Common position 2/2007 adopted on 11 December 2006 with a view to the adoption of Regulation on public passenger transport services by rail and by road and repealing Regulations 1191/69 and 1107/70

COMMON POSITION (EC) No 2/2007

adopted by the Council on 11 December 2006

with a view to the adoption of Regulation (EC) No .../2007 of the European Parliament and of the

Council of ... on public passenger transport services by rail and by road and repealing Council

Regulations (EEC) No 1191/69 and (EEC) No 1107/70

(2007/C 70 E/01)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EURO- (4) The main objectives of the Commission's White Paper of

PEAN UNION, 12 September 2001 `European transport policy for 2010:

time to decide' are to guarantee safe, efficient and high-

Having regard to the Treaty establishing the European Com- quality passenger transport services through regulated

munity, and in particular Articles 71 and 89 thereof, competition, guaranteeing also transparency and perfor-

mance of public passenger transport services, having

Having regard to the proposal from the Commission, regard to social, environmental and regional development

factors, or to offer specific tariff conditions to certain

Having regard to the pinion of the European Economic and categories of travellers, such as pensioners, and to elimi-

Social Committee (1), nate the disparities between transport undertakings from

different Member States which may give rise to substan-

Having regard to the opinion of the Committee of the tial distortions of competition.

Regions (2),

Acting in accordance with the procedure laid down in

Article 251 of the Treaty (3), (5) At the present time, many inland passenger transport

Whereas: services which are required in terms of general economic

interest cannot be operated on a commercial basis. The

competent authorities of the Member States must be able

(1) Article 16 of the Treaty confirms the place occupied by to act to ensure that such services are provided. The

services of general economic interest in the shared values mechanisms that they can use to ensure that public

of the Union. passenger transport services are provided include the

following: the award of exclusive rights to public service

(2) Article 86(2) of the Treaty lays down that undertakings operators, the grant of financial compensation to public

entrusted with the operation of services of general service operators and the definition of general rules for

economic interest are subject to the rules contained in the operation of public transport which are applicable to

the Treaty, in particular to the rules on competition, all operators. If Member States, in accordance with this

insofar as the application of such rules does not obstruct Regulation, choose to exclude certain general rules from

the performance, in law or in fact, of the particular tasks its scope, the general regime for State aid should apply.

assigned to them.

(3) Article 73 of the Treaty constitutes a lex specialis in rela-

tion to Article 86(2). It establishes rules applicable to the

compensation of public service obligations in inland (6) Many Member States have introduced legislation

transport. providing for the award of exclusive rights and public

service contracts in at least part of their public transport

(1) OJ C 195, 18.8.2006, p. 20. market, on the basis of transparent and fair competitive

(2) OJ C 192, 16.8.2006, p. 1. award procedures. As a result, trade between Member

(3) Opinion of the European Parliament of 14 November 2001 States has developed significantly and several public

(OJ C 140 E, 13.6.2002, p. 262), Council Common Position of

11 December 2006 and Position of the European Parliament of ... (not service operators are now providing public passenger

yet published in the Official Journal). transport services in more than one Member State.

C 70E/2 EN Official Journal of the European Union 27.3.2007

However, developments in national legislation have led to Regulation to that specific sector. The provisions of this

disparities in the procedures applied and have created Regulation do not prevent the integration of inland

legal uncertainty as to the rights of public service opera- waterway services into a wider urban, suburban or

tors and the duties of the competent authorities. Regu- regional public passenger transport network.

lation (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 (1), does not deal with (11) Contrary to Regulation (EEC) No 1191/69, the scope of

the way public service contracts are to be awarded in the which extends to freight transport services, it is not

Community, and in particular the circumstances in which considered advisable for this Regulation to cover the

they should be the subject of competitive tendering. The award of public service contracts in that specific sector.

Community legal framework ought therefore to be Three years after the entry into force of this Regulation

updated. the organisation of freight transport services should

therefore be subject to compliance with the general prin-

ciples of the Treaty.

(7) Studies carried out and the experience of Member States

where competition in the public transport sector has

been in place for a number of years show that, with

appropriate safeguards, the introduction of regulated (12) It is irrelevant from the viewpoint of Community law

competition between operators leads to more attractive whether public passenger transport services are operated

and innovative services at lower cost and is not likely to by public or private undertakings. This Regulation is

obstruct the performance of the specific tasks assigned to based on the principles of neutrality as regards the

public service operators. This approach has been system of property ownership referred to in Article 295

endorsed by the European Council under the so-called of the Treaty, of the freedom of Member States to define

Lisbon Process of 28 March 2000 which called on the services of general economic interest, referred to in

Commission, the Council and the Member States, each in Article 16 of the Treaty, and of subsidiarity and propor-

accordance with their respective powers, to `speed up tionality referred to in Article 5 of the Treaty.

liberalisation in areas such as ... transport'.

(13) Some services, often linked to specific infrastructure, are

(8) Passenger transport markets which are deregulated and in operated mainly for their historical interest or tourist

which there are no exclusive rights should be allowed to value. As the purpose of these operations is manifestly

maintain their characteristics and way of functioning different from the provision of public passenger trans-

insofar as these are compatible with Treaty requirements. port, they need not therefore be governed by the rules

and procedures applicable to public service requirements.

(9) To be able to organise their public passenger transport

services in the manner best suited to the needs of the (14) Where the competent authorities are responsible for

public, all competent authorities must be able to choose organising the public transport network, apart from the

their public service operators freely, taking into account actual operation of the transport service, this may cover

the interests of small and medium sized enterprises, a whole range of other activities and duties that the

under the conditions stipulated in this Regulation. To competent authorities must be free either to carry out

guarantee application of the principles of transparency, themselves or entrust, in whole or in part, to a third

equal treatment of competing operators and proportion- party.

ality, when compensation or exclusive rights are granted,

it is essential that a public service contract between the

competent authority and the chosen public service

operator define the nature of the public service obliga- (15) Contracts of long duration can lead to the closing of the

tions and the agreed reward. The form or designation of market for a longer period than is necessary, thus dimin-

the contract may vary according to the legal systems of ishing the benefits of competitive pressure. To minimise

the Member States. distortions of competition while protecting the quality of

services, public service contracts should be of limited

duration. It is, however, necessary to make provision for

extending public service contracts by a maximum of half

(10) Contrary to Regulation (EEC) No 1191/69, the scope of their initial duration where the public service operator

which extends to public passenger transport services by has to invest in assets for which the depreciation period

inland waterway, it is not considered advisable for this is exceptional and, because of their special characteristics

Regulation to cover the award of public service contracts and constraints, in the case of the outermost regions as

in that specific sector. The organisation of public specified in Article 299 of the Treaty. In addition, where

passenger transport services by inland waterway is there- a public service operator makes investments in infrastruc-

fore subject to compliance with the general principles of ture or in rolling stock and vehicles which are exceptional

the Treaty, unless Member States choose to apply this in the sense that both concern high amounts of funds,

and provided the contract is awarded after a fair competi-

(1) OJ L 156, 28.6.1969, p. 1. Regulation as last amended by Regulation tive tendering procedure, an even longer extension

(EEC) No 1893/91 (OJ L 169, 29.6.1991, p. 1). should be possible.

