Institutional • Regulation and standards

Note: this page is for educational purposes only. It is not a substitute for the official page of the operating company or manufacturer. 

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This institutional page deals with the third railway period, characterized by a return to state control, and financing and control through a generalized contractual and normative framework.

General glossary

The current environment can be broken down into four main themes: 

1) Regulations and standards
• what competences does Europe have? 
• standards developed at three levels: global, European or national (ISO, UIC, Cenelec, etc.)
• pan-European or global regulations (OTIF)
• European regulations with directives, regulations, decisions and recommendations.

2) Transport policy
• what motivated liberalization? Transport deregulation, a new role for the State and the regions
• what did the European Union do?
• a brief chronology of the various legislative stages 
• they try to influence the debate: CER, ERFA, AllRail, EIM , UIRR,… 

3) Implementing the new rail landscape
• new rail governance: the State, the regulator, the safety organization, the AOTs
• rail sector renewal: new players
• contracts, public service delegation, open access, franchises

4) Tools to revitalize the railways
• European Railway Agency (ERA)
• Technical Specifications for Interoperability
• Funds and research programs
• the industry today
• ERTMS / ETCS
• Europe and the interconnection of rail networks

European Union competencies

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The three central legislative institutions of the European Union

The three central legislative institutions of the European Union illustrates the distribution of powers and responsibilities between the various EU institutions, contributing to the Union’s decision-making and legislative process.

It refers to the three main institutions that play a central role in the EU’s legislative and decision-making process. These three institutions are:

• The European Commission: This is the EU’s executive body. The Commission proposes new legislation, manages EU policies and programs, ensures the application of EU law and represents the EU on the international stage. The Commission is made up of one Commissioner per Member State, appointed by national governments, and is headed by a President elected by the European Parliament;

• The European Parliament: represents European citizens and is directly elected by them. The European Parliament shares legislative power with the Council of the European Union. It examines, amends and adopts the legislative proposals of the European Commission, and plays a supervisory role over the other EU institutions;

• The The Council of the European Union: Also known as the “Council of Ministers”, it represents the governments of the EU member states. The Council shares legislative power with the European Parliament. It adopts European laws (regulations, directives, decisions) jointly with the European Parliament, and coordinates the policies of the member states.

➤ See more about the seven European institutions

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Subsidiarity

The member states of the European Union (EU) attach great importance to the principle of subsidiarity. The main reason is that there are significant differences in approach to economic, social and fiscal policy between member states. These differences are due to a variety of factors, including historical traditions, cultural values, political preferences, levels of economic and social development, as well as institutional structures specific to each country.

Some authors suggest that the principle of subsidiarity enables the European Union to have indirect control over areas that the Treaties do not assign to the Union.

Through Protocols 1 and 2, the Lisbon Treaty establishes the parliaments of the Member States as the official guardians of the principle of subsidiarity. Within eight weeks of the transmission of a draft legislative act, these national parliaments can send reasoned opinions to the presidents of the three poles of the institutional triangle – the European Parliament, the Council and the Commission – on the non-conformity of a Commission draft with the principle of subsidiarity. If the number of opinions represents one third (or one quarter, depending on the hypothesis) of the votes allocated to the parliaments, the project must be re-examined.

This shows that member states are fully involved in the drafting of directives, whereas the EU is often the favorite target of national politicians.  

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Green Papers, White Papers, Directives, Regulations, Decisions, Recommendations

The European Commission’s Green Paper and White Paper are key documents in the European Union’s (EU) policy-making process.

• Green paper:
  • The Green Paper is a consultative document published by the European Commission that launches a discussion on a specific policy topic ;
  • Its main aim is to gather views and contributions from stakeholders, member states and the public on a particular issue ;
  • It generally asks open-ended questions to stimulate debate, and invites stakeholders to submit their opinions, ideas and experiences ;
  • After the consultation period, the Commission can use the feedback gathered to develop concrete policy proposals.
• White paper:
  • The White Paper is a more formal document presenting the European Commission’s specific policy proposals on a given subject ;
  • Unlike the Green Paper, it offers more detailed guidelines and proposals on how the Commission intends to tackle a problem or achieve a policy objective ;
  • The White Paper is often used to launch major initiatives, or to present long-term strategic orientations for the EU in areas such as the economy, the environment, security, etc. It can be followed by a process of consultation and debate ;
  • It may be followed by a more focused consultation process and further policy development before concrete legislative proposals are put forward.

Overall, directives set objectives to be achieved, regulations impose directly applicable rules, decisions are specific to individual cases, while recommendations provide advice without being binding.

