Select Committee on European Scrutiny Thirty-First Report





COM(02) 107

Amended Draft Regulation on action by the Member States concerning public service requirements and the award of public service contracts in passenger transport by road, rail and inland waterways.

Legal base:

Articles 71 and 89 EC; co-decision; qualified majority voting


Document originated:

21 February 2002

Deposited in Parliament:

8 April 2002


Transport, Local Government and the Regions

Basis of consideration:

EM of 21 May 2002

Previous Committee Report:

None; but see (21618) 10776/00: HC 23-xxviii (1999-2000), paragraph 11 (1 November 2000)

To be discussed in Council:

17 June 2002

Committee's assessment:

Politically important

Committee's decision:

Not cleared; further information awaited




33038.33079 Subsidies (state aids) are usually incompatible with the EC Treaty, but not always. For example, subsidies to transport operators are compatible with the EC Treaty if they represent reimbursement for the discharge of certain obligations inherent in the concept of public service. An obvious example would be subsidies provided to a rural bus service. Regulation 1191/69/EEC[9] provides for the imposition of public service obligations (PSOs) on operators of public service passenger transport by road, rail and inland waterways; and for the reimbursement of costs, including a mechanism for calculating the financial burden resulting from PSOs. This basic framework was amended by Regulation 1893/91/EEC[10], which established public service contracts as the normal method.

33038.33080 Since 1991, public transport markets have been opened to greater competition, with some trans-national operators emerging as important players. The Commission, which says that the existing Regulations address neither how public service contracts should be awarded, nor the evolving market for public transport provision, believes that there is a need for an entirely new Regulation to establish clear rules for putting competition in public transport on a Community basis.

33038.33081 In July 2000, the Commission adopted a draft Regulation with the objectives of stimulating more efficient and attractive public transport, through the use of controlled competition and other measures and promoting legal certainty for authorities and operators. The Commission saw the development of an international market in the operation of public transport as justifying the application of Community competition law to the public transport sector.

33038.33082 The previous Committee left uncleared the Commission's draft proposal on 1 November 2000, pending further clarification of some points and receipt of a Regulatory Impact Assessment.

33038.33083 During the draft regulations first reading in the European Parliament, amendments were agreed which, amongst other things, would protect local public transport services from competition if the competent authority decided to provide the services itself. The amendment would also permit competent authorities to grant themselves exclusive rights to provide local public transport. As a way of balancing this protection, the European Parliament also adopted an amendment that would deny operators the right to compete elsewhere if they were operating services which were directly awarded without competition, as a way of avoiding a distortion of competition.

33038.33084 In February 2002, the Commission adopted an amended proposal, which according to the Parliamentary Under-Secretary of State, Department for Transport, Local Government and the Regions (Mr David Jamieson) takes on board some of the amendments adopted by the European Parliament and the concerns expressed by Member States during negotiations. According to the Commission the amended proposal incorporates new provisions which reinforce the original objectives or achieve them in a simpler way.

The document

33038.33085 This is an amended proposal of a text that was considered by the previous Committee. According to the Minister, the main changes to the text include:

"Purpose and Scope

"The European Parliament sought to limit the scope of the Regulation to local transport, but the Commission has decided that it is appropriate to include the whole public transport sector not least to ensure consistency with the original Regulation (1191/69). The Commission has, however, introduced an exemption for rail services whose main purpose is historic preservation and the provision of recreational facilities.

"Adequate passenger transport

"The Commission has introduced a consumer-orientated approach to the concept of adequate public passenger transport. And competent authorities would now need to aim to secure adequate services rather than being required to secure such services.

"Public service contracts

"The Regulation continues to indicate that public service contracts should normally be awarded by competitive tendering, and should be of limited duration. The Commission has accepted the European Parliament's amendment increasing the maximum normal contract length to 8 years for bus services and 15 years for rail and inland waterway services. The potential for longer contracts where heavy investment is required remains. The proposal also has a new article on the contents of contracts.

"Direct award of contracts

"The Commission has widened the exemptions from competitive tendering. A competent authority would now be able directly to award a contract to itself or to an operator for:

 "i)    heavy rail services if national or international safety standards could not be met in any other way;

 "ii)    metro services if the age, size or technical uniqueness of the system meant that the incumbent operator would have a significant advantage under competitive tendering;

 "iii)  metro or light rail services it controls if this would be conducive to greater efficiency in the use of public money or publicly financed assets;

"Additionally, the Commission has accepted the European Parliament's amendment increasing the general 'de minimis' exception from competition of services from an annual value of _400,000 to _1,000,000. It has also increased the de minimis exemption for authorities who bundle all their services into a single contract from _800,000 to _3,000,000. The previous exemption from competition for certain 'integrated services' has been deleted.

