France seeks to undo even the existing bad structure which allows liberalisation in name but prevents it in practice. It is not surprising that French National Railways (SNCF) was fined €60m last month by the French Competition Authority for abuse of its dominant position and other anti-competitive actions.
There are good and bad aspects to France's planned restructuring of the railways. While it is good that the infrastructure manager will get full control of all its activities, it is bad that it will get closer in management terms to the incumbent operator SNCF, as this is likely to create a new holding rail company: SNCF SA. This is a step backwards in liberalisation which the European Commission (EC) must investigate. It is perhaps a coincidence that only last week the Advocate General of the European Court of Justice published his opinion on the current structure in France – and concludes that it does not even comply with the First Railway Package.
Last month, the EC sent a Letter of Formal Notice to Germany (see footnote below) under its infraction proceedings. It accused Germany of breaching EU rules that require integrated railways to maintain accounting separation and prohibit the transfer of funds related to infrastructure management or the provision of public-service transport services to any other businesses. There is no transparency between the infrastructure manager (DB Networks) and the train operators owned by German Rail (DB) due to a peculiar profit transfer agreement that foresees the transfer of all profits made by the subsidiaries to the holding company regardless of the origin of the "profits" (for example, public funds granted by the state to fund infrastructure development) or its intended use (to cross-finance commercial activities of the holding company, to make acquisitions abroad, etc).
Other competition issues are also being considered, and the Commission believes that this would result in the absurd situation of independent operators financing their own competitors belonging to the holding company; these are the hidden subsidies that keep DB ahead of any competition.
Thus, the two member states pressing hardest to preserve their monopolistic structures are themselves the subject of legal challenges for failure to implement the European laws they approved over 10 years ago, fines for competition abuse, or both.
For 2013, the Fourth Railway Package is an essential prerequisite to the successful completion of rail liberalisation and attracting the private sector investment which rail needs so badly. Our experience in Britain is that this will not happen unless the private sector is confident about the long-term future, and to achieve this requires an effective internal market with a level playing field in rail between all market actors. If this happens, one can expect good growth in quality, price and efficiencies as well as of course much reduced carbon outputs.
However, unless there is real separation between train operators and infrastructure managers, this will not be achieved. Infrastructure managers must be totally independent with the widest responsibility for delivery and management, and with full transparency between them and any train operator.
Footnote: I am happy to supply readers with the full list of 17 infringements by email.