EU ministers agree on injecting competition into domestic rail service

European railway companies will be allowed to offer domestic rail services in other countries from 2020 under new proposals agreed on Thursday(8 October) by European Union ministers.

The proposals form part of a package put forward in 2013 by the executive European Commission designed to inject competition into domestic rail markets across the 28-nation EU.

Domestic passenger rail markets are still largely dominated by one incumbent, such as SNCF in France or SNCB in Belgium.

Sweden and Britain are the only countries that have fully opened their markets to domestic competition. Germany, Austria, Italy, Czech Republic and the Netherlands have opened theirs to a limited extent.

“Today’s agreement on the fourth railway package paves the way for better efficiency, performance, value for money and quality of rail services in the EU,” said Violeta Bulc, EU Transport Commissioner.

Thursday’s agreement means negotiations can start with the European Parliament to agree on a final compromise.

European train companies will be allowed either to set up commercial activities to compete with operators in other countries or to bid for public-service contracts that are awarded by governments on lines that are not as profitable.

Commercially viable lines, usually high-speed networks, will be open to competition from 2020. The majority of lines subject to public-service contracts will be liberalised 10 years after a new law takes effect, expected in 2016.

Italy, for example, has already opened up its high-speed network. It now has two operators competing, Italo and state-owned Trenitalia.

But the majority of domestic rail lines, over 90 percent according to the Commission, are operated under public-service contracts.

Countries often directly award rail contracts to the local incumbent, which is either compensated or granted exclusive rights on the line.

The original proposal would have introduced mandatory competitive tendering for such rail contracts. Opposition from member states means that governments will be able to directly award contracts where the geographical characteristics are such that it would result in service improvements, or where they do not receive enough bids.

The reform also strengthens the independence of track owners from railway companies by making them responsible for all functions concerning the network such as investment plans and maintenance.

It does not prohibit vertically integrated structures such as that recently introduced in France, where the track owner RFF and the railway company were brought into the same holding company. But it does introduce safeguards against the transfer of funds between the two. 

In the UK, the new leader of the Labour opposition, Jeremy Corbyn, has pledged to re-nationalise rail franchises privatised under the administration of Conservative prime minister John Major in the 1990s, although critics have debated whether this would be permissable under EU law.