Greater competition will help to create a more efficient and customer-responsive industry. EU rail legislation has consistently encouraged competitiveness and market opening, with the first major law in this direction dating back to 1991.
The legislation is based on a distinction between infrastructure managers who run the network and the railway companies that use it for transporting passengers or goods. Different organisational entities must be set up for transport operations on the one hand and infrastructure management on the other. Essential functions such as allocation of rail capacity (the “train paths” that companies need to be able to operate trains on the network), infrastructure charging and licensing must be separated from the operation of transport services and performed in a neutral fashion to give new rail operators fair access to the market. Moreover it must be guaranteed that public funds for the infrastructure and for the payment of compensation for transport services under public service obligations may not be used to finance transport operations, in order to avoid distortions of competition and an unfair use of public money.
EU Member States must also have regulatory bodies in place to monitor railway markets and to act as an appeal body for rail companies if they believe they have been unfairly treated.
Directive 2012/34/EU recasting the First Railway Package contains the basic provisions for market opening in the railway sector.
Further proposals are made in the Commission's 4th Railway Package .
Opening markets Europe-wide
As well as encouraging greater competition within national markets, EU legislation gives rail operators the ability to run services in and between other EU countries, opening up competition in a cross-border sense.
Rail freight transport has been completely liberalised in the EU since the start of 2007, for both national and international services. This means that any licensed EU railway company with the necessary safety certification can apply for capacity and offer national and international freight services by rail throughout the EU. The liberalisation increased competition and efficiency of the rail freight transport, new operators entered the market and rail became better able to compete with other transport modes.
The market for international rail passenger services has been liberalised in the EU from 1 January 2010. Any licensed, certified rail company established in the EU is in principle able to offer such services, and in doing so has the right to pick up and set down passengers at any station along the international route. The market for purely domestic rail passenger services is not yet being opened up to EU-wide competition. However, the Commission has announced to make proposals in that sense.
In 2013, the Commission adopted a report on the effects of opening up the international rail passenger markets .