February 05, 2013

Germany rewrites the Fourth Railway Package

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THANKS to the intervention of the German Chancellor Angela Merkel, the Fourth Railway Package, published by the European Commission (EC) on January 30, is a very different document from the original and excellent draft setting up a fully-liberalised and competitive railway structure compliant with the principles of the Internal Market.

In the space of less than a month, Merkel responding to massive lobbying by German Rail (DB) forced the Commission to turn the package into a German Railway Package for Europe.

This new package now allows Germany's railway holding company model to be maintained, which in turn permits the hidden transfer of funds from the infrastructure manager via the holding company to the commercial activities of train operators, placing them in a competitive advantage over their competitors who do not benefit from such aid. It allows for subsidised DB companies to acquire operators in other member states, unfairly competing with other companies. By failing to provide full separation between infrastructure managers and railway undertakings, it will allow confidential information as well as funding to flow undetected between these companies, again to the detriment of fair competition.

The new text gives member states, where a separated model exists, the right to refuse operators from a holding company onto their network. However, it fails to explain how such a complex procedure would work in practice.

In Germany, the EC's infraction proceedings have already demonstrated wide-ranging failures to comply even with existing law, particularly on the issue of hidden transfers of profits from the infrastructure manager to the holding company. The French government - Germany's partner in this monopolistic exercise – is hurrying towards the same integrated structure which is already seen by the EC as illegal in other member states, and this is in spite of French National Railways (SNCF) being fined more than €60m for anti-competitive behaviour.

So, two of the European Union's largest member states, which are already in breach of railway law, have succeeded in getting the law changed so that they can carry on as they please. Many smaller member states have expressed concern about the potential for their passenger and freight operations being taken over by DB.

Little has been heard from customers about these proposed changes. Don't passengers want the better quality services and lower fares or subsidies which come with competition above track? Don't freight customers want the better quality and competitive prices which competition brings?

I fear that all that this German rail legislation will do is reduce the growth that rail could achieve and deter potential investors who fear that their investments will be threatened by a national monopolist, finally leading to a situation in Europe where everybody puts more cars and trucks on the road.

Other parts of the Fourth Railways Package are very welcome, such as giving the European Railways Agency greater responsibility to ensure interoperability of rolling stock and other equipment. However, we must guard against member states retaining responsibility as well, duplicating rather than simplifying approval processes.

I also welcome the provision of an infrastructure manager with full control and responsibility for all the essential functions needed to manage the network, and for infrastructure managers to be required to cooperate and set up formal consultation arrangements with their customers on a non-discriminatory basis.

It is now up to the European Parliament and the Council to alter, improve and correct this package and achieve the objectives which business, customers and the industry know is necessary to create the internal market, investment and efficiency that the rail sector needs so badly. They must also achieve this during this coming legislative period before the European elections and new commissioners are appointed, whilst remembering that the monopolists will seek to delay any change for as long as possible!

Tony Berkeley

Lord Tony Berkeley is chairman of the Rail Freight Group, the representative body of Britain's railfreight industry which includes 150 companies covering logistics, train operations, terminals, and infrastructure managers. He is also a board member of the European Rail Freight Association, the grouping of private operators and other companies promoting European railfreight. Berkeley sits in Britain's House of Lords, where he was an opposition transport spokesperson in 1996-97, and is secretary of the All Party Parliamentary Rail Group. Berkeley was public affairs manager of Eurotunnel from 1981 until the end of construction of the Channel Tunnel in 1994, and is a member of the Institution of Civil Engineers, fellow of the Chartered Institute of Transport and Logistics, and an honorary fellow of the Institution of Mechanical Engineers.

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