RECOMMENDATION FOR SECOND READING on the Council common position for adopting a regulation of the European Parliament and of the Council on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70

4.4.2007 - (13736/1/2006 – C6-0042/2007 – 2000/0212(COD)) - ***II

Committee on Transport and Tourism
Rapporteur: Erik Meijer

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

on the Council common position for adopting a regulation of the European Parliament and of the Council on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70

(13736/1/2006 – C6‑0042/2007 – 2000/0212(COD))

(Codecision procedure: second reading)

The European Parliament,

–   having regard to the Council common position (13736/1/2006 – C6‑0042/2007),

–   having regard to its position at first reading[1] on the Commission proposal to Parliament and the Council (COM(2000)0007)[2],

–   having regard to the first amended Commission proposal (COM(2002)0107)[3],

–   having regard to the second amended Commission proposal (COM(2005)0319)[4],

–   having regard to Article 251(2) of the EC Treaty,

–   having regard to Rule 62 of its Rules of Procedure,

–   having regard to the recommendation for second reading of the Committee on Transport and Tourism (A6-0131/2007),

1.  Approves the common position as amended;

2.  Instructs its President to forward its position to the Council and Commission.

Council common position	Amendments by Parliament
Amendment 1 Recital 10
(10) Contrary to Regulation (EEC) No 1191/69, the scope of which extends to public passenger transport services by inland waterway, it is not considered advisable for this Regulation to cover the award of public service contracts in that specific sector. The organisation of public passenger transport services by inland waterway is therefore subject to compliance with the general principles of the Treaty, unless Member States choose to apply this Regulation to that specific sector. The provisions of this Regulation do not prevent the integration of inland waterway services into a wider urban, suburban or regional public passenger transport network.	(10) Contrary to Regulation (EEC) No 1191/69, the scope of which extends to public passenger transport services by inland waterway, it is not considered advisable for this Regulation to cover the award of public service contracts in that specific sector. The organisation of public passenger transport services by inland waterway and by national sea waters is therefore subject to compliance with the general principles of the Treaty, unless Member States choose to apply this Regulation to those specific sectors. The provisions of this Regulation do not prevent the integration of services by inland waterway and national sea waters into a wider urban, suburban or regional public passenger transport network.
Amendment 2 Recital 15
(15) Contracts of long duration can lead to the closing of the market for a longer period than is necessary, thus diminishing the benefits of competitive pressure. To minimise 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 their initial duration where the public service operator has to invest in assets for which the depreciation period is exceptional and, because of their special characteristics and constraints, in the case of the outermost regions as specified in Article 299 of the Treaty. In addition, where a public service operator makes investments in infrastructure or in rolling stock and vehicles which are exceptional in the sense that both concern high amounts of funds, and provided the contract is awarded after a fair competitive tendering procedure, an even longer extension should be possible.	(15) Contracts of long duration can lead to the closing of the market for a longer period than is necessary, thus diminishing the benefits of competitive pressure. To minimise distortions of competition while protecting the quality of services, public service contracts should be of limited duration. The extension of the contract should be subject to positive confirmation from users, which should be periodically checked by the competent authority in accordance with prearranged procedures to ensure that it is objective. It is, however, necessary to make provision for extending public service contracts by a maximum of half their initial duration where the public service operator has to invest in assets for which the depreciation period is exceptional and, because of their special characteristics and constraints, in the case of the outermost regions as specified in Article 299 of the Treaty. Where a public service operator makes investments in infrastructure or in rolling stock and vehicles which are exceptional in the sense that both concern high amounts of funds, and provided the contract is awarded after a fair competitive tendering procedure, at the moment the investment is made, the residual cost for the part which is not amortised during the term of the contract should be determined, as it should be borne by the successful bidder who succeeds the operator who made the investment.
Amendment 3 Recital 17
(17) In keeping with the principle of subsidiarity, competent authorities are free to establish quality standards for public service obligations, for instance with regard to minimal working conditions, passenger rights, the needs of persons with reduced mobility or environmental protection.	(17) In keeping with the principle of subsidiarity, competent authorities are free to choose the way they establish social and quality criteria in order to maintain and raise quality standards for public service obligations, for instance with regard to minimal working conditions, passenger rights, the needs of persons with reduced mobility, environmental protection, the security of passengers and employees as well as collective agreement obligations and other rules and agreements concerning workplaces and social protection at the place where the service is provided. To ensure transparent and comparable terms of competition between operators, specific quality of service requirements imposed by competent authorities should refer, whenever available, to the European quality Standards 13816 and 15140 approved in 2002 and 2006 by the European Committee for standardisation (CEN). At any event, it needs to be ensured that the generally applicable standards in these areas are also complied with in comparable form for public road and rail passenger services.
Justification
Service-level agreements should be provided for, and the conditions for the award of operating licences should refer as clearly as possible to quality of service for the consumer. The European Parliament has adopted this position in its first reading (Amendments 32 and 37-51), and the Commission has already adopted these amendments (COM(2002)107, Article 4a). In order to achieve that together with social protection of employees in competition, it is not enough to define social protection as a criterion to be applied by the competent authority on a voluntary basis.
Amendment 4 Recital 20
(20) Where a public authority chooses to entrust a general interest service to a third party, it must select the public service operator in accordance with Community law on public contracts and concessions, as established by Articles 43 to 49 of the Treaty, and the principles of transparency and equal treatment. In particular, the provisions of this Regulation are to be without prejudice to the obligations applicable to public authorities by virtue of the directives on the award of public contracts, where public service contracts fall within their scope.	(20) Where a public authority chooses to entrust a general interest service to a third party, it must select the public service operator in accordance with Community law on public contracts and concessions, as established by Articles 43 to 49 of the Treaty, and the principles of transparency and equal treatment. In particular, the provisions of this Regulation are to be without prejudice to the obligations applicable to public authorities by virtue of the directives on the award of public contracts, where public service contracts fall within their scope. Uniform legal protection of those interested in tendering must be guaranteed, drawing no distinction between contracts awarded under this Regulation and those under Directives 2004/17/EC and 2004/18/EC. The provisions of Directive 89/665/EEC should therefore apply uniformly to the review of all tendering procedures.
Justification