• Directives:
  • Directives are EU legislative acts that set general objectives to be achieved by member states ;
  • They oblige member states to achieve these objectives, but the way in which they do so is left to their discretion. Member States therefore have some leeway as to how to implement them in their national legislation ;
  • Directives must be transposed into the national legislation of member states in order to become binding at national level ;
  • They are binding in terms of the result to be achieved, but leave some freedom as to the means to be implemented to achieve it.
• Regulations:
  • Regulations are EU legislative acts that are binding and directly applicable in all member states, without the need for transposition into national legislation ;
  • Unlike directives, regulations are immediately applicable in all member states as soon as they enter into force. They therefore have legal uniformity throughout the EU.
• Decisions:
  • Decisions are legislative acts that are specific to certain persons or entities, such as member states, companies or individuals ;
  • They are binding on those to whom they are addressed, and have direct legal effects on those specific parties ;
  • Unlike directives and regulations, decisions are not intended to regulate generally, but to deal with specific cases or settle particular issues.
• Recommendations:
  • EU recommendations are not binding on member states. They provide advice, guidance or suggestions on how member states can act in certain areas ;
  • Although not binding, recommendations can influence member states’ policies and practices ;
  • Recommendations are often used to encourage policy coordination and convergence between member states.

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The European Union’s transport policy

The adoption of the Single European Act in 1986, and the substitution of the unanimity rule for that of qualified majority voting, enabled progress to be made towards the establishment of a common transport market. Emphasis was placed on liberalizing air, river, road and sea transport, which gradually opened up to intra-Community competition. In addition, interconnections between member states are being promoted via a trans-European transport network.

European transport policy is governed by Articles 90 to 100 of the Treaty on the Functioning of the European Union (TFEU). Since the Treaty of Lisbon, which came into force in 2009, all common transport policy has been governed by the ordinary legislative procedure (formerly known as co-decision). The Treaty abolished the exceptions that had previously existed.

The EU is therefore competent in three areas:

• Transport policy: the EU draws up policies to promote safe, efficient and sustainable transport, notably through the development of trans-European transport networks and the promotion of more environmentally-friendly modes of transport ;
• Regulation: the EU establishes common standards and regulations for different modes of transport, such as air, rail, road and sea. This includes rules on safety, the environment, passenger rights, etc.
• Funding: the EU provides funding and subsidies to support specific transport projects, such as the development of cross-border transport infrastructures or the modernization of transport networks.

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EU railway policy

This policy was based on two pillars:

• a series of four legislative packages to harmonize and revitalize the rail sector, an area of great interest to member states who had great political difficulty in reforming a sector known for its conservative nature. But also because the reforms “wanted by Europe” would in turn mitigate the impact on national public finances ;
• a cross-border rail network called TEN-T, based on 9 corridors linking all parts of the country. This means that funds can only be spent on the 9 corridors, and avoids EU money being spread too thinly.

The four European Union (EU) legislative packages refer to a series of reforms and directives aimed at liberalizing and harmonizing the rail market within the EU. The aim of these legislative packages is to promote competition, improve the efficiency and quality of rail services, and enhance the interoperability of rail networks across Europe.

Four railway legislative packages were necessary:

• The first rail package (2001): this package introduced rules to open up the rail market to competition by separating infrastructure management activities from rail services. It also established common rail safety standards and encouraged the creation of national regulatory agencies.
• The second rail package (2004): this package aimed to further liberalize the rail market by extending rail operators’ access to rail infrastructure and establishing rules for rail passenger rights.
• The third rail package (2007): this package continued the rail market liberalization reforms by strengthening the independence of rail infrastructure managers and promoting the creation of a European Railway Agency responsible for rail safety. This package was at the root of the emergence of new entrants in the mainline segment, mainly from 2011-2013, when many countries set up a formal regulator.
• The fourth rail package (2016): this package comprised two pillars, a technical one (which was easily voted through), and a second, much more political one, which was more complicated to finalize. The aim was to liberalize domestic passenger traffic, provided in all countries by subsidized public services, by obliging States to issue calls for tender. This divisive issue of national sovereignty enabled the direct award of public service contracts without competitive tendering to be maintained until the end of December 2023, and a majority of states and regions took advantage of this to retain the monopoly for a further 10 years.

Although there are still developments to come, these four packages are generally regarded as the culmination of almost thirty years of effort. Alas, this culmination did not come at the best time of the 21st century, since the 2020s were first characterized by a pandemic, followed by crises and questioning linked to a troubled geopolitical context. In some cases, the ideas of the 1990s and 2000s no longer corresponded to the world of the 2020s and 2030s.

The other major rail project is the cross-border rail network known as TEN-T (and encompassing all modes of transport), which includes a number of priority projects eligible for special financial support and coordination from the EU. These range from civil engineering to support for traffic digitization. These projects aim to overcome bottlenecks, improve the efficiency of transport networks, particularly across borders, and promote more sustainable solutions in terms of both effectiveness and efficiency.

