Wednesday, April 20, 2016

Questions and Answers – The Fourth Railway Package

Brussels, 20 April 2016

On 19 April 2016, the European Parliament and the Council reached an agreement on the Fourth Railway Package, a series of measures that aim to make EU railways more attractive, innovative and competitive

What is the Fourth Railway Package?

The Fourth Railway Package was put forward by the European Commission in January 2013. It is a set of six legislative proposals designed to revitalise the rail sector and deliver better quality of service and more choice to passengers. It comprises two so-called 'pillars' which have been negotiated in parallel:

The 'market pillar' includes:
A Regulation which deals, inter alia, with the award of public service contracts for domestic passenger transport services by rail ('PSO Regulation')
a Directive regarding the opening of the market of domestic passenger transport services by rail and the governance of the railway infrastructure ('Governance Directive')
a proposal to repeal an old Regulation on the grant of State aid to railway undertakings (Regulation on the normalisation of the accounts of railway undertakings')

The 'technical pillar' includes:
a Regulation on the European Union Agency for Railways and repealing Regulation (CE) n° 881/2004 ;
a Directive on the interoperability of the rail system within the European Union (Recast of Directive (CE)n° 2008-57)
a Directive on railway safety (Recast of Directive (CE) n°2004-49) 

What are the main elements of the Fourth Railway Package as agreed by the European Parliament and the Council on April 19?

The Fourth Railway Package will complete the Single Market for Rail services. It will establish the right for European undertakings to operate everywhere in the EU and set the rules for competition more stringently.

Detailed rules will ensure the impartiality of infrastructure managers, in particular in vertically integrated structures, so as to guarantee the non-discriminatory treatment of new entrants wishing to access the network. Experience shows that this is of primary importance for creating a level playing field where competition can flourish. The new rules on financial transparency will remove the risk of distortive cross-subsidies between state-financed infrastructure managers and transport operators competing in free markets.

The tendering of public service contracts will ensure that public authorities get the best possible value for public money while retaining an optimal level of public transport services for citizens. Another important improvement will include clearer rules on the definition of public service obligations and their scope of application as well as a new framework guaranteeing that railway operators will encounter non-discriminatory access conditions to rail rolling stock that will incentivise them to participate in tender procedures for a rail public service contract.

How will the proposed initiatives bolster the competitiveness of the EU railways? 

The package will boost the competitiveness of rail in two related ways. On the one hand, with gradual market-opening, incumbent railway companies will be obliged to become more competitive in order to withstand competition from new entrants. On the other hand, a better offer of services will help the rail sector become more competitive towards other modes of transport.

Through the rules agreed on under the so-called "market pillar", domestic passenger markets will be opened up for competition with railway undertaking shaving the possibility to provide commercial services throughout the EU and with the principle of mandatory tendering for public service contracts in rail established. The end of monopolies and the introduction of public tenders will encourage railway operators to become more responsive to customer needs, improve the quality of their services and improve their cost-effectiveness. Railway companies will also be encouraged to embrace innovation: this means not only new technologies and digitalisation, but also innovative business models. As a consequence, not only the rail sector will become more competitive towards other modes of transport, but national railway companies will become more competitive European and global players.

The so-called "technical pillar" will further contribute to the competitiveness of sector. In particular, it will:
Save firms from having to do multiple applications in the case of operations beyond one single Member State. The European Railway Agency (ERA) will issue authorizations for placing vehicle on the market and issue safety certificates for railway undertakings, valid throughout the EU. So far railway undertakings and manufacturers need to be certified separately by all national safety authorities (NSA) in the respective Member States in which the trains would operate.
Create a "One stop shop" which will act as a single entry point for all such applications. This information and communication system will make the procedure easy and transparent. It will also ensure consistency in the case of different applications for similar authorisations.
Streamline the large number of national rules. The Agency is already working on an action plan to reduce them. These rules create a risk of insufficient transparency and disguised discrimination of new operators, which is a serious risk for new investors. Reduction and simplification of the current rules will contribute to achieve the Single European Railway Area, to increase cross-border traffic and to boost the competitiveness of the railway sector.

How will the Fourth Railway Package contribute to rail safety? 

The new Railway Safety Directive will revise the role of the national safety authorities (NSAs) and reallocate the responsibilities between them and the European Railway Agency (ERA). ERA will play a major role as it will be granting the single safety certificate to rail companies. National Safety Authorities activities will be more focused on the oversight of the rail companies operating in their respective countries and on activities requiring either presence on the territory or local linguistic skill (such as inspections/audits). Moreover, to ensure that NSAs perform effectively these activities, the Agency will monitor their performance and decision-making.