To avoid jeopardising the continuity of transport services, we need a legal protection procedure that will quickly produce conclusive results. To be effective, legal protection must also avoid the possibility of divergent decisions on the same case. Accordingly there needs to be uniform legal protection for the award of public service contracts, including service concessions and public service contracts covered by Directives 2004/17/EC and 2004/18/EC, in accordance with the established procedure of Directive 89/665/EEC.
Amendment 5 Recital 20 a (new)
	(20a) Where a transport undertaking, on its own initiative, provides a public passenger transport service for the first time, the competent local authority must have the right to waive the competitive tendering procedure and to promote the entrepreneurial initiative by the direct award of a temporary exclusive right to the public service operator. Under this procedure, financial compensation for the performance of public service obligations pursuant to Article 3(1) may not be granted. Financial compensation under Article 3(2) is not affected.
Justification
Undertakings are often able to assess the need for public transport services better and more quickly than the local competent authorities. Where transport services are launched on the initiative of undertakings it must be possible to award the initiator exclusive rights on a temporary, once-only basis. If transport services initiated by undertakings had to be subjected to a tendering procedure by the competent authority in order to be awarded the necessary exclusive rights, this would remove any motivation for innovation on the part of undertakings.
Amendment 6 Recital 26
(26) The compensation granted by competent authorities to cover the costs incurred in discharging public service obligations should be calculated in a way that prevents overcompensation. Where a competent authority plans to award a public service contract without putting it out to competitive tender, it should also respect detailed rules ensuring that the amount of compensation is appropriate and reflecting a desire for efficiency and quality of service.	(26) The compensation granted by competent authorities to cover the costs incurred in discharging public service obligations should be calculated in a way that prevents overcompensation and does not impose undercompensation. Consideration should be given in particular to using the results of comparable services awarded in a public tendering procedure as a benchmark when calculating compensation. Where a competent authority plans to award a public service contract without putting it out to competitive tender, it should also respect detailed rules ensuring that the amount of compensation is appropriate and reflecting a desire for efficiency and quality of service. One way of ensuring sufficiently high quality is to make entitlement to full compensation conditional on quality standards reflecting the current state of technology.
Justification
Many competent authorities still impose public service obligations (PSO) upon historical railway undertakings (RUs) without however, properly compensating the costs incurred. They impose undercompensation of the PSO requested. They can use their ownership of the RU to enforce this unsatisfactory position. While the RU should remain free to submit the most competitive price, this decision must remain a commercial decision entirely in the hands of the RU in question. The public authority should have no power to impose compensation below the actual cost of the services required.
The logic behind the method of calculating compensation is hard to follow. One way of calculating compensation in connection with the direct award of a contract – which makes sense given that the operator is a business, and which has in some cases already been used in the law of the Member States – is to use the market price for comparable services as a benchmark. This would also comply with the 4th criterion of the Court of Justice and avoid the legal uncertainty which a conflict with the judgment of 24 July 2003 in Court of Justice case 280/00 would engender.
Amendment 7 Recital 27
(27) By appropriately considering any effect of complying with the public service obligations on the demand of public passenger transport services in the calculation scheme of the Annex, the competent authority and the public service operator can prove that overcompensation has been avoided.	(27) By appropriately considering any effect of complying with the public service obligations on the demand of public passenger transport services in the calculation scheme of the Annex, the competent authority and the public service operator can prove that over or undercompensation has been avoided.
Justification
The aim is to ensure legal certainty with regard to the compensation calculation scheme contained in the Annex. The size of the compensation should be adequate to cover the costs incurred in discharging public service obligations.
Amendment 8 Recital 31
(31) During the transitional period, the introduction of the provisions of this Regulation by the competent authorities may take place at different times. It may therefore be possible, during this period, that public service operators from markets not yet affected by the provisions of this Regulation tender for public service contracts in markets that have been opened to controlled competition more rapidly. In order to avoid, by means of proportionate action, any imbalance in the opening of the public transport market, competent authorities should be able to refuse, in the second half of the transitional period, tenders from undertakings, more than half the value of the public transport services performed by which are not granted in accordance with this Regulation, provided that this is applied without discrimination and decided in advance of an invitation to tender.	(31) During the transitional period, the introduction of the provisions of this Regulation by the competent authorities may take place at different times. It may therefore be possible, during this period, that public service operators from markets not yet affected by the provisions of this Regulation tender for public service contracts in markets that have been opened to controlled competition more rapidly. In order to avoid, by means of proportionate action, any imbalance in the opening of the public transport market, competent authorities should be able to refuse, in the second half of the transitional period, tenders from undertakings, the public transport services of which are not awarded a contract in accordance with this Regulation, provided that this is applied without discrimination and decided in advance of an invitation to tender.
Amendment 9 Recital 36
(36) The scope of Council Regulation (EEC) No 1107/70 of 4 June 1970 on the granting of aids for transport by rail, road and inland waterway is covered by this Regulation. That Regulation is considered obsolete while limiting the application of Article 73 of the Treaty without granting an appropriate legal basis for authorising current investment schemes, in particular in relation to investment in transport infrastructure in a public private partnership. It should therefore be repealed in order for Article 73 of the Treaty to be properly applied to continuing developments in the sector without prejudice to this Regulation or Council Regulation (EEC) No 1192/69 of 26 June 1969 on common rules for the normalisation of the accounts of railway undertakings . 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.	(36) The scope of Council Regulation (EEC) No 1107/70 of 4 June 1970 on the granting of aids for transport by rail, road and inland waterway is covered by this Regulation. That Regulation is considered obsolete while limiting the application of Article 73 of the Treaty without granting an appropriate legal basis for authorising current investment schemes, in particular in relation to investment in transport infrastructure in a public private partnership. It should therefore be repealed in order for Article 73 of the Treaty to be properly applied to continuing developments in the sector without prejudice to this Regulation or Council Regulation (EEC) No 1192/69 of 26 June 1969 on common rules for the normalisation of the accounts of railway undertakings . 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 2007.
Amendment 10 Article 1, paragraph 2