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Some texts on subjects related to European railway policy

◼ Legislative packages
We’ve already mentioned these above. The aim of these legislative packages is to strengthen the interoperability of rail networks across Europe and thereby promote the quality of rail services. One example is European Parliament Directive 2012/34/EU, which defines railway undertakings and establishes the basic rules and principles governing their access to the European rail market, as well as the conditions for granting rail operating licences.

Another example is Directive 2007/59/EC of the European Parliament on the certification of train drivers operating locomotives and trains on the Community’s rail network.

With the status of “railway undertaking” and certified drivers, an operator can begin the process of operating a train service throughout the European Union. But it’s a bit more complicated than that, because you need to find slots, rolling stock and… funding. And that’s not up to the EU…

◼ Technical Specifications for Interoperability 
The European Union’s Technical Specifications for Interoperability (TSIs) for the rail sector are a set of standards and directives designed to facilitate the interoperability of rail systems across Europe. The main aim of these specifications is to enable different national rail networks to operate harmoniously and consistently, while guaranteeing a high level of safety, reliability and performance.

Many of the standards were taken from those already in existence within the UIC. The difference is that, once transposed into directives, TSI standards become mandatory.

◼ State aids 
State aid and its limits are governed mainly by European Union (EU) rules on state aid. The main EU legislative texts in this field are:

• EU Treaties: Article 107 of the Treaty on the Functioning of the European Union (TFEU) concerns state aid. This article establishes the general principle that state aid liable to distort competition in the EU internal market is considered incompatible with that market, except in certain circumstances defined in subsequent articles of the TFEU. This includes aid granted by Member States or through State resources which favors certain undertakings or the production of certain goods and which may affect trade between EU Member States.

• Regulation (EU) 2015/1589: This regulation establishes procedural rules for the European Commission when examining state aid granted by member states. It defines the criteria according to which state aid can be considered compatible with the EU internal market.

• European Commission communication on state aid: The European Commission regularly publishes communications setting out guidelines and conditions for the application of EU state aid rules. These communications provide guidance on different types of state aid, their conditions of compatibility and possible exemptions.

◼ Company mergers and acquisitions
The main European Union (EU) texts restricting company mergers or acquisitions in Europe are as follows:

• Regulation (EC) no. 139/2004: This regulation establishes the rules and procedures for the control of company concentrations within the EU. It aims to ensure fair competition and prevent any excessive concentration of economic power that could harm competition in the European single market.

• Directive 2004/25/EC: Although it does not directly govern mergers and acquisitions, this directive aims to harmonize the rules governing takeover bids within the European Union, in order to guarantee a high level of investor protection and ensure the smooth functioning of the internal market.

• European Commission guidelines: The European Commission regularly publishes guidelines and communications providing guidance on the application of EU merger control rules. These guidelines detail the assessment criteria and procedures to be followed when reviewing mergers and acquisitions.

These legislative texts and guidelines provide the legal and procedural framework for examining and regulating company mergers and acquisitions in Europe, with the aim of guaranteeing the maintenance of fair competition and avoiding any excessive concentration of economic power. Regulation (EC) no. 139/2004 concerns company mergers, while Directive 2004/25/EC concerns takeover bids.

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Why is public service not an EU competence?

Because it is not explicitly defined as a competence of the European Union (EU) in the EU’s founding treaties, notably the Treaty on the Functioning of the European Union (TFEU). Instead, EU competences are specifically defined and divided between the EU and the member states.

• Principles of subsidiarity and proportionality: according to these principles, the EU only intervenes when objectives cannot be sufficiently achieved by member states acting alone, and when its action is necessary to achieve these objectives. Public services are often seen as a national or local matter, and EU intervention is not always necessary to provide effective public services.
• Diversity of national systems: public services vary considerably from one Member State to another in terms of organization, financing and delivery. The EU recognizes this diversity and respects the principle of subsidiarity, allowing member states to define and manage their own public services in accordance with their national traditions, preferences and needs.
• Respect for national competences: the EU respects the competences of member states in many areas, including public services. The Union generally intervenes in this area solely to ensure compliance with the fundamental principles of the internal market, such as free competition, free movement of goods and services, and non-discrimination.

However, although public services are not an exclusive competence of the EU, the European Union can indirectly influence the policies and practices of Member States in this field, notably through legislation on public procurement, competition policy, directives on services, and the funding of specific projects via programs such as the European Regional Development Fund (ERDF) or the European Interconnection Facility (EIF).

Can the EU own a transport company?

No. The European Union is not responsible for directly managing transport companies, and therefore, for example, cannot directly manage a European public rail service. In fact, there is no text to this effect to date. The operation and management of railroads is the responsibility of the Member States or national railway authorities. The EU only has a supporting, coordinating and regulatory role, as explained above.

It should be remembered that the EU can only act within the limits of the competences assigned to it by the Member States. For the time being, therefore, there is no question of the EU managing a night train or high-speed rail network. It can, however, support such projects, but not own a company. 🟧

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Institutional • Regulation and standards• Lexical