"The Commission has also added three safeguards which it believes will ensure that the interests of passengers are served:

 i)  competent authorities must make their decisions in a way that permits public debate;

 ii)  potential competitors may come forward with an alternative plan of their own;

 iii)  competent authorities must review the operator's performance every 5 years.

"Emergency action

"The Commission has accepted the European Parliament's amendments permitting competent authorities to award contracts directly in emergencies, for example where tenders received do not meet specified requirements. These are grouped in a new article.

"Safeguards for authorities

"Amendments here include: clarifying the text to enable competent authorities to resist encouraging a market monopoly and extending the competent authorities' ability to protect employees transferring between operators (previously limited to cases where an exclusive right has been awarded).


"General rules for public transport operation

"The limit on the amount of compensation for complying with general rules (such as concessionary fares) has been deleted. However, there is a new requirement for general rules which provide compensation to refer to quality and reliability standards for the services with penalties on operators that fail to deliver.

"Award Procedures

"The Commission has clarified the structure for award procedures. Importantly, it has accepted that for larger contracts, competent authorities should be able to conduct post-tender negotiations with potential operators.

"To improve transparency, the information to be made public under this article has increased, along with the thresholds for publication (in line with the revised 'de minimis' values). The reporting procedure has been simplified, with a requirement on Member States to report to the Commission on a biannual, rather than annual basis.

"The appeals procedure has also been simplified so that Member States can identify a public or judicial body to which people may appeal against a decision made by a competent authority. Where a public body has been identified, decisions made by that body shall be subject to judicial review.

"The accounting procedures provision now recognises that operators should be able to make a reasonable profit. The Commission also feels the amended accounting requirements would be less burdensome than existing requirements.

"Transitional Measures

"Contracts awarded before the Regulation enters into force which followed the Public Procurement Directives or another fair competitive procedure would be allowed to remain in place so long as they are of a finite and reasonable duration.

"There has been some relaxation of the requirement to bring contracts into compliance with the Regulation. The main effect of this, in most cases, is to extend the transition period for making current arrangements compliant from 3 to 8 years — although with certain caveats. The amendments would also, in some cases, permit competent authorities providing bus services themselves to continue for longer still where exclusive rights are not awarded and with the prior approval of the Commission.

"The European Parliament proposed a structural reciprocity clause which the Commission has rejected as it considers the clause to be incompatible with the Treaty. However, under the Commission's amended proposal, competent authorities would, during the transition period, be able potentially to exclude from contract award procedures operators in possession of exclusive rights or financial compensation awarded other than in accordance with the Regulation (transitional reciprocity).

The Government's view

33038.33086 The Minister says that:

"We continue to support the idea of a new Regulation aimed at opening up much of the European public transport market to fair competition. This is consistent with the UK Government's policy on further liberalising European markets. Importantly, the Barcelona European Council in March 2002, called for agreement on the regulation by December 2002.

"While many of the policy implications set out in the Explanatory Memorandum (10776/00) on the Commission's original proposal remain as stated, there have been some substantial changes to the proposal. The majority of the amendments may, in principle, be welcomed by the UK. We particularly support the change that would allow existing competitively procured contracts to remain in place and the removal of the provisions on compensation for complying with general rules, which might have had an adverse impact on the provision of commercial bus services outside London. We also support the new Article on Emergency Provisions and the Commission's acceptance that a judicial body may consider appeals against competent authorities' decisions.

"We believe that the revised exemptions in the amended proposal also provide greater comfort for those UK metro/light rail systems which might otherwise have been adversely effected. But we recognise that these exemptions are likely to mean that more of the European metro/light rail market will remain closed to competition.

"The longer maximum contract lengths proposed by the Commission should assuage many of our concerns across all transport modes, although there may remain potential difficulties with a small number of contracts with very long contract periods. We will need to investigate this more carefully. We also still need to consider carefully the potential effect of the Regulation on passenger rail franchising policy.

"Other areas which require clarification and further consideration include the scope of the provisions in Article 10 relating to the imposition by authorities of general rules to be adhered to by all operators.

"Finally, we remain concerned that there is insufficient clarity on the application of this Regulation vis-à-vis the Public Procurement Directives. We shall do everything possible to ensure greater certainty in this area."


