Competition in the passenger railway transport is a process which has been set in motion by the European institutions for years already. One could say that it all started with the EU Directive 91-440 whose approach to deregulating rail transport was to separate infrastructure and operation. The aim of this measure was clearly to create a suitable environment for third parties to access the network and therefore to introduce competition in the sector. The opportunity for the European Commission to take measures regarding the transportation sector is based on the fact that this field is a shared area between the EU and the Member States (article 70 of the Treaty refers to transports as a common policy). Europe’s interest in this area is undeniable for a lot of reasons such as the fact that mobility is essential for the internal market. Transports are a lever for economic growth and job creation.

Furthermore, railway transport is generally perceived as an eco-friendly means of transportation. Its negative externalities are considered to be lower than those of other means of transportation such as road or air and notably with regard to greenhouse gas emissions. In the light of its inherently global nature, railway sector requires strong cooperation between the States and the institutions at both European and International level in order to fully respond to people’s mobility requirements.
As Europe believes that competition is a means for the railway sector to regain its competitivity and to be modernised, the European institutions have adopted for almost 25 years now measures to create a unique European railway framework. These measures have been essentially centralised in what is called “Railway Packages”.

The first railway package which is mostly known for the measures related to the railway infrastructure (directive 91-440 stated above being part of this package) allowed competition in the freight sector. It aimed to create uniform rules on the licensing of railway undertakings, on the allocation of infrastructure capacity, on the levying of charges for the use of the railway as well as on the safety certification.

The second railway package established security rules as well as interoperability technical specifications. In addition, according to the EU directive 49-2004, the Member States were obliged to establish a national safety authority. In France, this authority is the Public establishment for the railway safety (Etablisement public de la sécurité ferroviaire -EPSF).

The third railway package allowed competition in the international railway transport area. It also contained the EU regulation 2007/1370 on public passenger transport services by rail and by road according to which operators may be in charge of public service contracts they gain through tender procedures.

Finally, the fourth railway package whose negotiations have been completed at the end of 2016 is one of the most controversial package as it states the opening of the passengers’ railway markets to competition. The forth package also contains measures related to the improvement of the quality service and to the economic effectiveness of the sector. It clearly indicates that the railway managers are compelled to grant third parties’ access to the network on a non-discriminatory basis. It revises the rules regarding safety certification and rolling stock homologation.

Although railway passenger markets have been opened to competition for almost twenty years in countries such as the United Kingdom, Sweden or Germany, the process has not been well received everywhere. In France for instance, even though debates upon competition in the sector have been initiated almost ten years ago, the rhythm of negotiations is very slow.

However, on September 2017 two senators, Hervé Maurey and Louis Nègre introduced a draft national law (projet de loi) with regard to the opening of the French railway passenger market. The senators seemed in favour of an immediate competition in the sector, without any attempt to experiment. Indeed, France, does not have any time left to proceed to any kind of testing the waters as it would fall outside the European schedule the Commission set for to Member States to introduce competition in their railway sector. As such, according to the forth railway package, starting December 2019, Member States can proceed to tenders while they still have the possibility to directly award a contract to an operator, without any competitive tendering. However, starting 2023, competitive tenders become the norm. The transport authority will only be able to directly award a contract only if the measure is justified on the ground of exceptional circumstances.

In the light of this dates, even though competition is introduced in French railway market during 2019, its effects will not be that visible as the French transport authorities have recently renewed their contracts with SNCF Mobilités, the national operator. Therefore, these contracts which last six to seven years tend to lock the market in favour of the national operator, competition in the market not being able to prove its merits until 2023-2025.

Furthermore, in order to prepare the French market to the arrival of the competition, the French Prime Minister, Edouard Phillipe designed Jean-Cyril Spinetta, the former CEO of KLM Air France to develop the appropriate strategy in order to reshape the railway industry. For that, Spinetta, met with all the actors in the sector (railway operators, unions, consumer organisations etc.). His report was presented on the 15th of February 2018 and it generated mixed feelings as to the strategy the sector has to follow. This report sets some interesting considerations on the business model the railway manager has to adopt (SNCF Réseau), on the TGV model, on the conditions in which competition has to develop in order to guarantee both competition dynamics between the operators as well as the preservation of the public service. The report admits the compatibility of the competition for the market to the characteristics of regional railway transports and it proclaims open access for the TGV model. However, in order to preserve the railway lines which risk to be closed due to their lack of economic viability, Spinetta considers a combination of competition in the market and for the market in their specific case.

One of the main issue with competition in the French sector as well as in Spinetta’s report is the staff transfer aspect. Unions are not content with Spinetta’s prognosis (he clearly indicates that following tender procedures the staff will be transferred from the previous operator to the new one) and a national strike has been going on since the 3rd of April. The report also puts and end to the employment of new railway agents under the SNCF status.

Moreover, as competition requires the adjustment of the legal French framework to the European dispositions, the Prime Minister announced the intention to reorganise SNCF. The national company will therefore modify its legal status, passing from a public establishment to a public limited company, following the German Model of the DB.

Social dissatisfaction regarding the way the process is being conducted is also due to the fact that competition will be introduced in France via ordinances (ordonnances) and not, as one, might have expected, through parliamentary means. A draft national law for a new railway pact has been presented on, 14th of March, authorizing the Government to deal with the competition process through ordinances. This is surprising for several reasons, but the measure is justified by the urgency of the project. A Government representative declared this week that “This was the only means to make sure that the project would be settled in six months, based on a real coordination with the actors of the sector (..)”. Urgency may justify the means, but be it as it may, a lot of aspects still require coordination as well as State decision such as the railway debt.

The National Assembly approved following a first lecture, the draft national law for a new railway pact on the 17th of April through 454 votes for and 80 against. However, the draft needs to be addressed by the Senate starting 23rd of May. According to the French Ministry of Transportation, a final decision should intervene during July 2018.
Following the same direction as Spinetta’s rapport, the draft national law for a new social railway pact allows the French regions (as they are transport organizing authorities) to open rail passenger traffic to competition. It also establishes the disappearance of the status of railway workers for new hires. But the bill does not clearly states whether the State wishes to take in charge the railway debt.

Despite the bill being examined by the National Assembly and soon to be by the Senate, the negotiations with the railway unions continue.
Recently, Laurent Berger, the secretary general of CFDT asked that the “non-transferability” of SNCF be included in the bill. It seems that he has declared on Cnews that :“I ask that the government say very clearly that there will be no transferability of any SNCF subsidiary whatsoever". Following this request, Jean-Baptiste Djebbari, rapporteur of the bill, publicly confirmed that the non-transferability of the national company would be enshrined in the law in order to “leave no room for the fantasy of privatization”.

In the light of these events, the competition process In France is not expected to be an easy one. But even though the national strike affects us all, we shall only hope that this recent reform will pave the way for a new much competitive and dynamic railway sector.
Stay tuned for more!
J-C Spinetta, Report « The future of the railway transport », 15th of February 2018, pp.127.