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EU Regulation and Competition Law in the Transport Sector, 2nd Edition edited by Ortiz Blanco, Luis; Van Houtte, Ben (23rd February 2017)

Part III Inland Transport, 10 Railway Transport (II) Competition

Mark J English

From: EU Regulation and Competition Law in the Transport Sector (2nd Edition)

Edited By: Luis Ortiz Blanco, Ben Van Houtte

From: Oxford Competition Law (http://oxcat.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved. Subscriber: null; date: 21 May 2019

Subject(s):
Joint ventures — Abuse of dominant position — Market definition — European Union — Technology — Passenger transport — Railways — National merger control — State aid

(p. 180) 10  Railway Transport (II) Competition

(I)  Introduction

10.01  According to the European Commission’s 2008 guidelines on State aid for railway undertakings, ‘[t]he railways have unique advantages: they are a safe and clean mode of transport’ and rail transport ‘has great potential for contributing to the development of sustainable transport in Europe’.1 Despite this, the guidelines continue,

… having declined steadily from the 1960s to the end of the 20th century. Both goods and passenger traffic volumes have fallen in relative terms compared with the other transport modes. Rail freight has even shown a decline in absolute terms: loads transported by rail were higher in 1970 than in 2000. The traditional railway undertakings were unable to offer the reliability and good timekeeping their customers expected of them, which led to a shift of traffic from rail to the other modes of transport, chiefly road. Although passenger transport by rail might have continued to grow in absolute terms, this increase seems very limited compared with that of road and air transport.2

10.02  The guidelines also state that ‘[t]he relative decline in Europe’s railway industry is largely due to the way transport supply has been organised historically, essentially on national and monopolistic lines’.3

10.03  As discussed at Chapter 9, market liberalization has come only relatively recently to the European rail sector and, at the time of writing, is far from complete. The trans-European freight network was opened to competition on 15 March 2003. International freight services were liberalized on 1 January 2006 and domestic rail freight services (cabotage) were liberalized on 1 January 2007. By contrast, international passenger services were liberalized only on 1 January 2010 and, at the time of writing, domestic passenger services have yet to be liberalized within the EU.

10.04  It is a trite observation that, like any regulated sector, liberalization and the competition rules in the rail sector play complementary roles: liberalization creates the environment for competition to exist and application of the competition rules safeguards this environment. In other words, without liberalization, there is little or no competition to distort (or for that matter to protect). The relatively slow pace of liberalization in the rail sector in the EU, (p. 181) which is still incomplete, has affected all areas of competition law enforcement in the sector. Further, rail liberalization has happened at different paces in different Member States, which has led to different scope for application of the competition rules in different Member States. For example, in most (but not all) Member States one observes the continued powerful presence of national rail incumbents. The UK is the obvious exception to this general rule.4 While legal and economic barriers have no doubt played their role, it should not be ignored that much of the rail sector may not be viable without significant public support.5 This may also discourage prospective entrants.

10.05  Consistent with a general trend, the Commission has moved away from rail sector-specific legislation and guidance and towards the inclusion of rail in ‘horizontal’ rules of general application. Nevertheless some rail sector-specific rules remain both for antitrust and for State aid.

10.06  Beginning with market definition, this chapter will examine second the antitrust and merger control rules applicable and as applied to the rail sector before conducting a similar examination for the State aid rules.

(II)  Market Definition

10.07  As any area of competition law, relevant markets in the rail sector are defined based on supply and demand factors. That said, the incomplete state of liberalization of the sector—limiting supply and demand opportunities—and the facts of individual cases have inevitably played their role in market definition.

10.08  Broadly, the case law and decisional practice has identified relevant markets for (i) ‘upstream’ aspects such as the provision of access to rail infrastructure, traction services, and rolling stock; (ii) ‘downstream’ services such as passenger rail services, freight transport, and freight forwarding; and (iii) miscellaneous products/services.

10.09  Issues of market definition more generally are dealt with at Chapter 8, Section II.

(A)  ‘Upstream’ services

10.10  A number of cases have identified a relevant market for ‘access to and management of railway infrastructure’ (e.g. access to the physical network of tracks and stations).6 The relevant (p. 182) market may be limited essentially to the part of the infrastructure under investigation (e.g. a specific intercity railway path,7 or the Channel Tunnel and its access areas).8

10.11  Another ‘upstream’ market identified in the case law and decisional practice is that for the provision traction services (i.e. access to locomotives and drivers) for passenger and freight services.9 Different Member States have their own type of track etc., and locomotives and drivers must comply with national technical standards and the driver requires special qualifications to drive on a national railway network, which de facto limits a potential downstream entrant’s choice, possibly to just the national incumbent.10 The Commission has also suggested that it considers there to be a distinct market for the supply of electrical traction current.11

10.12  The case law and decisional practice has also identified relevant markets related to rolling stock (i.e. locomotives, carriages, and wagons), with a possible distinction between rolling stock for passenger and freight services,12 and rolling stock maintenance services.13

(B)  Rail transport of passengers

10.13  The Commission’s approach to market definition for international rail passenger services resembles the ‘origin and destination’ (or ‘O&D’) approach seen in the aviation industry (see Chapter 16, Section II). However, unlike airplanes, rather than flying from a to b, trains typically serve a route, stopping at various points along the way. In its 2014 Thalys merger decision, the Commission defined the relevant markets as certain international routes (e.g. Paris-Brussels, Paris-Netherlands, and Brussels-Germany), excluding itineraries within a single Member State.14

10.14  Like aviation cases, the Commission has distinguished between different types of passenger, essentially classifying passengers as business/‘time-sensitive’ (less price sensitive) and leisure/‘non-time-sensitive’ (more price sensitive).15 As one may expect, the Commission considers that business/time-sensitive passengers are less likely to consider other modes of transport—especially those that imply longer journey times—as valid substitutes than leisure/non-time-sensitive passengers. For example, in its 1998 Eurostar merger decision, the Commission (p. 183) considered that only air services to Brussels from London’s Heathrow and Gatwick airports were valid substitutes for time-sensitive passengers, to the exclusion of services from other London airports and other modes of transport (e.g. sea crossings, coach, and driving one’s own car). The Commission took a more relaxed view in respect of leisure/non-time-sensitive passengers.16 The Commission has also on occasion considered the competitive constraint of indirect train services.17

10.15  A small number of Commission decisions have considered national rail passenger transport services.18

(C)  Rail transport of freight

10.16  As concerns freight services, the case law and decisional practice distinguishes between the rail freight/cargo services (i.e. the physical movement of goods, and ancillary services) and freight forwarding (i.e. the organization of transport for the specific demand of a customer, possibly including various additional services up to the organization of a whole logistics chain).19

10.17  The Commission has considered that owing to differing technical and regulatory requirements, markets for freight services are generally national, but that there has been a trend towards international services as the European freight markets are liberalized. Also, the Commission has noted the existence of certain international ‘corridors’, which may be seen as separate markets.20 Only a relatively small number of cases concern the international transport of freight.21 In these cases, the relevant markets have generally been determined by the facts of the individual case, for example, the transport of freight between the UK and continental Europe,22 or international of transport of freight via the Alps.23 On occasion, the Commission has included other modes of land transport as part of the same relevant market.24

10.18  A number of Commission decisions have concerned domestic freight services. In these cases, the Commission has generally considered that not all transport modes can be considered as substitutable, suggesting that there is a separate relevant market for rail freight transport.25 (p. 184) The Commission has also suggested that it may be appropriate to distinguish between ‘block train’ services (i.e. entire trains running from a single point of origin to a single point of destination) and the more complex single wagon services (i.e. services in which trains are assembled in a marshalling yard in the region of origin, transported to a marshalling yard in the region of destination and disassembled into single wagon loads for transport to their final destination).26 The Commission has also suggested that it may find separate markets for different types of freight.27

10.19  A small number of Commission decisions concern freight forwarding services, which, as mentioned above, generally are considered not to belong to the same relevant market as the transport of cargo.28 The Commission has suggested that there may be a market for land freight forwarding services comprising both road and rail services.29 The Commission also has also generally distinguished between domestic and international freight forwarding services.30

(III)  Antitrust

(A)  The legislative framework

10.21  Since 1 May 2004, Articles 101 and 102 TFEU apply to inland transport, including rail. Similarly, since the same date, the procedural framework established by Regulation 1/2003 applies to inland transport. Indeed, Regulation 1/2003 largely repealed Regulation 1017/68,33 which contained provisions equivalent to those of Articles 101 and 102 TFEU34 and a separate procedural framework for inland transport. Therefore, since May 2004, the general EU antitrust rules apply to the rail sector.35

(p. 185) 10.22  Before this development, the Commission had taken the position that there was no substantive difference between Arts 101 and 102, and their equivalents in Regulation 1017/68.36 This position was endorsed by the General Court.37 Therefore, the pre-2004 decisional practice and case law of the Court applying the relevant provisions of Regulation 1017/68 can be read as if Arts 101 and/or 102 TFEU had been applied. As the distinction is now obsolete and for the sake of simplicity, this chapter refers to Articles 101 and 102 for pre-2004 cases.

10.23  Nevertheless, a small number of specific substantive rules that were contained in Regulation 1017/68 remain in force. These have since been codified in Regulation 169/2009.38 As Regulation 169/2009 was merely an exercise in codification, the Regulation did not endorse the relevance or suitability of the continuation of these sector-specific rules. Now that Articles 101 and 102 TFEU are applicable in their entirety, one may wonder what useful purpose they continue to serve.39 Nevertheless, for the sake of completeness,40

10.24  Article 1 of Regulation 169/200941 states that:

The provisions of this Regulation shall, in the field of transport by rail, road and inland waterway, apply both to all agreements, decisions and concerted practices which have as their object or effect the fixing of transport rates and conditions, the limitation or control of the supply of transport, the sharing of transport markets, the application of technical improvements or technical cooperation … and to the abuse of a dominant position on the transport market. These provisions shall apply also to operations of providers of services ancillary to transport which have any of those objects or effects.

10.25  Article 2 of Regulation 169/200942 states that:

  1. 1.  The prohibition in Article [101](1) of the Treaty shall not apply to agreements, decisions or concerted practices the object and effect of which is to apply technical improvements or to achieve technical cooperation by means of:

    1. (a)  the standardisation of equipment, transport supplies, vehicles or fixed installations;

    2. (b)  the exchange or pooling, for the purpose of operating transport services, of staff, equipment, vehicles or fixed installations;

    3. (c)  the organisation and execution of successive, complementary, substitute or combined transport operations, and the fixing and application of inclusive rates and conditions for such operations, including special competitive rates;

    4. (d)  the use, for journeys by a single mode of transport, of the routes which are most rational from the operational point of view;

    5. (e)  the coordination of transport timetables for connecting routes;

    6. (p. 186) (f)  the grouping of single consignments;

    7. (g)  the establishment of uniform rules as to the structure of tariffs and their conditions of application, provided such rules do not lay down transport rates and conditions.

  2. 2.  The Commission shall, where appropriate, submit proposals to the Council with a view to extending or reducing the list in paragraph 1.

