COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT  pursuant to the second subparagraph of Article 251(2) of the EC Treaty  concerning the common position adopted by the Council with a view to the adoption of a Regulation of the European Parliament and of the Council on public passenger transport services by rail and by road
Date: 2006-12-12
Institutions: European Commission
Subjects: carriage of passengers, drafting of EU law, provision of services, public service, rail transport, road transport

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 12.12.2006 
COM(2006)805 final 

2000/0212 (COD) 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT 

pursuant to the second subparagraph of Article 251(2) of the EC Treaty 

concerning the 

common position adopted by the Council with a view to the adoption of a Regulation of 
the European Parliament and of the Council on public passenger transport services by 
rail and by road 

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2000/0212 (COD) 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT 

pursuant to the second subparagraph of Article 251(2) of the EC Treaty 

concerning the 

common position adopted by the Council with a view to the adoption of a Regulation of 
the European Parliament and of the Council on public passenger transport services by 
rail and by road 

(Text with EEA relevance) 

1. 

BACKGROUND 

Date  of  transmission  of  the  revised  proposal  to  the 
European  Parliament  and  the  Council  (COM(2005) 
319 final – 2000/0212(COD)) 

22.7.2005 

Date of the opinion of the Committee of the Regions 

16.2.2006 

Date  of  the  opinion  of  the  European  Economic  and 
Social Committee 

17.5.2006 

Date  of  the  opinion  of  the  European  Parliament  (first 
reading) of the initial proposal COM (2000) 7 

14.11.2001 

Date of adoption of the common position 

11.12.2006 

2. 

PURPOSE OF THE COMMISSION PROPOSAL 

The  proposal  aims  to  replace  a  Regulation  adopted  in  1969  that  today  still  constitutes  the 
Community  regulatory  framework  applicable  in  the  public  passenger  transport  sector1.  The 
economic environment of the public passenger inland transport sector has changed profoundly 
since 1969. This Regulation is now outdated and constitutes a source of legal uncertainty that 
is already reflected in an increase in disputes.  

Given the unsuitability of the Community legislative framework and with a view to boosting 
the  effectiveness  and  quality  of  services,  the  Commission  presented,  in  September  2000,  a 

1 

Regulation (EEC) No 1191/69 of the Council of 26 June 1969 (OJ L 156, 28.6.1969, p. 1) on action by 
Member  States  concerning  the  obligations  inherent  in  the  concept  of  a  public  service  in  transport  by 
rail, road and inland waterway. Regulation last amended by Regulation (EEC) No 1893/91 (OJ L 169, 
29.6.1991, p.1). 

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proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council2  to  replace  the 
Regulation of 1969. 

Following  the  opinion  of  the  European  Parliament  in  November  2001  (first  reading),  the 
Commission presented an amended proposal in February 2002. However, particularly in light 
of  the  widely  differing  experience  of  opening  up  the  markets  in  the  Member  States,  the 
Council did not have the opportunity to continue its work on this matter.  

In order to solve these difficulties, reconcile the different positions on this issue expressed in 
the European Parliament and the Council, and take into account the judgment of the Court of 
Justice  of  the  European  Communities  in  the  Altmark  case3,  in  July  2005  the  Commission 
adopted a revised proposal for a Regulation, replacing the amended proposal of 2002.  

The  main  thrust  of  the  proposal  is  to  simplify  the  legislative  approach,  introduce  greater 
flexibility  into  the  organisation  of  public  transport  services  and  take  greater  account  of  the 
principles of subsidiarity and transparency.  

The proposal regulates the ways in which competent authorities may intervene in the inland 
public  passenger  transport  sector.  To  that  end,  it  lays  down  the  methods  for  paying 
compensation for public service obligations and awarding exclusive rights in the sector. The 
proposal generalises the rules for the conclusion of contracts and increased transparency in the 
relations between public authorities and transport operators. At the same time, at the request 
of  the  European  Parliament,  the  proposal  acknowledges  for  the  first  time  the  free  choice  of 
local  authorities  as  regards  the  organisation  of  public  transport.  It  establishes  a  clear 
framework  for  the  possibility  of  competitive  tendering  for  public  service  contracts  and  for 
competent authorities to run the services themselves or have them run by an internal operator. 

3. 

COMMENTS ON THE COMMON POSITION 

The  common  position,  adopted  by  qualified  majority,  makes  certain  adjustments  considered 
acceptable  by  the  Commission  as  they  do  not  undermine  the  goals  of  legal  certainty, 
transparency, subsidiarity and flexibility guiding the Commission's proposal.  