27.3.2007 EN Official Journal of the European Union C 70E/3

(16) Where the conclusion of a public service contract may with a view to the best use of public funds, competent

entail a change of public service operator, it should be authorities should be able to determine the modalities for

possible for the competent authorities to ask the chosen subcontracting their public passenger transport services,

public service operator to apply the provisions of in particular in the case of services performed by an

Council Directive 2001/23/EC of 12 March 2001 on the internal operator. Furthermore, a subcontractor should

approximation of the laws of the Member States relating not be prevented from taking part in competitive tenders

to the safeguarding of employees' rights in the event of in the territory of any competent authority. The selection

transfer of undertakings, businesses or parts of undertak- of a subcontractor by the competent authority or its

ings or businesses (1). This Directive does not preclude internal operator needs to be carried out in accordance

Member States from safeguarding transfer conditions of with Community law.

employees' rights other than those covered by Direc-

tive 2001/23/EC and thereby, if appropriate, taking into

account social standards established by national laws,

regulations or administrative provisions or collective (20) Where a public authority chooses to entrust a general

agreements or agreements concluded between social part- interest service to a third party, it must select the public

ners. service operator in accordance with Community law on

public contracts and concessions, as established by Arti-

cles 43 to 49 of the Treaty, and the principles of trans-

parency and equal treatment. In particular, the provisions

of this Regulation are to be without prejudice to the obli-

gations applicable to public authorities by virtue of the

(17) In keeping with the principle of subsidiarity, competent directives on the award of public contracts, where public

authorities are free to establish quality standards for service contracts fall within their scope.

public service obligations, for instance with regard to

minimal working conditions, passenger rights, the needs

of persons with reduced mobility or environmental

protection. (21) Some invitations to tender require the competent autho-

rities to define and describe complex systems. These

authorities should therefore be empowered, when

awarding contracts in such cases, to negotiate details with

some or all of the potential public service operators after

(18) Subject to the relevant provisions of national law, any tenders have been submitted.

local authority or, in the absence thereof, any national

authority, may choose to provide its own public

passenger transport services in the area it administers or (22) Invitations to tender for the award of public service

to entrust them to an internal operator without competi- contracts should not be mandatory where the contract

tive tendering. However, this self-provision option needs relates to modest amounts or distances. In this respect,

to be strictly controlled to ensure a level playing field. greater amounts or distances should enable competent

The competent authority or group of authorities authorities to take into account the special interests of

providing integrated public passenger transport services, small and medium sized enterprises. Competent authori-

collectively or through its members, should exercise the ties should not be permitted to split up contracts or

required control. In addition, a competent authority networks in order to avoid tendering.

providing its own transport services or an internal

operator should be prohibited from taking part in

competitive tendering procedures outside the territory of

that authority. The authority controlling the internal (23) Where there is a risk of disruption of the provision of

operator should also be allowed to prohibit this operator services, the competent authorities should be empowered

from taking part in competitive tenders organised within to introduce emergency short-term measures pending the

its territory. Restrictions on the activities of an internal award of a new public service contract which is in line

operator do not interfere with the possibility of the direct with all awarding conditions of this Regulation.

award of public service contracts where they concern

transport by rail with the exception of other track-based

modes such as metro or tramways. Furthermore, the

direct award of public service contracts for heavy rail (24) Public passenger transport by rail raises specific issues of

does not preclude the possibility for competent authori- investment burden and infrastructure cost. In March

ties to award public service contracts for public passenger 2004, the Commission presented a proposal to amend

transport services on other track-based modes such as Council Directive 91/440/EEC of 29 July 1991 on the

metro and tramway to an internal operator. development of the Community's railways (2) so as to

guarantee access for all Community railway undertakings

to the infrastructure of all Member States for the purpose

of operating international passenger services. The aim of

this Regulation is to establish a legal framework for

compensation and/or exclusive rights for public service

(19) Subcontracting can contribute to more efficient public contracts and not the further opening of the market for

passenger transport and makes it possible for undertak- railway services.

ings to participate, other than the public service operator

which was granted the public service contract. However, (2) OJ L 237, 24.8.1991, p. 25. Directive as last amended by Directive

2004/51/EC of the European Parliament and of the Council (OJ L 164,

(1) OJ L 82, 22.3.2001, p. 16. 30.4.2004, p. 164).

C 70E/4 EN Official Journal of the European Union 27.3.2007

(25) In the case of public services, this Regulation allows each refuse, in the second half of the transitional period,

competent authority, within the context of a public tenders from undertakings, more than half the value of

service contract, to select its operator of public passenger the public transport services performed by which are not

transport services. Given the differences in the way granted in accordance with this Regulation, provided that

Member States organise their territory in this respect, this is applied without discrimination and decided in

competent authorities may justifiably be allowed to advance of an invitation to tender.

award public service contracts directly for railway travel.

(26) The compensation granted by competent authorities to (32) In paragraphs 87 to 95 of its judgment of 24 July 2003

cover the costs incurred in discharging public service in Case C-280/00 Altmark Trans GmbH (1), the Court of

obligations should be calculated in a way that prevents Justice of the European Communities ruled that compen-

overcompensation. Where a competent authority plans to sation for public service does not constitute an advantage

award a public service contract without putting it out to within the meaning of Article 87 of the Treaty, provided

competitive tender, it should also respect detailed rules that four cumulative conditions are satisfied. Where these

ensuring that the amount of compensation is appropriate conditions are not satisfied and the general conditions for

and reflecting a desire for efficiency and quality of the application of Article 87(1) of the Treaty are met,

service. public service compensation constitutes State aid and is

subject to Articles 73, 86, 87 and 88 of the Treaty.

(27) By appropriately considering any effect of complying

with the public service obligations on the demand of

public passenger transport services in the calculation (33) Compensation for public services may prove necessary in

scheme of the Annex, the competent authority and the the inland passenger transport sector so that undertak-

public service operator can prove that overcompensation ings responsible for public services operate on the basis

has been avoided. of principles and under conditions which allow them to

carry out their tasks. Such compensation may be compa-

tible with the Treaty pursuant to Article 73 under certain

conditions. Firstly, it must be granted to ensure the provi-

sion of services which are services of general interest

(28) With a view to the award of public service contracts,

with the exception of emergency measures and contracts within the meaning of the Treaty. Secondly, to avoid

relating to modest distances, the competent authorities unjustified distortions of competition it may not exceed

should take the necessary measures to advertise, at least what is necessary to cover the net costs incurred through

one year in advance, the fact that they intend to award discharging the public service obligations, taking account

such contracts, so as to enable potential public service of the revenue generated thereby and a reasonable profit.

operators to react.

(34) Compensation granted by the competent authorities in

(29) Directly awarded public service contracts should be accordance with the provisions of this Regulation may

subject to enhanced transparency. therefore be exempted from the prior notification

requirement of Article 88(3) of the Treaty.

(30) Given that competent authorities and public service

operators will need time to adapt to the provisions of

this Regulation, provision should be made for transitional (35) This Regulation replaces Regulation (EEC) No 1191/69;

arrangements. With a view to the gradual award of that Regulation should therefore be repealed. For public

public service contracts in line with this Regulation, freight transport services, a transitional period of three

Member States should provide the Commission with a years will assist the phasing out of compensation not

progress report within six months after the first half of authorised by the Commission in accordance with Arti-

the transitional period. The Commission may propose cles 73, 86, 87 and 88 of the Treaty. Any compensation

appropriate measures on the basis of these reports. granted in relation to the provision of public passenger

transport services other than those covered by this Regu-

lation which risks involving State aids within the

meaning of Article 87(1) of the Treaty should comply

(31) During the transitional period, the introduction of the with the provisions of Articles 73, 86, 87 and 88

provisions of this Regulation by the competent authori- thereof, including any relevant interpretation by the

ties may take place at different times. It may therefore be Court of Justice of the European Communities and espe-

possible, during this period, that public service operators cially its ruling in Case C-280/00 Altmark Trans GmbH.

from markets not yet affected by the provisions of this When examining such cases, the Commission should

Regulation tender for public service contracts in markets therefore apply principles similar to those laid down in

that have been opened to controlled competition more this Regulation or, where appropriate, other legislation in

rapidly. In order to avoid, by means of proportionate the field of services of general economic interest.

action, any imbalance in the opening of the public trans-

port market, competent authorities should be able to (1) [2003] ECR I-7747.