10.26  As it is an exception to the general rule, the Commission has consistently held that Article 2 of Regulation 169/2009 (and its predecessor) should be interpreted restrictively. In Far Eastern Freight Conference, the Commission held that this provision is ‘merely declaratory and lists a number of different kinds of agreement which do not fall within the scope of Article [101(1) TFEU]’ and that only agreements whose ‘sole object and sole effect is to achieve technical improvements or technical cooperation’ fall within the scope of the exception.43

10.27  In Deutsche Bahn, the General Court held that ‘[t]he introduction of a legal exception for agreements of a purely technical nature cannot amount to an authorization, on the part of the [EU] legislature, allowing agreements to be concluded whose purpose is the joint fixing of prices. If it were otherwise, any agreement establishing a joint price-fixing system in the railway, road or inland waterway transport sector would have to be regarded as a technical agreement within the meaning of Article [2 of Regulation 169/2009], and Article [101 as applied to the sector] would be rendered nugatory’.44

(B)  Agreements and concerted practices

10.28  As mentioned above, until 1 May 2004, formally speaking, Article 2 of Regulation 1017/68, rather than Article 101 TFEU (and its predecessors) applied to rail transport services. Article 101 TFEU applied otherwise (e.g. to infrastructure services).45 However, as also mentioned above, this was in itself of little practical consequence as the two provisions were interpreted consistently.

10.29  In Eurotunnel,46 the Commission considered the compatibility of a ‘usage contract’ between (i) Eurotunnel (the concessionaires of and managers for the Channel Tunnel, an under-sea rail link between France and the UK), (ii) British Rail (‘BR’), and (iii) Société National des Chemins de Fer (‘SNCF’). The usage contract covered arrangements for the use of the Channel Tunnel and had already been exempted for 3 years by the Commission in 1991. It provided that BR and SNCF could operate the international passenger and freight trains through the Channel Tunnel, for which half of the tunnel’s capacity was earmarked, and Eurotunnel would operate the ‘shuttle’ services (i.e. services carrying cars, coaches, caravans, and freight vehicles through the Channel Tunnel), for which the other half of the (p. 187) tunnel’s capacity was earmarked. The Commission found that under the usage contract, BR and SNCF were, together, allocated 100 per cent of the capacity available to operate international passenger and freight rail services, thus foreclosing competition from other railway undertakings and that the agreement thus had both an object and effect of restricting competition.47 The Commission’s decision exempted the usage contract for 30 years on the condition that BR and SNCF do not oppose the sale to competing railway undertakings of at least 25 per cent of the hourly capacity of the Tunnel in each direction that is reserved for international passenger and freight trains.48

10.30  BR and SNCF appealed to the General Court, which annulled the Commission’s decision.49 The General Court held that as Eurotunnel was under no obligation to use 50 per cent of capacity for ‘shuttle’ services, it could make part of that capacity available to third parties for the operation of international trains.50 In this respect, the General Court found that the Commission committed an error of fact that vitiated its decision.51 In 1999, the Commission re-examined the agreement and closed the case with a ‘comfort letter’.52

10.31  In HOV SVZ/MCN,53 the Commission considered the compatibility with Article 101 TFEU of the maritime container network (‘MCN’) agreement between Deutsche Bahn (‘DB’), Nederlandse Spoorwegen (‘NS’) and Société National des Chemins de Fer Belges (‘SNCB’), Intercontainer (a joint subsidiary of 24 railway undertakings responsible for organizing and selling international container carriage services) and Transfracht (a subsidiary of DB that also organized and sold international container carriage services). The MCN provided for cooperation between the parties in respect of the carriage by rail of sea-borne containers to or from Germany, which pass through a Belgian, Dutch, or German port. The Commission found that ‘the parties to the agreement make a single offer based on tariffs agreed between them, and the transport is provided respectively by Intercontainer to or from the western ports [eg Antwerp or Rotterdam] and by Transfracht to or from the northern ports [eg Hamburg, Bremen and Bremerhaven]’.54Therefore, the Commission found that the MCN had the object and effect of restricting actual or potential competition between Transfracht and Intercontainer and between the railway undertakings for the sale of combined transport services. The Commission also found that the MCN gave Transfracht and Intercontainer an unfair competitive advantage vis-à-vis their competitors through their preferential relationship with the railway undertakings party to the MCN.55 In Deutsche Bahn,56 the General Court confirmed the Commission’s Article 101 TFEU assessment, finding that the MCN ‘consisted in “directly or indirectly fixing prices” within the meaning of (p. 188) Article [101(1)(a) TFEU]’.57 This case also concerns the application of Article 102 TFEU to DB (i.e. Section III.C).

10.32  In Night Services,58 in a brief decision, the Commission assessed for compatibility with Article 101 TFEU various agreements between BR, DB, NS, SNCF, and SNCB establishing a joint business called European Night Services (‘ENS’) and concerning the overnight international passenger rail services between the UK and continental Europe, through the Channel Tunnel. The Commission found the agreements to be restrictive of competition between the participating railway undertakings by object and by effect.59 Nevertheless, the Commission considered that the agreements created efficiencies (i.e. the offering of new services that previously did not exist) and granted an exemption, subject to conditions aimed at facilitating new entry.60

10.33  On appeal, the General Court annulled the Commission’s decision in a highly critical ruling.61

10.34  First, the General Court concluded that the Commission had not provided sufficient reasons concerning market shares of the parties and, hence, on whether the examined agreements had the capacity to affect interstate trade. The General Court held that this shortcoming was alone sufficient to annul the Commission’s decision.62

10.35  Second, in a well-known statement on object and by effect in Article 101 TFEU more generally, the General Court held that:

[i]n assessing an agreement under Article [101 TFEU], account should be taken of the actual conditions in which it functions, in particular the economic context in which the undertakings operate, the products or services covered by the agreement and the actual structure of the market concerned … unless it is an agreement containing obvious restrictions of competition such as price-fixing, market-sharing or the control of outlets … In the latter case, such restrictions may be weighed against their claimed procompetitive effects only in the context of Article [101(3) TFEU], with a view to granting an exemption from the prohibition in Article [101(1)].63

10.36  The General Court held that it was therefore necessary to examine the Commission’s assessment of the effects of the agreements on actual and potential competition.64

10.37  Concerning the restriction of potential competition between the parent railway undertakings, the General Court found that the Commission decision ‘fails to take account of the economic context and characteristics’ and, showing some degree of scepticism towards the liberalizing effects of Directive 91/440 at the time of the decision, that ‘it would be (p. 189) unrealistic, given the novelty and the specific features of the night rail services in question, for the parent undertakings to set up other subsidiaries in other Member States having the status of railway undertakings for the sole purpose of forming a new joint venture to compete with ENS’. The General Court also observed that ‘no third parties took any steps during the administrative procedure to submit observations as a potential competitor capable of being affected or concerned by the implementation of the ENS agreements’.65

10.38  It has been observed that the Night Services case is an example of a ‘Catch-22’ type situation (i.e. in markets where competition has experienced difficulties in developing, the competition rules might protect incumbents rather than promoting new entry).66 However, as has also been observed, the legislative framework continues to evolve, fostering further competition. It should be borne in mind that the Commission’s reasoning in the Night Services decision was very brief, and the decision was annulled because of the absence or insufficiency of reasoning.

10.39  Concerning cartels, in July 2015 Commission fined two providers of ‘block train’ cargo services (i.e. rail services that deliver cargo from one hub to another without splitting or storing carriages, over €49 million). The Commission found that Schenker (a subsidiary of German rail incumbent DB), Express Interfracht (part of Austrian rail incumbent Österreichische Bundesbahnen [‘ÖBB’]) and Swiss rail operator Kühne+Nagel engaged in various forms of customer allocation and price fixing on their ‘Balkantrain’ and ‘Soptrain’ block train services. The Commission found that the cartel operated from 2004 until 2012.

10.40  DB/Schenker was fined approximately €32 million, and Express Interfracht/ÖBB was fined approximately €17 million. Kühne + Nagel did not receive a fine as it blew the whistle on the cartel. DB/Schenker and Express Interfracht/ ÖBB received discounts on their fines for leniency cooperation and for settling the case.67

10.41  Interestingly, the Commission’s press release underlines that the infringement decision does not cover ‘[t]he intrinsic upstream coordination of the operators (joint purchasing of transport services, such as locomotion/traction, trailers and other equipment from national rail carriers) […] because such coordination to create a “blocktrain” service is not anticompetitive’.68 Therefore, as well as finding and sanctioning a cartel, the Commission decision appears—indirectly—to approve the upstream coordination in so far as it is necessary to create the relevant ‘block train’ services.

10.42  In Freight Forwarding,69 the Commission fined fourteen groups of companies a total of €169 million for the operation of four distinct cartels concerning ‘door to door’ international airfreight forwarding services. As well as air transport, freight forwarding may involve the transport of goods by rail.

(p. 190) 10.43  On 24 November 2015, Commission officials carried out unannounced inspections of certain Austrian train companies for suspected infringements. The Commission’s press release stated that ‘[t]he Commission has concerns that the companies concerned may have violated EU antitrust rules that prohibit cartels and restrictive business practices and/or abuse of a dominant market position […] The Commission’s investigation relates to alleged anti-competitive practices aimed at excluding competing rail passenger transport operators from the market’.70 In addition, on 28 June 2016, Commission officials carried out unannounced inspections of certain rail operators in Austria, Slovakia and the Czech Republic for suspected competition law infringements.71

(C)  Unilateral conduct: abuse of a dominant position

10.44  As mentioned above, until 1 May 2004, formally speaking, Article 8 of Regulation 1017/68, rather than Article 102 TFEU (and its predecessors), applied to rail transport services.72 However, as described above, this had no substantive impact on the interpretation of the EU competition rules on unilateral conduct.

10.45  Also mentioned, a feature of the rail sector in most, but not all, Member States is the continued presence of powerful incumbent undertakings. Furthermore, in the EU, railway infrastructure is considered a ‘natural monopoly’ to which ‘equitable and non-discriminatory access’ must be granted.73 Perhaps unsurprisingly therefore, the Commission has been prepared to enforce Article 102 in this sector.74

10.46  In HOV SVZ/MCN, in addition to an infringement of Article 101 TFEU,75 the Commission found that DB had abused its dominant position. The Commission found that DB (in combination with its subsidiary, Transfracht, part of the DB undertaking) controlled the level of tariffs for carriage via the German ports covered by the MCN. The Commission also found that as a compulsory supplier of rail services in Germany, and as a powerful member of the MCN, DB was able to control the tariffs also for carriage via non-German (i.e. Belgian and Dutch) ports.76 The Commission found substantial differences in the prices for services via western (i.e. Dutch and Belgian) ports and northern (i.e. German) ports that were not (p. 191) justified by objective factors: it was generally more expensive to transport goods via Dutch or Belgian ports than it was via German ports. The Commission found therefore that DB had abused its dominant position by imposing discriminatory prices within the MCN in order to promote its own services and those provided by its subsidiary, Transfracht.77 The Commission imposed an ECU 11 million fine on DB in respect its abusive conduct.78 DB appealed the decision, but the General Court upheld it in its entirety, including the amount of the fine.79

10.47  In GVG/FS,80 the Commission investigated a complaint from Georg Verkehrsorganisation (‘GVG’), a small private German railway undertaking, against Ferrovie dello Stato (‘FS’), the Italian incumbent railway undertaking. GVG wished to provide international rail passenger services from various points in Germany to Milan (Italy), via Basle (Switzerland). GVG had secured the necessary access to the Swiss and German rail networks. However, GVG complained that FS, the Italian rail incumbent, refused to give GVG access to the Italian rail infrastructure and refused to enter into negotiations to form an ‘international grouping’,81 provide ‘traction’ (i.e. a locomotive and a driver) etc.—all of which were claimed to be necessary to provide the Italian segment of the service.