In addition, ERA will play a key role in the development of an improved safety culture. It has already started preparing the new tool for occurrence reporting. This will facilitate the exchange of information among the actors who identify or are informed about a safety risk, and in particular will allow information to be shared quickly after an accident.

I am a citizen: what is in the Package for me?Citizens will reap the benefits of more efficient, user-friendly and cost-effective railways. They will have access to better mobility options in terms of more frequent trains and better services. Lower operational costs for railway companies and competitive pressure can be expected to lead to lower fares for travellers for commercial lines. Furthermore, new business models such as 'low-cost rail' should benefit citizens by allowing more people to travel at affordable prices.

The new PSO regulation will improve the legal framework for public services. The principle of mandatory competitive tendering will lead to better and more cost-efficient services that are more adapted to user demand and better value for money for taxpayers. 

I work in the rail sector: what is in the Package for me?

Market opening will not be made at the expenses of workers. The package will in particular clarify the legal framework for staff protection. It will provide more legal certainty to competent authorities that want to take measures for staff protection based on an assessment of the local/national labour markets.

Market opening will also boost the development of a dynamic rail sector and generate new business and growth opportunities. The experience from the Member States having already opened their domestic rail market suggests that this will create new and stable jobs. 

I am a railway undertaking: what is in the Package for me?

The introduction of competition on commercial lines and the tendering of public service contracts for rail will generate significant business opportunities for the growth of railway undertakings on a European scale and will provide a better framework for efficient investment decisions in this market. Moreover the increased role of ERA will allow a faster and unified safety certification across the EU. It will lead to a reduction of administrative burden and to cost reductions for railway undertakings.

I am a Member State/region: what is in the Package for me?

The future legislation will allow Member States to contract better rail public services for their citizens. When awarding public service contracts, through a competitive tender procedure, Member States and regions will be able to ensure better value for public money to the benefit of citizens.

Even applying the exceptional possibility of directly awarding a rail contract in case of performance improvements the new legal framework will enable the competent authorities to better negotiate the conditions and price they have to pay for provision of public rail transport services.

The legislation will also provide for sufficient flexibility for those Member States where due to the characteristics of the market the competitive award might not bring the necessary benefits. 

I am a rail rolling stock company: what is in the Package for me?

An opening up of the market for domestic rail passenger services and a consecutive rise of the number of actors in this market will trigger either leasing or the purchase of rail rolling stock. This will create business opportunities for leasing companies including the financing of these activities. The expected boost of the demand for railway services will also have a positive effect on all services related to provision of public service in rail, for example maintenance of rolling stock. 

I am a manufacturer: what is in the Package for me?

Domestic market opening should boost the development of new transport services and demand for rolling stock. This will mean more business for the train manufacturers and their suppliers. Moreover, the increased role of ERA will allow for a faster and unified vehicle authorisation across the EU, since until now rolling stock needed to be authorised separately by all national safety authorities (NSA) in the respective Member States. It will lead to a reduction of administrative burden and to cost reductions for manufacturers. 

I am an infrastructure manager: what is in the Package for me

The expected growth in railway traffic will lead to an increased use of railway infrastructure, thus, generating more revenues for infrastructure managers - notably through infrastructure charges or charges for rail-related services. The new governance rules will ensure that infrastructure managers can act in full impartiality and pursue the strategies which are best for their business.

In addition, the increased role of ERA also regarding European Rail Traffic Management Systems (ERTMS) will allow for the harmonised implementation of ERTMS in the EU. The new pre-authorisation on trackside equipment performed by ERA will lead to detect problems at an earlier stage and avoid additional cost. 

What are the next steps for the Fourth Railway package? 

Once the package is adopted, Member States will need adequate time to transpose the new rules into national legislation. In particular, as regards the PSO regulation they will need to apply the new regulatory framework based on the principle of competitive award of rail public service contracts starting as of 2023.

The Commission will monitor and assist Member States during the preparatory phase to help them develop the administrative capacity, expertise and technical know-how required to reap the full benefits of the new legal framework.

ERA will start delivering vehicle authorisation, ERTMS trackside pre-authorisations and safety certificates three years after the entry into force of the Package. However, as regards other tasks, such as the monitoring of national safety authorities and national rules, ERA will start performing its duties immediately after publication of the new legislative framework.

For more information

Press release (IP/16/1382): Fourth Railway Package


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