27.3.2007 EN Official Journal of the European Union C 70E/5

(36) The scope of Council Regulation (EEC) No 1107/70 of value. Member States may apply this Regulation to public

4 June 1970 on the granting of aids for transport by rail, passenger transport by inland waterways.

road and inland waterway (1) is covered by this Regu-

lation. That Regulation is considered obsolete while

limiting the application of Article 73 of the Treaty 3. This Regulation shall not apply to public works conces-

without granting an appropriate legal basis for author- sions within the meaning of Article 1(3)(a) of Directive

ising current investment schemes, in particular in relation 2004/17 of the European Parliament and of the Council of

to investment in transport infrastructure in a public 31 March 2004 coordinating the procurement procedures of

private partnership. It should therefore be repealed in entities operating in the water, energy, transport and postal

order for Article 73 of the Treaty to be properly applied services sectors (3) or of Article 1(3) of Directive 2004/18 of the

to continuing developments in the sector without preju- European Parliament and of the Council of 31 March 2004 on

dice to this Regulation or Council Regulation (EEC) the coordination of procedures for the award of public works

No 1192/69 of 26 June 1969 on common rules for the contracts, public supply contracts and public service

normalisation of the accounts of railway undertakings (2). contracts (4).

With a view to further facilitating the application of the

relevant Community rules, the Commission will propose

State aid guidelines for railway investment, including

investment in infrastructure in 2006.

Article 2

(37) With a view to assessing the implementation of this

Regulation and the developments in the provision of Definitions

public passenger transport in the Community, in particu-

lar the quality of public passenger transport services and

the effects of granting public service contracts by direct For the purpose of this Regulation:

award, the Commission should produce a report. This

report can, if necessary, be accompanied by appropriate

proposals for modifying this Regulation, (a) `public passenger transport' means passenger transport

services of general economic interest provided to the public

on a non-discriminatory and continuous basis;

(b) `competent authority' means any public authority or group

of public authorities of a Member State or Member States

HAVE ADOPTED THIS REGULATION: which has the power to intervene in public passenger trans-

port in a given geographical area or any body vested with

such authority;

Article 1 (c) `competent local authority' means any competent authority

whose geographical area of competence is not national;

Purpose and scope (d) `public service operator' means any public or private under-

taking or group of such undertakings which operates public

1. The purpose of this Regulation is to define how, in accord- passenger transport services or any public body which

ance with the rules of Community law, competent authorities provides public passenger transport services;

may act in the field of public passenger transport to guarantee

the provision of services of general interest which are among (e) `public service obligation' means a requirement defined or

other things more numerous, safer, of a higher quality or at a determined by a competent authority in order to assure

lower cost than those that market forces alone would have public passenger transport services in the general interest

allowed. that an operator, if it were considering its own commercial

interests, would not assume or would not assume to the

same extent or under the same conditions without reward;

To this end, this Regulation lays down the conditions under

which competent authorities, when imposing or contracting for

public service obligations, compensate public service operators (f) `exclusive right' means a right entitling a public service

for costs incurred and/or grant exclusive rights in return for the operator to operate certain public passenger transport

discharge of public service obligations. services on a particular route or network or in a particular

area, to the exclusion of any other such operator;

2. This Regulation shall apply to the national and interna- (g) `public service compensation' means any benefit, particularly

tional operation of public passenger transport services by rail financial, granted directly or indirectly by a competent

and other track-based modes and by road, except for services authority from public funds during the period of implemen-

which are operated mainly for their historical interest or their tation of a public service obligation or in connection with

tourist that period;

(1) OJ L 130, 15.6.1970, p. 1. Regulation last amended by Regulation (EC) (3) OJ L 134, 30.4.2004, p. 1. Directive as last amended by Commission

No 543/97 (OJ L 84, 26.3.1997, p. 6). Regulation (EC) No 2083/2005 (OJ L 333, 20.12.2005, p. 28).

(2) OJ L 156, 28.6.1969, p. 8. Regulation as last amended by the 2003 Act (4) OJ L 134, 30.4.2004, p. 114. Directive as last amended by Commission

of Accession. Regulation (EC) No 2083/2005.

C 70E/6 EN Official Journal of the European Union 27.3.2007

(h) `direct award' means the award of a public service contract competent authorities to integrate public service obligations

to a given public service operator without any prior compe- establishing maximum tariffs in public service contracts.

titive tendering procedure;

(i) `public service contract' means one or more legally binding 3. Without prejudice to the provisions of Articles 73, 86, 87

acts confirming the agreement between a competent and 88 of the Treaty, Member States may exclude from the

authority and a public service operator to entrust to that scope of this Regulation general rules on financial compensation

public service operator the management and operation of for public service obligations which establish maximum tariffs

public passenger transport services subject to public service for pupils, students, apprentices and persons with reduced

obligations; depending on the law of the Member States, the mobility. These general rules shall be notified in accordance

contract may also consist of a decision adopted by the with Article 88 of the Treaty. Any such notification shall

competent authority: contain complete information on the measure and, in particular,

details on the calculation method.

- taking the form of an individual legislative or regulatory

act, or

- containing conditions under which the competent

authority itself provides the services or entrusts the Article 4

provision of such services to an internal operator;

(j) `value' means the value of a service, a route, a public service Mandatory content of public service contracts and general

contract, or a compensation scheme for public passenger rules

transport corresponding to the total remuneration, before

VAT, of the public service operator or operators, including

compensation of whatever kind paid by the public authori- 1. Public service contracts and general rules shall:

ties and revenue from the sale of tickets which is not repaid

to the competent authority in question; (i) clearly define the public service obligations with which the

public service operator is to comply, and the geographical

(k) `general rule' means a measure which applies without discri- areas concerned;

mination to all public passenger transport services of the

same type in a given geographical area for which a compe-

tent authority is responsible; (ii) establish in advance, in an objective and transparent

manner, the parameters on the basis of which the compen-

sation payment is to be calculated in a way that prevents

(l) `integrated public passenger transport services' means inter- overcompensation. In the case of public service contracts

connected transport services within a determined geogra- awarded in accordance with Article 5(2), (4), (5) and (6),

phical area with a single information service, ticketing these parameters shall be determined in such a way that no

scheme and timetable. compensation payment may exceed the amount required to

cover the net financial effect on costs incurred and revenues

generated in discharging the public service obligations,

taking account of revenue relating thereto kept by the

public service operator and a reasonable profit;

Article 3

(iii) determine the arrangements for the allocation of costs

Public service contracts and general rules connected with the provision of services. These costs may

include in particular the costs of staff, energy, infrastructure

charges, maintenance and repair of public transport vehi-

cles, rolling stock and installations necessary for operating

1. Where a competent authority decides to grant the the passenger transport services, fixed costs and a suitable

operator of its choice an exclusive right and/or compensation, return on capital.

of whatever nature, in return for the discharge of public service

obligations, it shall do so within the framework of a public

service contract. 2. Public service contracts and general rules shall determine

the arrangements for the allocation of revenue from the sale of

tickets which may be kept by the public service operator, repaid

2. By way of derogation from paragraph 1, public service to the competent authority or shared between the two.

obligations which aim at establishing maximum tariffs for all

passengers or for certain categories of passenger may also be

the subject of general rules. In accordance with the principles 3. The duration of public service contracts shall be limited

set out in Articles 4 and 6 and in the Annex, the competent and shall not exceed ten years for coach and bus services and

authority shall compensate the public service operators for the fifteen years for passenger transport services by rail or other

net financial effect, positive or negative, on costs incurred and track-based modes. The duration of public service contracts

revenues generated in complying with the tariff obligations relating to several modes of transport shall be limited to fifteen

established through general rules in a way that prevents over- years if transport by rail or other track-based modes represents

compensation. This shall be so notwithstanding the right of more than 50 % of the value of the services in question.