10.48  The Commission found that the Italian railway infrastructure controlled by FS was an ‘essential facility’82 and that FS was dominant in traction services and in intercity rail journeys in Italy. The Commission also concluded that FS had abused its various dominant positions by refusing to (a) provide traction to GVG (necessary for GVG due to lack of network interoperability in different countries); (b) grant GVG access to the Italian rail infrastructure on fair and non-discriminatory terms; or (c) negotiate the formation of an international grouping with GVG.83

10.49  However, by the time of the Commission’s decision, FS had entered into an international grouping with GVG, and agreed to provide traction services and suitable train paths on terms that allowed GVG to enter its desired routes. In addition, FS undertook to enter into international groupings with other railway undertakings and, for a period of five years, to provide traction services on a non-discriminatory basis to other railway undertakings wishing to provide international rail passenger services.84 Although the Commission found an abuse, owing to the novelty of the case, FS’s subsequent cooperation with GVG and the undertakings offered by FS, the Commission did not impose a fine on FS.85

(p. 192) 10.50  The GVG/FS case provides a good example of the competition rules supplementing liberalization: the legislative framework provided for the possibility of forming an international grouping, whereas in the specific circumstances of the case, the Commission found that Article 102 TFEU created the obligation for FS to form one with GVG.

10.51  In Deutsche Bahn I and II,86 the Commission accepted commitments from DB pursuant to Article 9 of Regulation 1/2003 and closed its investigations. The investigations concerned the supply of traction current, the electricity used to propel electric locomotives, to railway undertakings in Germany. DB Energie, a subsidiary of DB, was the only supplier of traction current in Germany. The Commission was concerned that DB’s pricing for traction current—including discounts—on the downstream markets for the provision of rail freight and long-distance passenger transport services constituted a margin squeeze that may prevent undertakings that are as efficient as DB on the downstream markets from competing profitably.87 In practice, members of the DB group qualified for larger discounts than competitors did, owing to their greater consumption.88 The Commission considered traction current to be an indispensable input for undertakings to compete on the downstream market and that DB’s pricing practices were likely to have anticompetitive effects.89

10.52  In light of these provisional findings, DB committed to introduce a new system for traction current pricing under which DB would price separately for accessing the network and for the electricity. In addition, DB committed to charge the same price for electricity to all railway undertakings, without volume or duration discounts (DB’s downstream operations being the largest ‘customer’ of DB energy). DB also committed to offer access to its traction current network for third-party energy providers so that they can supply traction current in competition with DB. The commitments will lapse if 25 per cent of traction (p. 193) currents purchased by downstream competitors of DB are sourced from third-party electricity providers.90

10.53  In AB Lietuvos geležinkeliai,91 the Commission (at the time of writing) suspects that the Lithuanian railway incumbent (‘LG’) has abused its dominant position by removing a railway track running between Lithuania and Latvia and thereby potentially limiting the number of rail connections between Lithuania and Latvia. The Commission’s press release announcing the issuance of a statement of objections against LG states that the track removal may have ‘limited competition on the rail markets in Lithuania and in Latvia, in particular by obstructing the plans of a major customer of LG from redirecting its railway freight to Latvia using the services of other rail operators’.92

10.54  On 24 November 2015, Commission officials carried out unannounced inspections of certain Austrian rail companies for suspected infringement of Article 102.93 In April 2016, Commission officials carried out unannounced inspections of České dráhy, the Czech national rail operator for suspected infringements of Article 102 that may have foreclosed rival passenger transport operators.94

(IV)  Merger Control

10.55  In contrast to the antitrust rules, the EU merger control rules have been applicable to the rail transport sector since the entry into force of the first EU Merger Regulation in 1990.95 At the time of writing, there is no, and there has not been, EU merger control legislation or guidelines specific to the rail sector.

10.56  That said, transactions necessarily take place within the regulatory framework in place at the relevant time, which has been and continues to be more restrictive for passenger services than for freight services.

10.57  For example, the liberalization of international rail passenger services on 1 May 2010 allowed the SNCF and London & Continental Railways to move from running the cross-Channel ‘Eurostar’ services as an international grouping provided for under Directive 91/440 to a full-function joint venture, under which the joint venture entity was responsible for marketing, operating, and managing the Eurostar services in the UK, France, and (p. 194) Belgium.96 In May 2015, the Commission conditionally approved the acquisition of sole control in Eurostar by SNCF.97 The commitments were designed to facilitate competitive entry on the London-Brussels and London-Paris rail routes, currently operated only by Eurostar. In addition to access to ticket offices, relevant areas of train stations, maintenance centres etc., the parties committed to make available to a new entrant train paths currently used by Eurostar at ‘peak times’. These commitments resemble slot commitment packages commonly seen in aviation merger and alliance reviews.98

10.58  Similarly, in September 2014, the Commission authorized the creation of a new Thalys joint venture between SNCF and SNCB (the French and Belgian rail incumbents, respectively).99 This new joint venture company, which is a railway undertaking in its own right, replaces collaboration originally involving SNCF and SNCB, as well as DB and NS (the German and Dutch rail incumbents, respectively) that provided for international passenger rail services under the Thalys brand. The Commission found the competitive impact of the operation to be limited as it essentially concerned a restructuring of the existing relationship between SNCF and SNCB, with the only change being the introduction of a non-compete clause between SNCF and SNCB, which the Commission found would have only a limited effect on potential competition. In addition, the Commission considered that the JV would face competitive constraints from intermodal competition and new entrants.100 The Commission nevertheless carried out a route-by-route assessment of the JV’s main international routes.101

10.59  More generally, ‘concentrations’ in the rail sector have included: (i) acquisitions of sole control,102 (ii) acquisitions of joint control,103 and (iii) full-function joint ventures.104 Broadly speaking, mergers in the rail sector have concerned: (i) international passenger (p. 195) services,105 (ii) domestic passenger services,106 (iii) domestic and international freight services,107 (iv) rolling stock,108 and (v) freight forwarding and logistics.109

10.60  On occasion, notified transactions with particularly strong national nexus have been referred by the Commission to national competition authorities, either in whole110 or in part.111

(V)  State Aid

(A)  Preliminary observations

10.61  The Commission considers that ‘a dynamic railway industry is necessary for establishing an efficient, clean, and safe goods and passenger transport system that will contribute to the creation of a single European market enjoying lasting prosperity’. By the same token, the Commission believes that road congestion is ‘plaguing’ many parts of the EU.112

(p. 196) 10.62  Nevertheless, the Commission recognizes that, historically, the rail sector has not fulfilled its potential: ‘in the absence of competition … railway undertakings had no incentive to reduce their operating costs and develop new services. Their activities did not bring in sufficient revenue to cover all the costs and investments necessary. These essential investments were not always made and sometimes Member States forced the national railway undertakings into … heavy indebtedness … which itself had a negative impact on their development’.113 In addition, the European Union ‘has inherited a mosaic of national rail networks characterised by different track gauges and incompatible signalling and safety systems’.114

10.63  Public contributions to the European railway sector have been, and continue to be, significant.115 This is due in part to the frequently poor state of the sector, including poor interconnectivity, and, in part, to the widely held view that the externalities of the railway sector (e.g. noise, air pollution, safety, and congestion) are better than those of alternative transport modes, especially road:116 according to the Commission, ‘[t]he granting of State aid to the railway industry can be authorised only where it contributes to the completion of an integrated European market, open to competition and interoperable and to [EU] objectives of sustainable mobility’.117 As well as general State aid principles, State aid policy in this sector must accommodate the EU Common Transport Policy, the various pieces of liberalizing legislation, as well as other policy considerations such as regional development, and social and environmental protection.118 For example, in a document accompanying its 2012 report on competition policy, the Commission stated that ‘[a]n overarching objective of rail transport policy is to increase the share of freight and passengers transported via rail’.119

10.64  As already observed,120 the regulatory context is relevant to substantive State aid assessments. Indeed, the Commission’s State aid guidelines for railway undertakings are based on the principles established in the successive railway liberalization packages,121 and, according to the Commission, the aim of the guidelines is ‘to improve the transparency of public financing and legal certainty … in the context of the opening-up of the markets’.122

(p. 197) (B)  The legislative framework

10.65  The general State aid provisions apply to the rail sector.123 However, in addition, there is a lex specialis for State aid in the inland transport sector, including rail transport found in Articles 93 and 96 TFEU. These rules apply in addition to the lex generalis of Article 107 and 108 TFEU. Article 93 therefore provides an additional basis upon which State aid may be permitted.124 Article 96 TFEU prohibits Member States from engaging in certain supportive or protectionist activities in relation to transport operations in the EU, unless approved by the Commission. However, this provision is rarely used in practice.125

10.66  For many years—until their repeal in 2009126—Regulations 1191/69127 and 1107/70128 were central the Commission’s State aid assessments in the inland transport sector, including rail. Regulation 1191/69 created a framework for the assessment of funding by Member States of public services in the inland transport sector. Regulation 1107/70 fleshed out the rules for assessing the compatibility of State aid granted for the reimbursement for the fulfilment of public service obligations.

10.67  The Court of Justice’s seminal Altmark judgment129 dealt with the issue of the circumstances in which compensation for the carrying out of public services would be considered as State aid. In addition, the Court of Justice in Altmark held that Regulation 1107/70 set out exhaustively the circumstances in which aid could be granted under Article 93 TFEU.130 Therefore, it was not possible to refer directly to Article 93 TFEU. However, now that Regulation 1107/70 has been repealed, one can refer directly to Article 93 TFEU.

(C)  The PSO Regulation

10.68  Regulation 1370/2007 (the ‘Public Service Obligation Regulation’, or ‘PSO Regulation’)131 follows from the Altmark judgment and sets out the circumstances in which Member States may grant compensation for the carrying out of public services in the rail (and road) sector while being exempted from the prior notification requirement of Article 108(3) TFEU.132 It applies to the operation of national and international public passenger transport services by (p. 198) rail and other track-based modes of transport (and by road), and sets out the circumstances in which Member States may act to guarantee the provision of transport services of general interest ‘which are among other things more numerous, safer, of a higher quality or provided at lower cost than those that market forces alone would have allowed’.133

10.69  Article 3 of the PSO Regulation establishes the principle that where Member States grant an operator and exclusive right and/or compensation, in return for assuming and carrying out a public service obligation, this shall be done using a ‘public service contract’.134

10.70  Article 4 sets out the mandatory content of public service contracts and ‘general rules’. In particular, Articles 4(1) and 4(2) of the PSO Regulation specify that public service contracts shall:

  • •  clearly define the public service obligations with which the public service operator is to comply, and the geographical areas concerned;

  • •  establish in advance, in an objective and transparent manner, the parameters on the basis of which the compensation payment, if any, is to be calculated, and the nature and extent of any exclusive rights granted, in a way that prevents overcompensation;

  • •  determine the arrangements for the allocation of costs connected with the provision of services; and

  • •  determine the arrangements for the allocation of revenue from the sale of tickets that may be kept by the public service operator, repaid to the competent authority, or shared between the two.

10.71  Article 4 thus incorporates the well-known Altmark criteria for when public service compensation shall not be considered a State aid.

