Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70
Date: 2007-10-23
Institutions: Council of the European Union, European Parliament
Subjects: application of EU law, carriage of passengers, provision of services, public service, rail transport, road transport, subcontracting

3.12.2007

EN

Official Journal of the European Union

L 315/1

I

(Acts adopted under the EC Treaty/Euratom Treaty whose publication is obligatory)

REGULATIONS

REGULATION (EC) No 1370/2007 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 23 October 2007

on public passenger transport services by rail and by road and repealing Council Regulations (EEC)
Nos 1191/69 and 1107/70

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EURO-
PEAN UNION,

(3)

Article 73 of the Treaty constitutes a lex specialis in relation
to Article 86(2). It establishes rules applicable to the com-
pensation of public service obligations in inland transport.

Having regard to the Treaty establishing the European Commu-
nity, and in particular Articles 71 and 89 thereof,

Having regard to the proposal from the Commission,

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

(4)

Having regard to the opinion of the Committee of the Regions (2),

Acting in accordance with the procedure laid down in Article 251
of the Treaty (3),

Whereas:

(1)

(2)

Article 16 of the Treaty confirms the place occupied by
services of general economic interest in the shared values
of the Union.

Article 86(2) of the Treaty lays down that undertakings
entrusted with the operation of services of general eco-
nomic interest are subject to the rules contained in the
Treaty, in particular to the rules on competition, in so far
as the application of such rules does not obstruct the per-
formance, in law or in fact, of the particular tasks assigned
to them.

(5)

(1) OJ C 195, 18.8.2006, p. 20.
(2) OJ C 192, 16.8.2006, p. 1.
(3) Opinion of

the European Parliament of 14 November 2001
(OJ C 140 E, 13.6.2002, p. 262), Council Common Position of
11 December 2006 (OJ C 70 E, 27.3.2007, p. 1) and Position of the
European Parliament of 10 May 2007. Council Decision of 18 Sep-
tember 2007.

The main objectives of the Commission’s White Paper of
12 September 2001 ‘European transport policy for 2010:
time to decide’ are to guarantee safe, efficient and high-
quality passenger transport services through regulated
competition, guaranteeing also transparency and perfor-
mance of public passenger transport services, having
regard to social, environmental and regional development
factors, or to offer specific tariff conditions to certain cat-
egories of traveller, such as pensioners, and to eliminate
the disparities between transport undertakings from differ-
ent Member States which may give rise to substantial dis-
tortions of competition.

At the present time, many inland passenger transport ser-
vices which are required in the general economic interest
cannot be operated on a commercial basis. The competent
authorities of the Member States must be able to act to
ensure that such services are provided. The mechanisms
that they can use to ensure that public passenger transport
services are provided include the following: the award of
exclusive rights to public service operators, the grant of
financial compensation to public service operators and the
definition of general rules for the operation of public trans-
port which are applicable to all operators. If Member
States,
in accordance with this Regulation, choose to
exclude certain general rules from its scope, the general
regime for State aid should apply.

L 315/2

EN

Official Journal of the European Union

3.12.2007

(6)

(7)

(8)

(9)

Many Member States have enacted legislation providing for
the award of exclusive rights and public service contracts
in at least part of their public transport market, on the
basis of transparent and fair competitive award procedures.
As a result, trade between Member States has developed
significantly and several public service operators are now
providing public passenger transport services in more than
one Member State. However, developments in national leg-
islation have led to disparities in the procedures applied
and have created legal uncertainty as to the rights of pub-
lic service operators and the duties of the competent
authorities. Regulation (EEC) No 1191/69 of the Council
of 26 June 1969 on action by Member States concerning
the obligations inherent in the concept of a public service
in transport by rail, road and inland waterway (1), does not
deal with the way public service contracts are to be awarded
in the Community, and in particular the circumstances in
which they should be the subject of competitive tendering.
The Community legal framework ought therefore to be
updated.

Studies carried out and the experience of Member 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 operators leads to more attractive and innovative
services at lower cost and is not likely to obstruct the per-
formance of the specific tasks assigned to public service
operators. This approach has been endorsed by the Euro-
pean Council under the Lisbon Process of 28 March 2000
which called on the Commission, the Council and the
Member States, each in accordance with their respective
powers, to ‘speed up liberalisation in areas such as …
transport’.

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

In order to be able to organise their public passenger trans-
port services in the manner best suited to the needs of the
public, all competent authorities must be able to choose
their public service operators freely, taking into account
the interests of small and medium-sized enterprises, under
the conditions stipulated in this Regulation. In order to
guarantee the application of the principles of transparency,
equal treatment of competing operators and proportional-
ity, when compensation or exclusive rights are granted, it
is essential that a public service contract between the com-
petent authority and the chosen public service operator
defines the nature of the public service obligations and the

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

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

agreed reward. The form or designation of the contract
may vary according to the legal systems of the Member
States.

(10)

(11)

(12)

Contrary to Regulation (EEC) No 1191/69, the scope of
which extends to public passenger transport services by
inland waterway, it is not considered advisable for this
Regulation to cover the award of public service contracts
in that specific sector. The organisation of public passen-
ger transport services by inland waterway and, in so far as
they are not covered by specific Community law, by
national sea water is therefore subject to compliance with
the general principles of the Treaty, unless Member States
choose to apply this Regulation to those specific sectors.
The provisions of this Regulation do not prevent the inte-
gration of services by inland waterway and national sea
water into a wider urban, suburban or regional public pas-
senger transport network.