27.3.2007 EN Official Journal of the European Union C 70E/7

4. If necessary, having regard to the conditions of deprecia- are to be awarded in accordance with Directives 2004/17/EC or

tion of assets, the duration of the public service contract may be 2004/18/EC, the provisions of paragraphs 2 to 6 of this Article

extended by a maximum of 50 % if the public service operator shall not apply.

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 predo-

minantly to the passenger transport services covered by the

contract. 2. Unless prohibited by national law, any competent local

authority, whether or not it is an individual authority or a

group of authorities providing integrated public passenger trans-

If justified by costs deriving from the particular geographical port services, may decide to provide public passenger transport

situation, the duration of public service contracts specified in services itself or to award public service contracts directly to a

paragraph 3 in the outermost regions may be extended by a legally distinct entity over which the competent local authority,

maximum of 50 %. or in the case of a group of authorities at least one competent

local authority, exercises control similar to that exercised over

its own departments (hereinafter referred to as an internal

If justified by the amortisation of capital in relation to excep- operator). Where a competent local authority takes such a deci-

tional infrastructure, rolling stock or vehicular investment and if sion, the following shall apply:

the public service contract is awarded in a fair competitive

tendering procedure, a public service contract may have a

longer duration. To ensure transparency in this case, the compe-

tent authority shall transmit to the Commission within one year (a) for the purposes of determining whether the competent

after the conclusion of the contract the public service contract local authority exercises control, factors such as the degree

and elements justifying its longer duration. of representation on administrative, management or supervi-

sory bodies, specifications relating thereto in the articles of

association, ownership, effective influence and control over

5. Without prejudice to national and Community law, strategic decisions and individual management decisions

including collective agreements between social partners, compe- shall be taken into consideration. In accordance with Com-

tent authorities may require the selected public service operator munity law, 100 % ownership by the competent public

to grant staff previously taken on to provide services the rights authority, in particular in the case of public-private partner-

to which they would have been entitled if there had been a ships, is not a mandatory requirement for establishing

transfer within the meaning of Directive 2001/23/EC. Where control within the meaning of this paragraph, provided that

competent authorities require public service operators to there is a dominant public influence and that control can be

comply with certain social standards, tender documents and established on the basis of other criteria;

public service contracts shall list the staff concerned and give

transparent details of their contractual rights and the conditions

under which employees are deemed to be linked to the services.

(b) the condition for applying this paragraph is that the internal

operator and any entity over which this operator exerts even

6. Where competent authorities, in accordance with national a minimal influence perform their public passenger trans-

law, require public service operators to comply with certain port activity within the territory of the competent local

quality standards, these standards shall be included in the tender authority, notwithstanding any outgoing lines or other ancil-

documents and in the public service contracts. lary elements of that activity which enter the territory of

neighbouring competent local authorities, and do not take

part in competitive tenders concerning the provision of

7. Tender documents and public service contracts shall be public passenger transport services organised outside the

transparent as to whether or not subcontracting may be consid- territory of the competent local authority;

ered. The public service contract shall, in accordance with

national and Community law, determine the conditions applied

to subcontracting.

pate in fair competitive tenders as from two years before the

end of its directly awarded public service contract under the

condition that a final decision has been taken to submit the

Article 5 public passenger transport services covered by the internal

operator contract to fair competitive tender and that the

internal operator has not concluded any other directly

Award of public service contracts awarded public service contract;

1. Public service contracts shall be awarded in accordance

with the rules laid down in this Regulation. However, service (d) in the absence of a competent local authority, points (a), (b)

contracts or public service contracts as defined in Direc- and (c) shall apply to a national authority for the benefit of

tive 2004/17/EC or Directive 2004/18/EC for public passenger a geographical area which is not national, provided that the

transport services by bus or tram shall be awarded in accord- internal operator does not take part in competitive tenders

ance with the procedures provided for under those Directives concerning the provision of public passenger transport

where such contracts do not take the form of service conces- services organised outside the area for which the public

sions contracts as defined in those Directives. Where contracts service contract has been granted.

C 70E/8 EN Official Journal of the European Union 27.3.2007

3. Any competent authority which has recourse to a third 2. At the written request of the Commission, Member States

party other than an internal operator, shall award public service shall communicate, within a period of three months or any

contracts on the basis of a competitive tendering procedure, longer period as may be fixed in that request, all the informa-

except in the cases specified in paragraphs 4, 5 and 6. The tion that the Commission considers necessary to determine

procedure adopted for competitive tendering shall be open to all whether the compensation granted is compatible with this

operators, shall be fair and shall observe the principles of trans- Regulation.

parency and non-discrimination. Following the submission of

tenders and any preselection, the procedure may involve nego-

tiations in accordance with these principles in order to deter-

mine how best to meet specific or complex requirements. Article 7

4. Unless prohibited by national law, the competent authori- Publication

ties may decide to award public service contracts directly either

where their average annual value is estimated at less than 1. Each competent authority shall make public once a year

EUR 1 million or where they concern the annual provision of an aggregated report on the public service obligations for which

less than 300 000 kilometres of public passenger transport it is responsible, the selected public service operators and the

services. compensation payments and exclusive rights granted to the said

public service operators by way of reimbursement. This report

shall allow the performance, quality and financing of the public

In the case of a public service contract directly awarded to a transport network to be monitored and assessed.

small and medium sized enterprise operating not more than 20

vehicles, these thresholds may be increased to either an average 2. Each competent authority shall take the necessary

annual value estimated at less than EUR 1,7 million or when measures to ensure that, at least one year before the launch of

they concern the annual provision of less than 500 000 kilo- the invitation to tender procedure or one year before the direct

metres of public passenger transport services. award, the following information at least is published in the

Official Journal of the European Union:

5. In the event of a disruption of services or the immediate (a) the name and address of the competent authority;

risk of such a situation, the competent authority may take an

emergency measure. This emergency measure shall take the (b) the type of award envisaged;

form of a direct award or a formal agreement to extend a public

service contract or a requirement to provide certain public (c) the services and areas potentially covered by the award.

service obligations. The public service operator shall have the

right to appeal against the decision to impose the provision of Competent authorities may decide not to publish this informa-

certain public service obligations. The award or extension of a tion where a public service contract concerns an annual provi-

public service contract by emergency measure or the imposition sion of less than 50 000 kilometres of public passenger trans-

of such a contract shall not exceed two years. port services.

Should this information change after its publication, the compe-

6. Unless prohibited by national law, competent authorities tent authority shall publish a rectification accordingly as soon as

may decide to make direct awards of public service contracts possible. This rectification shall be without prejudice to the

where they concern transport by rail, with the exception of launching date of the direct award or of the invitation to tender.

other track-based modes such as metro or tramways. In deroga-

tion from Article 4(3), such contracts shall not exceed 10 years,

except where Article 4(4) applies. This paragraph shall not apply to Article 5(5).