The  Council  has  extended  possibilities  for  the  direct  award  of  rail  contracts  to  all  rail 
transport services with the exception of underground railway and tram services, while at the 
same time limiting in principle the duration of such contracts to 10 years.  

As requested by Parliament, the Council took into account the specific situation of SMEs and 
revised the level of thresholds applicable to SMEs only, enabling the direct award of public 
service  contracts  with  an  annual  value  of  not  more  than  EUR  1.7  million  or  relating  to  a 
maximum of 500 000 km per year to firms operating no more than 20 vehicles. The reason for 
this  adjustment  in  favour  of  SMEs  is  the  specific  structure  of  the  market  for  local  transport 
services subject to the specific rules of the "Transport" chapter of the Treaty. In the view of 
the Commission, these arrangements cannot be expanded further.  

2 
3 

COM(2000) 7 final - 2000/0212 (COD), as amended by COM(2002) 107 final. 
Judgment  of  24 July  2003  in  Case  C-280/00  Altmark  Trans  GmbH  and  Regierungspräsidium 
Magdeburg v Nahverkehrsgesellschaft Altmark GmbH [2003] ECR I-7747. 

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In  agreement  with  the  position  of  Parliament  and  the  proposal  from  the  Commission,  the 
Council  confirmed  the  principle  that  local  authorities  were  free  to  choose  to  launch  an 
invitation to tender or to use an internal operator, particularly for bus, tram and underground 
railway  services.  In  addition,  in  order  to  take  into  account  certain  specific  features  and  to 
avoid  producing  a  text  that  would  be  difficult  to  apply,  the  Council  has  adjusted  the 
conditions  in  which  authorities  are  permitted  to  operate  public  transport  services  either 
themselves or via an internal operator.  

The Council has also decided to enhance transparency for contracts awarded directly. 

The  Council  has  confirmed  the  introduction  of  the  principle  of  reciprocity  requested  by 
Parliament, but as per the proposal from the Commission and in accordance with the case law 
of  the  Court  of  Justice  of  the  European  Communities,  this  clause  has  a  time  limitation  and 
forms part of a process of gradual liberalisation. It is therefore of a strictly transitional nature. 

Lastly, the Council reached agreement on the arrangements applicable to existing contracts 
and on the need to make provision for a longer transitional period for the application of the 
provisions that apply specifically to the procedures for the award of contracts. On this point, 
the transitional period will last for 12 years after the entry into force of the Regulation. 

4. 

DETAILED COMMENTS ON THE COMMON POSITION 

The references below are to recitals and articles of the common position. 

4.1 

Amendments  of  the  European  Parliament  accepted  by  the  Commission  and 
incorporated in full or in part in the common position 

Purpose and scope 

The  principles  of  amendments  1,  5,  132,  21,  22  and  31,  which  state  the  objectives  of  the 
Regulation, particularly in terms of general interest (the improvement of transport on the basis 
of  social  and  environmental  factors,  tariffs,  the  protection  of  individuals  with  reduced 
mobility, regional development policy, etc.), are included in recitals 4 and 13a and in the first 
subparagraph of Article 1(1).  

The  principles  of  amendments  2  and  3,  which  relate  to  the  underlying  principles  of  the 
Regulation, are included in recitals 1, 7 and 9. 

Amendment 6, which specifies the situation of the deregulated markets, is included in recital 
6b. 

The part of amendment 23 which excludes historical trains from the scope of the Regulation is 
included in Article 1(2). 

Definition 

Amendment  25  is  included  in  Article  2(n)  in  that  it  includes  a  single  information  service, 
ticket scheme and timetable in the definition of integrated services.  

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Relationship to public procurement law 

Amendment 8, which states that the public procurement Directives do not apply to contracts 
that constitute service concessions, is included in Articles 5(1) and 8(1).  

Duration of contracts 

Amendments 15 and 54 call for the extension of the maximum duration of the contracts to 8 
years for transport by road and to 15 years for transport by rail. In its revised proposal, the 
Commission includes the durations proposed by Parliament in recital 12 and Article 4(5) and 
has  incorporated  into  Article  4(6)  the  possibility  for  contracts  of  a  longer  duration  to  be 
concluded in certain circumstances. The common position increased the maximum theoretical 
duration  of  road  contracts  from  eight  to  ten  years  and  has  expanded  the  possibilities  for 
concluding longer contracts. At the same time, Article 5(6) limits to ten years the theoretical 
duration of rail contracts that have been awarded directly. 

