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State aid for railway undertakings

Community guidelines on State aid for railway undertakings clarify the rules applicable to public funding for this type of enterprise. The Commission wishes to support the liberalisation of the rail transport sector and to ensure that public funding contributes to the development of sustainable mobility within the European Union.

ACT

Community guidelines on State aid for railway undertakings [Official Journal C 184 of 22.7.2008].

SUMMARY

The objective of these guidelines is to provide guidance on the compatibility of State aid for railway undertakings with Articles 73 and 87 of the Treaty establishing the European Community. State aid which distorts or threatens to distort competition within the Common Market is prohibited (Article 87.1 EC). Derogations are however provided for, in particular when aid promotes the economic development of the European Union in general (Article 87.3 EC).

Also, Article 73 of the Treaty provides that aids are compatible with the Treaty if they meet the needs of coordination of transport or if they represent reimbursement for the discharge of certain obligations inherent in the concept of a public service. Aid relating to Public Service Obligations (PSOs) is covered by a specific Regulation and is consequently excluded from the scope of these guidelines.

Scope

These guidelines apply to railway undertakings as well as to urban, suburban or regional passenger transport undertakings with regard to aid for the purchase and renewal of rolling stock. Public funding for infrastructure managers is not covered.

The guidelines cover the following support measures:

The support of railway undertakings by means of infrastructure funding.

The Commission considers that this type of funding may constitute aid if it allows undertakings to benefit indirectly from an advantage by lightening the burden of charges that encumber their budget. It is therefore important to evaluate whether the measure for infrastructures does actually have such an effect. Where 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 in force, the Commission considers that public financing of the infrastructure does not constitute State aid. If such financing is considered to constitute aid, it may nevertheless be authorised if the infrastructure in question meets the needs of transport coordination.

Aid for the purchase and renewal of rolling stock.

The Commission highlights the necessity of investing in the modernisation and/or renewal of the fleet of locomotives and carriages used for passenger transport. The Commission considers that such investment is indispensable to keeping rail transport competitive with other modes of transport which cause more pollution, to limiting the impact of this means of transport on the environment and to enhancing the interoperability of national networks.

The compatibility assessment of aid for the purchase and renewal of rolling stock should be made according to the common-interest objective to which the aid is contributing. Within this framework, the Commission applies rules defined for the following aid categories:

Debt cancellation by States with a view to the financial rejuvenation of railway undertakings.

The Commission notes that the level of indebtedness of many railway undertakings remains very high, in particular in Member States who acceded in 2004, the effect of which is the limitation of their investment capacity. Under certain conditions, debt cancellation may be considered as aid compatible with the Common Market if it seeks to ease the transition towards an open railway market, without unduly distorting competition and trade between Member States.

Aid for restructuring railway undertakings.

The compatibility of State aid for restructuring firms in difficulty in the railway industry is assessed on the basis of the 2004 guidelines on aid for restructuring. These guidelines do not provide for derogations for railway undertakings. The Commission nevertheless considers that given the difficulties of the European rail freight sector, it is in the common interest that aid granted to railway undertakings in difficulty might, under certain circumstances, be considered compatible with the Treaty. Derogations will apply under certain conditions, only to the freight divisions of railway undertakings and for restructurings notified before 1 January 2010.

Aid for coordination of transport.

The concept of ‘transport coordination’, used in Article 73 of the Treaty, implies an intervention by public authorities which is aimed at guiding the development of the transport sector in the common interest. Aid for coordination of transport may be in several forms:

  • aid for infrastructure use;
  • aid for reducing external costs designed to encourage a modal shift from road to rail;
  • aid for promoting interoperability, and, to the extent to which it meets the needs of transport coordination, aid for promoting greater safety, the removal of technical barriers and the reduction of noise pollution;
  • aid for research and development in response to the needs of transport coordination.

The Commission presents in detail the method to determine eligible costs, as well as the conditions making it possible to ensure that this aid meets the conditions of compatibility mentioned in Article 73 of the Treaty. Aid for rail infrastructure use, reducing external costs and interoperability is considered as compatible when it is necessary and proportionate.

Aid for research and development is subject to specific provisions set out in Article 9 of the PSO Regulation. The Community framework for State aid for research, development and innovation applies to this type of aid.

State guarantees for railway undertakings.

The Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees sets out the legal requirements applicable to State guarantees, including in the rail transport field.

Implementation

These guidelines apply to all aid, whether or not notified, as from 22 July 2008. Member States must modify their existing aid schemes so as to comply with them by 22 July 2010 at the latest.

Context

The European Community is conducting a policy to revitalise the rail industry, by introducing conditions fostering competition on the rail transport services markets, by encouraging technical harmonisation on the European rail networks and by granting financial support in the TEN-T programme and the Structural Funds framework.

Last updated: 02.10.2008
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