3. In the case of a direct award of public service contracts for

transport by rail as provided for in Article 5(6), the competent

authority shall make public the following information within

Article 6 one year after the granting of the award:

(a) name of the contracting entity and its ownership;

Public service compensation (b) duration of the public service contract;

1. All compensation connected with a general rule or a performed;

public service contract shall comply with the provisions laid

down in Article 4, irrespective of how the contract was (d) description of the parameters of the financial compensation;

awarded. All compensation, of whatever nature, connected with

a public service contract awarded directly in accordance with (e) quality targets;

Article 5(2), (4), (5) or (6) or connected with a general rule shall

also conform to the provisions laid down in the Annex. (f) conditions relating to essential assets.

27.3.2007 EN Official Journal of the European Union C 70E/9

4. When so requested by an interested party, a competent Public service contracts may continue until they expire where

authority shall forward to it the reasons for its decision for the their termination would entail undue legal or economic conse-

direct award of a public service contract. quences and provided that the Commission has given its

approval.

4. Without prejudice to paragraph 3, the competent authori-

Article 8 ties may opt, in the second half of the transitional period speci-

fied in paragraph 2, to exclude from participation in the award

of contracts by invitation to tender those public service opera-

Transition tors which cannot provide evidence that the value of the public

transport services for which they are receiving compensation or

enjoy an exclusive right granted in accordance with this Regu-

1. Public service contracts shall be awarded in accordance lation represents at least half the value of all the public transport

with the rules laid down in this Regulation. However, service services for which they are receiving compensation or enjoy an

contracts or public service contracts as defined in Direc- exclusive right. Such exclusion shall not apply to public service

tive 2004/17/EC or 2004/18/EC for public passenger transport operators running the services which are to be tendered. For the

services by bus or tram shall be awarded in accordance with the application of this criterion, no account shall be taken of public

procedures provided for under those Directives where such service contracts awarded by emergency measure as referred to

contracts do not take the form of service concessions contracts in Article 5(5).

as defined in those Directives. Where contracts are to be

awarded in accordance with Directives 2004/17/EC or

2004/18/EC, the provisions of paragraphs 2 to 4 of this Article Where competent authorities make use of the option referred to

shall not apply. in the first subparagraph, they shall do so without discrimina-

tion, exclude all potential public service operators meeting this

criterion and inform the potential operators of their decision at

2. Without prejudice to paragraph 3, the award of public the beginning of the procedure for the award of public service

service contracts by rail and by road shall comply with Article 5 contracts.

as from ... (*). During this transitional period Member States

shall take measures to gradually comply with Article 5 in order

to avoid serious structural problems in particular relating to The competent authorities concerned shall inform the Commis-

transport capacity. sion of their intention to apply this provision at least two

months before the publication of the invitation to tender.

Within six months after the first half of the transitional period,

Member States shall provide the Commission with a progress

report, highlighting the implementation of any gradual award of

public service contracts in line with Article 5. On the basis of Article 9

the Member States' progress reports, the Commission may

propose appropriate measures addressed to Member States. Compatibility with the Treaty

3. For the application of paragraph 2, no account shall be 1. Public service compensation for the operation of public

taken of public service contracts awarded in accordance with passenger transport services or for complying with tariff obliga-

Community and national law: tions established through general rules paid in accordance with

this Regulation shall be compatible with the common market.

(a) before 26 July 2000 on the basis of a fair competitive Such compensation shall be exempt from the prior notification

tendering procedure; requirement laid down in Article 88(3) of the Treaty.

(b) before 26 July 2000 on the basis of a procedure other than 2. Without prejudice to Articles 73, 86, 87 and 88 of the

a fair competitive tendering procedure; Treaty, Member States may continue to grant aids for the trans-

port sector pursuant to Article 73 of the Treaty which meet the

(c) as from 26 July 2000 and before ... (**) on the basis of a needs of coordination of transport or which represent reimbur-

fair competitive tendering procedure; sement for the discharge of certain obligations inherent in the

concept of a public service, other than those covered by this

(d) as from 26 July 2000 and before ... (**) on the basis of a Regulation, and in particular:

procedure other than a fair competitive tendering proce-

dure. (a) until the entry into force of common rules on the allocation

of infrastructure costs, where aid is granted to undertakings

The contracts referred to in (a) may continue until they expire. which have to bear expenditure relating to the infrastructure

The contracts referred to in (b) and (c) may continue until they used by them, while other undertakings are not subject to a

expire, but for no longer than 30 years. The contracts referred like burden. In determining the amount of aid thus granted,

to in (d) may continue until they expire, provided they are of account shall be taken of the infrastructure costs which

limited duration comparable to the durations specified in competing modes of transport do not have to bear;

Article 4.

(b) where the purpose of the aid is to promote either research

(*) 12 years after the date of entry into force of this Regulation. into, or development of, transport systems and technologies

(**) The date of entry into force of this Regulation. which are more economic for the Community in general.

C 70E/10 EN Official Journal of the European Union 27.3.2007

Such aid shall be restricted to the research and development Article 11

stage and may not cover the commercial exploitation of such

transport systems and technologies. Reports

After the end of the transitional period specified in Article 8(2),

the Commission shall present a report on the implementation

Article 10 of this Regulation and on the developments in the provision of

public passenger transport in the Community, assessing in par-

ticular the development of the quality of public passenger trans-

Repeal port services and the effects of direct awards, accompanied, if

necessary, by appropriate proposals for modifying this Regu-

1. Regulation (EEC) No 1191/69 shall be repealed. Its provi- lation.

sions shall however continue to apply in relation to freight

transport services for a period of three years after the entry into Article 12

force of this Regulation. Entry into force

2. Regulation (EEC) No 1107/70 shall be repealed. This Regulation shall enter into force on ... (*).

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

For the European Parliament For the Council

The President The President

... ...

(*) Three years following publication of the Regulation in the Official

Journal.

27.3.2007 EN Official Journal of the European Union C 70E/11

ANNEX

RULES APPLICABLE TO COMPENSATION IN THE CASES REFERRED TO IN ARTICLE 6(1)

1. The compensation connected with public service contracts awarded directly in accordance with Article 5(2), (4), (5) or

(6) or with a general rule must be calculated in accordance with the rules laid down in this Annex.

2. The 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. The effects shall be assessed by comparing the situation where the public service obligation is met

with the situation which would have existed if the obligation had not been met. In order to calculate the net financial

effect, the competent authority shall be guided by the following scheme:

Costs incurred in relation to a public service obligation or a bundle of public service obligations imposed by the

competent authority/authorities, contained in a public service contract and/or in a general rule,

- minus any positive financial effects generated within the network operated under the public service obligation(s) in

question,

- minus receipts from tariff or any other revenue generated while fulfilling the public service obligation(s) in ques-

tion,

- plus a reasonable profit,

= net financial effect.

3. Compliance with the public service obligation may have an impact on possible transport activities of an operator

beyond the public service obligation(s) in question. In order to avoid overcompensation or lack of compensation, quan-

tifiable financial effects on the operator's networks concerned shall therefore be taken into account when calculating

the net financial effect.

4. Costs and revenue must be calculated in accordance with the accounting and tax rules in force.

5. In order to increase transparency and avoid cross-subsidies, where a public service operator not only operates compen-

sated services subject to public transport service obligations, but also engages in other activities, the accounts of the

said public services must be separated so as to meet at least the following conditions:

- the operating accounts corresponding to each of these activities must be separate and the proportion of the corre-

sponding assets and the fixed costs must be allocated in accordance with the accounting and tax rules in force,

- all variable costs, an appropriate contribution to the fixed costs and a reasonable profit connected with any other

activity of the public service operator may under no circumstances be charged to the public service in question,

- the costs of the public service must be balanced by operating revenue and payments from public authorities,

without any possibility of transfer of revenue to another sector of the public service operator's activity.

