulation with regard to service quality
legislation in force in the
and compliance with the social
Member States.

This apart, the EESC would welcome speedy adoption
1.11
of the regulation, which is necessary to ensure legal certainty
within the sector.

2. Introduction

The European Commission has published a new
2.1
proposal for a regulation on public service obligations with
regard to public road and rail passenger transport services. The
document in question is the third version.

2.2
The EESC welcomes the Commission's work, which
enables discussions — previously blocked at institutional level
— to be re-launched.

2.3
The proposed text is intended to reconcile the varying
positions voiced in previous discussions in the light of recent
developments in case law, particularly the Altmark Trans judg-
ment, and to address concerns about compliance with the prin-
ciples of subsidiarity and of administrative freedom for public
authorities.

It is very different from and simpler than the previous
2.4
version. However, in order not to prolong the legislative proce-
dure, the Parliament decided to treat it as a revised version of
the same text and to examine it at second reading. The
proposal
is therefore now before the Council of Ministers,
which has just begun its examination and has decided to study
its correlation with the third rail package, particularly with
regard to the opening-up of international traffic and the possi-
bility of cabotage (2).

2.5
The Commission considers that the current legislative
framework, which dates from 1969, is outdated and that the
efficiency and quality of modes of transport must be improved
in order to maintain or increase their market share. It would
like to regulate competition, including for regions and towns,
in order to ensure transparency in the way in which public
service contracts are awarded and executed (3).
In its 2001
opinion on the previous proposal for a regulation the EESC
welcomed ‘the Commission's intention of introducing a market
regime for public passenger transport based on controlled
rather than full competition’ (4).

(2) It should be noted that the current proposal no longer covers inland
waterway transport, which therefore continues to be governed by
Article 73 of the Treaty.

(3) COM(2005) 319 final, section 2.1.
(4) OJ C 221, 7.8.2001 (point 2.2).

2.7
At the present moment, given that the proposal for a
regulation is to be discussed by the European Parliament at a
second reading, the EESC can only reiterate its desire for trans-
parency, equal opportunities and controlled competition in
public road and rail passenger transport management proce-
dures,
in compliance with the neutrality principle of Article
295 of the Treaty.

2.8
In that connection the recent case law of the European
Court of Justice, especially the Altmark Trans and Stadt Halle
judgments, has helped to clarify the issue. In exercising its right
of initiative, the Commission is not bound by the doctrine of
case law, the legal system of the European Union being mainly
based on written law rather than the decisions of the courts. In
practice, the proposal for a regulation incorporates the princi-
ples of the three main criteria identified in the Altmark Trans
judgment (Article 4). Aspects of the fourth criterion can be
found in point 7 of the annex.

2.9
It should be pointed out that the Altmark Trans judg-
ment defined the criteria ensuring that compensation of public
service obligations is not legally classified as state aid. The
proposal for a regulation is broader in scope and covers points
not dealt with in the case law, such as the questions of the
compatibility with competition rules of compensation legally
classified as state aid and the grant of exclusive rights. In 1969
there was no transport market; the question of exclusive rights
did not, therefore, arise.

3. General comments

3.1
The Committee welcomes the Commission's initiative
but would like to raise a number of legal questions which merit
discussion, and stresses how important it is that the new regu-
lation should genuinely guarantee the legal security that the
whole sector needs so badly in order to ensure rapid adoption
and implementation.

The Committee welcomes the Commission's efforts to
3.2
achieve a new balance in local transport which respects the
local authorities' administrative freedom and is satisfactory for
all stakeholders.

3.3
It welcomes the fact that the local authorities are free
either to put their transport services out to competitive tender,
to provide the services themselves or via an internal operator,
providing that precise criteria are met in order to prevent any
distortion of competition.

(5) ibid, point 2.4.

C 195/22

EN

Official Journal of the European Union

18.8.2006

3.4
The Committee reaffirms its support for the principle of
controlled competition, rather than full competition, which has
been incorporated in the new proposal
for a regulation
(Articles 3 and 5(3)). This principle seems to offer the best
basis for reconciling public service needs with the need for a
secure, harmonised framework of
the award of
contracts. It reconciles public-service-related and commercial
needs in the sector (irrespective of the legal status of the enter-
prises concerned).

rules for

3.5
The Committee considers that a competitive system
offering the general use of contracts and freedom to choose
between competitive tender or direct award is the best guar-
antee of improved public transport quality and efficiency. What
will happen is that the organising authorities will need to estab-
lish clearly and in advance public service obligations, the areas
concerned,
rules determining compensation and the
arrangements for sharing costs and revenues, as well as arran-
ging sufficient prior publicity.

the

At the same time, operators will have a clear under-

3.6
standing of the conditions which they operate under.

is responsible,

3.7
In addition, the proposal envisages that ‘each competent
authority shall publish once a year a detailed report on the
public service obligations for which it
the
selected operators and the compensation payments and exclu-
sive rights granted to the said operators by way of reimburse-
ment’ (Art. 7). This will enable members of the public to find
out about the exact conditions under which public transport
services operate, thus putting them in a position to question
the quality and cost of the services provided to them. However,
it must be ensured that the report does not unduly increase the
administrative burden on local authorities and thus, by exten-
sion, on operators. Too much bureaucracy is not conducive to
full information.