Contrary to Regulation (EEC) No 1191/69, the scope of
which extends to freight transport services, it is not con-
sidered advisable for this Regulation to cover the award of
public service contracts in that specific sector. Three years
after the entry into force of this Regulation the organisa-
tion of freight transport services should therefore be made
subject to compliance with the general principles of the
Treaty.

It is immaterial from the viewpoint of Community law
whether public passenger transport services are operated
by public or private undertakings. This Regulation is based
on the principles of neutrality as regards the system of
property ownership referred to in Article 295 of the Treaty,
of the freedom of Member States to define services of gen-
eral economic interest, referred to in Article 16 of the
Treaty, and of subsidiarity and proportionality referred to
in Article 5 of the Treaty.

(13)

Some services, often linked to specific infrastructure, are
operated mainly for their historical interest or tourist value.
As the purpose of these operations is manifestly different
from the provision of public passenger transport, they
need not therefore be governed by the rules and proce-
dures applicable to public service requirements.

(14) Where the competent authorities are responsible for orga-
nising the public transport network, apart from the actual
operation of the transport service, this may cover a whole
range of other activities and duties that the competent
authorities must be free either to carry out themselves or
entrust, in whole or in part, to a third party.

3.12.2007

EN

Official Journal of the European Union

L 315/3

(15)

Contracts of long duration can lead to market foreclosure
for a longer period than is necessary, thus diminishing the
benefits of competitive pressure. In order to minimise dis-
tortions of competition, while protecting the quality of ser-
vices, public service contracts should be of
limited
duration. The extension of such contracts could be subject
to positive confirmation from users. In this context, it is
necessary to make provision for extending public service
contracts by a maximum of half their initial duration where
the public service operator must invest in assets for which
the depreciation period is exceptional and, because of their
special characteristics and constraints, in the case of the
outermost regions as specified in Article 299 of the Treaty.
In addition, where a public service operator makes invest-
ments in infrastructure or in rolling stock and vehicles
which are exceptional in the sense that both concern high
amounts of funds, and provided the contract is awarded
after a fair competitive tendering procedure, an even longer
extension should be possible.

(16) Where the conclusion of a public service contract may
entail a change of public service operator, it should be pos-
sible for the competent authorities to ask the chosen pub-
lic service operator to apply the provisions of Council
Directive 2001/23/EC of 12 March 2001 on the approxi-
mation of the laws of the Member States relating to the
safeguarding of employees’ rights in the event of transfer
of undertakings, businesses or parts of undertakings or
businesses (1). This Directive does not preclude Member
States from safeguarding transfer conditions of employees’
rights other than those covered by Directive 2001/23/EC
and thereby, if appropriate, taking into account social stan-
dards established by national laws, regulations or admin-
istrative provisions or collective agreements or agreements
concluded between social partners.

(17)

In keeping with the principle of subsidiarity, competent
authorities are free to establish social and qualitative crite-
ria in order to maintain and raise quality standards for pub-
lic service obligations, for instance with regard to minimal
working conditions, passenger rights, the needs of persons
with reduced mobility, environmental protection, the secu-
rity of passengers and employees as well as collective
agreement obligations and other rules and agreements
concerning workplaces and social protection at the place
where the service is provided. In order to ensure transpar-
ent and comparable terms of competition between opera-
tors and to avert the risk of social dumping, competent
authorities should be free to impose specific social and ser-
vice quality standards.

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

(18)

Subject to the relevant provisions of national law, any local
authority or, in the absence thereof, any national authority
may choose to provide its own public passenger transport
services in the area it administers or to entrust them to an
internal operator without competitive tendering. However,
this self-provision option needs to be strictly controlled to
ensure a level playing field. The competent authority or
group of authorities providing integrated public passenger
transport services, collectively or through its members,
should exercise the required control. In addition, a compe-
tent authority providing its own transport services or an
internal operator should be prohibited from taking part in
competitive tendering procedures outside the territory of
that authority. The authority controlling the internal opera-
tor should also be allowed to prohibit this operator from
taking part in competitive tenders organised within its ter-
ritory. Restrictions on the activities of an internal operator
do not interfere with the possibility of directly awarding
public service contracts where they concern transport by
rail, with the exception of other track-based modes such as
metro or tramways. Furthermore, the direct award of pub-
lic service contracts for heavy rail does not preclude the
possibility for competent authorities to award public ser-
vice contracts for public passenger transport services on
other track-based modes, such as metro and tramway, to
an internal operator.

(19)

Subcontracting can contribute to more efficient public pas-
senger transport and makes it possible for undertakings to
participate, other than the public service operator which
was granted the public service contract. However, with a
view to the best use of public funds, competent authorities
should be able to determine the modalities for subcontract-
ing their public passenger transport services, in particular
in the case of services performed by an internal operator.
Furthermore, a subcontractor should not be prevented
from taking part in competitive tenders in the territory of
any competent authority. The selection of a subcontractor
by the competent authority or its internal operator needs
to be carried out in accordance with Community law.

(20) Where a public authority chooses to entrust a general
interest service to a third party, it must select the public
service operator in accordance with Community law on
public contracts and concessions, as established by
Articles 43 to 49 of the Treaty, and the principles of trans-
parency and equal treatment. In particular, the provisions
of this Regulation are to be without prejudice to the obli-
gations applicable to public authorities by virtue of the
directives on the award of public contracts, where public
service contracts fall within their scope.

