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Commission clarifies rules on state aid

30 May 2008

EUROPE: The European Commission adopted guidelines clarifying the rules on state aid for railways on April 30. Drawn up to replace inconsistent national 'custom and practice', the guidelines set out how the particular requirements of the rail sector, especially in the most recent EU members, mean that state aid can remain compatible with the aims of competition and the wider interests of the EU.

Rail passenger transport is granted a derogation from regional aid guidelines which prohibited assistance for initial investment in vehicles. Public money can be put towards fleet modernisation, which the Commission says 'is urgently required, especially in the new member states, both in the passengers' interest and in that of greener mobility'. This is vital to keep rail competitive with modes which 'cause more pollution or entail higher external costs.'

So as not to distort the opening of the international market to competition, the guidelines state that the rolling stock must be allocated to specific urban, suburban or regional services for at least 10 years. Replacement stock must meet 'the latest interoperability, safety and environmental standards applicable to the network concerned', and the member state must prove the contribution to a coherent regional development strategy.

In the freight sector, the Commission confirms that government -backed unlimited guarantees are incompatible with the EC Treaty. It requires the removal of such guarantees from the whole of an undertaking which operates in both competitive and non-competitive markets - for ?example, an incumbent state railway which has bought private sector businesses.

Because of the current situation of the freight industry, the Commission will permit state aid for a one-off restructuring of operators to separate all freight activities from the passenger business by January 2010, when the passenger sector is opened to competition.

CER welcomed the guidelines, saying 'member states were not sure whether and to what extent they were allowed to grant railways public support for investment in modern trains and locomotives'. l

  • On April 30 the European Commission authorised the Czech government's five-year plan to provide €173m for rolling stock modernisation through public service contracts.