Procedures for the award of public service contracts 

Amendment 61, which undoubtedly represents the central element of the position adopted by 
the European Parliament at first reading, gives the competent authorities the choice of:  

•  allowing competitive tendering for the award of public service contracts; or  

•  providing  the  public  transport  services  themselves,  either  directly  or  via  an  internal 
operator,  on  the  condition  in  particular  that  they  do  not  compete  for  the  award  of  other 
public service contracts.  

The  principles  of  this  amendment  establishing  the  principle  of  free  choice  for  the 
competent authority, together with amendments 12, 14 and 29, are included in recital 15 and 
Article 5(2).  

The  Council  made  some  clarifications  with  regard  to  the  conditions  in  which  competent 
authorities may provide public transport services either themselves or via an internal operator: 

•  in the first subparagraph of Article 5(2) and in Article 5(2)(d), the common position adjusts 
the concept of competent local authority in order to also authorise groups of authorities and 
to take into account situations in which there is no competent local authority for transport;  

•  in  Article  5(2)(a),  the  common  position  alters  the  concept  of  control  by  relaxing  the 
criterion  relating  to  ownership  of  the  capital  by  the  competent  authority.  Consequently, 
some  firms  with  mixed  capital  (or  institutionalised  public-private  partnerships  (PPPIs)) 
may  be  regarded  as  internal  operators  and  thus  be  eligible  for  the  direct  award  of  public 
service  transport  contracts.  The  Regulation  nonetheless  requires  that  the  activities  of  the 
internal  operator  be  confined  to  a  specific  geographical  jurisdiction.  In  the  view  of  the 
Commission, this specific approach to transport is justified, on the basis of the "Transport" 
chapter  of  the  Treaty,  by  public  transport's  specific  needs,  and  in  no  way  prejudices  the 
approach  that  may  be  adopted  in  other  areas  of  activity.  The  Commission  also  considers 
that,  even  in  the  case  in  point,  the  solution  cannot  diverge  further  from  the  current 
interpretations  in  Community  case  law  of  the  provisions  of  the  Treaty  that  relate  to  the 
freedom  of  establishment  (Article  43  EC)  and  the  free  movement  of  services  (Article  49 
EC).  In  particular,  the  Regulation  maintains  the  essential  general  rule  whereby  the 

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competent authority must exercise over the internal operator a control similar to that which 
it exercises over its own departments. In the case of public transport, control is assessed in 
relation to the criteria laid down in the Regulation. In addition, the Regulation points out 
that any use of outsourcing by the internal operator must be carried out in compliance with 
the rules laid down in the Treaty.  

•  In  Article  5(2)(b),  the  common  position  relaxes  the  principle  of  confining  the  internal 

operator, so that it is free to operate certain outgoing routes.  

•  In  Article  5(2)(c),  the  Council  lays  down  arrangements  for  internal  operators  to  compete 
shortly before their domestic market is definitively opened up to competitive tendering.  

The  principle  of  amendment  7,  which  moderates  the  positive  assessment  of  the  use  of 
competitive tendering for public service contracts, is included in recital 6a via the wording "if 
the appropriate safeguard clauses are in place". 

As regards the rules for the tendering procedure, the principle of amendment 80, which allows 
for negotiations between the competent authority and the tenderers, is included in recital 17 
and  in  Article  5(3).  Amendment  81,  which  requires  the  competent  authority  to  provide 
adequate access to information, is included in recital 23 and in Article 7(2). 

Transparency 

The  principles  of  amendment  82  and  83,  which  reinforce  the  obligation  incumbent  on 
Member  States  and  competent  authorities 
the 
implementation of the Regulation, are covered by recital 24 and by Articles 7(1) and 8(2).  

to  periodically  submit  reports  on 

In  addition,  in  accordance  with  Parliament's  request  in  amendment  95,  Article  11  makes 
provision for the submission, after the end of the transitional period, of a Commission report 
evaluating in particular developments in the quality of public transport services.  

Distortion of competition 

The  principles  of  amendments  67,  68,  91  and  94,  which  aim  to  prevent  distortions  of 
competition  which  might  favour  operators  directly  awarded  public  service  contracts,  are 
included in Article 5(2)(b) and in Article 8(6), which introduces the principle of reciprocity 
during the transitional period.  

Emergency measures 

Parliament's  amendments  70,  78,  85  and  86  allow  competent  authorities  to  award  contracts 
directly in emergency situations, e.g. if the operator goes bankrupt. This concern is reflected 
in Article 5(5).  

Safeguard clauses 

The  Commission  and  the  Council  have  followed  Parliament's  amendments  71  and  72 
removing the provisions obliging operators to outsource a part of their services or eliminating 
certain dominant operators from tender procedures.  