33038.33087 The previous Committee noted that the Government viewed the original proposal as generally helpful. We note that the Commission believes that its amended proposal provides even "greater clarity and legal certainty, by inserting additional wording aimed at showing how the different parts of the Regulation fit together."

33038.33088 We note that the proposed Regulation offers a range of tools for authorities to use under Community law. The Commission says that the framework proposed will ensure better value for money and better services in public transport; ensure that operators have a real opportunity to gain access to the market; harmonise key aspects of the competitive procedures adopted in Member States; and promote legal certainty. We note that the Commission's proposal broadly supports a model of "controlled competition" rather than de-regulation. Indeed, as a way of illustrating the relative advantage of the former, the Commission observes that the number of trips on local buses in London (under controlled competition) increased by 13% whereas in the rest of England (under deregulation) the number of trips on local buses fell by 34%.

33038.33089 Nevertheless, despite the apparent advantages of the proposal, we are concerned about a number of aspects. First, we understand that the Commission's proposal for 15 year contracts is inconsistent with the 20 year contracts favoured by the Strategic Rail Authority. The Minister told us that the Government will have to "consider carefully the potential effect of the Regulation on passenger rail franchising policy". While we appreciate that there may be some uncertainty over details that still need to be agreed, we ask the Minister to indicate to us the ways in which the proposed regulation is likely to affect the passenger rail franchising policy, especially if, as seems likely, the Spanish Presidency seeks political agreement on the proposal at the next Transport Council in a few weeks.

33038.33090 Secondly, we note that some existing contracts, especially for heavy rail metro and light rail systems in the private sector, are for periods longer than the 15 year period set out in the proposal. The Minister suggests that compensation may be payable if the contract periods on these existing contracts are reduced. We ask the Minister which existing contracts are incompatible with the Commission's amended proposal.

33038.33091 Thirdly, we ask the Minister to outline the results of the DTLR follow-up consultation exercise that was concluded on 30 April on the amended proposal.

33038.33092 Fourthly, we note that the previous Committee's request for a Regulatory Impact Assessment (RIA) has not been met, presumably because the negotiations on the original text have been slow and uncertain. Nevertheless, in view of the interest shown by the Spanish Presidency in reaching a political agreement, we request a RIA on the amended proposal.

33038.33093 Meanwhile, we leave the document uncleared.






COM(00) 788









Commission Communication on externalisation of the management of Community programmes, including presentation of a Framework Regulation for a new type of executive agency.

Draft Council Regulation laying down the statute for executive agencies to be entrusted with certain tasks in the management of Community programmes.


Amended proposal for a Council Regulation laying down the statute for executive agencies to be entrusted with certain tasks in the management of Community programmes.



Legal base:

Article 308 EC; consultation; unanimity

Document originated:

Deposited in Parliament

(a) 13 December 2000

(b) 28 December 2001

(a) 24 January 2001

(b) 18 Apr 2002


HM Treasury

Basis of consideration:

(b) EM of 30 April 2002

Previous Committee Report:

(a) HC 152-i (2001-02), paragraph 5 (18 July 2001), HC 152-vii (2001-02), paragraph 4 (21 November 2001), HC 152 -xxiii (2001-02), paragraph 5 (10 April 2002)

To be discussed in Council:

No date set

Committee's assessment:

Legally and politically important

Committee's decision:

(a) Cleared

(b) Not cleared; further information requested




33038.33094 As part of its process of reform, the Commission set out in December 1999 to develop a coherent and manageable policy of 'externalisation', i.e. the carrying out of executive tasks implementing Community policies by bodies other than the Commission. The objective is to allow the Commission's permanent staff to be assigned to its essential tasks, to regain control of executive and support activities and, generally, to improve efficiency.

33038.33095 We considered document (a), which consisted of a Communication from the Commission together with a proposed Council Regulation, on 18 July and 21 November 2001 and on 10 April 2002. We were concerned that the creation of bodies with legal personalities separate from the Commission would be inconsistent with the principle that recourse to an agency does not relieve the Commission of its responsibilities under the Treaty, particularly Article 274 EC.[11] We also expressed concern that the draft Regulation was far from clear on the question of which tasks may be delegated by the Commission to an agency.