L 315/4

EN

Official Journal of the European Union

3.12.2007

(21)

(22)

(23)

falling within the

Effective legal protection should be guaranteed, not only
for awards
scope of Directive
2004/17/EC of the European Parliament and of the Coun-
cil of 31 March 2004 coordinating the procurement pro-
cedures of entities operating in the water, energy, transport
and postal services sectors (1) and Directive 2004/18/EC of
the European Parliament and of the Council of 31 March
2004 on the coordination of procedures for the award of
public works contracts, public supply contracts and public
service contracts (2), but also for other contracts awarded
under this Regulation. An effective review procedure is
needed and should be comparable, where appropriate, to
the relevant procedures set out
in Council Directive
89/665/EEC of 21 December 1989 on the coordination of
the laws, regulations and administrative provisions relat-
ing to the application of review procedures to the award of
public supply and public works contracts (3) and Council
Directive 92/13/EEC of 25 February 1992 coordinating
the laws, regulations and administrative provisions relat-
ing to the application of Community rules on the procure-
ment procedures of entities operating in the water, energy,
transport and telecommunications sectors (4).

Some invitations to tender require the competent authori-
ties to define and describe complex systems. These authori-
ties should therefore have power, when awarding contracts
in such cases, to negotiate details with some or all of the
potential public service operators once tenders have been
submitted.

(25)

(26)

(27)

Public passenger transport by rail raises specific issues of
investment burden and infrastructure cost. In March 2004,
the Commission presented a proposal to amend Council
Directive 91/440/EEC of 29 July 1991 on the development
of the Community’s railways (5) so as to guarantee access
for all Community railway undertakings to the infrastruc-
ture of all Member States for the purpose of operating
international passenger services. The aim of this Regulation
is to establish a legal framework for compensation and/or
exclusive rights for public service contracts and not the fur-
ther opening of the market for railway services.

In the case of public services, this Regulation allows each
competent authority, within the context of a public service
contract, to select its operator of public passenger trans-
port services. Given the differences in the way Member
States organise their territory in this respect, competent
authorities may justifiably be allowed to award public ser-
vice contracts directly for railway travel.

The compensation granted by competent authorities to
cover the costs incurred in discharging public service obli-
gations should be calculated in a way that prevents over-
compensation. Where a competent authority plans to
award a public service contract without putting it out to
competitive tender, it should also respect detailed rules
ensuring that the amount of compensation is appropriate
and reflecting a desire for efficiency and quality of service.

Invitations to tender for the award of public service con-
tracts should not be mandatory where the contract relates
to modest amounts or distances. In this respect, greater
amounts or distances should enable competent authorities
to take into account the special interests of small and
medium-sized enterprises. Competent authorities should
not be permitted to split up contracts or networks in order
to avoid tendering.

(28)

By appropriately considering the effects of complying with
the public service obligations on the demand for public
passenger transport services in the calculation scheme set
out in the Annex, the competent authority and the public
service operator can prove that overcompensation has
been avoided.

(24) Where there is a risk of disruption in the provision of ser-
vices, the competent authorities should have power to
introduce emergency short-term measures pending the
award of a new public service contract which is in line with
all the conditions for awarding a contract laid down in this
Regulation.

(29) With a view to the award of public service contracts, with
the exception of emergency measures and contracts relat-
ing to modest distances, the competent authorities should
take the necessary measures to advertise, at least one year
in advance, the fact that they intend to award such con-
tracts, so as to enable potential public service operators to
react.

(1) OJ L 134, 30.4.2004, p. 1. Directive as last amended by Council Direc-

tive 2006/97/EC (OJ L 363, 20.12.2006, p. 107).

(2) OJ L 134, 30.4.2004, p. 114. Directive as last amended by Council

Directive 2006/97/EC.

(3) OJ L 395, 30.12.1989, p. 33. Directive as amended by Directive

92/50/EEC (OJ L 209, 24.7.1992, p. 1).

(30) Directly awarded public service contracts should be sub-

ject to greater transparency.

(4) OJ L 76, 23.3.1992, p. 14. Directive as last amended by Directive

(5) OJ L 237, 24.8.1991, p. 25. Directive as last amended by Directive

2006/97/EC.

2006/103/EC (OJ L 363, 20.12.2006, p. 344).

3.12.2007

EN

Official Journal of the European Union

L 315/5

(31) Given that competent authorities and public service opera-
tors will need time to adapt to the provisions of this Regu-
lation, provision should be made
transitional
arrangements. With a view to the gradual award of public
service contracts in line with this Regulation, Member
States should provide the Commission with a progress
report within the six months following the first half of the
transitional period. The Commission may propose appro-
priate measures on the basis of these reports.

for

(32) During the transitional period, the application of the pro-
visions of this Regulation by the competent authorities
may take place at different times. It may therefore be pos-
sible, during this period, that public service operators from
markets not yet affected by the provisions of this Regula-
tion tender for public service contracts in markets that
have been opened to controlled competition more rapidly.
In order to avoid, by means of proportionate action, any
imbalance in the opening of the public transport market,
competent authorities should be able to refuse, in the sec-
ond half of the transitional period, tenders from undertak-
ings, more than half the value of the public transport
services performed by which are not granted in accordance
with this Regulation, provided that this is applied without
discrimination and decided in advance of an invitation to
tender.

