Opening up national freight and passenger markets to cross-border competition has been a major step towards creating an integrated European railway area and a genuine EU internal market for rail. A more competitive and efficient rail industry is a prerequisite for achieving the targets of reducing emissions and modal shift as outlined in the 2011 Transport White Paper. Greater technical harmonisation of rail systems and the development of key cross-border rail routes are also helping to break down barriers to a more competitive rail sector, along with better connections between EU and neighbouring markets.
Greater competition will help createa more efficient and customer-responsive industry. EU rail legislation has consistently encouraged competitiveness and market opening, with the first major law in this direction dating back to 1991.
Legislation is based on a distinction between infrastructure managers who run the network and railway companies that use it for transporting passengers or goods. Different organisational entities must be set up for transport operations on the one hand and infrastructure management on the other. Essential functions such as the allocation of rail capacity (“train paths” that companies need to be able to operate trains on the network), infrastructure charging and licensing must be separated from the operation of transport services and performed in a neutral fashion to give new rail operators fair access to the market. Moreover, it must be guaranteed that public funds for infrastructure and for the payment of compensation for transport services under public service obligations may not be used to finance transport operations. This is to avoid distortions of competition and the unfair use of public money.
EU Member States must also have regulatory bodies in place to monitor railway markets and to act as an appeal body for rail companies if they believe they have been unfairly treated.
Directive 2012/34/EU recasting the First Railway Package contains the basic provisions for market opening in the railway sector.
Further proposals are made in the Commission's 4th Railway Package.
Opening markets Europe-wide
As well as encouraging greater competition within national markets, EU legislation gives rail operators the ability to run services in and between other EU countries, opening up cross-border competition.
Rail freight transport has been completely liberalised in the EU since the start of 2007, for both national and international services. This means that any licensed EU railway company with the necessary safety certification can apply for capacity and offer national and international freight services by rail throughout the EU. Liberalisation increased competition and the efficiency of rail freight transport, new operators entered the market and rail became better able to compete with other transport modes.
The market for international rail passenger services has been liberalised in the EU since 1 January 2010. Any licensed, certified rail company established in the EU is in principle able to offer such services, and in doing so has the right to pick up and set down passengers at any station along the international route. The market for purely domestic rail passenger services is not yet being opened up to EU-wide competition. However, the Commission has made proposals which would bring this about in its 4th railway package.
In 2013, the Commission adopted a report on the effects of opening up the international rail passenger markets .