10.72  Articles 4(3) and 4(4) specify that generally the duration of public service contracts for passenger rail services may not exceed 15 years. However, this duration may be extended by 50 per cent if the operator ‘provides assets which are both significant in relation to the overall assets needed to carry out the passenger transport services covered by the public service contract and linked predominantly to the passenger transport services covered by the contract’ or, in the case of public service contract in ‘outermost regions’, if justified by costs linked to ‘the particular geographic situation’. In exceptional circumstances linked to the amortization of infrastructure, rolling stock, or vehicular investment, a public service contract may have a longer duration.

10.73  Article 5 sets out the rules for the award of public service contracts, and establishes fair and open procedures for the award of such contracts. Article 8 contains details of a transitional period. In particular, Article 8(2) states that the award of public service contracts by rail (and by road) shall comply with Article 5 as of 3 December 2019. This Article also states that during the transitional period, Member States shall take measures to bring their procedures into compliance with Article 5. To this end, midway through the transitional period, Member States are obliged to provide the Commission with a progress report on their efforts to bring their procedures in line with Article 5.

(p. 199) 10.74  Article 6 specifies that compensation connected with services falling within the scope of the Regulation shall comply with Article 4 (see above) and the Annex. In particular, point 2 of the Annex states that ‘[t]he compensation may not exceed an amount corresponding to the net financial effect equivalent to the total of the effects, positive or negative, of compliance with the public service obligation on the costs and revenue of the public service operator’ and provides guidance on how to calculate the ‘net financial effect’. Point 5 of the Annex contains basic rules on the accounts of the public service operator. This provision aims to increase transparency and avoid cross-subsidization.

10.75  Article 7 contains rules on publication by Member State authorities of reports concerning the public service obligations for which they are responsible and, at least one year before launching an invitation to tender for an award, details of the award envisaged. The latter shall be published in the Official Journal.

10.76  Article 9 states that public service compensation for the operation of public passenger transport services shall be deemed compatible with the internal market and, as such, exempt from the prior notification requirement of Article 108(3) TFEU.

10.77  Article 10 repeals Regulations 1191/69 and 1107/70.

10.78  In Public service contracts between the Danish Government and Danske Statsbaner135 the Commission examined for compatibility with the PSO Regulation and the Altmark case law public service contracts concluded between Denmark and Danske Statsbaner, a wholly publicly owned Danish railway company. Despite complaints alleging overcompensation, the Commission found that the Danish authorities’ policy of receiving dividends from Danske Statsbaner meant that there had in fact been no overcompensation (i.e. ‘excess’ profits, if any, had been returned to the state through the payment of dividends).136 Nevertheless, the Commission requested that Denmark amend its compensation mechanism to eliminate the risk of future over-compensation. The new mechanism introduces a maximum level of profit, but rewards the railway company for improvements in quality of service and efficiency gains.137

10.79  The Commission decision was appealed by bus operator Andersen. The General Court annulled the Commission approval decision as the General Court found that the Commission had assessed the aid under the wrong legal instrument.138 The Commission appealed the General Court ruling and the Grand Chamber of the Court of Justice handed down its ruling on 6 October 2015.139 The Court of Justice partially annulled the General Court ruling,140 and referred the case back to the General Court for judgment.141

(p. 200) 10.80  In 2014, the Commission opened an in-depth investigation concerning measures by the Italian state in favour of the Italian rail incumbent. The Commission is concerned, inter alia, whether certain PSO designations were strictly necessary.142

(D)  The 2008 Commission Guidelines for State aid to railway undertakings

10.81  As announced in the PSO Regulation143 and by the Commission in its 2005 Fret SNCF decision,144 in 2008, the Commission issued guidelines for the application of the State aid rules to the railway sector (the ‘Railway State Aid Guidelines’).145 The Railway State Aid Guidelines concern ‘railway undertakings’ within the meaning of Directive 91/440.146

10.82  Chapter 2147 of the Railway State Aid Guidelines concerns public financing of railway undertakings by means of railway infrastructure funding. The chapter does not cover the public financing of infrastructure as such.148 Rather, it examines the effects of public financing of infrastructure on railway undertakings.149 Although the Commission recognizes that public financing of infrastructure may in certain circumstances advantage a given railway undertaking (and thus constitute State aid), the guidelines state that ‘[w]here infrastructure use is open to all potential users in a fair and non-discriminatory manner, and access to that infrastructure is charged for at a rate in accordance with Community legislation (Directive 2001/14/EC), the Commission normally considers that public financing of the infrastructure does not constitute State aid to railway undertakings’.150

10.83  Chapter 3151 of the Railway State Aid Guidelines concerns aid for the purchase and renewal of rolling stock. The guidelines state that in certain circumstances State support for the purchase and renewal of rolling stock may be in the common interest and therefore compatible with the State aid rules.152 In assessing aid for these purposes, the Commission will usually apply the criteria applicable to one or more of the following categories of aid:153 (a) aid for the coordination of transport;154 (b) aid for restructuring railway undertakings;155 (c) aid (p. 201) for small- and medium-sized enterprises;156 (d) aid for environmental protection;157 (e) aid to offset costs relating to public service obligations and in the framework of public service contracts;158 and/or (f) regional aid.159

10.84  In the case of regional aid, the Commission considers that, provided certain conditions are met, State aid for initial investment in and, if for use in remote or sparsely populated regions, for replacement of rolling stock may be considered compatible with State aid rules. When the aid is for replacement of rolling stock, the derogation applies only when all the rolling stock that the aid is used to modernize is more than 15 years old.160

10.85  In order to benefit from this derogation, four cumulative conditions must be met: (a) the rolling stock is exclusively assigned to a specific region or a specific line that serves more than one region;161 (b) the rolling stock remains exclusively assigned to the specific region/line for at least ten years; (c) the rolling stock in question meets the latest interoperability, safety and environmental standards applicable to the network concerned; and (d) the Member State can show that the project contributes to a coherent regional development strategy.162

10.86  Importantly, the Railway State Aid Guidelines specify that the other conditions of the regional aid guidelines must be satisfied. In particular, intensity aid ceilings, regional aid maps, and rules on the accumulation of aid apply.163

10.87  For example, in Silent Rhein,164 the Commission approved a €20 million German scheme to provide public grant to fund the retrofitting of railway freight wagons with noise-reduced composite brakes as part of the ‘Silent Rhein’ pilot project.165

10.88  Chapter 4166 of the Railway State Aid Guidelines concerns debt cancellation. The Railway State Aid Guidelines recognize that a number of railway undertakings have, over the years, become heavily indebted and that may compromise their ability to make the necessary (p. 202) investments in infrastructure and rolling stock.167 This was largely addressed by Article 9 of Directive 91/440, and, consequently, the indebtedness of many railway undertakings was reduced in the 1990s, although a number of them still have levels of debt that the Commission considers excessive.168

10.89  According to the Commission, complete or partial debt cancellation in favour of railway undertakings constitutes State aid if: (a) it is financed through State resources; (b) the recipient railway undertaking is active in markets open to competition; and (c) it strengthens the competitive position of the recipient railway undertaking in at least one of those markets.169 In this respect, the Commission notes that Directive 2001/12 opened up the international rail freight services market to competition on the trans-European freight network from 15 March 2003. For this reason, the Commission considers that the market was generally open to competition on this date at the latest.170

10.90  The Commission will assess debt relief by reference to the relevant guidelines for State aid for rescuing and restructuring undertakings in difficulty171 and Chapter 5 of the Railway State Aid Guidelines.172 In addition, the Commission considers that under certain circumstances, it should be possible to authorize aid of this nature without financial restructuring, so long as this relates to debts incurred before the entry into force of Directive 2001/12 on 15 March 2001.173

10.91  Chapter 5174 of the Railway State Aid Guidelines concerns aid for restructuring a freight division of a railway undertaking. Although these guidelines do not exempt railway undertakings from the applicable guidelines on rescue and restructuring, the Commission considered the European rail freight sector to be in a ‘very specific situation’ that justified under certain circumstances the granting of aid to railway undertakings to overcome difficulties related to freight divisions/operations.175 However, this regime was only available for restructurings notified before 1 January 2010 (the date on that the rail passenger transport market was opened to competition).176

10.92  In its 2005 Fret SNCF decision,177 the Commission not only assessed the aid in light of the then applicable guidelines on State aid for rescuing and restructuring firms in difficulty. More significantly, the Commission followed an approach in line with the guidelines that would be published 3 years later. In this case, the Commission approved a restructuring plan (p. 203) for the national rail incumbent’s freight division. The plan aimed to improve service offering and quality, improve productivity (primarily through cost reduction), and refocus commercial strategy on more profitable operations. In parallel, the plan involved the improvement of the division’s balance sheet through public funds.178 The plan had a budget of up to €1.5 billion, €700 million of which was to be financed by the SNCF through the sale of various assets, and a maximum of €800 million of which was to be financed by the French state.179 The Commission was satisfied that the restructuring plan would allow the division to return to long term financial viability, while respecting general conditions of State aid control, including the ‘one time, last time’ principle.180

10.93  In its 2010 Fret SNCB decision,181 the Commission again applied the principles developed in Fret SNCF and formalized in the Railway State Aid Guidelines. As with other freight divisions of incumbent railway undertakings, SNCB’s freight division was making significant losses and was considered to be ill adapted to the rigours of competition brought about through liberalization.182 In light of this, the Belgian authorities formulated a restructuring plan for SNCB’s freight division, which at the time of notification it had already started implementing. The plan aimed both to reduce costs and to improve the quality and attractiveness of the freight division’s services.183 Consistent with the Railway State Aid Guidelines, SNCB’s freight activities were also transferred to a separate legal entity, ‘Newco’.184 Implementation of the restructuring plan would cost an estimated €490 million.185

10.94  As required by paragraph 80 of the Railway State Aid Guidelines, the Commission satisfied itself that implementation of the restructuring plan would result in an entity that would be viable in the long term in a competitive environment.186 Also, in line with the guidelines, the Commission satisfied itself: (a) that the aid did not lead to an excessive distortion in competition;187 (b) that the aid was limited to a minimum (in this respect, the Commission noted the significant contribution from the resources of Newco);188 and (c) that the ‘one time last time’ principle had been respected.189

10.95  In 2014, the Commission opened an in-depth investigation to determine whether the transfer of certain assets from the infrastructure manager to the Italian rail incumbent was genuinely done in the context of a reorganization of the group.190

(p. 204) 10.96  Chapter 6191 of the Railway State Aid Guidelines concerns aid for coordination of transport. Following repeal of Regulations 1191/69 and 1107/70 by the PSO Regulation, Article 93, which exempts State aids deemed to meet the needs of coordination of transport, may be applied directly (see above). This chapter of the Railway State Aid Guidelines seeks to establish criteria against which the Commission will assess State aid for compatibility with that Article.192

10.97  The Commission considers that ‘coordination of transport’ implies an intervention by public authorities that aims to guide the development of the transport sector in the common interest.193 Although the Commission considers that, in principle, a liberalized rail transport sector should, to a large extent, self-coordinate, the Commission recognizes that State intervention may nevertheless be appropriate in order to address certain market failures, for example, positive and negative externalities of certain transport modes, such as congestion and pollution or the failure to internalize the benefits of investment in research and development, and coordination/interoperability difficulties.194