(33)

(34)

In paragraphs 87 to 95 of its judgment of 24 July 2003 in
Case C-280/00 Altmark Trans GmbH (1), the Court of Jus-
tice of the European Communities ruled that compensa-
tion for public service does not constitute an advantage
within the meaning of Article 87 of the Treaty, provided
that four cumulative conditions are satisfied. Where those
conditions are not satisfied and the general conditions for
the application of Article 87(1) of the Treaty are met, pub-
lic service compensation constitutes State aid and is sub-
ject to Articles 73, 86, 87 and 88 of the Treaty.

Compensation for public services may prove necessary in
the inland passenger transport sector so that undertakings
responsible for public services operate on the basis of prin-
ciples and under conditions which allow them to carry out
their tasks. Such compensation may be compatible with
the Treaty pursuant to Article 73 under certain conditions.
Firstly, it must be granted to ensure the provision of ser-
vices which are services of general
interest within the
meaning of the Treaty. Secondly, in order to avoid unjus-
tified distortions of competition, it may not exceed what is
necessary to cover the net costs incurred through discharg-
ing the public service obligations, taking account of the
revenue generated thereby and a reasonable profit.

(1) [2003] ECR I-7747.

(35)

Compensation granted by the competent authorities in
accordance with the provisions of this Regulation may
therefore be exempted from the prior notification require-
ment of Article 88(3) of the Treaty.

(36)

(37)

This Regulation replaces Regulation (EEC) No 1191/69,
which should therefore be repealed. For public freight
transport services, a transitional period of three years will
assist the phasing out of compensation not authorised by
the Commission in accordance with Articles 73, 86, 87
and 88 of the Treaty. Any compensation granted in rela-
tion to the provision of public passenger transport services
other than those covered by this Regulation which risks
involving State aid within the meaning of Article 87(1) of
the Treaty should comply with the provisions of
Articles 73, 86, 87 and 88 thereof, including any relevant
interpretation by the Court of Justice of the European
Communities and especially its ruling in Case C-280/00
Altmark Trans GmbH. When examining such cases, the
Commission should therefore apply principles similar to
those laid down in this Regulation or, where appropriate,
other legislation in the field of services of general economic
interest.

The scope of Council Regulation (EEC) No 1107/70 of
4 June 1970 on the granting of aids for transport by rail,
road and inland waterway (2) is covered by this Regulation.
That Regulation is considered obsolete while limiting the
application of Article 73 of the Treaty without granting an
appropriate legal basis for authorising current investment
schemes, in particular in relation to investment in trans-
port infrastructure in a public private partnership. It should
therefore be repealed in order for Article 73 of the Treaty
to be properly applied to continuing developments in the
sector without prejudice to this Regulation or Council
Regulation (EEC) No 1192/69 of 26 June 1969 on com-
mon rules for the normalisation of the accounts of railway
undertakings (3). With a view to further facilitating the
application of the relevant Community rules, the Commis-
sion will propose State aid guidelines for railway invest-
ment, including investment in infrastructure in 2007.

(38) With a view to assessing the implementation of this Regu-
lation and the developments in the provision of public pas-
senger transport in the Community,
in particular the
quality of public passenger transport services and the
effects of granting public service contracts by direct award,
the Commission should produce a report. This report may,
if necessary, be accompanied by appropriate proposals for
the amendment of this Regulation,

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

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

(3) OJ L 156, 28.6.1969, p. 8. Regulation as last amended by Regulation

(EC) No 1791/2006 (OJ L 363, 20.12.2006, p. 1).

L 315/6

EN

Official Journal of the European Union

3.12.2007

HAVE ADOPTED THIS REGULATION:

(c)

‘competent local authority’ means any competent authority
whose geographical area of competence is not national;

Article 1

Purpose and scope

The purpose of this Regulation is to define how, in accor-
1.
dance with the rules of Community law, competent authorities
may act in the field of public passenger transport to guarantee the
provision of services of general interest which are among other
things more numerous, safer, of a higher quality or provided at
lower cost than those that market forces alone would have
allowed.

To this end, this Regulation lays down the conditions under which
competent authorities, when imposing or contracting for public
service obligations, compensate public service operators for costs
incurred and/or grant exclusive rights in return for the discharge
of public service obligations.

2.
This Regulation shall apply to the national and international
operation of public passenger transport services by rail and other
track-based modes and by road, except for services which are
operated mainly for their historical interest or their tourist value.
Member States may apply this Regulation to public passenger
transport by inland waterways and, without prejudice to Council
Regulation (EEC) No 3577/92 of 7 December 1992 applying the
principle of freedom to provide services to maritime transport
within Member States (maritime cabotage) (1), national sea waters.

3.
This Regulation shall not apply to public works concessions
within the meaning of Article 1(3)(a) of Directive 2004/17/EC or
of Article 1(3) of Directive 2004/18/EC.

Article 2

Definitions

For the purpose of this Regulation:

(a)

‘public passenger transport’ means passenger transport ser-
vices of general economic interest provided to the public on
a non-discriminatory and continuous basis;

(b)

‘competent authority’ means any public authority or group of
public authorities of a Member State or Member States which
has the power to intervene in public passenger transport in a
given geographical area or any body vested with such
authority;

(1) OJ L 364, 12.12.1992, p. 7.