6. `Reasonable profit' must be taken to mean a rate of return on capital that is normal for the sector in a given Member

State and that takes account of the risk, or absence of risk, incurred by the public service operator by virtue of the

intervention by the public authority.

7. The method of compensation must promote the maintenance or development of:

- effective management by the public service operator, which can be the subject of an objective assessment, and

- the provision of passenger transport services of a sufficiently high standard.

C 70E/12 EN Official Journal of the European Union 27.3.2007

STATEMENT OF THE COUNCIL'S REASONS

I. INTRODUCTION

- The Commission submitted the revised proposal for a Regulation of the European Parliament and of

the Council on public passenger transport services by rail and by road, known as the Public Service

Obligations proposal, on 20 July 2005 (1). Before this revised proposal, the Commission put forward

two other proposals: on 27 July 2000, the original proposal (2) and, on 21 February 2002, an

amended proposal (3).

- On 14 November 2001, the European Parliament voted its opinion in first reading on the basis of

the original Commission proposal of July 2000 (4). The European Parliament decided to treat the

proposal of July 2005 as a revised version of the initial proposal of July 2000 and, consequently,

will examine this proposal only at second reading.

- The Council, at its meeting on 9 June 2006, reached a political agreement on the revised proposal,

with the Czech, Greek, Luxembourg and Maltese delegations abstaining from the vote. On

11 December 2006, the Council adopted its Common Position.

- In carrying out its work, the Council took account of the opinions of the European Economic and

Social Committee (5) and of the Committee of the Regions (6).

II. EUROPEAN PARLIAMENT AMENDMENTS

As the first reading in the Parliament was based on the Commission's initial proposal of 2000 and the

Common Position of the Council on the significantly modified proposal of 2005, the Council cannot

make references to individual parliamentary amendments in this statement of its reasons. As an alterna-

tive, the Council will address Parliament's first reading in general terms and in relation to the key

elements of the Common Position.

III. ANALYSIS OF THE COMMON POSITION

1. General

The legislative framework for Public Service Obligations currently in force dates from 1969 and was

last amended in 1991 (7). The Council considers that in today's European market for public passenger

transport services, where operators are no longer exclusively national, regional or local, a new set of

rules is needed. These rules must reduce distortion of competition by establishing non-discriminatory

conditions of competition amongst operators, by enhancing transparency and by guaranteeing legal

certainty for both operators and authorities involved in public passenger transport. The ensuing level

playing field will promote safe, efficient and high-quality public passenger transport services.

The Commission proposals of 2000 and 2002 did not achieve the necessary majority in the Council,

the main reason being the vast differences among Member States on the introduction of further

competition in public passenger transport. Moreover, Member States wanted to await the judgment

pending in the ALTMARK case (8), on how provisions on State aid apply to public services in general,

and to public transport in particular. A more pragmatic approach by both the Commission and the

Member States was needed to pave the way for Council's Common Position. The Commission put

more emphasis on subsidiarity, which led to a proposal that was simpler and more flexible than its

previous proposals, and the Member States, after several years of experience with different models of

organising public transport, were better able to acknowledge their respective benefits and drawbacks.

Finally, the ALTMARK judgment clearly underlined the need to modernise Community legislation on

public passenger transport.

(1) OJ C 49, 28.2.2006, p. 37.

(2) OJ C 365E, 19.12.2000, p. 169.

(3) OJ C 151E, 25.6.2002, p. 146.

(4) OJ C 140E, 13.6.2002, p. 164.

(5) OJ C 195, 18.8.2006, p. 20.

(6) OJ C 192, 16.8.2006, p. 1.

(7) Regulation (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 (OJ L 156, 28.6.1969, p. 1) as last

amended by Regulation (EEC) No 1893/91 (OJ L 169, 29.6.1991, p. 1).

(8) Judgment of 24 July 2003 in case C-280/00 Altmark Trans GmbH and Regierungsprsidium Magdeburg v Nahverkehrsge-

sellschaft Altmark GmbH ([2003] ECR I-7747).

27.3.2007 EN Official Journal of the European Union C 70E/13

In its Common Position, the Council strikes a balance amongst several interests: the ability for autho-

rities to determine the way they organise public transport themselves, the wish to introduce more

competition in the public transport sector by awarding public service contracts through tendering

procedures - also called `regulated competition' - and the need to achieve a new legislative frame-

work that takes account of the specificities of existing public transport systems while providing suffi-

cient time for these systems to adapt to the new rules. The Council has also introduced modifications

to the Commission proposal with a view to facilitating its implementation in practice.

2. Key policy issues

2.1. Scope

The Council specifies the scope of the Regulation as covering those public passenger transport

services by rail and by road for which competent authorities, when imposing or contracting for

public service obligations, compensate operators for the costs incurred and/or grant exclusive

rights in return for the discharge of public service obligations. In the light of the evolving Euro-

pean market for public transport, the Council holds that restricting the scope to local transport,

as proposed by the Parliament, would no longer be appropriate.

Furthermore, unlike the 2000 and the 2002 proposals, which included public passenger trans-

port by inland waterways in its own right, the Commission's 2005 proposal was restricted to

rail and road. The Regulation would only apply to inland waterway services that are part of a

wider public transport system. Now, the Council has returned to the spirit of the preceding

proposals by including in its Common Position a provision allowing Member States, if they so

wish, to apply the Regulation to public passenger transport services by inland waterway.

In the Common Position, the Council clarifies the sort of contracts to which the Regulation

applies. Firstly, it points out that contracts for public passenger transport services by bus or by

tram must be awarded in accordance with the procedures of the Public Procurement Directives

unless such contracts take the form of service concession contracts. In so doing, the Council

clarifies the approach proposed by the Commission, which leaves authorities the choice of the

applicable regime. If a public service contract entails a risk for the operator, the Regulation

applies, and if not, the Public Procurement Directives (1) apply. Because of this freedom of

administrative choice, the Council prefers the Commission's approach to the proposal of the

Parliament, which was that the Regulation should apply to all contracts for public passenger

transport. Secondly, the Common Position explicitly excludes public works concessions from

the scope of the Regulation, stating that the Public Procurement Directives provide the applic-

able regimes for this kind of contract.

Finally, with a view to enhancing flexibility for authorities, in its Common Position, the Council

allows them to exclude from the scope of the Regulation general rules on financial compensa-

tion for public service obligations which set maximum tariffs for pupils, apprentices and

persons with reduced mobility.

2.2. Direct award

The Council considers that a system offering competent authorities the freedom to choose

between competitive tender and direct award is the best guarantee of improved public transport

quality and efficiency. In that light, in its Common Position, the Council maintains the four

derogations whereby authorities may award contracts directly, as proposed by the Commission,

but introduces several modifications as regards the exact modalities.

(1) Directive 2004/18 on the coordination of procedures for the award of public works contracts, public supply contracts and

public service contracts (OJ L 134, 30.4.2004, p. 114) or Directive 2004/17 coordinating the procurement procedures of

entities operating in the water, energy, transport and postal services (OJ L 134, 30.4.2004, p. 1).

C 70E/14 EN Official Journal of the European Union 27.3.2007

2.2.1. Internal operators

The Council welcomes the Commission proposal to allow competent authorities, which

choose not to put their public transport services out to tender, to provide these services

themselves or to award them directly to a third party over which they exercise control

similar to that exercised over their own departments - the so-called `internal operator'.

The Council agrees with Parliament's first reading and the Commission's revised proposal

that, in order to avoid the risk of distortion of competition, an internal operator should

in principle not participate in tendering procedures outside the area of the authority

from which it received its direct award.