10.98  The Commission considers that aid to meet the needs of the coordination of rail transport can take the following forms: (a) aid for infrastructure use;195 (b) aid to encourage a modal shift to rail because it generates lower negative externalities than, for example, road transport;196 (c) aid for promoting interoperability;197 and (d) aid for research and development.198

10.99  As concerns the first three categories, the guidelines describe the eligible costs, and set out the following intensities of aid that can be presumed to satisfy the requirements of necessity and proportionality: (a) for aid for rail infrastructure use, 30 per cent of the total cost of rail transport, up to 100 per cent of the eligible costs; (b) for aid for reducing external costs, 30 per cent of the total cost of rail transport, up to 50 per cent of the eligible costs; and (c) for interoperability aid, 50 per cent of the eligible costs. Above these thresholds, there is no such presumption. It is therefore incumbent upon Member States to demonstrate that the aid in excess of the thresholds is both necessary and proportionate.199

10.100  As concerns State aid for research and development, a ‘horizontal’ EU framework already exists for the assessment of State aid for this purpose.200 In addition, Article 9(2)(b) of the PSO Regulation reproduces the text of Article 3(1)(c) of Regulation 1107/70 and concerns (p. 205) State aid for research and development.201 However, the Railway State Aid Guidelines state that it cannot be excluded that aid for research and development may be assessed directly against Article 93 TFEU.202

10.101  Although it predates the Railway State Aid Guidelines and is assessed under Regulation 1107/70, the Commission’s 2003 Company Neutral Revenue Scheme (or CNRS) decision203 is in line with the approach announced in the guidelines to support modal shifts from road to rail. The decision concerns a scheme notified by the UK to support the movement of ‘intermodal containers’ by rail, including but not limited to freight arriving by sea. The scheme was open not only to railway undertakings but to anyone taking commercial responsibility to pay track access charges to the UK rail network operator, including also shippers and end customers. The CNRS provided a fixed grant in respect of each eligible container moved. In essence, the grant was equal to the lesser of (i) the environmental benefits of using rail rather than road, or (ii) the extra cost of using rail rather than road.204 Eligible costs were the total door-to- door costs of using rail-based traffic flows and aid intensity would not exceed 30 per cent of these.205 Considering these factors, the Commission found the aid scheme to be compatible with the Treaty.206

10.102  Chapter 7207 of the Railway State Aid Guidelines is the final substantive chapter of the guidelines and concerns State guarantees for railway undertakings. The guidelines state that the Commission has already published a notice on State aid in the form of guarantees.208 In the Railway State Aid Guidelines, the Commission observes that several railway undertakings are enjoying unlimited State guarantees, and invites the beneficiaries of the guarantees to notify the Commission of these, as well as the measures envisaged to remove them.209

(p. 206) 10.103  Chapter 8210 of the Railway State Aid Guidelines contains the ‘final provisions’, in particular, rules on the cumulation of aid.211

(E)  The financing of railway infrastructure

10.104  The Railway State Aid Guidelines cover the public financing of infrastructure insofar as it may affect railway undertakings, but not railway infrastructure as such. Traditionally, Member States appear to have considered the funding of the construction of infrastructure, such as rail infrastructure, not to constitute State aid and the Commission appears, by and large, not to have objected to this position.212 Indeed, in a non-liberalized environment, the absence of competition in the sector would have negated the possibility that public funding could distort competition. However, the continuing process of liberalization and the General Court’s 2011 judgment in Leipzig-Halle,213 confirmed by the Court of Justice,214 raise the question of whether railway infrastructure projects may themselves fall within the purview of the State aid rules.

10.105  The Leipzig-Halle case concerns the public funding of the construction of a runway at Leipzig-Halle airport. In essence, the General Court held that it was not appropriate to dissociate the construction of the runway from its subsequent use: for example, if the exploitation of the runway is considered an economic activity then so is the construction of the runway. In light of this, the construction of the runway fell within the ambit of EU State aid control. This view was endorsed by the Court of Justice.215 These judgments raise the issue of whether a similar approach should be adopted for the construction of railway infrastructure, or whether a change of approach is—or will at some point become—necessary.

10.106  Shortly after the General Court’s judgment, DG Competition produced a note to DG Regional and Urban Policy (or ‘DG REGIO’) entitled ‘Application of State aid rules to infrastructure investment projects’.216 In this note, DG Competition stated that:

[A]fter the [General Court’s] Leipzig/Halle ruling, it cannot be denied anymore that the financing of any type of infrastructure (excluding infrastructure related to security, safety, etc.) that is later commercially exploited is State aid relevant. This means a contrario that only financing of infrastructure that is later not commercially exploited and built in the interest of the general public is in principle excluded from the application of State aid rules.217

(p. 207) 10.107  On railway infrastructure specifically, DG Competition states that:

The activities of railway undertakings have become more and more liberalised and therefore subject to State aid rules: rail freight transport and international passenger transport by rail have been fully open to competition from January 2007 and January 2010 respectively, based on EU legislation. However, as regards the activity of railway infrastructure management (including the construction of railway infrastructure), it is left to Member States whether they want to liberalise this activity or keep a legal monopoly. There is no EU sectoral legislation that imposes on Member States to liberalise the management of infrastructure. Therefore, whether State aid rules apply to the construction and management of railway infrastructure depends on the legal situation in each Member State.218

10.108  Therefore, at the time of writing, although the scope for application of the State aid rules to the financing of railway infrastructure is likely to be limited,219 this situation may well evolve in the coming years.

Footnotes:

1  Communication from the Commission, Community guidelines on State aid for railway undertakings [2008] OJ C 184/13, para. 1.

2  ibid, para. 3 (footnotes omitted).

3  ibid, para. 5.

4  See, e.g. Final Report by Steer Davies Gleave (for the European Commission), Further Action at European Level Regarding Market Opening for Domestic Passenger Transport by Rail and Ensuring Non-Discriminatory Access to Rail Infrastructure and Services, November 2012. http://ec.europa.eu/transport/modes/rail/studies/rail_en.htm, paras 4.51–4.67, (Accessed 13 December 2016). See also Faull J. and Nikpay, A. 2014. The EU Law of Competition. 3rd ed. Oxford: Oxford University Press, para. 15.316.

5  Indeed, State aid in the railway sector has been, and continues to be, considerable (see below, Section V.A).

6  See Judgment of 15 September 1998, European Night Services, in Joined Cases T-374, 375, 384, and 388/94, EU:T:1998:198, para. 220; and Commission Decision of 27 August 2003 in Case COMP/37.685 GVG/FS, paras 49–50. See also Commission decision of 13 December 1994 in Case IV.32.490 Eurotunnel, paras 51–7 and, on appeal Judgment of 22 October 1996, British Railways Board v Commission, Joined cases T-79 and 80/95, EU:T:1996:155; Commission Decision of 20 July 2011 in Case COMP/M.6150 Veolia Transport/Trenitalia/JV, paras 37–40; and Commission Decision of 24 February 1993 in Case IV/34.434 Tariff structures in combined transport of goods, para. 10. See also Commission Decision of 12 June 2009 in Case COMP/M.5480 Deutsche Bahn/PCC Logistics, paras 33–6 concerning ‘terminal services’.

7  Case COMP/37.685 GVG/FS, para. 50.

8  Case IV.32.490 Eurotunnel, para. 57.

9  See Case COMP/37.685 GVG/FS, paras 51–8; see also Case COMP/M.6150 Veolia Transport/Trenitalia/JV, paras 41–6; Commission Decision of 22 January 2010 in Case COMP/M.5579 TLP/Ermewa, paras 65–73.

10  See Case COMP/37.685 GVG/FS, para. 57.

11  Commission Decisions of 18 December 2013 in Cases COMP/AT.39678 and 39731 Deutsche Bahn I and II, paras 27–31 and 34.

12  See Commission Decision of 11 December 1995 in Case IV/M.669 Charterhouse/Porterbrook, paras 16–19; Case COMP/M.5579 TLP/Ermewa, paras 15–35.

13  See Commission Decision of 11 August 2010 in Case COMP/M.5855 DB/Arriva, paras 153–6 and 163–4; and Case COMP/M.5579 TLP/Ermewa, paras 57–64.

14  Commission Decision of 19 September 2014 in Case COMP/M.7011 SNCF/SNCB/Thalys JV, paras 31–46. See also Commission Decision of 9 December 1998 in Case IV/M.1305 Eurostar, paras 22–7; Case IV.32.490 Eurotunnel, paras 58–67; Commission Decision of 21 September 1994 in Case IV/34.600 Night Services, para. 7; Commission Decision of 17 June 2010 in Case COMP/M.5655—SNCF/LCR/Eurostar, paras 15–16; Case COMP/M.6150 Veolia Transport/Trenitalia/JV, paras 19–22; and Commission Decision of 13 May 2015 in Case COMP/M.7449 SNCF Mobilities/Eurostar International Limited (full text of decision not available at time of writing).

15  See Case IV/M.1305 Eurostar, paras 14–21; Case IV.32.490 Eurotunnel, paras 64–6; Case IV/34.600 Night Services, paras 26–7; Case COMP/M.5655 SNCF/LCR/Eurostar, paras 17–20; Case COMP/M.6150 Veolia Transport/Trenitalia/JV, paras 23–5; and Case COMP/M.7011 SNCF/SNCB/Thalys JV, paras 47–56.

16  See Case IV/M.1305 Eurostar, paras 14–21; see also Case IV.32.490 Eurotunnel, paras 64–6; Case IV/34.600 Night Services, paras 26–7; and Case COMP/M.5655 SNCF/LCR/Eurostar, paras 21–9; Case COMP/M.6150 Veolia Transport/Trenitalia/JV, paras 26–34; Case COMP/M.7011 SNCF/SNCB/Thalys JV, paras 62–9.

17  See Case COMP/M.6150 Veolia Transport/Trenitalia/JV, paras 35–6; and Case COMP/M.7011 SNCF/SNCB/Thalys JV, paras 57–61.

18  See Cases COMP/AT.39678 and 39731 Deutsche Bahn I and II, paras 33–5; Case COMP/M.5855 DB/Arriva, paras 131–40; Commission Decision of 29 October 2009 in Case COMP/M.557 SNCF-P/CDPQ/Keolis/Effia, paras 16–36; Commission Decision of 23 July 2012 in Case COMP/M.6596 SNCF-P/Groupe Keolis, paras 15–16.

19  See e.g. Commission decision of 6 November 2007 in Case COMP/M.4746 Deutsche Bahn/English Welsh and Scottish Railway Holdings, para. 12.

20  Case COMP/M.4746 Deutsche Bahn/English Welsh and Scottish Railway Holdings, paras 24–32.

21  See Case IV.32.490—Eurotunnel; Commission decision of 29 March 1994 in Case IV/33941 HOV SVZ/MCN; Commission decision of 27 July 1994 in Case IV.34518 ACI; Commission decision of 4 August 2003 in Case COMP/M.3150 SNCF/Trenitalia/AFA; and COMP/M.4746 Deutsche Bahn/English Welsh and Scottish Railway Holdings.

22  Case IV.32.490—Eurotunnel, paras 62–3.

23  Case COMP/M.3150 SNCF/Trenitalia/AFA, para. 29.

24  ibid, para. 24.