(d)

‘public service operator’ means any public or private under-
taking or group of such undertakings which operates public
passenger transport services or any public body which pro-
vides public passenger transport services;

(e)

(f)

(g)

‘public service obligation’ means a requirement defined or
determined by a competent authority in order to ensure pub-
lic passenger transport services in the general interest that an
operator, if it were considering its own commercial interests,
would not assume or would not assume to the same extent
or under the same conditions without reward;

‘exclusive right’ means a right entitling a public service opera-
tor to operate certain public passenger transport services on
a particular route or network or in a particular area, to the
exclusion of any other such operator;

‘public service compensation’ means any benefit, particularly
financial, granted directly or indirectly by a competent
authority from public funds during the period of implemen-
tation of a public service obligation or in connection with
that period;

(h)

‘direct award’ means the award of a public service contract to
a given public service operator without any prior competi-
tive tendering procedure;

(i)

‘public service contract’ means one or more legally binding
acts confirming the agreement between a competent author-
ity and a public service operator to entrust to that public ser-
vice operator the management and operation of public
passenger transport services subject to public service obliga-
tions; depending on the law of the Member State, the con-
tract may also consist of a decision adopted by the competent
authority:

— taking the form of an individual legislative or regulatory

act, or

— containing conditions under which the competent
authority itself provides the services or entrusts the pro-
vision of such services to an internal operator;

(j)

‘internal operator’ means a legally distinct entity over which
a competent local authority, or in the case of a group of
authorities at least one competent local authority, exercises
control similar to that exercised over its own departments;

3.12.2007

EN

Official Journal of the European Union

L 315/7

(k)

‘value’ means the value of a service, a route, a public service
contract, or a compensation scheme for public passenger
transport corresponding to the total remuneration, before
VAT, of the public service operator or operators, including
compensation of whatever kind paid by the public authori-
ties and revenue from the sale of tickets which is not repaid
to the competent authority in question;

(l)

‘general rule’ means a measure which applies without dis-
crimination to all public passenger transport services of the
same type in a given geographical area for which a compe-
tent authority is responsible;

(m) ‘integrated public passenger transport services’ means inter-
connected transport services within a determined geographi-
cal area with a single information service, ticketing scheme
and timetable.

Article 3

Public service contracts and general rules

1. Where a competent authority decides to grant the operator
of its choice an exclusive right and/or compensation, of whatever
nature, in return for the discharge of public service obligations, it
shall do so within the framework of a public service contract.

2.
By way of derogation from paragraph 1, public service obli-
gations which aim at establishing maximum tariffs for all passen-
gers or for certain categories of passenger may also be the subject
of general rules. In accordance with the principles set out in
Articles 4 and 6 and in the Annex, the competent authority shall
compensate the public service operators for the net financial
effect, positive or negative, on costs incurred and revenues gen-
erated in complying with the tariff obligations established through
general rules in a way that prevents overcompensation. This shall
be so notwithstanding the right of competent authorities to inte-
grate public service obligations establishing maximum tariffs in
public service contracts.

3. Without prejudice to the provisions of Articles 73, 86, 87
and 88 of the Treaty, Member States may exclude from the scope
of this Regulation general rules on financial compensation for
public service obligations which establish maximum tariffs for
pupils, students, apprentices and persons with reduced mobility.
These general rules shall be notified in accordance with Article 88
of the Treaty. Any such notification shall contain complete infor-
mation on the measure and, in particular, details on the calcula-
tion method.

Article 4

Mandatory content of public service contracts
and general rules

1.

Public service contracts and general rules shall:

(b) establish in advance, in an objective and transparent manner,

(i)

the parameters on the basis of which the compensation
payment, if any, is to be calculated, and

(ii)

the nature and extent of any exclusive rights granted,

in a way that prevents overcompensation. In the case of pub-
lic service contracts awarded in accordance with Article 5(2),
(4), (5) and (6), these parameters shall be determined in such
a way that no compensation payment may exceed the
amount required to cover the net financial effect on costs
incurred and revenues generated in discharging the public
service obligations, taking account of revenue relating thereto
kept by the public service operator and a reasonable profit;

(c) determine the arrangements for the allocation of costs con-
nected with the provision of services. These costs may include
in particular the costs of staff, energy, infrastructure charges,
maintenance and repair of public transport vehicles, rolling
stock and installations necessary for operating the passenger
transport services, fixed costs and a suitable return on capital.

2.
Public service contracts and general rules shall determine
the arrangements for the allocation of revenue from the sale of
tickets which may be kept by the public service operator, repaid
to the competent authority or shared between the two.

The duration of public service contracts shall be limited and
3.
shall not exceed 10 years for coach and bus services and 15 years
for passenger transport services by rail or other track-based
modes. The duration of public service contracts relating to sev-
eral modes of transport shall be limited to 15 years if transport
by rail or other track-based modes represents more than 50 % of
the value of the services in question.

4.
If necessary, having regard to the conditions of asset depre-
ciation, the duration of the public service contract may be
extended by a maximum of 50 % if the public service operator
provides assets which are both significant in relation to the over-
all assets needed to carry out the passenger transport services cov-
ered by the public service contract and linked predominantly to
the passenger transport services covered by the contract.

(a)

clearly define the public service obligations with which the
public service operator is to comply, and the geographical
areas concerned;

If justified by costs deriving from the particular geographical situ-
ation, the duration of public service contracts specified in para-
graph 3 in the outermost regions may be extended by a maximum
of 50 %.

L 315/8

EN

Official Journal of the European Union

3.12.2007

If justified by the amortisation of capital in relation to exceptional
infrastructure, rolling stock or vehicular investment and if the
public service contract is awarded in a fair competitive tendering
procedure, a public service contract may have a longer duration.
In order to ensure transparency in this case, the competent
authority shall transmit to the Commission within one year of the
conclusion of the contract the public service contract and ele-
ments justifying its longer duration.