2. This Regulation shall apply to the national and international operation of public passenger transport services by rail and other track-based modes and by road, except for services which are operated mainly for their historical interest or their tourist value. Member States may apply this Regulation to public passenger transport by inland waterways.	2. This Regulation shall apply to the national and international operation of public passenger transport services by rail and other track-based modes and by road, except for services which are operated mainly for their historical interest or their tourist value. Member States may apply this Regulation to public passenger transport by inland waterways and national sea waters.
Amendment 11 Article 2, point (f)
(f) "exclusive right" means a right entitling a public service operator to operate certain public passenger transport services on a particular route or network or in a particular area, to the exclusion of any other such operator;	(f) "exclusive right" means a right entitling a public service operator for the purpose of performing public service obligations to operate certain public passenger transport services on a particular route or network or in a particular area and thereby excluding other operators wholly or partially from operating those services;
Justification
The exclusive rights conferred are solely those required to perform public service obligations. An exclusive right is present where other operators are excluded from operating the transport services in question. This addition is necessary because the current definition does not assume the existence of an exclusive right where two undertakings are joint contractual parties to a service contract even if, owing to these rights, no other operators can obtain authorisation to operate services.
Amendment 12 Article 2, point (i)
(i) "public service contract" means one or more legally binding acts confirming the agreement between a competent authority and a public service operator to entrust to that public service operator the management and operation of public passenger transport services subject to public service obligations; depending on the law of the Member States, the contract may also consist of a decision adopted by the competent authority: –         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 provision of such services to an internal operator;	(Does not affect English version.)
Justification
(Does not affect English version.)
Amendment 13 Article 2, point (i a) (new)
	(ia) 'internal operator' means a legally distinct entity over which the competent authority exercises complete control similar to that exercised over its own departments. For the purposes of determining whether such control exists, factors such as the degree of representation on administrative, management or supervisory bodies, specifications relating thereto in the articles of association, ownership, effective influence and control over strategic decisions and individual management decisions shall be taken into consideration; (Adoption of this amendment will necessitate changes throughout the text)
Justification
Repeat of the definition of internal operator as proposed by the Commission in its proposal from July 2005 (COM(2005)0319). Only competent authorities, in conformity with the provision contained in Article 2(c), may constitute themselves as an internal operator in the name of the principle of free administration of public authorities in application of the subsidiarity principle set out in Article 5 of the EC Treaty.
Amendment 14 Article 3, paragraph 2
2. By way of derogation from paragraph 1, public service 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 set out in Articles 4 and 6 and in the Annex, the competent authority shall compensate the public service operators for the net financial effect, positive or negative, on costs incurred and revenues generated in complying with the tariff obligations established through general rules in a way that prevents overcompensation. This shall be so notwithstanding the right of competent authorities to integrate public service obligations establishing maximum tariffs in public service contracts.	2. By way of derogation from paragraph 1, public service 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 set out in Articles 4 and 6 and in the Annex, the competent authority shall compensate the public service operators for the net financial effect, positive or negative, on costs incurred and revenues generated in complying with the tariff obligations established through general rules in a way that prevents overcompensation and does not impose undercompensation. This shall be so notwithstanding the right of competent authorities to integrate public service obligations establishing maximum tariffs in public service contracts.
Justification
Many competent authorities still impose public service obligations (PSO) upon historical railway undertakings (RUs) without however, properly compensating the costs incurred. They impose undercompensation of the PSO requested. They can use their ownership of the RU to enforce this unsatisfactory position. While the RU should remain free to submit the most competitive price, this decision must remain a commercial decision entirely in the hands of the RU in question. The public authority should have no power to impose compensation below the actual cost of the services required.
Amendment 15 Article 3, paragraph 3
3. Without prejudice to the provisions of Articles 73, 86, 87 and 88 of the Treaty, Member States may exclude from the scope of this Regulation general rules on financial compensation for public service obligations which establish maximum tariffs for pupils, students, apprentices and persons with reduced mobility.	3. Without prejudice to the provisions of Articles 73, 86, 87 and 88 of the Treaty, Member States may exclude from the scope of this Regulation general rules on financial compensation for public service obligations which establish maximum tariffs for pupils, students, apprentices and persons with reduced mobility. Such exclusion shall not lead to over or undercompensation of the costs incurred by the operator.
Justification
The aim is to ensure legal certainty with regard to the compensation calculation scheme contained in the Annex. The size of the compensation should be adequate to cover the costs incurred in discharging public service obligations.
Amendment 16 Article 3, paragraph 3 a (new)
	3a. A public service operator who wishes to discontinue or make substantial modifications to his public passenger transport service, provided the service is not subject to any public service obligations, shall notify the competent local authorities thereof at least three months in advance. The competent local authorities may waive this notification requirement.
Justification
Where operators provide a service in their own economic interest which meets a public service requirement, a public service contract is not essential. However, the competent local authorities must be notified of any substantial modification to the service with adequate notice, in order to give them time to take appropriate action. The amendment thus complies with the rules currently in force (Article 14(4) of Regulation (EEC) 1191/69).
Amendment 17 Article 4, paragraph 1, point (i)
(i) clearly define the public service obligations with which the public service operator is to comply, and the geographical areas concerned.	(i) clearly define the public service obligations, with which the public service operator is to comply, and the nature and extent of the exclusive rights granted and the geographical areas concerned.
Justification
To enable the operator to calculate the potential risk to its income, the nature and extent of the exclusive rights must be regulated in the service contract. This is also necessary to enable further exclusive rights to be awarded to third parties without any overlap, and therefore needs to meet stringent requirements as regards transparency and objectivity.
Amendment 18 Article 4, paragraph 1, point (ii)
(ii) establish in advance, in an objective and transparent manner, the parameters on the basis of which the compensation payment is to be calculated in a way that prevents overcompensation. In the case of public service contracts awarded in accordance with Article 5(2), (4), (5) and (6), these parameters shall be determined in such a way that no 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;	(ii) establish in advance, in an objective and transparent manner, the parameters on the basis of which the compensation payment is to be calculated in a way that prevents overcompensation and does not impose undercompensation. In the case of public service contracts awarded in accordance with Article 5(2), (4), (5) and (6), these parameters shall be determined in such a way that no 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. The operator’s actual costs shall be deemed to be costs incurred in discharging the public service obligations only if a typical, well-run operator would have incurred these costs in discharging the obligations in question;
