Study on the implementation of regulation (EC) n 1370/2007. on public passenger transport services by rail and by road. (prepared by DLA Piper)

Transcription

1 NOVEMBER 11 Study on the implementation of regulation (EC) n 1370/2007 on public passenger transport services by rail and by road (prepared by DLA Piper) Comments from the UITP EU-Committee on the DLA Piper report Introduction: Regulation (EC) n 1370/2007 sets the frame for the award of compensation and/or exclusive rights for the discharge of public service obligations in the field of public passenger transport services by rail and by road. Its provisions are therefore of key importance for the whole public transport sector in Europe. Two years after its publication in the Official Journal of the European Union, the regulation entered into force on 3 December In order to better accompany and facilitate its implementation in the different Member states, the EU Commission awarded the above mentioned study to draw an overview over the current state of application of the regulation, give guidance on good practice and propose recommendations. UITP and its members have followed with great interest the development of this study and have provided information on the local, regional and national situation. Although this study contains some inaccuracies and misunderstandings, this paper just addresses the recommendations put forward in Chapter V of the final report (p.149 and following) prepared by DLA Piper and in particular on the adoption of Guidelines by the European Commission on the implementation of Regulation 1370/2007. Even if such guidelines would not be binding as such, the members of the UITP EU-Committee agree that an interpretation by the European Commission would be useful for clarifying the understanding and enabling a homogenous application of Regulation 1370/2007 in the EU. However, it must be sure that the guidelines should not introduce a new legislation.

2 Comments on topics that could be included in guidelines: Date of implementation and retroactive application of the Regulation PSO: The study DLA Piper refers to the Danske Statbaner case to consider that the Regulation 1370/2007 can be implemented to PSO before 3 December 2009 (page118). The UITP EU-Committee does not share this point of view and considers on the contrary that the Regulation on PSO should only be implemented from its entry into force. Otherwise, it would not respect the very important legal principle of non-retroactivity. An implementation of this regulation before its entry into force would increase legal uncertainty and would create a kind of amnesty in relation to Regulation 1191/69 the UITP EU-Committee cannot support. Definition of PSO (p. 152): The UITP EU-Committee agrees that competent authorities must have discretion - under the control of the European Court of Justice and national courts- on what they consider as Public Service Obligation (PSO). It makes sense that PSO covers a coherent transport system with a view to ensuring the continuity of public transport services, including profitable routes. This last point is very important as it limits the compensation to be paid by public authorities. On page 153 of the study it is stated that As regards the geographic area concerned, the Commission could also confirm that the PSC may cover other territories than those of the competent authority. The UITP EU-Committee supports this idea, as long as the agreements between competent authorities respect the rules provided by the PSO regulation to award contracts, in particular the rules of confinement of the internal operator, which yet provide the possibility for outgoing lines ( ) which enter the territory of neighbouring competent local authorities. Under-compensation (p. 158): The DLA Piper study states that there is some uncertainty as to whether competent authorities are obliged to fully compensate the PSO to the operator under Regulation 1370/2007. Until now, only the principle of over-compensation applies, with a claw back obligation for the operator. The UITP EU-Committee is in favour of a win-win partnership between competent authorities and operators and therefore of balanced contracts between the parties. It is therefore not fair to only apply a principle of claw back when there is a case of overcompensation and not apply the parallel principle, when there is under-compensation. If the operator has fulfilled all his obligations and has reached the quality defined in the contract, he should be totally compensated and realise a reasonable profit. In both situations, a case by case method must be implemented. Moreover, all the obligations derived from general rules should be totally compensated. The cost of Social policy and the social fares must be the responsibility of the competent authorities (local or national). Parameters for compensation and nature of exclusive rights (p.153): In its study, DLA Piper criticizes the fact that Regulation 1370/2007 does not define the concept of over-compensation under PSC awarded after a competitive tendering process. It adds that it could be the case when the tendering process has relied on the principle of the most economically advantageous offer:..this presumption can be rebutted if the price of the contract does not reflect the market price because the tendering process would have relied on the most economically advantageous offer. The members of the UITP EU-Committee agree that control should be performed for cases of overcompensation with a claw back mechanism. The UITP EU-Committee does not however understand

3 why the award process of a contract following the principle of the most economically advantageous offer would be a problem. On the contrary, such a process should include several selection criteria, to respect the principle of subsidiarity: indeed the competent authorities must have the choice of the criteria in line with their public transport policy, in particular on quality and passenger rights. The Rühle Report on public procurement adopted in October 2011 by the European Parliament confirmed this point of view. Furthermore, the unique criterion of price is generally unsatisfactory. Moreover, the concept of "reasonable profit" should be clarified by the European Commission. It should be based on what is "normal for the industry." If the operator has been successful, it may keep a sizable portion of the gain, if not efficient: it cannot achieve profit. The Commission should integrate the concepts of efficiency and quality services in the concept of "reasonable profit". Subcontracting (p.155): The study states that the design, construction and operation contracts are functional service design contracts whereas the contracts which only concern the administration and the performance of the services should be considered as constructive service design. DLA Piper concluded therefore that the functional service design contracts would allow operators to fully subcontract whereas the constructive service design would require operators to perform a major part of the services themselves. The EU-UITP Committee does not share this interpretation of article 4 7. It is true to consider that most of the time, design, construction and operation contracts are functional service design contracts. However, contracts which only concern the administration and the performance of the services can also be functional service design, it depends on the role given by the competent authority to its operator. In this last situation, the PSO Regulation does not allow the operator to fully subcontract. It is important to remember that the PSO Regulation does not provide exactly the same rules for subcontracting: the internal operator must perform at least the major part of the service, whereas the operators on the market must perform at least a major part of the service. Internal operator (p.155): To enhance legal certainty, the study recommends a clarification of the article 5 2 a) on the definition of the internal operator and the possible share of private capital. The EU-UITP Committee has discussed this issue. On the one hand, there is a view that there is a need for more clarity on the possibilities of participation of private capital in the internal operators and that the Commission should give examples of cases. However there is also a view that there is no need for further clarification from the European Commission, because the individual situation will depend on the prescriptions of the member state s national company law. The DLA Piper study states that the Commission could also clarify the extent of the geographic confinement, by possibly limiting this condition to the European Union. On this topic too, two opinions have emerged. On the one hand it can be argued that there is a need for more clarity also in the territorial confinement: the Commission could help on the interpretation of the geographical scope and the activities involved. (operational and not ancillary activities). Similarly; the question arises about the possibility of internal operators bidding for contracts outside the EU; where it is considered that direct award is an exception to the process of regulated competition there is a view that the spirit of the regulation means that an internal operator should not participate in calls for tender outside the territory of the competent authority. There is a simple choice between two options: first: competition and being on the market, second: direct award and confinement. Any other solution would be totally unfair and discriminatory against the operators present on the market.