4. Specific comments

4.1 The regulation and public procurement law

4.1.1
two systems of law which can be applied to the sector.

The question of legal precedence arises, as there are

— if there is a straightforward tender, the public procurement
directive applies to the procedure for putting contracts out
to tender.

4.1.3
On this point, the EESC believes that the provisions of
the regulation should apply to all public service transport
contracts, in line with the principles of transparency and equal
treatment. This would be by far the simplest and clearest solu-
tion and would not call
into question the freedom of the
competent authorities to conclude contracts.

4.2 Direct award option

4.2.1
Unlike the two previous versions, the proposal for the
first time allows a public transport contract to be awarded to
an internal operator directly without competitive
tender
(Article 5(2)). This innovation responds to the wish expressed
in the previous debates that the local authorities' organisational
freedom be preserved.

4.2.2

There are a number of conditions for this:

— The services must be local.

— The internal operator must not take part in competitive
tenders organised outside the territory of the competent
authority and must perform all its activity within the terri-
tory of the competent authority. This is in the spirit of the
wish for competitive reciprocity expressed by the Parlia-
ment at the first reading (Amendment 61), in compliance
with the principles of the Treaty. This is a logical and fair
solution, as it would be unacceptable for a local-authority
controlled operator enjoying protection from competition
within its own territory to have the option of competing
against other operators in territories open to competition.

— Contracts may be awarded directly only to internal opera-
tors over which the competent authority exercises the kind
of complete control
it has over its own departments.
However, the Commission has not taken complete account
of the case law of the Court of Justice of the European
Communities (Teckal judgment of 18.11.1999, Stadt Halle
judgment of 11.1.2005 and Parking Brixen judgment of
13.10.2006).

4.1.2
At the first reading, in 2001, the European Parliament
adopted an amendment requiring the future regulation to take
precedence over public procurement law in order to create a
clear and coherent legal framework. The solution proposed by
the Commission is for the applicable law to be determined by
the choice of the organising public authority.

— if there is a public service obligation and the operator takes

on part of the risk, the regulation applies;

At the first reading, the European Parliament came out
4.2.3
clearly in favour of maintaining the option of direct award to a
local operator controlled by the competent
local authority
alongside the competitive tender option. The discussions in the
Council of Ministers have tended in the same direction, with
most representatives of the Member States being in favour of
the competent authorities retaining the freedom to provide
local services themselves, using in-house enterprises, or to
outsource them by competitive tender.

18.8.2006

EN

Official Journal of the European Union

C 195/23

4.2.4
The Commission has attempted to take account of this
consensus and has therefore sought to strike a balance between
controlled competition and the direct award option; the EESC
the administrative
endorses
freedom of
the organising public authorities while taking
account of the principles set out by the ECJ.

this approach as

it preserves

4.2.5
It should be pointed out that the Commission has
introduced a geographical demarcation criterion into the defini-
tion of internal operator in order to take account of the prin-
ciple of competitive reciprocity advocated by the Parliament for
local services provided under local government control, but in
a form which complies with the Treaty. The application of this
criterion raises two questions:

— Does this criterion refer to all transport services by internal
operators as well as to those provided by sub-contractors?

— What happens when routes continue beyond the limits of
the area for which the competent organising authority is
responsible? Should routes be curtailed or should specific
rules be applied in these cases? In this context the EESC
considers that the territorial competence criterion should be
relaxed. The services concerned could be of interest to areas
for which different competent authorities are responsible,
where this is necessary to ensure the unity of the network
and the integration of transport services in areas which
border on/are adjacent
the authority which
awarded the public service transport contract.

to that of

Provision should be made for the possibility that, in
4.2.6
order to ensure the unity of the network and the integration of
transport services in areas which border on/are adjacent to that
of the authority which awarded the public service contract,
services operated by the organising authority itself or by an
internal operator may also be of use to areas for which
different competent authorities are responsible.
In order to
prevent this option being used to circumvent the principle of
non-distortion of competition, it would be necessary to stipu-
late that services provided outside the area of territorial compe-
tence of the organising authority must not exceed a certain
percentage of the value of the main contract.

4.2.7
It should be made possible for the internal operators
of several local authorities to cooperate, particularly in relation
to research and development; otherwise they would become
than their potential competitors,
structurally less efficient
which would not have the same limitations.

similar to that exercised over the authority's own departments
is fundamental.