Justification
Many competent authorities impose public service obligations (PSO) upon historical railway undertakings (RUs) without however, properly compensating the costs incurred. In other words, they impose undercompensation of the PSO requested. They can use their ownership of the RU to enforce this unsatisfactory position. While the RU should remain free to submit the most competitive price, this decision must remain a decision entirely in the hands of the RU in question. The public authority should have no power to impose a compensation below the actual cost of the services required.
This amendment to Article 4(1) (ii) seeks to ensure that the regulation is in line with the case law of the Court of Justice on subsidies. The criterion cited here is the fourth Altmark-Trans criterion (cf. judgment of the Court of Justice in case C-280/00 (Altmark-Trans), ground 93. This is the decisive criterion intended to ensure that the services are performed efficiently and economically even in the event of direct award of contracts, and thus effectively to rule out over-compensation.
Amendment 19 Article 4, paragraph 3
3. The duration of public service contracts shall be limited and shall not exceed ten years for coach and bus services and fifteen years for passenger transport services by rail or other track-based modes. The duration of public service contracts relating to several modes of transport shall be limited to fifteen years if transport by rail or other track-based modes represents more than 50 % of the value of the services in question.	3. The duration of public service contracts shall be limited and shall not exceed ten years for coach and bus services and fifteen years for passenger transport services by rail or other track-based modes. The duration of public service contracts relating to several modes of transport shall be limited to fifteen years if transport by rail or other track-based modes represents more than 50 % of the value of the services in question. Without prejudice to Article 5(5), contracts for rail transport services shall be concluded for a minimum duration of three years.
Justification
If they wish to provide a high-level of service provision and meet obligations deriving from the acquis communautaire, railway operators must make continual investments. Given the scale of these investments and their multiannual character, railway operators must be guaranteed at least a compulsory three-year contract. Shorter contracts cannot provide railway operators with the financial stability they need to provide public services.
Amendment 20 Article 4, paragraph 5 a (new)
	5. Competent authorities shall be able to:   a) ensure the adequate provision of public passenger transport services; b) award public service contracts or lay down the general rules in order to secure the fulfilment of such services; c) adopt public service requirements in order to ensure the adequacy of services; d) monitor and assess the performance of operators in carrying out their contracts and in complying with the general rules; e) take action, including the imposition of penalties or the termination of public service contracts, when operators fail to meet the quality of service or service levels required under the contract.
Justification
This amendment enables competent authorities to penalise or terminate contracts when operators fail to comply with agreed quality standards that are part of their public service contract.
Amendment 21 Article 4, paragraph 7
7. Tender documents and public service contracts shall be transparent as to whether or not subcontracting may be considered. The public service contract shall, in accordance with national and Community law, determine the conditions applied to subcontracting.	7. Tender documents and public service contracts shall be transparent as to whether, and if so to what extent, subcontracting may be considered. If subcontracting takes place, the contractor entrusted with the administration and performance of public passenger transport services in accordance with this Regulation shall be required to perform the majority of the public passenger transport services itself. The public service contract shall, in accordance with national and Community law, determine the conditions applied to subcontracting.
Justification
If all tests relating to deployment of vehicles and staff are passed on to subcontractors, who may in turn subcontract work, there is a risk of negative implications for existing social and quality standards. This can only be counteracted, if subcontracting does take place, by requiring the firm entrusted with a public service contract to perform the majority of the public passenger transport services itself.
We are already seeing a trend whereby large groups submit tenders without details of equipment and staff, prevent subcontractors from doing so, and, once the concession has been awarded, have the small and medium-sized subcontractors in the palm of their hands. It may therefore be appropriate in individual cases to actively promote a market balance and to impose minimum and maximum quotas for subcontractors. Only a self-provision quota will make it possible to achieve “equality of arms” in terms of competition with the local SMEs.
Amendment 22 Article 5, paragraph 2, subparagraph 1
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 transport services, may decide to provide public passenger transport services itself or to award public service contracts directly to a legally distinct entity over which the competent local authority, 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 operator). Where a competent local authority takes such a decision, the following shall apply:	2. Provided that national law so permits, any competent local authority, whether or not it is an individual authority, group of authorities or authority set up specifically by the competent authorities providing integrated public passenger transport services in an economically and socially coherent transport area may decide to provide public passenger transport services itself or to award public service contracts directly to a legally distinct entity over which the competent local authority or group of authorities or authority set up specifically by the competent authorities exercises control similar to that exercised over its own departments (hereinafter referred to as an internal operator). Where a competent local authority takes such a decision, the following shall apply:
Justification
It is not generally clear from national law whether a specific procedure is prohibited or not. Legal clarity can be achieved only if an unambiguous implementing instruction is required of the national law. And this meets the requirement of subsidiarity: EC law provides standardised procedural rules, but it is only the active choice of the national legislator that determines which instruments are to be implemented in the Member State concerned.
Amendment 23 Article 5, paragraph 2, point (a)
(a) for the purposes of determining whether the competent local authority exercises control, factors such as the degree of representation on administrative, management or supervisory bodies, specifications relating thereto in the articles of association, ownership, effective influence and control over strategic decisions and individual management decisions shall be taken into consideration. In accordance with Community law, 100 % ownership by the competent public authority, in particular in the case of public-private partnerships, is not a mandatory requirement for establishing control within the meaning of this paragraph, provided that there is a dominant public influence and that control can be established on the basis of other criteria;	a) for the purposes of determining whether the competent local authority exercises control, factors such as the degree of representation on administrative, management or supervisory bodies, specifications relating thereto in the articles of association, ownership, effective influence and control over strategic decisions and individual management decisions shall be taken into consideration. In accordance with Community law, 100 % ownership by the competent public authority, in particular in the case of public-private partnerships, is not a mandatory requirement for establishing control within the meaning of this paragraph, provided that all the private partners have been selected on the basis of an invitation to tender valid for the duration of the public service contract. Moreover, private partners may not individually or collectively have a significant influence on the public service operator as defined in the international accounting standard IAS 28 laid down in Commission Regulation (EC) No 2238/2004 of 29 December 2004 amending Regulation (EC) No 1725/2003 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards IASs IFRS 1, IASs Nos. 1 to 10, 12 to 17, 19 to 24, 27 to 38, 40 and 41 and SIC Nos. 1 to 7, 11 to 14, 18 to 27 and 30 to 331. ___________   1OJ L 394, 31.12.2004, p. 1.