25  See Case COMP/M.5855 DB/Arriva, paras 144–5. See also Commission Decision of 9 October 2006 in Case COMP/M.4294 Arcelor/SNCFL/CFL Cargo, paras 17–18; Case COMP/M.4746 Deutsche Bahn/English Welsh and Scottish Railway Holdings, para. 17; Commission Decision of 25 November 2008 in Case COMP/M.5096 RCA/MAV Cargo, para. 25; Commission Decision of 14 July 2010 in Case COMP/M.5877 Geodis/Giraud, para. 9.

26  See Case COMP/M.5855 DB/Arriva, paras 147–9. See also Case COMP/M.4746 Deutsche Bahn/English Welsh and Scottish Railway Holdings, para. 19; Case COMP/M.5096 RCA/MAV Cargo, paras 39–40; Case COMP/M.5480 Deutsche Bahn/PCC Logistics, paras 23–5

27  Case COMP/M.5855 DB/Arriva, para. 151. See also Case COMP/M.5877 Geodis/Giraud, para. 10.

28  Case COMP/M.4746 Deutsche Bahn/English Welsh and Scottish Railway Holdings, paras 10–12; Commission decision of 18 March 2008 in Case COMP/M.4786 Deutsche Bahn/Transfesa; Case COMP/M.5096 RCA/MAV Cargo, para. 15; Case COMP/M.5480 Deutsche Bahn/PCC Logistics, paras 12–14 and 26–28; Case COMP/M.5579 TLP/Ermewa, paras 36–40; and Case COMP/M.5877 Geodis/Giraud, paras 18–26.

29  See Case COMP/M.5096 RCA/MAV Cargo, paras 18–19; and Case COMP/M.4786 Deutsche Bahn/Transfesa, para. 11.

30  See Case COMP/M.5096 RCA/MAV Cargo, para. 17, and the decisional practice cited therein.

31  See Case COMP/M.5855 DB/Arriva; and Case COMP/M.6150 Veolia Transport/Trenitalia/JV.

32  Case COMP/M.4786 Deutsche Bahn/Transfesa, paras 12–14.

33  Reg. (EEC) No. 1017/68 of the Council of 19 July 1968 applying rules of competition to transport by rail, road and inland waterway [1968] OJ L 175/1.

34  Art. 2 of Reg. 1017/68 was the equivalent of Art. 101 TFEU, and Art. 8 of Reg. 1017/68 was the equivalent of Art. 102 TFEU.

35  See Ch. 5.II.A.

36  In Decision 94/985/EC of 21 December 1994 in Case IV/33.218 Far Eastern Freight Conference [1994] OJ L 378/17, paras 60–61: ‘… Having been adopted before the Court of Justice’s express confirmation that the competition rules contained in the Treaty apply to the transport sector, Regulation 1017/68 reproduces with little variation the text of Articles [101 and 102 TFEU]. As part of the [EU]’s secondary legislation, Regulation (EEC) No. 1017/68 cannot derogate from the provisions of the Treaty. Consequently, Regulation (EEC) No 1017/68 must be interpreted in the light of the case law of the Court, as providing the Commission with the necessary means to enforce Articles [101 and 102 TFEU] in inland transport, without deviating from the basic competition rules contained in the Treaty’ (footnotes omitted).

37  Judgment of 21 October 1997, Deutsche Bahn v Commission, T-229/94, EU:T:1997:155, para. 77. The Court was considering the rules on abuse of dominance.

38  Council Reg. (EC) No. 169/2009 of 26 February 2009, applying rules of competition to transport by rail, road, and inland waterway (codified version) [2009] OJ L 61/1.

39  See Faull and Nikpay (referenced in footnote 4), paras 15.243 and 15.245.

40  For a more detailed description of Reg. 169/2009, see Ch. 5.II.B.

41  Formerly, Art. 1 of Reg. 1017/68.

42  Formerly, Art. 3 of Reg. 1017/68.

43  Case IV/33.218 Far Eastern Freight Conference (referenced in footnote 36), para. 66 (emphasis added). See also Decision 93/174/EEC of 24 February 1993 in Case IV/34.494 Tariff structures in the combined transport of goods [1993] OJ L 73/38, paras 36–48; and Commission Decision 94/594/EEC of 27 July 1994 in Case IV/34.518 ACI [1994] OJ L 224/28, paras 44–7. The ‘sole object and sole effect’ interpretation of the predecessor of Art. 2 has been endorsed by the General Court (see, e.g. Judgment in European Night Services, para. 220 (referenced in footnote 6)). See also Faull and Nikpay, paras 15.247–15.252 (referenced in footnote 4).

44  Judgment in Deutsche Bahn v Commission, para. (referenced in footnote 37), para. 37.

45  See, e.g. Judgment in SNCF and BR v Commission, EU:T:1996:155, para. 14.

46  Commission Decision 94/894/EC of 13 December 1994 in Case IV/32.490—Eurotunnel [1994] OJ L 354/66.

47  Eurotunnel, paras 82–4.

48  ibid, operative part.

49  Judgment in SNCF and BR v Commission, EU:T:1996:155.

50  ibid, paras 35, 36, and 49.

51  ibid, paras 59, 60, and 64.

52  See European Commission, XXIXth Report on Competition Policy 1999, p. 163. http://ec.europa.eu/competition/publications/annual_report/1999/en.pdf (Accessed 13 December 2016). See also Commission Decision of 27 July 1994 in Case IV/34.518 ACI (referenced in footnote 21).

53  Commission Decision 94/210/EC of 29 March 1994 in Case IV/33.941 HOV SVZ/MCN [1994] OJ L 104/34.

54  ibid, para. 82.

55  ibid, paras 83–9.

56  Judgment in Deutsche Bahn v Commission (referenced in footnote 37), para. 77.

57  ibid, para. 35. See also Commission notice of 27 May 1999 in Case IV/36.535 Communauté d’intérêts Automobiles [1999] OJ C 146/5; and Commission Decision 93/174/EEC of 24 February 1993 in Case IV/34.494 Tariff Structures in the combined transport of goods (referenced in footnote 43).

58  Commission Decision 94/663/EC of 21 September 1994 in Case IV/34.600 Night Services [1994] OJ L 259/20.

59  ibid, para. 38–53.

60  ibid, paras 71–84.

61  Judgment in European Night Services et al. v Commission (referenced in footnote 6), para. 220.

62  ibid, paras 90–105.

63  ibid, para. 136.

64  ibid, para. 138.

65  ibid, paras 144–5.

66  Faull and Nikpay (referenced in footnote 4), paras 15.312–15.313.

67  Commission Decision of 15 July 2015 in Case COMP/AT.40098 Blocktrains [2015] OJ C 351/5. See also European Commission press release IP/15/5376, Antitrust: Commission fines cargo train operators €49 million for cartel, 15 July 2015.

68  ibid.

69  Commission Decision of 28 March 2012 in Case COMP/39.462 Freight Forwarding [2012] OJ C 375/7. For more details, see Ch. 16.III.A.2.

70  Commission press release STATEMENT/15/6222, Antitrust: Commission confirms unannounced inspections in rail passenger transport sector, 2 December 2015. See also Reuters, EU investigates antitrust concerns over Austrian railways, 2 December 2015. http://uk.reuters.com/article/uk-eu-austria-railway-antitrust-idUKKBN0TL0YN20151202. (Accessed 13 December 2016).

71  See Commission press release STATEMENT/16/2438, Antitrust: Commission confirms unannounced inspections in rail passenger transport sector, 6 July 2016; see also Mlex, EU raids rail operators in Austria, Slovakia, Czech Republic, 6 July 2016.

72  See Section III.A.

73  See Directive 2012/34/EU of the European Parliament and of the Council of 21 November 2012 establishing a single railway area (recast) [2012] OJ L 343/32, Recital 71 and Art. 7.

74  At a national level see, for example, the judgment of the Cour d’Appel de Paris of 6 November 2014 in Case 2013/01128 (an appeal by SNCF against a decision (Decision 12-D-25 of 18 December 2012) by the French Autorité de la Concurrence finding abusive exclusionary behaviour by SNCF in the freight sector). See also decisions of the French Autorité de la Concurrence 14-D-11 of 2 October 2014 concerning practices in the distribution of train tickets; and 15-D-05 of 15 April 2015 concerning practices of the SNCF Group in the passenger transport sector. Concerning the UK, see also Practical Law, ORR fines EWS for abuse of dominant position, 17 November 2006.

75  See Section III.B (referenced in footnote 21).

76  Case IV/33.941 HOV SVZ/MCN (referenced in footnote 21), paras 143–56.

77  ibid, paras 157–248.

78  ibid, Art. 4, at para. 158 of its decision, the Commission stated that it did not assess the level of price as such, or the criteria used to determine the price.

79  Judgment in Deutsche Bahn v Commission (referenced in footnote 37), para. 77.

80  Commission Decision 2004/33/EC of 27 August 2003 in Case COMP/37.685—GVG/FS [2004] OJ L 11/17.

81  At the time of the GVG/FS decision, the only way for a railway undertaking from one Member State to access the rail passenger transport market in another Member State for the provision of international rail passenger transport services was by entering into an international grouping pursuant to Directive 91/440/EC (see GVG/FS,paras 12 and 71).

82  ibid, para. 120.

83  ibid, paras 117–52.

84  ibid, paras 156–61.

85  ibid, para. 164.

86  Commission Decision of 18 December 2013 in Case AT.39678/AT.39731 Deutsche Bahn I/II [2014] OJ C 86/4. The Commission was conducting a third investigation into DB (Case 39.915—Deutsche Bahn III), but on the same day as the Deutsche Bahn I/II decision, the Commission decided to close those proceedings. The Commission began its investigations with a dawn raid, the legality of which was (unsuccessfully) challenged by DB before the General Court (see Judgment of 6 September 2013, Deutsche Bahn v Commission, Joined Cases T-289, 290 and 521/11, EU:T:2013:404). DB appealed to the Court of Justice (Judgment in Deutsche Bahn and Others v. Commission, C-583/13 P, EU:C:2015:404), which handed down its judgment on 18 June 2015, partially upholding DB’s appeal. The Court of Justice confirmed the Commission may in principle carry out inspections without prior judicial authorization. However, the Court of Justice held that by briefing its agents carrying out the inspection of other potential infringements by DB—which were not identified in the inspection decision—the Commission had gone beyond providing background information on the investigation as set out in the investigation decision. Therefore, the Commission is prevented from using the documents obtained during such an inspection concerning the other alleged infringements unless their discovery was purely accidental. This ruling did not affect the validity of the Deutsche Bahn I and II commitment decisions. In any event, on 8 April 2016, the Commission decided to terminate the commitments early as the market share of competitors had risen above the predetermined threshold stated in the commitments (C(2016) 2175 final).,

87  ibid, paras, 14, and 42–54. In 2006, a German court had dismissed complaints against DB’s pricing. The court found that a dominant undertaking may in its pricing, favour its own group companies relative to third parties (see Steinvorth, T. 2014. ‘Deutsche Bahn: Commitments End Margin Squeeze Investigation’, Journal of European Competition Law and Practice 5(9): 628–30).

88  ibid, paras 22–6.

89  ibid, paras 55–63. See Communication from the Commission—Guidance on the Commission’s enforcement priorities in applying Art. 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings [2009] OJ C 45/7, paras 75–90.

