September 07, 2012

EC and Member States still at odds over rail policy

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IN the world of European railway policy, it's fair to say things usually move along quite slowly. The mind-bending complexity of drawing up and implementing legislation involving many institutions in many countries means progress, or often the lack of it, tends to be measured over years rather than days.

In this lumbering narrative, yesterday was notable for its burst of activity. In Luxembourg, the European Court of Justice Advocate General Mr Niilo Jääskinen dealt a blow to the infringement action brought by the European Commission (EC) against Germany and Austria by recommending to the judges of the court that European Directive 91/440 does not require institutional separation of the incumbent operator from the infrastructure manager. The court is likely to uphold this verdict and dismiss this action, an important endorsement for those Member States which have stuck with the holding company structure and are unwilling to relinquish it.

Meanwhile, in Brussels, Transport Commissioner Mr Siim Kallas told delegates attending a conference on the future of European rail policy at the European Economic and Social Committee (EESC) that "the rail sector cannot develop within national borders with member states protecting what they perceived as their national champions."

Speaking plainly with an eye on events in Luxembourg, Kallas warned that if the sector "does not rid itself of protectionist attitudes", a single European railway area will not develop. "Twenty years after the 1992 deadline for the completion of the internal market set by the Delors commission, we are far from having a single European railway area," he says.

Victory in the European Court is likely to give Germany, a powerful supporter of keeping infrastructure manager and incumbent operator under one roof, confidence it can win the fight to retain the integrated structure in the longer term. Other member states which employ a similar model, notably Italy, will also be buoyed by events in Luxembourg this week. In France, proponents of reuniting French National Railways (SNCF) with French Railway Networks (RFF) will see it as an endorsement of their position.

But does this mean Germany and German Rail (DB) have won the argument in favour of integration? Until now, liberalisation has seemed destined ultimately to require the full separation of infrastructure in all member states. The notion that incumbent operator and infrastructure manager should be mutually independent of one another has been successfully challenged, and assuming the judges accept Jääskinen's recommendations, will soon have legal precedent.

The EC will argue that this issue needs to be addressed as part of the forthcoming Fourth Railway Package, which will seek to remove the remaining obstacles to market access and will call for unbundling of infrastructure from operations. But perhaps commissioners should pause to consider whether full separation really is essential to fostering competition, efficiency, and growth in the rail sector. After all, the rail markets of Germany and Austria are arguably more open than those of any other EU member state.

Equally, as long as the infrastructure manager remains under the same organisational umbrella as the dominant operator, there will always be questions over its neutrality. The current investigation by EC antitrust authorities into allegations by private operators of anticompetitive pricing of traction power by DB Energy is one example of how these arrangements can be brought into question.

Furthermore, the holding company model is much easier to monitor in countries with strong regulators, such as Germany. In member states where regulators lack independence, are under-resourced, or do not have adequate powers – and there are still many of these - there is unlikely to be adequate scrutiny, or redress for anticompetitive behaviour.

Clearly it will not be practical to have a two-tier system where some states are allowed to persist with the holding company structure while others are not, and ultimately the Fourth Railway Package will need to deliver a robust, permanent solution to this thorny issue.

Keith Barrow

Keith Barrow joined IRJ as News Editor in 2006 and was promoted to Associate Editor in 2008. He was previously editor of employee publications for the Welsh Assembly Government, G4S, and Thomsonfly, and has written for a range of other publications including the Derby Telegraph. He graduated from Lincoln University in 2002 with a degree in journalism.

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