Amendment 24 Article 5, paragraph 2, point (b)
(b) the condition for applying this paragraph is that the internal operator and any entity over which this operator exerts even a minimal influence perform their public passenger transport activity within the territory of the competent local authority, notwithstanding any outgoing lines or other ancillary 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 public passenger transport services organised outside the territory of the competent local authority;	(b) the condition for applying this paragraph is that the internal operator and any entity over which this operator or the competent local authority exerts even a minimal influence perform their public passenger transport activity within the territory of the competent local authority, notwithstanding any outgoing lines or other ancillary 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 public passenger transport services organised outside the territory of the competent local authority;
Justification
The additional wording ensures that the ban on exterritorial participation in the tender cannot be circumvented easily with the aid of the internal operator’s affiliated companies.
In the interest of competition free of discrimination the exemption of direct award to internal operators must be restricted as tightly as possible. The crucial factor is the territorial restriction. This prevents internal operators in protected markets from moving out to operate in other markets and enjoy anti-competitive advantages there. A tight and clear definition of the internal operator’s territorial area is crucial. Extending the area to ‘outgoing lines and other ancillary elements’ in the territory of neighbouring authorities should therefore be deleted.
Amendment 25 Article 5, paragraph 2, point (c)
(c) notwithstanding point (b), an internal operator may participate 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 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 awarded public service contract;	2(c) notwithstanding point (b), an internal operator may participate in fair competitive tenders as from one year before the end of its directly awarded public service contract under the condition that a final and irrevocable decision has been taken to submit the 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 awarded public service contract. If the competent authority reverses this decision within two years, all contracts awarded to the internal operator in the intervening period shall automatically lapse;
Justification
Such a decision will not be taken suddenly by the competent authority and the internal operator will have adequate time to prepare during the process of reaching the decision. The decision must be irrevocable to ensure that the internal operator does not secure contracts through tendering and then have the previous direct award restored.
The purpose of this article is to gradually open up the market to competition. However, the principle of administrative freedom allows public authorities to change earlier decisions at any time, not least after an election. The necessary provision should therefore be made to prevent discrimination between competing operators. If a competent authority changes the decision to award an operating contract directly to its internal operator, the contracts concluded with that operator in the two preceding years should lapse automatically.
Amendment 26 Article 5, paragraph 2, points (d a) and (d b) (new)
	(da) if subcontracting under Article 4(7) is being considered, the internal operator shall be required to provide the major part of the passenger transport service himself; (db) in the case of directly awarded public service contracts, the competent authority shall provide adequate reasons for its decision to award the contract directly.
Justification
The whole purpose of the regulation must in no case be undermined by internal operators passing on the major part of their directly awarded transport services to subcontractors to the exclusion of competition and thus turning themselves into a purely management operation. This is likely to lead to adverse consequences for existing social and quality standards and to further distortion of competition between internal operators and third parties. The only way to counteract this is to ensure that in the event of subcontracting the operator is required to provide the major part of the passenger transport service himself.
Amendment 27 Article 5, paragraph 4
4. Unless prohibited by national law, the competent authorities may decide to award public service contracts directly either where their average annual value is estimated at less than EUR 1 million or where they concern the annual provision of less than 300 000 kilometres of public passenger transport services.	4. So far as national law allows, the competent authorities may decide to award public service contracts directly either where their average annual value is estimated at less than EUR 1 000 000* or where they concern the annual provision of less than 300 000 kilometres of public passenger transport services.
In the case of a public service contract directly awarded to a small and medium sized enterprise operating not more than 20 vehicles, these thresholds may be increased to either an average annual value estimated at less than EUR 1,7 million or when they concern the annual provision of less than 500 000 kilometres of public passenger transport services.	In the case of a public service contract directly awarded to a small or medium sized enterprise employing between 50 and 250 employees, these thresholds may be increased to either an average annual value estimated at less than EUR 3 000 000* or when they concern the annual provision of less than 1 000 000 kilometres of public passenger transport services.
	* These figures are to be adjusted every year in every Member State to the national inflation rates of the previous year, as provided by Eurostat.
Amendment 28 Article 5, paragraph 5 a (new)
	5a. Under the provisions of national law, a public service operator may, on his own initiative, apply for the renewal of an exclusive right to set up a public passenger transport service. The relevant local authority must award the requested public service contract directly, if it concerns a service which is not covered by any other exclusive right and will not demonstrably endanger any public service contracts that have already been awarded.
Justification
Enterprises can often assess the need for public transport provision better and earlier than the local authorities can. In the case of transport operations initiated by private enterprise, it must be possible for exclusive rights to be awarded once and for a limited period directly to the initiator of the transport operation. If the relevant authority had to award the necessary exclusive rights through a competitive procedure, even for transport operations initiated by private enterprise, this would immediately remove any incentive for innovation by private enterprise.
Amendment 29 Article 5, paragraph 6
6. Unless prohibited by national law, competent authorities may decide to make direct awards of public service contracts where they concern transport by rail, with the exception of other track-based modes such as metro or tramways. In derogation from Article 4(3), such contracts shall not exceed 10 years, except where Article 4(4) applies.	6. Unless prohibited by national law, competent authorities may decide to make direct awards of public service contracts concerning exclusive rights for public service obligations where they concern transport by rail, with the exception of other track-based modes such as metro or tramways, if this is necessary so as not to endanger the economic viability or safety of the transport operation in question. In derogation from Article 4(3), such contracts shall not exceed 10 years, except where Article 4(4) applies.