90  Ibid, para. 81. The German Federal Network Agency had already ordered DB to open up its electricity grid. DB’s commitments give effect to and supplement that order (see Steinvorth, referenced in footnote 87). See also Chirico, Filomena and Rabinovici, Itai. 2015. ‘The Application of EU Competition Rules in the Transport Sector’, Journal of European Competition Law and Practice 6(4): 287–97, particularly at 290–1.

91  Case AT.39813.

92  See Commission press release IP/15/2940, Antitrust: Commission sends statement of objections to Lithuanian rail incumbent AB Lietuvos geležinkeliai, 5 January 2015. See also Commission press release IP/13/197, Antitrust: Commission opens formal proceedings against the Lithuanian railway incumbent, AB Lietuvos geležinkeliai, 6 March 2013; and Rabinovici, Itai. 2014. ‘The Application of EU Competition Rules in the Transport Sector’, Journal of European Competition Law and Practice 5(4): 227–32.

93  See Section III.B.

94  Case AT.40156. See Mlex, EU confirms raids at Czech rail operator České dráhy, 2 June 2016. České dráhy has appealed the Commission decision to carry out inspections, claiming that the inspections were both arbitrary and disproportionate (Case T-325/16, action brought on 24 June 2016).

95  Council Reg. (EEC) No. 4064/89 of 21 December 1989 on the control of concentrations between undertakings [1989] OJ L 395/1; superseded by Council Reg. (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings [2004] OJ L 24/1.

96  See Commission Decision of 9 December 1998 in Case No. IV/M.1305 Eurostar, and Commission Decision of 17 June 2010 in Case No. COMP/M.5655 SNCF/LCR/Eurostar.

97  Commission Decision of 13 May 2015 in Case No. COMP/M.7449 SNCF Mobilités/Eurostar International Limited. The Commission’s decision is taken in the context of the proposed sale by the UK government to a private investor of its stake that gave it joint control of Eurostar. With this transaction in mind, SNCF negotiated a new shareholders’ agreement giving it sole control of Eurostar. SNCB maintained its non-controlling minority share. See Commission press release IP/15/4976, Mergers: Commission gives conditional authorisation for SNCF to acquire sole control of Eurostar, 13 May 2015. The public version of the decision was not available at the time of writing.

98  Paths need only be made available if a new entrant is unable to obtain the requisite access through the usual path allocation procedure. Again, this aspect resembles remedies commonly given in aviation cases (see Ch. 17.I).

99  Commission Decision of 19 September 2014 in Case No. COMP/M.7011 SNCF/SNCB/Thalys JV. See European Commission Daily News of 22 September 2014, MEX 14/22.09, Concentrations: La Commission autorise la création de l’entreprise commune Thalys JV par SNCF et SNCB dans les transports ferroviaires internationaux. See also Mlex, EU set to clear changes to Thalys joint venture, 12 September 2014. It appears that by the time of the transaction, NV no longer had an interest in Thalys.

100  ibid, paras 70–2. DB also ceded its interest in Thalys (understood to be around 10 per cent). DB already operated competitive services on a route served by Thalys (Frankfurt-Brussels) and had already stopped distributing Thalys tickets.

101  ibid, paras 73–100.

102  E.g. Commission Decision of 6 November 2007 in Case No. COMP/M.4746 Deutsche Bahn/English Welsh and Scottish Railway Holdings.

103  For example, Commission Decision of 16 February 2011 in Case No. COMP/M.6124 Ferrovie dello Stato/Cube Transport/Arriva Deutschland.

104  E.g. Eurostar and Thalys decisions (referenced in footnotes 97 and 99). See also Commission Decision of 4 August 2003 in Case No. COMP/M.3150 SNCF/Trenitalia/AFA; and Commission Decision of 20 July 2011 in Case No. COMP/M.6150—Veolia Transport/Trenitalia/JV.

105  See Eurostar and Thalys decisions (referenced in footnote 97 and 99). See also Commission Decisions in Cases No. COMP/M.3150 SNCF/Trenitalia/AFA (above) and No. COMP/M.6150 Veolia Transport/Trenitalia/JV (referenced in footnote 104).

106  See Commission Decision of 29 October 2009 in Case No. COMP/M.5557 SNCF-P/CDPQ/Keolis/Effia; Commission Decisions (there were two) of 12 August 2010 in Case No. COMP/M.5741 CDC/Veolia Environment/Transdev/Veolia Transport; Commission Decision of 11 August 2010 in Case No. COMP/M.5855 Deutsche Bahn/Arriva; Commission Decision of 16 February 2011 in Case No. COMP/M.6124 Ferrovie dello Stato/Cube Transport/Arriva Deutschland; Commission Decision of 20 July 2011 in Case No. COMP/M.6269 SNCF/HFPS/Wehinger GmbH/Rail Holding; Commission Decision of 23 July 2012 in Case No. COMP/M.6596 SNCF-P/Groupe Keolis; and Commission Decision of 19 November 2012 in Case No. COMP/M.6745 SNCF/Haselsteiner Familien-Privatstiftung/Augusta Holding/Rail Holding.

107  See Commission Decision of 9 October 2006 in Case No. COMP/M.4294 Arcelor/SNCFL/CFL Cargo; Commission Decision of 6 November 2007 in Case No. COMP/M.4746 Deutsche Bahn/English Welsh and Scottish Railway Holdings (see, in particular, paras 38–54, in which the Commission assessed the likely impact of the concentration on cross-border and domestic freight services in France, taking into account the competitive pressure that EWS may exercise on SNCF [the French incumbent], and DB’s close relationship with SNCF); Commission Decision of 25 November 2008 in Case No. COMP/M.5096 RCA/MAV Cargo (a particularity of this case was the presence of GySEV [Raaberbahn], an integrated rail and infrastructure company that was founded to facilitate cross-border rail transport in the Dual Monarchy of Austria-Hungary [see paras 92–7]); Commission Decision of 12 June 2009 in Case No. COMP/M.5480 Deutsche Bahn/PCC Logistics (see, in particular, para. 46); Commission Decision of 11 August 2010 in Case No. COMP/M.5855 Deutsche Bahn/Arriva; Commission Decision of 16 February 2011 in Case No. COMP/M.6124 Ferrovie dello Stato/Cube Transport/Arriva Deutschland; and Commission Decision of 16 September 2013 in Case No. COMP/M.6960 SNCF/COMSA-EMTE/CRT.

108  See Commission Decision of 11 December 1995 in Case No. IV/M.669 Charterhouse/Porterbrook; Commission Decision of 1 December 2008 in Case No. COMP/M.5263 Deutsche Bank London/Lloyds TSB Bank/Antin Infrastructure Partners (BNP Parisbas)/Porterbrook Leasing; and Commission Decision of 5 February 2009 in Case No. COMP/M.5439 OP Trust/Deutsche Bank London/Lloyds TSB Bank/BNP Parisbas/Porterbrook Leasing.

109  See Commission Decision of 17 September 2002 in Case No. IV/M.2905 Deutsche Bahn/Stinnes; Commission Decision of 18 March 2008 in Case No. COMP/M.4786 Deutsche Bahn/Transfesa; Commission Decision of 25 November 2008 in Case No. COMP/M.5096 RCA/MAV Cargo; Commission Decision of 6 February 2009 in Case No. COMP/M.5450 Kühne/HGV/TUI/Hapag-Lloyd; Commission Decision of 12 June 2009 in Case No. COMP/M.5480 Deutsche Bahn/PCC Logistics; Commission Decision of 22 January 2010 in Case No. COMP/M.5579 TLP/Ermewa; Commission Decision of 14 July 2010 in Case No. COMP/M.5877 Geodis/Giraud; Commission Decision of 22 December 2011 in Case No. COMP/M.6396 Rhenus/Wincanton International; and Commission Decision of 16 September 2013 in Case No. COMP/M.6960 SNCF/COMSA-EMTE/CRT.

110  E.g. Case No. COMP/M.5557 SNCF-P/CDPQ/Keolis/Effia (referenced in footnote 106).

111  E.g. Case No. COMP/M.5741 CDC/Veolia Environment/Transdev/Veolia Transport (referenced in footnote 106).

112  Communication from the Commission—Community guidelines on State aid for railway undertakings [2008] OJ C 184/13 (‘Railway State Aid Guidelines’), para. 2.

113  ibid, para. 6.

114  ibid, para. 7.

115  ibid, para. 13. For example, by the Commission’s estimates, State aid to the rail sector in 2012 alone totaled approximately €40 billion (see the ‘State aid Scoreboard–2013’, http://ec.europa.eu/competition/state_aid/scoreboard/non_crisis_en.html (Accessed 13 December 2016), (see spreadsheet ‘Subsidies to the railway sector’). In 2011, notified subsidies totaled €32.3 billion (i.e. 0.25 per cent of EU GDP) (Report from the Commission, State aid Scoreboard Autumn 2012 Update, Report on State aid granted by the EU Member States, Section 1.1. http://ec.europa.eu/competition/state_aid/studies_reports/2012_autumn_en.pdf) (Accessed 13 December 2016).

116  For example, in its Fret SNCF decision (see para. 10.92), the Commission quoted the estimation that the external costs per 1,000 km is €88, whereas for rail that figure is just €18, and that 80 per cent of negative externalities generated by all modes of transport (e.g. pollution, climate change, and noise) are generated by road transport (para. 34).

117  Railway State Aid Guidelines, para. 14.

118  See Ch. 5.IV

119  Commission Staff Working Document Accompanying the document Report from the Commission on Competition Policy 2012, SWD (2013)159 final, 7 May 2013, p. 37.

120  See above, Section I.

121  See Ch. 9.

122  Railway State Aid Guidelines, para. 15.

123  Generally applicable State Aid provisions that are relevant to the rail transport sector include Arts 107–9 TFEU, Commission Reg. (EU) No. 651/2014 declaring certain categories of aid compatible with the Internal Market in application of Arts 107 and 108 of the Treaty [2014] OJ L 187/1 (the ‘General Block Exemption Regulation’ [see, in particular, Art. 51—Social aid for transport for residents of remote regions]); Commission Reg. (EU) 1407/2013 on the application of Arts 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid [2013] OJ L 352/1; the various provisions on ‘horizontal’ aid (see Section V.D).

124  See Judgment in Commission v Belgium, 156/77, EU:C:1978:180.

125  For a more detailed discussion, see Ch. 8.V.

126  By Reg. (EC) No. 1370/2007 on public passenger transport services by rail and by road and repealing Council Regs (EEC) Nos 1191/69 and 1107/70 [2007] OJ L 315 /1 (the ‘PSO Regulation’), Recitals 36 and 37 and Art. 10.

127  Reg. (EEC) No. 1191/69 of the Council of 26 June 1969 on action by Member States concerning the obligations inherent in the concept of a public service in transport by rail, road and inland waterway [1969] OJ L 156/1.

128  Reg. (EEC) No. 1107/70 of the Council of 4 June 1970 on the granting of aids for transport by rail, road and inland waterway [1970] OJ L 130/1.

129  Judgment in Altmark Trans, C-280/00, EU:C:2003:415.

130  ibid, para. 108.

131  Reg. (EC) No. 1370/2007 of the European Parliament and the Council of 23 October 2007 on public passenger transport by rail and by road and repealing Council Regs (EEC) Nos 1191/69 and 1107/70 [2007] OJ L 315/1.