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General rules on tariffs 

The principles of amendments 130, 76, 77 and 124 on the arrangements for general rules to 
establish  maximum  tariffs  are  included  in  recital  5  and  in  Article  3(2).  For  services  that 
receive  only  financial  compensation  in  return  for  their  tariff  obligations,  Article  3(3)  of  the 
common  position  makes  it  possible  not  to  apply  the  Regulation  and  to  apply  instead  the 
Treaty's rules on State aid, which would impose the obligation to notify these payments.  

Compensation for public service obligations 

The principle of amendment 13, which relates to the compensating of operators, is included in 
the second subparagraph of Article 1(1) and in item 2 of the Annex. 

Amendment  19,  which  is  intended  to  enable  operators  to  use  loans  obtained  on  liberalised 
markets to supply public transport services, has been included in the common position. The 
prohibition  of  such  revenue  transfers,  as  laid  down  in  item  5  of  the  Annex,  applies  only  to 
revenue obtained on non-liberalised markets. 

The  principles  of  amendments  89  and  96  on  how  to  compensate  in  the  context  of  public 
service contracts awarded directly without an invitation to tender, are included in Article 4(2) 
and Article 6 and in the Annex.  

Transition 

The principles of amendments 90, 92 and 93, which aim to extend the transitional period and 
to relax the arrangements for ongoing contracts are included in Articles 8(2), 8(5) and 10(1). 
Article 12 stipulates that the Regulation will enter into force three years after its publication in 
the  OJ.  At  the  end  of  this  'entry  into  force'  period,  a  12-year  transitional  period  for  the 
application of the provisions relating to the award of public service contracts will commence. 
The provisions also relax the arrangements for ongoing contracts so that the organisation of 
public transport can gradually be brought into line in all the Member States.  

4.2 

Amendments of the European Parliament rejected by the Commission and not 
incorporated in the common position 

Scope 

Amendment 23 restricts the scope of the Regulation to local transport. Such a position would 
lead to the Regulation of 1969 (and its accompanying legal uncertainty) remaining in force for 
some areas of inland transport. Therefore, the scope retained is "Public passenger transport by 
rail and by road".  

Procedures for the award of public service contracts 

Amendments 9, 62, 63, 65 and 120 relate to the specific conditions for competitive tendering 
for certain types of transport services: integrated transport services, underground railway and 
light  rail  transit,  and  new  lines  created  at  the  initiative  of  operators.  The  purpose  of  these 
amendments is no longer valid as the common position retains the principle of free choice for 
competent  authorities.  This  principle  covers  integrated  transport  services,  underground 
railway  and  light  rail  transit  services,  and  new  lines.  It  is  no  longer  necessary  to  make 
provision  for  specific  exceptions  in  these  cases.  Consequently,  these  amendments  have  not 
been included. 

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Amendment 64 eliminates the obligation incumbent on the competent authority to announce 
one year in advance its intention to launch competitive tendering or to award a public service 
transport  contract  directly.  Since  the  principle  of  free  choice  must  be  accompanied  by  an 
adequate  level  of  transparency,  the  Commission  and  the  Council  judged  it  necessary  to 
maintain this access to information requirement via recital 23 and Article 7(2). 

Amendment  69  on  the  so-called  "quality  comparison"  procedure  was  not  included  in  either 
the Commission's revised proposal or the common position.  

Relationship to public procurement law 

Parliament's amendment 24 makes the Regulation's provisions prevail over the application of 
the  "public  procurement"  Directives.  This  would  contravene  the  Community's  commitments 
in  respect  of  the  WTO  Public  Procurement  Agreement.  The  common  position  does  not 
include  this  idea  of  the  primacy  of  the  Regulation  over  the  public  procurement  Directives. 
However,  in  the  interests  of  clarity,  Article  1(3)  introduced  by  the  Council  states  that  the 
Regulation does not apply to public works concessions. 

Definitions 

Amendments  107  and  119  add  to  the  definition  of  exclusive  rights.  These  additions  do  not 
have any real connection to the definition in question and have not been included. 

The purpose of amendment 26 on the definition of inland waterways is no longer valid as this 
sector has been removed from the scope of the Regulation. In any case, recital 8 and Article 
1(2)  reflect  the  removal  of  inland  waterway  transport  from  the  scope  of  the  Regulation  on 
account of the low transport volumes concerned and specify which arrangements apply to this 
sector.  

Amendment 27 constitutes a drafting change to the definition of the operator and has not been 
included. 