33038.33096 The Minister commented on these two points in her letter of 16 October 2001. In her letter of 19 March 2002, the Minister informed us that the European Court of Auditors delivered an Opinion on 8 November 2001 that it was advisable for the draft Regulation to lay down general rules under which the Commission would intervene if the agency acted contrary to the object of the Community programme in question, or more generally, acted unlawfully. The Court of Auditors further considered that, while these procedures could be specified in the instrument of delegation, the general framework should be established by the draft Regulation. We held document (a) under scrutiny, pending deposit of a revised version.

33038.33097 The Commission has revised its proposal in the light of opinions from the Court of Auditors and from the European Parliament.

The revised proposal

33038.33098 The principal changes in the revised proposal (document (b)) are the following. Article 9(7) now requires the Steering Committee[12] to evaluate the agency's efficiency and effectiveness on an annual basis. The Steering Committee is also to adopt and apply measures to combat fraud and irregularities (Article 9(8)). The provisions on discharge of the agency's budget (Article 14) have been slightly amended, so that the European Parliament is to grant a discharge of the agency's budget within the same timetable as that applying to the general budget of the European Communities. There is no provision (as there is with existing agencies) for the discharge to be given by the European Parliament on the basis of a recommendation from the Council.

33038.33099 Article 19(1) now provides that implementation of Community programmes entrusted to agencies shall be supervised by the Commission. Such supervision is to be exercised in accordance with the procedures set out in the instrument of delegation drawn up by the Commission under Article 6(3).

33038.33100 Article 21 no longer refers to the legality of acts of agencies being subject to review under Article 230 EC[13]. Instead, provision is made for a Member State or a person who is directly and individually concerned to refer an act of an agency to the Commission. The Commission is to take a decision on the act within one month and a failure to produce a decision within that time "shall mean that the action has been implicitly rejected" — Article 21(3). Article 21(4) provides that the Commission may examine any act of an executive agency within one month of its adoption and "may decide, having heard the reasons of the agency" to annul it.

The Government's view

33038.33101 In her Explanatory Memorandum of 30 April the Economic Secretary to the Treasury (Ruth Kelly) explains that the revised text has been produced by the Commission which has taken into account the opinions of the European Parliament and the European Court of Auditors, but that the Council has not yet considered the proposal in detail.

33038.33102 The Minister explains the amendments which have been made, and we draw attention to her comments on Articles 19 and 21. On Article 19, the Minister comments that the European Court of Auditors was particularly concerned that the proposal should lay down general rules to establish a control framework, but that the amendment may not be considered to go far enough. On Article 21, the Minister comments that the Commission has given no explanation for the expansion of Article 21, which no longer refers to the possibility of challenges to the Court of Justice under Article 230 EC and adds that:

"this revision is logical as the Commission remains legally liable for the acts carried out by an agency on its behalf. Article 230 therefore applies automatically and there is therefore no need to refer to it in this regulation."[14]

33038.33103 More generally, the Minister comments on the policy implications of the proposal as follows:

"The Government continues to believe that the purpose of the Commission's externalisation policy should be to take advantage of specialist expertise which can be provided more effectively and flexibly externally, especially for tasks or other programmes of limited duration. A decision to set up an Agency should also consider, fundamentally, whether the task in question can be carried out more efficiently by an Agency, rather than by the Commission or by some other means, such as outsourcing. But it is important that effective controls are in place to ensure adequate monitoring, supervision and evaluation of effectiveness, and also that the financial rules for managing an agency are in line with the changes which will come into force when the revised general Financial Regulation is adopted. The Government will make these points when this revised proposal is discussed."


33038.33104 While the revised proposal appears to us to be an improvement in some respects, we remain concerned that the key provisions on the scope of the power of delegation and the continuing responsibility of the Commission are still so vaguely and ambiguously expressed.

33038.33105 With respect to the latter point, the new provision in Article 21 appears to us to compound the problem. As explained by the Commission, it appears to rule out any direct challenge to an agency under Article 230 EC, instead providing only for an appeal against a Commission decision in respect of a complaint brought against an agency.

33038.33106 We also note that Article 20 provides for the contractual and non-contractual liability of the agency as a separate legal person and there appears to be no provision whereby the Commission can be made liable for the acts of its agents. We are concerned that this could prove to be a shield whereby the Commission could seek to avoid liabilities for activities carried out on its behalf.

33038.33107 We ask if the Minister shares these concerns and if she intends to seek greater clarity on these points. We shall hold the current version of the proposal under scrutiny, but shall clear document (a) on the grounds that it has been superseded.









European network for the protection of public figures — text resulting from the procedures of the Working Party on Police Co-operation (5 and 6 March 2002).