132  See PSO Reg., Recitals 33–5.

133  PSO Reg., Art. 1.

134  An exception is when ‘public service obligations … aim at establishing maximum tariffs for all passengers or for certain categories of passenger’. These may instead be the subject of ‘general rules’. Art. 4 of the PSO Reg. also applies to ‘general rules’.

135  Decision of the Commission of 24 February 2010 in Case C 41/08 (ex NN 35/08) [2011] OJ L 7/1.

136  ibid, paras 335–47 and Art. 1 of the operative part.

137  ibid, paras 222–40, 350–64, and Art. 2 of the operative part. See also the on-going investigation in Cases SA.32.544 Restructuring of the Greek Railway Group—TRAINOSE S.A. and SA.31.250 Restructuring aid to BDZ.

138  Judgment of 20 March 2013, Andersen v Commission, T-92/11, EU:T:2013:143. The General Court held that the Commission should have assessed the aid under the substantive rules in force on the date the aid was paid, i.e. Reg. 1191/69, not Reg. 1370/2007.

139  Judgment in Commission v Andersen, C-303/13 P, EU:C:2015:647.

140  In respect of aid paid from 3 December 2009 under the second public service contract concluded for years 2005–2014 (paras 60–2 and operative part).

141  The Court of Justice ordered the General Court to take account of Reg. 1370/2007in respect of aid granted after 3 December 2009 (ibid).

142  See European Commission press release IP/2014/330, State Aid: Commission opens in-depth investigation into measures in favour of Trenitalia and other members of Ferrovie dello Stato group, 27 March 2014. See also Chirico and Rabinovici pp. 287–97, particularly at 297 (referenced in footnote 90).

143  Recital 37.

144  Decision of the Commission of 2 March 2005 in Case N 386/2004 [2005] OJ C 172/3, paras 198–201. In this decision, the Commission already set out the principles that it intended to apply in future State aid assessments in the railway sector.

145  Communication from the Commission—Community guidelines on State aid for railway undertakings [2008] OJ C 184/13.

146  Railway State Aid Guidelines, para. 15. Ch. 3 (aid for purchase and renewal of rolling stock) of the Railway State Aid Guidelines also applies to urban, suburban, and regional passenger transport undertakings. The Railway State Aid Guidelines do not cover public financing intended for infrastructure managers (para. 15) or the application of the PSO Reg., which had not yet entered into force at the time of publication of the guidelines (para. 21).

147  Paras 22–6.

148  See Section V.E.

149  Para. 23.

150  Para. 25. See also decisional practice and guidelines cited in footnote 5 to this paragraph.

151  Paras 27–40.

152  Para. 29.

153  Para. 33.

154  See Railway State Aid Guidelines, Ch. 6 (below).

155  See Railway State Aid Guidelines, Ch. 5 (below) and Communication from the Commission—Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty [2014] OJ C 249/1.

156  See Commission Reg. (EC) No. 70/2001 on the application of Arts 87 and 88 of the EC Treaty on State aid to small- and medium-sized enterprises [2001] OJ L 10/33.

157  See Communication from the Commission—Guidelines on State aid for environmental protection and energy 2014–2020 [2014] OJ C 200/1. The environmental aid guidelines in force at the time of, and referred to by, the Railway State Aid Guidelines were Community guidelines on State aid for environmental protection [2008] OJ C 82/1.

158  See PSO Reg.

159  See Commission Guidelines on regional State aid for 2014–2020 [2013] OJ C 209/1. However, para. 10 of these guidelines states that: ‘[t]he Commission will apply the principles set out in these guidelines to regional aid in all sectors of economic activity, apart from [inter alia] the transport sector, which [is] subject to special rules laid down by specific legal instruments, which might derogate partially or totally from these guidelines’ (footnotes omitted). The regional aid guidelines in force at the time of, and referred to by, the Railway State Aid Guidelines were the Guidelines on national regional aid for 2007–2013 [2006] OJ C 54/13.

160  Para. 35.

161  Transport services serving several different regions, in one or more Member States, may benefit from this derogation if the Commission can be satisfied that there is an impact on the regional development of the regions served, e.g. by the regular nature of the service.

162  Para. 36.

163  Para. 38. See also paras 39 and 40.

164  Commission Decision of 5 November 2009 in Case N 324/2009 Support for the equipment of freight trains with certain brakes [2009] OJ C 299/5. This decision refers to the Community guidelines on State aid for environmental protection (above).

165  See also, for example, European Commission Report on Competition Policy Including Commission Staff Working Document 2009, para. 391.

166  Paras 41–61.

167  Para. 41.

168  Paras 42–7.

169  Para. 49.

170  Para. 50.

171  The Railway State Aid Guidelines refer to the 2004 guidelines ([2004] OJ C 244/2). However, since 1 August 2014, a new set of guidelines have applied ([2014] OJ C 249/1). For the application of these guidelines to a railway undertaking in difficulty see, for example, Commission Decision of 13 May 2009 in Case N 420/2008 Restructuring of London & Continental Railways and Eurostar (UK) Limited [2009] OJ C 183/2, and Commission Decision of 15 December 2010 in Case N 402/2010 Rescue aid for the Bulgarian State Railways EAD (BDZ) [2011] OJ C 187/7.

172  Para. 52.

173  Paras 54–61.

174  Paras 62–84.

175  Paras 63–4.

176  Para. 71.

177  Commission decision of 2 March 2005 in Case N 386/2004 Aide à la restructuration à fret SNCF [2005] OJ C 172/3.

178  ibid, paras 60–6.

179  ibid, paras 81–7.

180  ibid, paras 152–94.

181  Commission decision of 26 May 2010 (corrigendum 11 November 2010) in Case No. 726/2009 Aide à la restructuration des activités ‘fret’ de la SA de droit public SNCB [2010] OJ C 327/6. Notification of the restructuring plan took place on 24 December 2009.

182  ibid, paras 30–5.

183  ibid, paras 36–89.

184  ibid, paras 90–102 and 174–92. This is in line with para. 72 of the Railway State Aid Guidelines.

185  ibid, paras 103–4. This money was required to improve a balance sheet that had accumulated significant losses, pay for costs connected with changes to personnel numbers and status and improving Newco’s liquidity.

186  ibid, paras 193–229.

187  ibid, paras 230–44.

188  ibid, paras 245–50.

189  ibid, paras 255–9.

190  See European Commission press release IP/2014/330, State Aid: Commission opens in-depth investigation into measures in favour of Trenitalia and other members of Ferrovie dello Stato group, 27 March 2014. See also Chirico and Rabinovici pp. 287–97, particularly at 297 (referenced in footnote 90).

191  Railway State Aid Guidelines, paras 85–117.

192  Paras 85–7.

193  Para. 89.

194  Paras 90–3.

195  Paras 98 and 100–12. For an example that predates the guidelines, see Commission Decision of 7 June 2006 in Case N 622/2005 Aid scheme for conversion of European Train Control System (ETCS) for series of freight Locomotives [2006] OJ C 297/17.

196  ibid.

197  ibid.

198  Paras 98 and 113–7.

199  Para. 108.

200  See Communication from the Commission—Framework for State aid for research and development and innovation [2014] OJ C 198/1. At footnote 3 to para. 116, the Railway State Aid Guidelines cite the 2006 edition ([2006] OJ C 323/1). For example, in July 2016, the Commission ordered that Spain recover State aid granted to a test centre for high-speed trains. The Commission concluded that the project was not in line with State aid rules largely because the centre was duplicative of existing infrastructure insofar as testing facilities for potentially commercially viable projects was concerned (Case SA.37185 Aid to ADIF; see European Commission press release IP/16/2621, State aid: Commission orders Spain to recover incompatible State aid for high speed train test centre from railway operator ADIF, 25 July 2016).

201  This provision states that State aid may considered as compatible with Art. 93 TFEU in the following circumstances: ‘where the purpose of the aid is to promote either research into, or development of, transport systems and technologies which are more economic for the [EU] in general. Such aid shall be restricted to the research and development stage and may not cover the commercial exploitation of such transport systems and technologies’.

202  Para. 117.

203  Commission Decision of 16 December 2003 in Case N 464/2003 Company Neutral Revenue Support Scheme [2004] OJ C 16/25. See also Commission Decision of 18 September 2002 in Case N 308/2002 Award of grants to promote investment for the acquisition, maintenance, construction and development of railway infrastructure in the Land of Saxony-Anhalt [2002] OJ C 277/2; andCommission decision of the Commission of 12 September 2007 on the aid scheme C 12/06 (ex N 132/05), which the Czech Republic is planning to implement to support combined transport [2009] OJ L 68/8.

204  ibid, paras 23–8.

205  ibid, paras 19–46.

206  ibid, para. 94. See also, for example, Commission Decision of 17 July 2013 in Case SA.34369 Construction and operation of public intermodal transport [2014] OJ L 238/11; and Commission Decision of 31 May 2013 in Case SA.36485 Investment aid for the development of intermodal transport under the Infrastructure and Environmental Operational Programme [2013] OJ C 204/6. See also, for example, European Commission Report on Competition Policy Including Commission Staff Working Document 2009, para. 393 and the cases cited therein.

207  Paras 118–23. See also Commission Decision of 10 May 2007 in Case N 770/06 State guarantee for the purpose of financing the purchase of railway rolling stock by Czech Railways (Eurofima loan guarantee) [2007] OJ C 227/4.

208  The Railway State Aid Guidelines refer to the Commission Notice on the application of Arts 87 and 88 of the EC Treaty to State aid in the form of guarantees [2000] OJ C 71/14. However, more recently, it has published a revised notice, i.e. Commission Notice on the application of Arts 87 and 88 of the EC Treaty to State aid in the form of guarantees [2008] OJ C 155/10. Section 1.3 of the 2008 notice states that it applies to all economic sectors, including transport.

209  Paras 122–3.

210  Paras 124–9.

211  Paras 124–5.

212  See, e.g. Commission Decision of 7 June 2006 in Case N 478/2004 State guarantee for capital borrowings by Coràs Iompair Eirann (CIÉ) for infrastructure investment [2006] OJ C 209/8.

213  Judgment of 24 March 2011, Freistaat Sachsen and Land Sachsen-Anhalt and Mitteldeutsche Flughafen and Flughafen Leipzig/Halle v Commission, Joined Cases T-443 and 455/08, EU:T:2011:117.

214  Judgment in Mitteldeutsche Flughafen and Flughafen Leipzig-Halle v Commission, C-288/11 P, EU:C:2012:821.

215  Judgment in Freistaat Sachsen and Others v Commission, EU:T:2011:117, paras 95–100; and Judgment in Mitteldeutsche Flughafen and Flughafen Leipzig-Halle v Commission EU:C:2012:821, paras 42–3. For a more detailed discussion of these judgments, see Ch. 17).

216  DG Competition, Note to DG REGIO, Subject: Application of State aid rules to infrastructure investment projects, March 2011, available on the website of the Latvian Ministry of Finance. http://www.esfondi.lv/upload/00-vadlinijas/Note_on_State_aid_for_infrastructure_projects.pdf.(Accessed 13 December 2016).

217  ibid, para. 7 (emphasis in original, footnote omitted).

218  ibid, para. 9. See also the summary table on p. 4.

219  However, see Commission Decision of 28 November 2007 in Case NN 47/2007 United Kingdom, Metronet Rail CV Limited and Metronet Rail SSL Limited in administration (Rescue aid) [2008] OJ C 30/2.