The purpose of amendment 28 on the definition of short-distance public transport is no longer 
valid as this concept is no longer used in the common position.  

Amendment 30 introduces a specific definition of persons with reduced mobility which is not 
included in the common position. 

Public service contracts 

Amendments 33, 34, 35, 36, 37, 38, 39, 40, 41, 43, 44, 45, 46, 47, 48, 49, 116, 127 and 131 
amend and add to the list of criteria that the authorities must take into account when awarding 
public service contracts.  

The  purpose  of  these  amendments  is  no  longer  valid  since  neither  the  Commission  nor  the 
Council retained the approach of drawing up a list of criteria for compulsory awards. Such a 
list could quickly become outdated or even counter-productive.  

The approach that has been retained, which better complies with the principle of subsidiarity, 
enables competent authorities to have complete freedom to determine all of the elements that 
must be taken into consideration when awarding a contract, and in this way to determine their 
public  transport  priorities.  However,  recital  13a  states  that  the  authorities  may  establish 

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quality  standards  for  areas  such  as  working  conditions,  passengers'  rights,  environmental 
protection and the needs of persons with reduced mobility. 

Amendments 108, 55, 56, 57, 58 and 59 impose the inclusion in public service contracts of 
certain  provisions  concerning  contract  termination,  the  obligation  to  provide  an  annual 
activity  report,  maintenance  of  assets,  a  system  of  penalties  and  arrangements  for  addenda. 
These  amendments  have  not  been  included  as  such  provisions  fall  under  the  principle  of 
subsidiarity and the balance of the contract to be established between the parties.  

For  the  same  reasons,  amendments  133  and  134,  which  require  the  selected  operator  to 
maintain  employees'  rights,  have  not  been  included  by  the  Commission  and  the  Council. 
Nevertheless, as regards worker protection, recital 13 and Article 4(7) stipulate explicitly that 
the authorities may, in the context of an invitation to tender, require prospective operators to 
maintain certain rights of existing staff. 

Review procedures 

The object of amendments 8, 84, 85, 86 and 87, which relate to review procedures in response 
to decisions taken by the competent authority, is not covered since the common position no 
longer lays down specific procedures in this area. 

Operators from third countries  

The object of amendments 4, 20, 74 and 125, which relate to the conditions of access and the 
rules of establishment applicable to operators from third countries, was not included since this 
aspect  is  not  dealt  with  specifically  either  in  the  Commission  proposal  or  in  the  Council's 
common position. Consequently, these amendments have not been included. 

4.3 

Amendments  of  the  European  Parliament  rejected  by  the  Commission  and 
incorporated in full or in part in the common position 

Small and medium-sized enterprises 

Amendments 17 and 19 are intended to guarantee that the specific interests of SMEs on the 
local  transport  market  are  taken  into  account.  These  amendments  were  not  included  in  the 
Commission proposal but are clearly reflected in Article 5(4) of the common position, which 
establishes  a  specific  threshold  at  a  higher  level  that  applies  solely  to  contracts  awarded  to 
SME, which are defined in the same Article as firms operating no more than 20 vehicles. It 
should  be  recalled  that  this  provision  takes  account  of  the  particular  structure  of  the  local 
transport  market,  in  which  SMEs  sometimes  play  a  crucial  role.  In  addition,  the  transport 
sector is subject to the specific rules of the "Transport" chapter of the Treaty.  

4.4 

New elements 

Scope 

Recitals  8a  and  29  and  Article  1(2)  relate  to  the  removal  of  public  goods  transport  services 
from the scope of the Regulation and specify which arrangements apply to this sector. 

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Transparency 

Article  7(3)  introduces  the  obligation  for  the  competent  authority  to  publish  specific 
information in the case of the direct award of transport services by rail. 

Article 7(4) obliges the competent authority to provide, at the request of any interested party, 
its reasons for the direct award of a public service contract.  

Compatibility with the Treaty 

Article 9(2) specifies the arrangements that apply to aid provided in response to the need for 
coordination of transport services or which corresponds to reimbursement for the discharge of 
certain obligations inherent in the concept of public service, other than those that fall under 
the  Regulation.  Consequently,  Article  10(2)  makes  provision  for  the  repeal  of  Council 
Regulation (EEC)  No 1107/70  of  4 June 1970  on  the  granting  of  aids  for  transport  by  rail, 
road and inland waterway. 

5. 

CONCLUSIONS 

The  Commission  considers  that  the  common  position  adopted  by  qualified  majority  on 
11.12.2006  does  not  affect  the  objectives  or  the  approach  of  its  revised  proposal,  and  can 
therefore support it. 

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