While supporting the overall concept of an internal operator in its Common Position,

the Council adds several provisions to the Commission proposal in order to take the

specificities of national and local transport systems into account:

- Acknowledging national responsibilities for the organisation of public transport,

Member States retain the power to prohibit local authorities, by law, from making

use of the possibility of awarding public service contracts directly on their territory,

- In addition to the definition of `competent authority', it underlines that a `competent

local authority' covers both an individual authority and a group of authorities offering

interconnected transport services,

- The basis for determining `control' by the authority over the internal operator, as

proposed by the Commission, has been retained, while specifying that full public

ownership is not a mandatory requirement for such control,

- Clarification of the issue of territorial restriction on an internal operator to avoid

having to restrict public transport services which cross the borders of administrative

territories, contrary to the interests of passengers,

- Internal operators whose directly awarded public service contracts are about to expire

are allowed to participate - if certain conditions are fulfilled - in competitive

tenders so that they can prepare for operating in a competitive environment,

- If no local competent authorities exist, national authorities can conclude public

service contracts with an internal operator.

2.2.2. Minor contracts

Council leaves unchanged the thresholds below which public service contracts may be

directly awarded as proposed by the Commission in the light of Parliament's first reading.

Authorities may refrain from a competitive tendering procedure if the average annual

value of the contract remains below EUR 1 million or if the contract concerns the provi-

sion of less than 300 000 kilometres of public passenger transport services per year.

Furthermore, in the spirit of the Parliament's interest in small businesses, the Council

introduces additional thresholds for small and medium sized enterprises operating not

more than 20 vehicles. In this case, direct awards are allowed if the average annual value

of the public service contracts remains below EUR 1,7 million or if less than

500 000 kilometres of public passenger transport are provided. Finally, in acknowledge-

ment of national responsibilities for the organisation of public transport, the Common

Position gives Member States the ability to choose to prohibit authorities on their terri-

tory from making use of the possibility of granting direct awards in the case of minor

contracts.

2.2.3. Emergency situations

The Council supports the Commission proposal - which was inspired by Parliament's

first reading - to award contracts directly in the event of a disruption of services or an

immediate risk of such a situation. However, considering the time needed to organise the

award of new public service contracts, the Council has chosen to allow emergency

measures for a period of two years instead one year as proposed by the Commission.

Furthermore, in order to reflect practice, in the Common Position, it is specified that

27.3.2007 EN Official Journal of the European Union C 70E/15

emergency measures can take the form of a direct award, a formal agreement to extend a

public service contract or a requirement to discharge certain public service obligations. In

the latter case, the public service operator has the right of appeal.

2.2.4. Heavy rail

In view of the special position of public passenger transport services by rail, the Council

allows authorities to award public service contracts directly in the case of all heavy rail,

unless prohibited by national law. Moreover, by extending the possibility of direct award

from regional and long-distance rail, as proposed by the Commission, to all heavy rail,

including (sub)urban rail and integrated networks, the Council avoids the difficulties

which could arise if a distinction needs to be made between long-distance and regional,

on the one hand, and (sub)urban rail, on the other hand. As regards this extension of

direct award to all heavy rail, the Swedish delegation, joined by the Italian delegation,

made a statement for the minutes (Annex I) when the TTE Council reached its political

agreement on 9 June 2006.

2.3. Duration of contracts

As regards the duration of public service contracts for coaches and buses and for rail and other

track-based services, the Council balances, on the one hand, the need for an amortisation period

that is financially sound, and, on the other hand, contract durations providing incentives for

new operators. For rail and other track-based modes the Council has kept the proposed duration

of 15 years. For coach and bus services, the Council has extended the contract duration

proposed by the Commission from eight to 10 years. In so doing, the Council follows the

Commission proposal as amended in the light of the first reading in the Parliament, with the

exception of an additional contract duration of two years for bus transport. As a way of counter-

balancing the extension of direct award to all heavy rail, the initial duration of directly awarded

heavy rail contracts is not allowed to exceed 10 years.

Furthermore, the Council has kept, with some changes, the Commission proposal to allow the

duration of public service contracts to be extended by a maximum of 50 % where necessary for

investment. In addition, the Council allows a 50 % extension for contracts in the outermost

regions if justified by the costs deriving from a particular geographical situation.

Finally, in exceptional cases, the Common Position allows the duration of a contract to be

extended by even more than 50 %. Such extension must be justified by the amortisation of

capital in relation to exceptional infrastructure, rolling stock or vehicular investment. Moreover,

the public service contract must be awarded in a fair competitive tendering procedure and the

authority allowing the longer duration must forward the contract and the elements justifying its

longer duration to the Commission within one year of conclusion of the contract.

2.4. Social standards and quality of service

Unlike the 2000 and the 2002 proposals, the Commission's revised proposal of 2005 leaves the

definition of social and quality criteria for public passenger transport services to authorities, in

keeping with the principle of subsidiarity. The Council supports this approach.

Council specifies and extends the provision in the Commission's proposal on the transfer of

social rights. The provision in the Commission proposal allowed authorities to decide whether

the selected public service operators would be obliged to grant staff taken on previously to

provide services the same rights they would have been entitled to if there had been a transfer

within the meaning of Directive 2001/23/EC. Considering this a matter of subsidiarity, the

Council, like the Commission, does not see the need to make this provision on employees'

rights compulsory, as suggested by Parliament in its first reading. However, the Council does

C 70E/16 EN Official Journal of the European Union 27.3.2007

add to this provision the obligation that authorities, in setting such requirements, must act

within the constraints set by national and/or Community law. Furthermore, with a view to

increasing transparency, the Council incorporates in its Common Position the obligation that, if

authorities require public service operators to comply with certain social standards, tender docu-

ments and public service contracts must list the staff concerned and give transparent details of

their contractual rights as well as the conditions under which employees are deemed to be

linked to the services.

With a view to simplifying the Regulation and in keeping with the principle of subsidiarity, in

its revised proposal, the Commission chose not to set a list of quality criteria to be used by

authorities when awarding public service contracts. In its Common Position, the Council follows

the Commission's reasoning that authorities should continue to be responsible for setting

quality standards. However, with a view to increasing transparency, the Council introduces the

obligation that, if quality standards are set, authorities must include these standards in their

tender documents and in their public service contracts.

2.5. Transparency

With a view to enhancing transparency, the Council welcomes the proposal of the Commission

requiring competent authorities to conclude a public service contract where exclusive rights

and/or compensation are granted in return for the discharge of public service obligations.

Furthermore, transparency concerning the award and the content of public service contracts is

essential to avoid the risk of distortion of competition, in particular if the contract is awarded

directly. The Parliament acknowledged the importance of improving transparency in the public

passenger transport sector at several junctures during its first reading.

With a view to further increasing transparency in the public transport sector and as a counter-

balancing measure to the extension of the possibility of direct award to all heavy rail, the

Council introduces the following measures in its Common Position:

- An obligation for authorities to forward, at the request of any interested party, their reasoned

decisions relating to a directly awarded public service contract. The Czech delegation stated

in the TTE Council of 9 June 2006 that it rejected this provision and added to the minutes

the statement which appears in Annex II,

- An obligation for authorities to make public, in the case of directly awarded public service

contracts for transport by rail, certain information within one year of granting the award.