Unless prohibited by national law, any competent local
2.
authority, whether or not it is an individual authority or a group
of authorities providing integrated public passenger transport ser-
vices, may decide to provide public passenger transport services
itself or to award public service contracts directly to a legally dis-
tinct entity over which the competent local authority, or in the
case of a group of authorities at least one competent local author-
ity, exercises control similar to that exercised over its own depart-
ments. Where a competent local authority takes such a decision,
the following shall apply:

5. Without prejudice to national and Community law, includ-
ing collective agreements between social partners, competent
authorities may require the selected public service operator to
grant staff previously taken on to provide services the rights to
which they would have been entitled if there had been a transfer
within the meaning of Directive 2001/23/EC. Where competent
authorities require public service operators to comply with cer-
tain social standards, tender documents and public service con-
tracts shall list the staff concerned and give transparent details of
their contractual rights and the conditions under which employ-
ees are deemed to be linked to the services.

6. Where competent authorities, in accordance with national
law, require public service operators to comply with certain qual-
ity standards, these standards shall be included in the tender docu-
ments and in the public service contracts.

7.
Tender documents and public service contracts shall indi-
cate, in a transparent manner, whether, and if so to what extent,
subcontracting may be considered. If subcontracting takes place,
the operator entrusted with the administration and performance
of public passenger transport services in accordance with this
Regulation shall be required to perform a major part of the pub-
lic passenger transport services itself. A public service contract
covering at the same time design, construction and operation of
public passenger transport services may allow full subcontracting
for the operation of those services. The public service contract
shall, in accordance with national and Community law, determine
the conditions applicable to subcontracting.

Article 5

Award of public service contracts

(a)

for the purposes of determining whether the competent local
authority exercises control, factors such as the degree of rep-
resentation on administrative, management or supervisory
bodies, specifications relating thereto in the articles of asso-
ciation, ownership, effective influence and control over stra-
tegic decisions and individual management decisions shall be
taken into consideration. In accordance with Community
law, 100 % ownership by the competent public authority, in
particular in the case of public-private partnerships, is not a
mandatory requirement for establishing control within the
meaning of this paragraph, provided that there is a dominant
public influence and that control can be established on the
basis of other criteria;

(b)

the condition for applying this paragraph is that the internal
operator and any entity over which this operator exerts even
a minimal influence perform their public passenger transport
activity within the territory of the competent local authority,
notwithstanding any outgoing lines or other ancillary ele-
ments of that activity which enter the territory of neighbour-
ing competent local authorities, and do not take part in
competitive tenders concerning the provision of public pas-
senger transport services organised outside the territory of
the competent local authority;

(c) notwithstanding point (b), an internal operator may partici-
pate in fair competitive tenders as from two years before the
end of its directly awarded public service contract under the
condition that a final decision has been taken to submit the
public passenger transport services covered by the internal
operator contract to fair competitive tender and that the
internal operator has not concluded any other directly
awarded public service contract;

1.
Public service contracts shall be awarded in accordance with
the rules laid down in this Regulation. However, service contracts
or public service contracts as defined in Directives 2004/17/EC
or 2004/18/EC for public passenger transport services by bus or
tram shall be awarded in accordance with the procedures pro-
vided for under those Directives where such contracts do not take
the form of service concessions contracts as defined in those
Directives. Where contracts are to be awarded in accordance with
Directives 2004/17/EC or 2004/18/EC, the provisions of para-
graphs 2 to 6 of this Article shall not apply.

(d)

in the absence of a competent local authority, points (a), (b)
and (c) shall apply to a national authority for the benefit of a
geographical area which is not national, provided that the
internal operator does not take part in competitive tenders
concerning the provision of public passenger transport ser-
vices organised outside the area for which the public service
contract has been granted;

3.12.2007

EN

Official Journal of the European Union

L 315/9

(e)

if subcontracting under Article 4(7) is being considered, the
internal operator shall be required to perform the major part
of the public passenger transport service itself.

3.
Any competent authority which has recourse to a third
party other than an internal operator, shall award public service
contracts on the basis of a competitive tendering procedure,
except in the cases specified in paragraphs 4, 5 and 6. The pro-
cedure adopted for competitive tendering shall be open to all
operators, shall be fair and shall observe the principles of trans-
parency and non-discrimination. Following the submission of
tenders and any preselection, the procedure may involve negotia-
tions in accordance with these principles in order to determine
how best to meet specific or complex requirements.

4.
Unless prohibited by national law, the competent authori-
ties may decide to award public service contracts directly either
where their average annual value is estimated at less than
EUR 1 000 000 or where they concern the annual provision of
less than 300 000 kilometres of public passenger transport
services.

In the case of a public service contract directly awarded to a small
or medium-sized enterprise operating not more than 23 vehicles,
these thresholds may be increased to either an average annual
value estimated at less than EUR 2 000 000 or where they con-
cern the annual provision of less than 600 000 kilometres of pub-
lic passenger transport services.

In the event of a disruption of services or the immediate risk
5.
of such a situation, the competent authority may take an emer-
gency measure. This emergency measure shall take the form of a
direct award or a formal agreement to extend a public service con-
tract or a requirement to provide certain public service obliga-
tions. The public service operator shall have the right to appeal
against the decision to impose the provision of certain public ser-
vice obligations. The award or extension of a public service con-
tract by emergency measure or the imposition of such a contract
shall not exceed two years.

Unless prohibited by national law, competent authorities
6.
may decide to make direct awards of public service contracts
where they concern transport by rail, with the exception of other
track-based modes such as metro or tramways. In derogation
from Article 4(3), such contracts shall not exceed 10 years, except
where Article 4(4) applies.

