A YEAR AGO we reported on how all but one of the 25 European Union (EU) member states operating rail networks had failed to correctly implement the First Railway Package. The reaction of the European Commission (EC) was to begin infringement proceedings against these 24 countries in an effort to ensure all measures agreed in the FRP were fully transposed into their respective legal systems.

Indeed, the EC notes that talks with all 24 member states concerned have produced positive results. However last month it conceded that 21 member states have yet to fully comply with the FRP.

Adopted by the EC in 2000, the FRP is intended to create the conditions for a liberalised railfreight market where any operator in possession of the relevant licenses can gain access to national railway networks. A deadline of March 2003 was set for 15 member states to transpose the FRP into their legal systems, with the eight new member states due to adopt the measures in May 2004.

More than five years on, the EC's vision of a level playing field for railfreight across Europe is still obscured by myriad national variations in regulation and network management. As with its previous assessment of FRP implementation, the EC has once again highlighted recurring weaknesses in railway liberalisation in several countries. These include:

• the lack of independence of the infrastructure manager in relation to railway operations

• insufficient implementation of provisions of the directive on track access charging, such as the absence of a performance regime to improve the operation of the railway, and lack of incentives for infrastructure managers to reduce costs and access charges, and

• the failure to set up an independent regulatory body with the necessary powers to remedy competition problems.

The latter is arguably a cornerstone of a competitive railfreight industry, but the EC's latest reasoned opinions suggest inadequate regulation is a widespread issue.The Czech Republic, Germany, Spain, France, Italy, Slovenia, Romania, Estonia and Greece have yet to establish a regulatory framework that fully satisfies the requirements of the FRP.

A week before the Commission issued its latest reasoned opinions, the Community of European Railway and Infrastructure Companies (CER) published a report by the Institute for Transport Studies, Britain, which examines the current state of railway liberalisation in Europe. The report, entitled European Transport Policy - Progress and Prospects, suggests the concerns raised by the EC in June 2008, including lack of independence of infrastructure managers from incumbent train operators, the failure to establish an adequate regulatory framework, and insufficient incentives for infrastructure managers to reduce costs and track access charges, has resulted in "continuing suspicion that the institutional arrangements are biased in favour of the incumbent."

The report continues: "Both incumbents and new entrants are concerned when the regulator on whom they rely for impartiality is weak or not independent enough from the political authorities, as has been the case to date in many countries, for instance France, Italy and Spain. New entrants would feel reassured if such independence was guaranteed and incumbents feel that a strong regulatory body is the best way to put an end to unjustified and damaging suspicion."

There are encouraging signs of change in some countries that have previously resisted instigating a non-discriminatory regime. In France, where the government is keen to add impetus to the country's flagging railfreight industry, a law was passed by the National Assembly on September 22 establishing an independent railway regulator.

Where the legislative gaps remain, the EC has given member states until next month to come up with proposals to complete transposition of the FRP. The EC says any member state that fails to comply with this order will face legal action in the European Court of Justice. This tougher stance has been welcomed by the European Rail Infrastructure Managers (EIM). "The challenges posed to the railways by the financial crisis make it even more vital that Europe acts forcefully to ensure that rail operators can maintain their competitive edge," says secretary general Mr Michael Robson.

The CER believes the Commission needs to look beyond the failings outlined in its latest communications to member states, and ensure that the financial measures required by the FRP are implemented correctly. "It is not sufficient to look into the formal organisational aspects of the FRP alone," says Mr Johannes Ludewig, CER executive director. "The Commission should also tackle more substantial questions which are currently left out of the infringement procedures. It has to ensure that member states meet their financial obligations as laid down in the legislation."

Directive 2001/14 stipulates that governments must adequately invest in rail infrastructure and compensate railways for their public service obligations. CER argues that this is often not sufficiently done and suggests that as a guardian of the treaty, the Commission should put more pressure on the member states to eliminate what it sees as fundamental shortcomings.

While the EC recognises that cooperation with member states is more likely to produce much more favourable results than a courtroom confrontation, the almost glacial rate of progress on several key aspects of the FRP suggests a firmer approach may now be needed. The EC will need to reinforce its rhetoric with action if the FRP is to achieve its objectives Europe-wide.