Justification
As a rule, national law does not state unambiguously whether a particular procedure is prohibited or not. Legal clarity can only be achieved by an unambiguous implementing provision at national law level. Moreover, this is in line with the subsidiarity principle: EC law makes standardised rules of procedure available throughout Europe, but the national legislator has to actively choose which of the instruments will be applicable in that Member State.
As the basic principles of this regulation state that direct awards must be an absolute exception, there must be precise conditions attached to this special arrangement for rail transport.
Amendment 30 Article 7, paragraph 1
1. Each competent authority shall make public once a year an aggregated report on the public service obligations for which it is responsible, the selected public service operators and the 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 transport network to be monitored and assessed.	1. Each competent authority shall make public once a year an aggregated report on the public service obligations for which it is responsible, the selected public service operators and the compensation payments and exclusive rights granted to the said public service operators by way of reimbursement. This report shall distinguish between bus transport, rail transport and rail infrastructure, allow the performance, quality and financing of the public transport network to be monitored and assessed and provide information on the type and extent of exclusive rights that have been granted.
Justification
The report must differentiate to provide a minimum level of comparability. The extent of exclusivity must be transparent for other operators, so that that they can be aware, when taking business decisions, which part of the market is inaccessible because of exclusive rights.
Amendment 31 Article 7, paragraph 2, point (c a) (new)
	(ca) quality targets relating to punctuality and reliability and the applicable rewards and penalties.
Or. it
Amendment 32 Article 7, paragraph 3, point (a)
(a) name of the contracting entity and its ownership;	(a) name of the contracting entity and its ownership, together with its control structure;
Amendment 33 Article 7, paragraph 3, point (e)
(e) quality targets;	(e) quality targets relating to punctuality and reliability and the applicable rewards and penalties;
Amendment 34 Article 7 a (new)
	Article 7a When deciding on and awarding public service contracts under Article 5(2) to (5), Member States shall provide legal protection for those interested in tendering which is as effective as that provided by Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts.
Amendment 35 Article 8, paragraph 2, subparagraph 1
2. Without prejudice to paragraph 3, the award of public service contracts by rail and by road shall comply with Article 5 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 transport capacity. * Note for OJ: 12 years after the date of entry into force of this Regulation.	2. Without prejudice to paragraph 3, the award of public service contracts by rail and by road shall comply with Article 5 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 transport capacity. * Note for OJ: 8 years after the date of entry into force of this Regulation.
Amendment 36 Article 8, paragraph 3, subparagraph 2
The contracts referred to in (a) may continue until they expire. The contracts referred to in (b) and (c) may continue until they expire, but for no longer than 30 years. The contracts referred to in (d) may continue until they expire, provided they are of limited duration comparable to the durations specified in Article 4.	The contracts referred to in (a) may continue until they expire. The contracts referred to in (b) and (c) may continue until they expire, but for no longer than 15 years. The contracts referred to in (b) and (d) may continue until they expire, provided they are of limited duration comparable to the durations specified in Article 4.
Justification
As the legislative procedure for revision of this regulation has been in operation since 2000, this transitional provision can be substantially shortened. This would also more rapidly achieve a high quality public transport service providing good value for passengers and taxpayers.
Amendment 37 Article 8 a (new)
	Article 8a Appeal procedures   1. Member States shall guarantee operators and other interested parties the right to lodge an appeal with a public or judicial body against decisions and preliminary decisions taken by competent authorities under this Regulation.   2. The body referred to in paragraph 1 shall be independent of the competent authorities concerned and of the operators involved and shall be empowered to request any relevant information from any party concerned, to take binding decisions and to award damages.   3. Where this body is not a judicial body, its decisions shall be subject to judicial review.   4. The provisions governing implementation of the appeal procedure shall be determined by the Member States.   5. As regards cross-border services, the authorities concerned shall agree on which appeal body shall be competent.
Amendment 38 Article 9, paragraph 2, subparagraph 1
2. Without prejudice to Articles 73, 86, 87 and 88 of the Treaty, Member States may continue to grant aids for the transport sector pursuant to Article 73 of the Treaty which meet the needs of coordination of transport or which represent reimbursement for the discharge of certain obligations inherent in the concept of a public service, other than those covered by this Regulation, and in particular:	2. Member Sates may, in accordance with Article 73 of the Treaty, continue to grant aids for the transport sector which meet the need of coordination of transport or which represent reimbursement for the discharge of certain obligations inherent in the concept of a public service, other than those covered by this Regulation, such as for example:
Amendment 39 Article 9, paragraph 2, subparagraph 2
Such aid shall be restricted to the research and development stage and may not cover the commercial exploitation of such transport systems and technologies.	deleted
Justification
In order to ensure that the set targets are achieved, the measures laid down in this article should support not only the research and development stage but also the operational stage.
Amendment 40 Article 12, paragraph 1
This Regulation shall enter into force on ………………………………*. ∗ Note for OJ: three years following publication of the Regulation in the Official Journal.	This Regulation shall enter into force on ………………………………*. ∗ Note for OJ: 18 months following publication of the Regulation in the Official Journal.
Justification
As the legislative procedure for revision of this regulation has been in operation since 2000, this transitional provision can be substantially shortened. This would also more rapidly achieve a high quality public transport service providing good value for passengers and taxpayers.
Amendment 41 Annex, point 2 a (new)
	2a. The costs to be included in this calculation must be in line with the costs that an average, well-managed enterprise, with sufficient means of transport to meet its public service obligations, would have incurred in fulfilling these obligations.
Amendment 42 Annex, paragraph 3 a (new)
	3a. The compensation must not exceed the amount corresponding to the net financial effect of the sum of the (positive or negative) impact on the costs and revenue of a public service operator as a result of fulfilling public service obligations, on the basis of the costs that an average, well-managed enterprise, with sufficient means of transport to meet its public service obligations, would have incurred in fulfilling these obligations. In analysing these costs, as far as possible reference should be made to the rates and parameters that would have applied to comparable public service obligations in the context of a tendering procedure pursuant to Article 5(3) or an open tendering procedure pursuant to Directives 2004/17/EC or 2004/18/EC.
Justification
This addition to the annex ensures that the regulation is in line with the Court of Justice’s judgment on State aid legislation. This also reflects the ‘fourth Altmark-Trans’ criterion (cf. ECJ judgment C-280/00 (Altmark Trans), point 93). This is the key criterion to ensure efficient and economic service provision, even when contracts are awarded directly, and thus effectively to exclude overcompensation.