Where bodies responsible for review procedures are not judicial
in character, written reasons for their decisions shall always be
given. Furthermore, in such a case, provision must be made so
that any alleged illegal measure taken by the review body or any
alleged defect in the exercise of the powers conferred on it may
be the subject of judicial review or review by another body which
is a court or tribunal within the meaning of Article 234 of the
Treaty and independent of both the contracting authority and the
review body.

Article 6

Public service compensation

1.
All compensation connected with a general rule or a public
service contract shall comply with the provisions laid down in
Article 4, irrespective of how the contract was awarded. All com-
pensation, of whatever nature, connected with a public service
contract awarded directly in accordance with Article 5(2), (4), (5)
or (6) or connected with a general rule shall also comply with the
provisions laid down in the Annex.

2.
At the written request of the Commission, Member States
shall communicate, within a period of three months or any longer
period as may be fixed in that request, all the information that the
Commission considers necessary to determine whether the com-
pensation granted is compatible with this Regulation.

Article 7

Publication

1.
Each competent authority shall make public once a year an
aggregated report on the public service obligations for which it is
responsible, the selected public service operators and the compen-
sation payments and exclusive rights granted to the said public
service operators by way of reimbursement. This report shall dis-
tinguish between bus transport and rail transport, allow the per-
formance, quality and financing of the public transport network
to be monitored and assessed and, if appropriate, provide infor-
mation on the nature and extent of any exclusive rights granted.

2.
Each competent authority shall take the necessary measures
to ensure that, at least one year before the launch of the invita-
tion to tender procedure or one year before the direct award, the
following information at least is published in the Official Journal
of the European Union:

(a)

the name and address of the competent authority;

(b)

the type of award envisaged;

7. Member States shall take the necessary measures to ensure
that decisions taken in accordance with paragraphs 2 to 6 may be
reviewed effectively and rapidly, at the request of any person hav-
ing or having had an interest in obtaining a particular contract
and who has been or risks being harmed by an alleged infringe-
ment, on the grounds that such decisions have infringed Commu-
nity law or national rules implementing that law.

(c)

the services and areas potentially covered by the award.

Competent authorities may decide not to publish this informa-
tion where a public service contract concerns an annual provision
of less than 50 000 kilometres of public passenger transport
services.

L 315/10

EN

Official Journal of the European Union

3.12.2007

Should this information change after its publication, the compe-
tent authority shall publish a rectification accordingly as soon as
possible. This rectification shall be without prejudice to the
launching date of the direct award or of the invitation to tender.

This paragraph shall not apply to Article 5(5).

In the case of a direct award of public service contracts for
3.
transport by rail, as provided for in Article 5(6), the competent
authority shall make public the following information within one
year of granting the award:

(a) name of the contracting entity, its ownership and, if appro-
priate, the name of the party or parties exercising legal
control;

(b) duration of the public service contract;

(c) description of
performed;

the passenger

transport services to be

(d) description of the parameters of the financial compensation;

(e) quality targets, such as punctuality and reliability and rewards

and penalties applicable;

(f)

conditions relating to essential assets.

Within six months after the first half of the transitional period,
Member States shall provide the Commission with a progress
report, highlighting the implementation of any gradual award of
public service contracts in line with Article 5. On the basis of the
Member States’ progress reports, the Commission may propose
appropriate measures addressed to Member States.

3.
In the application of paragraph 2, no account shall be taken
of public service contracts awarded in accordance with Commu-
nity and national law:

(a) before 26 July 2000 on the basis of a fair competitive ten-

dering procedure;

(b) before 26 July 2000 on the basis of a procedure other than a

fair competitive tendering procedure;

(c) as from 26 July 2000 and before 3 December 2009 on the

basis of a fair competitive tendering procedure;

(d) as from 26 July 2000 and before 3 December 2009 on the
basis of a procedure other than a fair competitive tendering
procedure.

The contracts referred to in (a) may continue until they expire.
The contracts referred to in (b) and (c) may continue until they
expire, but for no longer than 30 years. The contracts referred to
in (d) may continue until they expire, provided they are of limited
duration comparable to the durations specified in Article 4.

4. When so requested by an interested party, a competent
authority shall forward to it the reasons for its decision for directly
awarding a public service contract.

Public service contracts may continue until they expire where
their termination would entail undue legal or economic conse-
quences and provided that the Commission has given its approval.

Article 8

Transition

1.
Public service contracts shall be awarded in accordance with
the rules laid down in this Regulation. However, service contracts
or public service contracts as defined in Directive 2004/17/EC
or 2004/18/EC for public passenger transport services by bus or
tram shall be awarded in accordance with the procedures pro-
vided for under those Directives where such contracts do not take
the form of service concessions contracts as defined in those
Directives. Where contracts are to be awarded in accordance with
Directives 2004/17/EC or 2004/18/EC, the provisions of para-
graphs 2 to 4 of this Article shall not apply.

4. Without prejudice to paragraph 3, the competent authori-
ties may opt, in the second half of the transitional period speci-
fied in paragraph 2, to exclude from participation in the award of
contracts by invitation to tender those public service operators
which cannot provide evidence that the value of the public trans-
port services for which they are receiving compensation or enjoy
an exclusive right granted in accordance with this Regulation rep-
resents at least half the value of all the public transport services
for which they are receiving compensation or enjoy an exclusive
right. Such exclusion shall not apply to public service operators
running the services which are to be tendered. For the application
of this criterion, no account shall be taken of public service con-
tracts awarded by emergency measure as
referred to in
Article 5(5).