4.2.9
Finally, it is surprising that strictly defined conditions
apply to the general case of direct award to an internal
operator, whilst the specific exception to the principles of the
regulation, concerning direct award to a rail operator, is not
subject to any conditions; no reason for this is given in the
explanatory memorandum.

4.3 Competitive tender

Apart

from award to an internal operator,

the
4.3.1
proposal also provides for recourse to competitive tender.
There are three derogations from the tendering obligation:

— for minor contracts,

— to ensure continuity of public services in the event of
disruption of services or the immediate risk of such a situa-
tion,

— for public service contracts concerning regional or long-

distance transport by rail.

4.3.2
The EESC considers that the first two derogations are
justified in principle, although the criteria used to define minor
contracts are debatable. The third derogation on the other hand
raises several questions. Partly because of the size of the sector
concerned (turnover of about EUR 50 billion), partly because
the award conditions are — in contrast to conditions for award
to an internal operator — not particularly stringent, even
though Article 7 contains useful provisions
for publicity
measures, and partly because rail transport is not a sector
whose nature warrants its being permanently closed to compe-
tition, unless it is subject to provisions similar to those set out
in Article 5(2) of the proposal for a regulation.

4.3.3
It may be asserted that transparency, the principle of
equal opportunities and the interests of users and operators
would be better served by means of controlled tendering proce-
dures, and that the approach adopted, probably as the result of
a political compromise, rather unbalances the text in terms of
its legal coherence.

4.4 Compensation for public service obligations

Justice (Stadt Halle case of 11.1.2005)

4.2.8
It will be necessary to clarify these points in terms of
both legal certainty and the practical organisation of services.
The criteria established by the case law of the European Court
of
for defining an
internal operator leave some room for doubt, e.g. the phrase
‘factors such as’, which suggests that the list of criteria is not
exhaustive. However, recent case law (Parking Brixen case of
13.10.2005) once again underlines that the criterion of control

Article 6 of the proposal for a regulation refers to
4.4.1
Article 4, which is based in part on the criteria of the Altmark
Trans judgment. Any compensation, however it is assigned,
must conform with these provisions. In the case of directly
awarded contracts, compensation must also comply with the
rules set out in the annex, which state that, to calculate the
amount of the compensation, the situation of direct service
provision must be compared with that of a service provided
under market conditions if the obligation had not been met.

C 195/24

EN

Official Journal of the European Union

18.8.2006

4.4.2

The text thus distinguishes between two situations:

— if there is competitive tender, the compensation of public
service obligations reflects the spirit of the first three condi-
tions set out it the Altmark Trans judgment;

— if a contract has been directly awarded without competitive
tender, the public service obligation compensation will be
based partly on the criteria established by the Altmark
Trans judgment, but a comparative study of the economic
management of the service outside the scope of public
service obligations must also be carried out.

4.4.3
This systems gives rise to a certain legal complexity,
requiring clearer definition in order to ensure transparency and
good management for customers and taxpayers.

4.5 Quality of services and social legislation

the purpose of

The Commission stresses that

the
4.5.1
proposal for a regulation is to regulate the question of public
service obligations, and compensation for these, in the trans-
port sector and not to deal with issues such as service quality,
social
legislation and consumer protection. Only Article 4(7)
therefore deals with social rights in a flexible way. This is after
all an area of national competence.

Brussels, 18 May 2006.

4.5.2
However, the 2002 revised proposal was more precise
in defining a suitable level of quality for public transport and
passenger information, as well as social legislation (old Articles
4, 4a) and 4b)).

The EESC deplores

4.5.3
this excessively cautious new
wording on quality, passenger information and the guarantees
offered by national social legislation. It urges the Commission
to amplify its proposal in the spirit of the 2002 proposal, while
respecting the principles of subsidiarity and local authorities'
administrative freedom. Without actually drawing up an
exhaustive list of safety, quality and passenger information
criteria, it would nonetheless be a good idea to indicate certain
minimum requirements in these areas.

4.6 Transition between the current situation and the new legislation

4.6.1
There is a certain amount of imprecision in Article
8(6), which regulates competitive tendering during the second
half of the transitional period, but leaves the question wide
open of what should happen during the first half of the period
and in the case of direct award of contracts.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

18.8.2006

EN

Official Journal of the European Union

C 195/25

APPENDIX

to the opinion of the European Economic and Social Committee

The following amendment was defeated but received at least a quarter of the votes cast:

Point 4.6

Add a new paragraph to point 4.6:

Inland public transport markets in the EU have been opened up or liberalised to differing degrees, ranging from
those that remain closed via those that allow controlled competition to those that have been fully liberalised. A tran-
sitional period is therefore needed, so that national markets can adapt to the Regulation and reach comparable
levels, in order to prevent inequalities arising between Member States.

Reason

To be given orally.

Result of the voting:

For: 22

Against: 43

Abstentions: 3.