• [1]  OJ C 140 E, 13.6.2002, p. 282.
• [2]  OJ C 365 E, 19.12.2000, p. 169.
• [3]  OJ C 151 E, 25.6.2002, p. 146.
• [4]  Not yet published in OJ.

EXPLANATORY STATEMENT

I. Genesis of the current situation

At its inception, public transport by road and rail served a relatively small and affluent clientele - people who later would mostly opt to travel by car. Entrepreneurs invested capital and know-how in the expectation that they would be able to make a profit in this new market. Due to growing losses, much public transport was later restricted to the busiest times of day and the busiest routes, or was even eliminated altogether.

If purely market principles had been applied, reductions in numbers of routes and frequencies would have been inevitable, as would substantial fare increases. In opposition to this trend, authorities - particularly in urban regions - seek to improve public transport in order to limit the space commandeered by cars, to keep residential areas, employment areas and recreation areas accessible and to do what they can to combat the environmental nuisance caused by traffic. Efforts to preserve and expand scheduled transport services have therefore become increasingly dependent on the services being taken over by operators owned by local or regional authorities or the State. Where private operators have remained in existence, they have become dependent on public funding to cover their unavoidable operating deficits. As a result, both public enterprises and private contract partners have acquired monopolies on the right to provide scheduled services and on access to public funding.

II. Commission proposal of 2000

In the 1990s, studies were performed on a new system of competition, financing and allocation of areas, 'regulated competition', which would replace all the different hitherto existing national, regional and local systems. This created an expectation that in future public procurement procedures would have to be adhered to throughout EU territory. Some Member States have already anticipated such a system when revising their national legislation.

Subsequently, the Commission, in the explanatory memorandum on its proposal for a regulation of 2000, drew attention to the existing legislative framework, particularly:

-          Article 73 of the EC Treaty, pursuant to which aid is compatible with the Treaty if it represents reimbursement for the discharge of certain obligations inherent in the concept of a 'public service';

-          Regulation (EEC) No 1191/69, as amended by Regulation (EEC) No 1893/91, which enumerates these forms of compensation, which are exempt from the requirement to notify State aid as referred to in Article 88(3) of the Treaty.

However, this Regulation did not lay down how public service contracts should be awarded or how markets should be opened up.

The award procedure was partially regulated in Directives 92/50/EC and 93/38/EEC, which in 2004 were to be replaced by Directives 2004/17/EEC and 2004/18/EEC.

However, there are many contracts (and particularly concessions) to which these procedures do not apply. The Regulation as then proposed by the Commission and also the later amended proposals, on the other hand, did provide for them.

The Commission also drew attention to the change in the situation due to the rise of large international corporations. These offer to take bus, tram and rail services over from public authorities and private concession-holders on condition that they receive financial compensation for the anticipated operating deficit, including a grant which enables them to operate at a profit.

On 20 July 2000, the Commission indicated its desire to guarantee transparency and equal treatment of enterprises by means of the regulation proposed in COM(2000)0007, thus ensuring that the award by competent authorities of long-term concessions to operators with which they had traditional relationships or were on friendly terms did not result in legal action being brought by other interested businesses. In order to achieve this, it was proposed that competition should be introduced between businesses, to be effected by inviting them to tender for five-year public-service contracts. Other forms of selection of businesses would only remain possible in exceptional cases.

III. Parliament's first reading

Local and regional authorities, users' organisations, environmental organisations and trade unions raised serious objections to the requirement to carry out public procurement procedures in every case. They did so partly out of an expectation that ultimately this requirement would make it impossible for the many publicly owned urban and regional operators to remain in existence, because the businesses in question were established to serve a home market as effectively as possible and not with the aim of competing in some remote place. They would only need to be eliminated from a tender procedure once, for example because of price competition from a larger business, in order to go into liquidation.