4 On the other hand, the view is that there is no need for further clarification from the European Commission, on the territorial confinement, which is sufficiently defined by the PSO Regulation. Under this opinion; the Regulation cannot be implemented outside of Europe and as a consequence, internal operators could participate to calls for tenders outside the European Union. Award of Public Service Contracts (p.155): DLA Piper proposes in its study that all contracts, including concessions, are awarded in accordance with public procurement rules. This idea does not take Article 5, into account, in particular: 5 2 concerning the direct award to an internal operator, 5 4, concerning the proceeding for the negotiated competition, 5 5 concerning this exemption of competition and 5 6, concerning conventional rail passenger transport services. The UITP EU-Committee strongly opposes such proposals. The fact that the Commission (DG Markt) will soon present a proposal for legislation on the subject should clarify the issue and leave no room for proposals of this kind. The traditional procedures of public procurements: restricted and open procedures do not allow any room for the negotiation. However, a negotiation which respects the Treaty principles is necessary for the award of concessions (which is provided in the draft of the future directive on concessions). It is important also to underline that the rules of public procurement are not convenient at all for concessions for the award of contracts. More flexibility during the life of the contract is also necessary, particularly for public transport which is in direct competition with cars. Moreover, the UITP EU-Committee does not share the analysis of the study of DLA Piper on its chapter 4 on Assessment, in particular pages : - It is stated in the study that: PSC for public passenger services by bus or tram that do not take the form of service concession as defined in directives 2004/17 and 2007/18 are to be awarded in accordance with these directives, for example on the basis of an open procedure, a restricted procedure or a negotiated procedure with or without publication. Therefore the EU UITP Committee understands from this analysis that the contracts concerning railway services, which are not concessions, should be awarded following the procedures provided by the public procurement Directives. However, neither Directive 2004/17, nor Directive 2004/18 provides special procedures for railway services in their annex XVII B and II B. Only very limited obligations are provided in respect of technical specifications. - The DLA Piper study states, that given the broad scope of the definition of the network given by Directive 2004/17, the contracts of transports should be awarded following the procedures provided by it. (page 110) It is essential to remember that Directive 2004/17 must only be used by the contracting entities (the operators) for the awarding of their own contracts. This directive cannot be used by competent authorities, unless they are operators themselves. Therefore the competent authorities (called contracting authorities ) must use Directive 2004/18 for the award of their public procurements when they need a public transport operator. The same confusion between the two public procurement Directives is on page 17 of the study. - Finally, the study states that: the steps and modalities which shall be followed under Regulation 1370/2007 are de facto comparable to the ones described in the public procurement Directives» page 111. The members of the UITP EU-Committee do not agree with this assertion: there are many differences between the open, the restricted procedures and the negotiated procedure, even if they all respect the principles of the Treaty. Negotiation offers in particular some flexibility which can be very useful for both parties during the procedure of awarding contracts.

5 Public service compensation (page 156): Extract from the DLA Piper study: Indeed, the Commission follows a two-stage analysis of a compensation arrangement according to which it first examines whether the compensation is state aid under the Altmark criteria and, if so, whether it could nevertheless be exempted from prior notification and considered as compatible with the internal market under Regulation 1370/2007. From a practical point of view, it would appear unnecessary to proceed to such a two-stage review since there is no need to notify a compensation which would comply with Regulation 1370/2007. For the members of the UITP EU-Committee, the very purpose of Regulation 1370/2007 is to address state aid in the transport sector. Before the Regulation on PSO, the main target of Regulation 1191/69 was to provide special rules to compensate public transport services. Therefore, it was decided that the competent authorities would not have the obligation to notify their compensations to the European Commission, as long as they are proportionate to the public service obligations decided. This is also the reason why public transport is excluded from the Monti package, which sets guidelines for state aid in public services. Moreover, to follow a two stages analysis seems to further increase the complexity of the legislation and thus its uncertainty. Transition period: DLA Piper states that confusion was created by the Commission itself for the starting point for the 30 years period: between the entry into force of the Regulation and 26 July They ask therefore for a clarification of the rules regarding the transition period. While some members of the UITP EU-Committee draw attention to the issue of the starting point of the transition period, others consider that there is no need for clarification by the European Commission. Monitoring the application of the PSO Regulation: DLA Piper advises the European Commission to monitor the implementation of the annual ROSPA in all Member States. This proposal does not seem realistic, given the workload required