Internal market and State aid — public passenger transport services by rail and road
Regulation (EC) No 1370/2007 on public passenger transport services by rail and by road
WHAT IS THE AIM OF THE REGULATION?
Known as the public service obligation (PSO) regulation, it sets out conditions under which transport operators can be compensated or given exclusive rights by public authorities to provide public transport services which are in the general interest but would otherwise not be commercially viable. By establishing public service obligations, authorities aim to ensure that passengers can access safe, efficient, attractive and high-quality public passenger transport services.
It repeals Council Regulations (EEC) No 1191/69 and (EEC) No 1107/70. It was last modified by Regulation (EU) 2016/2338.
The PSO regulation sets out:
an obligation for authorities to conclude public service contracts when they
- give exclusive rights which entitle a public transport operator to provide certain public passenger transport services on a particular route or network or in a particular area, excluding all other operators and/or
- give compensation to public transport operators to cover the costs incurred in providing public service obligations;
rules on how public service contracts must be awarded;
rules on how to calculate the amount of compensation.
The regulation applies to public passenger transport services by bus and by rail. However, EU countries can also apply it to public passenger transport by inland waterways and national sea waters.
Public service contracts and general rules
The authority which is competent for a given area must conclude a public service contract granting an operator an exclusive right and/or compensation in exchange for providing PSOs.
Obligations to apply maximum tariffs for all or certain categories of passengers may also be imposed via general rules, which apply to all operators without discrimination.
The authority grants compensation to offset the impact of the public service obligations on the operator’s costs and revenues.
The public service contracts (and general rules) define:
- the public service obligations to be discharged;
- the rules for calculating compensation and the nature and the scope of any exclusive rights;
- overcompensation must be avoided;
- how the costs linked to service supply (staff costs, energy, infrastructure, rolling stock, maintenance, etc.) should be allocated;
- how revenue from the sale of tickets is to be allocated (whether it is kept by the operator, repaid to the authority, or shared).
The duration of public service contracts must not exceed 10 years for bus and coach services, and 15 years for rail or other track-based forms of transport.
Awarding public service contracts
Public service contracts must be awarded according to the rules of this regulation. However, for awarding certain passenger transport services by bus or tram, the public procurement procedures of Directives 2014/25/EC (see summary Public purchasing — rules for water, energy, transport and postal sectors) and 2014/24/EC apply (see summary Public contracts — setting out clear ground rules).
As a general rule, competent authorities must award public service contracts by transparent and non-discriminatory competitive procedures.
However, the obligation to award contracts by a competitive procedure does not apply:
- where a local authority provides public transport services itself or assigns them to an internal transport operator (a separate body, which the local authority controls in a similar way to one of its own departments);
- where the volume of the contract is modest
- estimated average annual value of less than €1 million or
- less than 300,000 kilometres of public passenger transport services;
- where emergency measures are taken or contracts are imposed in response to actual or potential service interruptions.
Public service contracts in the rail sector
Regulation (EU) 2016/2338 has amended this regulation by introducing the principle of competitive award also for public service contracts in the railway sector, which was previously excluded. Long transition periods were allowed, to enable authorities and operators to adapt to the new rules.
Direct award of rail contracts remains possible in exceptional and well-defined circumstances, notably where:
it is justified by structural and geographical characteristics of the market and network (size, demand characteristics, network complexity, technical and geographical isolation, type of services); and
it would result in an improvement in quality of services or cost-efficiency, or both, compared to the previous contract;
the volume of the contract is modest
- estimated average annual value less than € 7.5 million per year or
- fewer than 500,000 kilometres.
Unconditional, direct awards of rail public service contracts will no longer be possible as of 25 December 2023.
FROM WHEN DOES THE REGULATION APPLY?
It has applied since 3 December 2009, except for Article 5 on awarding of public service contracts, which applies from 3 December 2019.
For more information, see:
Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70 (OJ L 315, 3.12.2007, pp. 1-13)
Successive amendments to Regulation (EC) No 1370/2007 have been incorporated into the original document. This consolidated version is of documentary value only.
Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts (OJ L 94, 28.3.2014, pp. 1-64)
See consolidated version.
Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ L 94, 28.3.2014, pp. 65-242)
See consolidated version.
Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (OJ L 94, 28.3.2014, pp. 243-374)
See consolidated version.
Communication from the Commission on interpretative guidelines concerning Regulation (EC) No 1370/2007 on public passenger transport services by rail and by road (OJ C 92, 29.3.2014, pp. 1-21)
last update 01.10.2019