In addition, all the businesses concerned objected to the proposed five-year term for contracts, because such a lack of continuity would hamper investment. If invitations to tender were to be issued periodically, trade unions called for transport staff to be protected against dismissal and against poorer terms of employment with a new contractual partner. Sources in the various Member States drew attention to the wide variation of practices between countries and the undesirability of imposing uniform rules at EU level while ignoring the experience gained by means of those practices. In accordance with these objections, Parliament adopted amendments at first reading on 14 November 2001 by 317 votes to 224, inter alia to make it possible to provide tram and underground services and scheduled bus services within a range of 50 km without a public procurement procedure. Where such a procedure was held, competition should be based not only on price but also on quality, while the contract terms were extended to 8 years for bus services and 15 years for rail. The transparency requirements which the Commission had proposed for public procurement procedures were accepted.

IV. The Council's common position

After first reading it was more than six years before the Council succeeded in agreeing a common position on the proposal for a regulation. One factor which helped it to do so was that on 20 July 2005 in COM(2005)0319 the Commission submitted a revised position, largely adhering to the position adopted by Parliament in 2001. In 2006, under the Presidency of Austria, the Council reached a similar conclusion, after which the German Presidency finalised the proposal, with a few refinements regarding the relationship between this regulation and Directive 2004/18/EEC on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts, and Directive 2004/17/EEC coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors. This version of the proposal is characterised by greater subsidiarity for the Member States than provided for in the Commission proposal of 2000; in particular, it will remain possible for transport to be provided in towns and conurbations by publicly owned operators. In addition to publicly owned operators and public tender procedures, the Council's common position permits a third option, direct award.

V. Consideration by the Committee on Transport and Tourism

There is now a large measure of agreement between Parliament's position at first reading in 2001, the Commission's revised position of 2005 and the common position of the Council of 2006. Your rapporteur bases his proposal on this agreement. The amendments which he proposed to Parliament's Committee on Transport and Tourism dealt with points raised by non-governmental organisations regarding legal certainty and quality.

One consequence of the application of this regulation could be a reduction in the continuity of operation. This means that the employees concerned would regularly face serious uncertainty about the future of their jobs because a change of contractual partner could result in collective redundancies. Even if employees were recruited by another operator, their terms of employment might suffer. This is similar to the situation with business closures and takeovers. The Council's common position, which, as requested by Parliament at first reading, is based on greater freedom of choice for Member States, does mention the desirability of arrangements governing the transfer of staff (Article 4(5) and (6)), but does not make them compulsory. Amendments to insert a requirement for such arrangements while leaving it to the Member States to decide the details, in accordance with national traditions, did not secure a majority when put to the vote in the Committee on Transport and Tourism. Nor did amendments to provide for particular national circumstances and protect the Member States concerned against effects particularly unfavourable to them.

The Committee accepted the Council's definition in Article 2(c) of areas for which contracts can be concluded: any area smaller than a Member State is eligible. Proposals to delete the option of direct award of contracts, which the Council wished to include in Article 5(6), were rejected, but, by a small majority, this option was restricted to a shorter transition period and on the other hand, in Article 5(4), by a large majority, extended in the case of contracts with SMEs. In addition, amendments were adopted relating to avoiding compensation payments which do not cover costs, which would so undermine businesses that continuity of service could not be guaranteed, as well as concerning arrangements for appeal and the conditions which should apply to subcontracting. In view of these relatively small amendments to the common position, your rapporteur anticipates that it will be possible to reach agreement with the Council at second reading, so that, within seven years of the Commission's having submitted this proposal, the legislative procedure can be concluded.

PROCEDURE

Title	Public service requirements for transport by rail and road
References	13736/1/2006 - C6-0042/2007 - 2000/0212(COD)
Date of Parliament’s first reading – P number	14.11.2001                     T5-0597/2001
Commission proposal	COM(2000)0007 - C5-0326/2000
Amended Commission proposal	COM(2002)0107 and COM(2005)0319
Date receipt of common position announced in plenary	18.1.2007
Committee responsible        Date announced in plenary	TRAN 18.1.2007
Rapporteur(s)        Date appointed	Erik Meijer 15.1.2007
Discussed in committee	22.1.2007		28.2.2007
Date adopted	27.3.2007
Result of final vote	+: –: 0:	37 4 7
Members present for the final vote	Inés Ayala Sender, Etelka Barsi-Pataky, Jean-Louis Bourlanges, Paolo Costa, Michael Cramer, Luis de Grandes Pascual, Arūnas Degutis, Christine De Veyrac, Petr Duchoň, Saïd El Khadraoui, Robert Evans, Emanuel Jardim Fernandes, Mathieu Grosch, Georg Jarzembowski, Stanisław Jałowiecki, Timothy Kirkhope, Dieter-Lebrecht Koch, Jaromír Kohlíček, Sepp Kusstatscher, Jörg Leichtfried, Bogusław Liberadzki, Eva Lichtenberger, Marian-Jean Marinescu, Erik Meijer, Robert Navarro, Seán Ó Neachtain, Josu Ortuondo Larrea, Willi Piecyk, Luís Queiró, Reinhard Rack, Luca Romagnoli, Brian Simpson, Renate Sommer, Dirk Sterckx, Ulrich Stockmann, Armando Veneto, Marta Vincenzi, Roberts Zīle
Substitute(s) present for the final vote	Johannes Blokland, Philip Bradbourn, Markus Ferber, Zita Gurmai, Jeanine Hennis-Plasschaert, Helmuth Markov, Ioan Mircea Paşcu, Leopold Józef Rutowicz, Corien Wortmann-Kool
Substitute(s) under Rule 178(2) present for the final vote	Alexandru Athanasiu