While supporting the Commission proposals on publicity, the Council introduces several modifi-

cations with a view to improving their practical applicability and reducing unnecessary bureau-

cracy:

- Authorities are required to submit an aggregated report on their public service contracts

instead of a detailed report as proposed by the Commission,

- Authorities must announce the award of a public service contract at least one year in

advance in the Official Journal. Minor contracts are exempted from this obligation,

- Authorities are required to publish rectifications if there is a change in the information

announced on the award of a public service contract,

- Emergency measures are exempted from advance announcement,

- The initial period within which Member States must communicate to the Commission the

information necessary for determining whether the compensation granted is compatible

with the Regulation is extended from 20 working days, as proposed by the Commission, to

three months.

27.3.2007 EN Official Journal of the European Union C 70E/17

2.6. Transition

With a view to providing authorities and operators with sufficient time to adapt to the new

legislative framework, the Council makes several modifications to the transitional arrangements

proposed by the Commission. First of all, the Regulation enters into force three years after the

publication of the Regulation. Twelve years thereafter, public service contracts by rail and by

road need to be awarded in accordance with the Regulation. Secondly, the Council replaces the

distinction made in the Commission proposal between transition periods for transport by road,

on the one hand, and by rail, on the other hand, with one single transitional arrangement. In

the light of the extension of the possibility of direct awards in the case of heavy rail, the Council

considers a longer transition period for public transport by rail than for public transport by

road no longer justified. Thirdly, instead of a two-phased transition period, Council chooses a

gradual approach allowing authorities to determine for themselves, to a certain extent, how to

manage the transition to the new set of rules for awarding contracts. Within six months after

the first half of the transition period, Member States have to provide the Commission with

progress reports. On the basis of these reports, the Commission will assess whether additional

measures are needed to avoid disruptions in the supply of public transport.

As regards contracts concluded before the entry into force of the Regulation, the Common Posi-

tion provides for a transitional arrangement that is very much in line with the proposals the

Parliament put forward in first reading. The Council seeks a balance between, on the one hand,

respecting the principle `pacta sunt servanda' and, on the other hand, avoiding closure of markets

for too long a period. A distinction is made between:

- contracts awarded on the basis of a fair competitive tendering procedure and contracts

awarded on the basis of another awarding procedure,

- contracts awarded before 26 July 2000 - when the Commission submitted its initial

proposal on Public Service Obligations - and contracts awarded after that time.

For the in total four categories of contracts, the Council proposes individual expiry arrange-

ments. For exceptional cases where termination of a public service contract would entail undue

legal or economic consequences, the Common Position provides for continuation until expiry,

provided the Commission has given its approval.

In its Common Position, the Council maintains the provision of the Commission proposal

whereby, in the second half of the transition period, if operators cannot provide evidence that

the value of the public transport services for which they are receiving compensation or enjoy an

exclusive right granted in accordance with the Regulation represents at least half of the value of

all their public transport services, then authorities may refuse to allow them to participate in the

tender procedures they organise. To this provision the Council adds that authorities are not

allowed to prevent operators which are already running the services which are to be put out to

tender from participating in the tender procedure. After intensive discussions, the Council

decided not to take up a clause allowing authorities to deny participation in a tendering proce-

dure to operators which had received all or part of their contracts as a direct award. The

Council does not find such a reciprocity clause appropriate in the light of the jurisprudence of

the Court of Justice. The Court sets strict conditions for applying reciprocity clauses, considering

them only admissible in the context of a gradual liberalisation process and provided they are of

a transitional nature and restricted in time.

2.7. Other significant issues

Other significant issues introduced in the Council's Common Position are:

- Council follows the Commission proposal not to lay down, for the inland public transport

sector, specific rules on subcontracting. However, Council seeks to increase transparency by

incorporating in the Common Position the requirement that tender documents and public

service contracts must clearly show whether subcontracting is possible. Moreover, the

contract must determine the conditions applied to subcontracting in accordance with

national and Community law,

C 70E/18 EN Official Journal of the European Union 27.3.2007

- The Commission proposed to repeal Regulation (EEC) No 1191/69 and Regulation (EEC)

No 1107/70 completely. As certain provisions of these two Regulations are still in use, the

Council's Common Position provides for a phasing out of Regulation (EEC) No 1191/69 and

for inclusion of certain specific provisions of Regulation (EEC) No 1107/70 in the new

Regulation on Public Service Obligations,

- Council adapts the provision on reporting by the Commission on developments in the

provision of public passenger transport in Europe in the light of its Common Position

requiring in particular an assessment of the quality of public passenger transport services

and the effects of direct awards,

- Council makes some changes to the Annex to the draft Regulation with a view to improving

the calculation of the compensation allowed in the case of directly awarded contracts to

make it more easily applicable in practice.

IV. CONCLUSION

Unable to find an agreement on the 2000 and 2002 Commission proposals on Public Service Obliga-

tions, the Council has succeeded in achieving a Common Position on the basis of the Commission

proposal of 2005. The Commission drew up this revised proposal in the light of Parliament's first

reading of its initial 2000 proposal, with a view to reconciling the positions of the three institutions. As

the Common Position broadly follows the approach of this revised proposal, the Council considers it a

good basis for the second reading talks with the Parliament.

27.3.2007 EN Official Journal of the European Union C 70E/19

ANNEX I

STATEMENT BY SWEDEN JOINED BY ITALY FOR INCLUSION IN THE MINUTES OF THE COUNCIL OF

9 JUNE 2006

Re: item 9: Revised Proposal for a Regulation of the European Parliament and of the Council on public passenger

transport services by rail and by road

POLITICAL AGREEMENT

In reaching a political agreement on a common position on the Regulation on public passenger transport services by rail

and by road, Sweden wants to put forward the following position:

1. As agreed by the Council at its meeting on 5 December 2005, the main aim of this Regulation is to establish a legal

framework for compensation for public service contracts, rather than the opening of the market for railway services.

This is why the option of direct award for railway services is retained in this Regulation.

2. The Decision by the Council to allow continued direct awards for rail passenger services does not preclude the right of

initiative of the Commission to make any future legislative proposal on the opening of the domestic rail passenger

market that the European Parliament and the Council would then consider.

3. Any future proposal for opening the market for domestic rail passenger services will need to be based on a reasoned

determination of whether this should take the form of open access to the rail network for all operators, or competitive

tender for public service contracts or exclusive rights, or both.

4. In the absence of harmonised legislation on the opening of national markets for rail passenger services, Sweden is of

the opinion that Member States retain the right to apply measures of reciprocity insofar as these measures are in

accordance with Community law.

C 70E/20 EN Official Journal of the European Union 27.3.2007

ANNEX II

STATEMENT OF THE CZECH REPUBLIC FOR INCLUSION IN THE MINUTES OF THE COUNCIL OF

9 JUNE 2006

Re: item 9: Revised Proposal for a Regulation of the European Parliament and of the Council on public passenger

transport services by rail and by road

POLITICAL AGREEMENT

The Czech Republic is fully aware that optimum transparency in awarding public service contracts is one of the main

objectives of the proposal for a Regulation on public passenger transport services by rail and by road. In that regard the

Czech Republic has no objection to requiring that the competent authority notify any interested party on request of a

decision on its part leading to the direct award of a public service contract, and that it demonstrate that it has acted in

accordance with the relevant articles of the Regulation, including setting compensation levels in line with the rules set out

in the Annex to the Regulation. However, the Czech Republic cannot agree to the current wording of Article 7(4)

(9840/06), since in its opinion it reduces the legal certainty of all parties involved in direct award. The Czech Republic is

worried above all that an aggrieved interested party might contest a given reasoned decision in order to force a compar-

ison between the directly awarded contract and its own alternative bid. In some cases this might subsequently prevent a

public service contract from being awarded directly; the Czech Republic finds this wholly unacceptable.

Because of this reservation the Czech Republic cannot endorse political agreement on this proposal in Council and is

therefore abstaining from the vote.