The Fourth Railway Package: the Commission proposes, Member States aren’t disposing

The Fourth Railway Package aims to remove the remaining barriers to the creation of a single European market for rail services. The proposed legislation would reform the EU’s rail sector by encouraging competition and innovation in domestic passenger markets. It would also implement structural and technical reforms. The end result should be higher levels of safety, interoperability and reliability in the European rail network.

The European rail network remains quite fragmented. Different Member States use different safety standards and technical systems. Cross-border train services, for example, have to get safety authorisation from several different national authorities and deal with several different signalling systems. This makes it complicated and expansive for new rail operators and new technical equipment to enter the rail market.

By removing the remaining barriers to the single European rail area, the proposed Fourth Railway Package will help create a more competitive rail sector, with better connections between the EU and its neighbouring countries.

The changes would also help the EU meet targets for reduced emissions and encourage increased use of rail transport, as outlined in the Commission’s 2011 Transport White Paper^[1].

A Communication from the Commission entitled ‘The Fourth Railway Package – Completing the single European railway area to foster European competitiveness and growth’ gives some indications for the future of European railways and defines the legislative framework needed to achieve this future vision.

The creation of a Single Rail market has been on the EU agenda for many years. Early EU legislation laid down the basic principles guiding the improvement of rail efficiency via progressive market opening and in particular the separation of service providers (passenger and goods) and infrastructure. Since 2000, these ideas s have been progressively translated into reality, not least through the adoption of three successive packages of EU legislation. However the share of rail in the overall transport mix has remained modest, partly due to suitability issues (for example, rail is not practical for many short distance urban journeys such as trips to the supermarket) but also because of obstacles to market entry hampering competition and innovation.

In 2012, parts of this legislation were simplified, consolidated and further reinforced by Directive 2012/34/EU establishing SERA^[2] bolstering existing provisions on competition, regulatory oversight and financial architecture of rail sector. This strengthens the power of national regulators, improves the framework for investment in rail, and ensures fairer access to rail infrastructure and rail-related services. It entered into force on 15 December 2012 with transposition required by mid-2015^[3].

For Infrastructure governance, it is urgent to create common rules for the governance of the Infrastructure Managers (IM) that treat all Rail Services Undertakings (RU) as equals and guarantee proper involvement of public authorities and users of infrastructure in the preparation of decisions having an impact on them. IMs will need to establish a coordination body with RUs, customers and public authorities making them central players in investment planning and the drive for efficiencies. It will set economic incentives and performance indicators to measure and to improve the efficiency of IMs and, finally, it will establish a European Network of IMs to promote cross-border cooperation, with particular attention paid to operations along RFCs and international passenger transport routes.

Relating to Interoperability and Safety, to realise the potential of the single market, higher levels of harmonization are necessary at EU level, so the Commission proposes revising the European Rail Agency (ERA) Regulation to transfer to the Agency competence for issuing vehicle authorisations for placing on the market and for safety certification for RUs. While legal responsibility would lie with ERA, it would work in close cooperation with relevant National Safety Authorities (NSA). At the same time it would have an enhanced role in the supervision of national rules and monitoring NSAs, as well in facilitating the deployment of the European Rail Traffic System (ERTS). The proposed changes to ERA’s role will be reflected in amendments and updating the legislation. Besides these changes, ERA’s governance structure and internal operating methods will be improved and aligned with recently adopted Joint Statement and Common Approach on the EU decentralised agencies.

The aim of these proposals is to achieve a 20% reduction in the time to market for new RUs and a 20% reduction in the cost and time taken to authorise rolling stock.

Regarding the social dimension, the Commission underlines that the rail sector will, in the next decade, face simultaneously the challenges of an ageing working population and the efficiency effects of market opening. Approximately 30% of all rail workers will retire in the next 10 years^[4] leading to workface shortages, while at the same time several RUs may need to be restructured to improve productivity and efficiency. IM/RU separation will require more people to do complementary tasks in the short term. It is important to enable the rail sector to improve its attractiveness as an employer for innovative and highly skilled professions with an adequate level of remuneration.

‘The low efficiency and quality of some rail services are mainly the result of low competition, remaining market distortion and suboptimal structures’^[5]. For this reason it is hoped that the package will contribute to creating a more efficient customer-responsive industry and improving the relative attractiveness of rail sector vis-à-vis other modes.

The Fourth Railway Package comprises the following legislative proposals:^[6]

Proposal for a Directive on the interoperability of the rail system within the European Union (Recast);[7]
Proposal for a Regulation amending Regulation (EC) No 1370/2007 concerning the opening of a market for domestic passenger transport services by rail;
Proposal for a Regulation on the European Union Agency for Railways and repealing Regulation (EC) No 881/2004;[8]
Proposal for a Regulation repealing Regulation (EEC) No 1192/69 of the Council on common rules for the normalisation of the accounts of railway undertakings;[9]
Proposal for a Directive on railway safety;[10]
Proposal for a Directive amending the Directive 2012/34/EU of 21 November 2012 establishing a single European railway area, as regards the opening of the market for domestic passenger transport services by rail and the governance of the railway infrastructure.[11]

The State of Play

With the Fourth Railway Package, the European Commission has put forward proposals to move towards that objective by regulating the liberalisation of national rail markets and harmonising technical standards and requirements. Negotiations on the package started in 2013.

The technical part of the Package is largely agreed by all stakeholders and an informal agreement has now been reached between the European Parliament, Commission and Member States. The Luxembourg Presidency of the Council could close negotiations before the summer of 2015. In October the Luxembourg Presidency hopes to reach a compromise on the more political aspects of the packages including:

establishment of passenger-friendly common ticketing platforms ;
inefficiencies in infrastructure management including unfair capacity allocation;
unused rolling stock, paid for with taxpayers’ money , which could be available for news services and operators;
creating a level playing field in the rail market to ensure fair competition, which includes the involvement of new entrants and privates sector operators – essential for innovation and growth.

All stakeholders agree that rail has a bright future. But national monopolies and champions are always hard to break down. Success on the creating a single market for a sector is precisely the sort of EU that the UK wants and a bell weather of its frustration with its European partners.

[1] COM(2011)144 def – 28 March 2011.

[2] Directive 2012/34/EU of 21 November 2012 establishing a single European railway area (recast), OJ L 343 of 14.12.2012.

[3] Italy has transposed the Directive with a legislative decree in May 2015. The object of the Decree is to answer the infringement procedure number 2008/2097 and the EU Court of Justice ruling on Italy’s failure to implement the rules.

[4] Domestic Passenger Rail Markets IA

[5] Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions ‘The Fourth Railway Package – Completing the Single European Railway Area to foster European Competitiveness and Growth’, 30.1.2013, COM(2013) 25 final.

[6] All these proposals are dated on 31.1.2013

[7] COM(2013) 30 final.

[8] COM(2013) 27 final.

[9] COM(2013) 26 final.

[10] COM(2013) 31 final.

[11] COM(2013) 29 final.