2. Without prejudice to paragraph 3, the award of public ser-
vice contracts by rail and by road shall comply with Article 5 as
from 3 December 2019. During this transitional period Member
States shall take measures to gradually comply with Article 5 in
order to avoid serious structural problems in particular relating to
transport capacity.

Where competent authorities make use of the option referred to
in the first subparagraph, they shall do so without discrimination,
exclude all potential public service operators meeting this crite-
rion and inform the potential operators of their decision at the
beginning of the procedure for the award of public service
contracts.

3.12.2007

EN

Official Journal of the European Union

L 315/11

The competent authorities concerned shall inform the Commis-
sion of their intention to apply this provision at least two months
before the publication of the invitation to tender.

Such aid shall be restricted to the research and development stage
and may not cover the commercial exploitation of such transport
systems and technologies.

Article 9

Compatibility with the Treaty

Article 10

Repeal

1.
Public service compensation for the operation of public pas-
senger transport services or for complying with tariff obligations
established through general rules paid in accordance with this
Regulation shall be compatible with the common market. Such
compensation shall be exempt from the prior notification require-
ment laid down in Article 88(3) of the Treaty.

2. Without prejudice to Articles 73, 86, 87 and 88 of the
Treaty, Member States may continue to grant aid for the trans-
port sector pursuant to Article 73 of the Treaty which meets
transport coordination needs or which represents reimbursement
for the discharge of certain obligations inherent in the concept of
a public service, other than those covered by this Regulation, and
in particular:

(a) until the entry into force of common rules on the allocation
of infrastructure costs, where aid is granted to undertakings
which have to bear expenditure relating to the infrastructure
used by them, while other undertakings are not subject to a
like burden. In determining the amount of aid thus granted,
account shall be taken of the infrastructure costs which com-
peting modes of transport do not have to bear;

(b) where the purpose of the aid is to promote either research
into, or development of, transport systems and technologies
which are more economic for the Community in general.

1.
Regulation (EEC) No 1191/69 is hereby repealed. Its provi-
sions shall however continue to apply to freight transport services
for a period of three years after the entry into force of this
Regulation.

2.

Regulation (EEC) No 1107/70 is hereby repealed.

Article 11

Reports

After the end of the transitional period specified in Article 8(2),
the Commission shall present a report on the implementation of
this Regulation and on the developments in the provision of pub-
lic passenger transport in the Community, assessing in particular
the development of the quality of public passenger transport ser-
vices and the effects of direct awards, accompanied, if necessary,
by appropriate proposals for the amendment of this Regulation.

Article 12

Entry into force

This Regulation shall enter into force on 3 December 2009.

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

Done at Strasbourg, 23 October 2007.

For the European Parliament
The President
H.-G. PÖTTERING

For the Council
The President
M. LOBO ANTUNES

L 315/12

EN

Official Journal of the European Union

3.12.2007

ANNEX

Rules applicable to compensation in the cases referred to in Article 6(1)

1.

2.

The compensation connected with public service contracts awarded directly in accordance with Article 5(2), (4), (5)
or (6) or with a general rule must be calculated in accordance with the rules laid down in this Annex.

The compensation may not exceed an amount corresponding to the net financial effect equivalent to the total of the
effects, positive or negative, of compliance with the public service obligation on the costs and revenue of the public
service operator. The effects shall be assessed by comparing the situation where the public service obligation is met
with the situation which would have existed if the obligation had not been met. In order to calculate the net financial
effect, the competent authority shall be guided by the following scheme:

costs incurred in relation to a public service obligation or a bundle of public service obligations imposed by the com-
petent authority/authorities, contained in a public service contract and/or in a general rule,

minus any positive financial effects generated within the network operated under the public service obligation(s) in
question,

minus receipts from tariff or any other revenue generated while fulfilling the public service obligation(s) in question,

plus a reasonable profit,

equals net financial effect.

3.

Compliance with the public service obligation may have an impact on possible transport activities of an operator
beyond the public service obligation(s) in question. In order to avoid overcompensation or lack of compensation, quan-
tifiable financial effects on the operator’s networks concerned shall therefore be taken into account when calculating
the net financial effect.

4.

Costs and revenue must be calculated in accordance with the accounting and tax rules in force.

5.

In order to increase transparency and avoid cross-subsidies, where a public service operator not only operates com-
pensated services subject to public transport service obligations, but also engages in other activities, the accounts of the
said public services must be separated so as to meet at least the following conditions:

— the operating accounts corresponding to each of these activities must be separate and the proportion of the cor-
responding assets and the fixed costs must be allocated in accordance with the accounting and tax rules in force,

— all variable costs, an appropriate contribution to the fixed costs and a reasonable profit connected with any other
activity of the public service operator may under no circumstances be charged to the public service in question,

— the costs of the public service must be balanced by operating revenue and payments from public authorities, with-

out any possibility of transfer of revenue to another sector of the public service operator’s activity.

6.

‘Reasonable profit’ must be taken to mean a rate of return on capital that is normal for the sector in a given Member
State and that takes account of the risk, or absence of risk, incurred by the public service operator by virtue of public
authority intervention.

3.12.2007

EN

Official Journal of the European Union

L 315/13

7.

The method of compensation must promote the maintenance or development of:

— effective management by the public service operator, which can be the subject of an objective assessment, and

— the provision of passenger transport services of a sufficiently high standard.