European network for the protection of public figures — text proposed by the Presidency following the procedures of the Article 36 Committee (11/12 April 2002).


Legal base:

Articles 29, 30(1) and 34(2)(c) EU; consultation; unanimity


Document originated:

(b) 23 April 2002

Deposited in Parliament:

(a) 9 April 2002

(b) 3 May 2002


Home Office

Basis of consideration:

EM of 20 May 2002

Previous Committee Report:

(a) HC 152-xxvii (2001-02), paragraph 5 (1 May 2002)

To be discussed in Council:

13/14 June 2002

Committee's assessment:

Politically important

Committee's decision:

(a) Cleared

(b) Not cleared; further information requested




33038.33108 This is a Presidency proposal for a Council Decision to address the threat of assassination and attacks on dignitaries visiting Member States by setting up a network of contact points within national police departments, or other bodies responsible for the protection of public figures. We have considered versions of the proposal three times already, largely because the drafting of both the document and the Explanatory Memoranda have prompted questions. When we considered document (a) in May, we decided to keep it under scrutiny until we had further clarification from the Parliamentary Under-Secretary of State at the Home Office (Mr Bob Ainsworth ) and until we received the amended text which we understood to be forthcoming.

33038.33109 The Minister has now deposited the amended text (document (b)), together with an Explanatory Memorandum, which addresses our queries on document (a) as well as commenting on the new document.

Document (b)

33038.33110 The latest version of the text gives the network significantly less power than earlier drafts. The former Article 4, which made the network "competent to advise" on a number of issues, has been dropped. The emphasis is now on information-exchange, development of best practice and promotion of secondments.

The Government's view

33038.33111 The Minister begins by addressing one of our requests for clarification. He confirms that the network will have no right to initiate legislation since this power is conferred only on the Commission and the Member States by virtue of the Treaties. He continues:

"Any proposal made by the Network could therefore only be tabled as a formal initiative by the Commission or a Member State. However, in accordance with Article 3 of the Council Decision, the activities of the Network will be discussed by the Council on the basis of an annual report to be submitted by the Network. The Council will also evaluate its activities every three years. This will ensure that the Council maintains oversight of the Network's work."

33038.33112 We were concerned to learn that the definition of the kinds of information to be exchanged had become broader. The Minister tells us:

"The Government will seek to ensure that any proposals for information sharing of an operational or technical nature will not undermine national security or the safety of protected public figures."

33038.33113 The Minister then lists a number of points in document (b) on which the Government will be seeking further clarification:

"—  The Government will not wish to have the names of national contact points published in an unclassified document such as the Official Journal, as such a move could have security implications for the people concerned. We will therefore seek an amendment to [Article 1 (2)].

The Government will seek to ensure in promoting the exchange of information between departments participating in the Network, any information should be subject to, or in accordance with, national legislation and that the safety of protected individuals will not be compromised.

The Government will seek assurances that any exchange of information adheres to the Council of Europe Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data (28 January 1981)."

33038.33114 Finally, the Minister reiterates the Government's support for the "aim underpinning the proposals", and tells us that the draft Decision is scheduled for adoption at the Justice and Home Affairs Council on 13-14 June.


33038.33115 We thank the Minister for confirming that the proposed network could not initiate legislation, and note that its powers have now been significantly limited.

33038.33116 We also note that, although the Minister repeats his support for the aim of the draft Decision, he is still seeking amendments to its contents, especially in relation to the exchange of information. We share his concerns and consider that proper safeguards should be written in to the text.

33038.33117 We clear document (a), but will hold document (b) under scrutiny until we learn whether the Government has secured the assurances it is seeking.


OJ No. L 156, 28.6.1969. Back

10  OJ No. L 169, 29.6.1991. Back

11  "The Commission shall implement the budget...on its own responsibility and within the limits of the appropriations, having regard to the principles of sound financial management". Back

12  The Steering Committee consists of five persons appointed by the Commission to manage the agency -Article 8(1). Back

13  "The Court of Justice shall review the legality of acts adopted jointly by the European Parliament and the Council, of acts of the Council, of the Commission and of the ECB, other than recommendations and opinions, and of acts of the European Parliament intended to produce legal effects vis-à-vis third parties."  Back

14  However, the Commission's explanatory memorandum states that 'the Commission cannot accept the suggestion that the Commission be declared liable in law for the acts of the agencies, because the agencies have their own legal personality'. The memorandum also states that 'actions against acts of an agency may be brought to the Commission, whose decisions may subsequently be appealed to the Court of Justice'.  Back

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