EU Court Takes Aim at Czech and Slovenian Rail

     (CN) – The Czech Republic and Slovenia became the latest countries to face the wrath of Europe’s highest court for failing to improve railway infrastructure access in the wake of deregulation.
     The Thursday decisions are the latest among similar findings against other EU countries by the Court of Justice of the European Union. Investigations by the European Commission uncovered numerous violations of the EU’s liberalization of the rail industry, culminating in formal actions against 12 nations in 2010.
     Liberalization of the rail industry requires member states to provide fair network access for all carriers. Whereas large railway conglomerates once performed functions such as issuing access licenses, allocating infrastructure capacities and fixing usage charges, they must now outsource these duties to independent managers tasked with guaranteeing equal and nondiscriminatory use of rail lines.
     In the Czech Republic, the justices found that a maximum charge for the use of rail infrastructure – set annually by the Ministry of Finance – impermissibly restricts the autonomy of the infrastructure manager. The new EU transport scheme requires that railway infrastructure managers be completely independent of both government and rail company ties.
     “That conclusion cannot be called into question by the Czech Republic’s argument alleging the necessity of avoiding the monopoly position held by the infrastructure manager resulting in the setting of excessive charges,” the Luxembourg-based court wrote. “Indeed, under the directive it is for the regulatory body or any other body enjoying the same degree of independence, to monitor free competition in the rail services markets. In the Czech Republic that task has, however, been entrusted to the Office for the Protection of Competition.”
     Czech officials also failed to implement ways to encourage the infrastructure manager to lower charges and level access costs across the board. The country argued that such reductions would harm efforts to improve its crumbling rail lines, which it says violate EU safety standards.
     “While it is true that member states are required to take into account the state of that infrastructure, they are nevertheless also required either to ensure that multi-annual funding agreements containing incentives are concluded or to establish an appropriate regulatory framework for that purpose,” the court wrote. “The deterioration of the infrastructure does not rule out the adoption of measures aimed at ensuring that the costs of managing the infrastructure correspond to those of an efficiently managed infrastructure, on the one hand, and do not include unnecessary costs that could be open to misuse by the infrastructure manager, on the other.”
     While the incentives adopted must also comply with safety objectives, the court found that state funding of the infrastructure manager does not encourage the manager to commit to lower access costs, the court found.
     The European Commission did not show, however, that Czech officials failed to set access charges according to the actual costs incurred in providing rail lines with service. Instead, the justices took the country to task for its failure to improve performance of its railway network – another key component of the deregulation scheme.
     “In this case, the legislative and contractual provisions relied on by the Czech Republic cannot be regarded as constituting such a coherent and transparent whole,” the court wrote.
     Slovenia violated the scheme by allowing its infrastructure manager to prepare timetables and allocate train paths. Since Slovenia’s infrastructure manager was also a railway company – Slovenia Railways – it was prohibited from setting schedules and network paths, the court found in a separate opinion.
     The country rescinded Slovenia Railways’ powers by a legislative act in 2010, but that move came too late to avoid penalties, according to the ruling. Additionally, Slovenia – like the Czech Republic – failed to incentivize its infrastructure manager to reduce costs across its network, the court found. It also noted that changes the country has made since the commission’s report came too late.
     Luxembourg dodged liability in the court’s third opinion, which found no issue with how Luxembourg allows railway Chemins de fer luxembourgeois to allocate train paths in the event of traffic disruptions.
     Luxembourg’s traffic managers are not subject to the same independence requirement as infrastructure managers, the court said.
     “The provision concerns specific measures which must be taken when train movements have been disrupted in order to restore, for safety reasons, normal operating conditions, which is not the case with the other provisions which relate to the establishment of the working timetable and the ad hoc allocation of individual train paths,” the opinion states. “Measures adopted cannot therefore be regarded as directly concerning the essential function of allocating capacity or train paths for the purpose of the law, a function which must be entrusted to an independent allocation body. Rather, that portion deals with ad hoc measures which must be adopted in an emergency to deal with a specific situation and ensure that rights to capacity in the form of train paths may in fact be exercised by the operator holding such rights, in accordance with the working timetable.
     “Therefore, the adoption of such measures falls within traffic management and is not subject to the requirement of independence, so that an infrastructure manager which is simultaneously a railway undertaking may be entrusted with such functions.”
     Slovenia and the Czech Republic join a growing list of EU countries that failed to implement railway improvements quickly enough to satisfy regulators, including France , Spain and Hungary , and Poland . Besides Luxembourg, the high court has thus far only cleared Germany and Austria of tardiness.

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