House of Lords - Tunnel vision? Completing the European rail market

Tunnel vision? Completing the European rail market - European Union Committee Contents

CHAPTER 3: the governance of the channel tunnel

The Channel Tunnel in the EU regulatory context

41. The Channel Tunnel, as a major cross-border transport corridor between two Member States, is subject not only to English and French law but also to bi-national regulations adopted by the IGC, and EU law.[67] As discussed in the previous chapter, under the terms of the Railway Packages Member States must ensure adequate separation between infrastructure managers and railway undertakings, as well as establishing independent regulators. These requirements apply to the governance of the Channel Tunnel, as do the various Directives concerning safety, interoperability and infrastructure access. The governance arrangements for the Channel Tunnel, as stipulated in the Treaty of Canterbury, are delineated in Figure 1 and also summarised in Box 4.

42. Witnesses disagreed as to whether the Channel Tunnel constituted a bottleneck in the future development of the European rail market.[68] As the Channel Tunnel was conceived before the development of EU legislation and regulation, we sought to examine whether its governance arrangements adhered to the EU framework, or whether they were instead a barrier to growth of the European rail market.

FIGURE 1

Channel Tunnel Governance Structure

BOX 4

Channel Tunnel Governance Arrangements

Intergovernmental Commission (IGC)

The Intergovernmental Commission (IGC) was established under Article 10 of the Treaty to manage all aspects of the operation of the Channel Tunnel on behalf of the UK and French governments. This includes drawing up and enforcing regulations applicable to the Channel Tunnel, including transposing any relevant EU measures, and liaising with the two governments and Concessionaires as necessary.

The IGC also has a role in economic regulation, as the designated regulatory body responsible under Article 30 of Directive 2001/14/EC for allocating infrastructure capacity and charging for its use. In this role it is assisted by a Joint Economic Committee composed of experts from both countries. As each government retains sovereign competence for their territorial security, a Joint Security Committee brings together relevant officials from each country to advise the IGC on such matters.

Channel Tunnel Safety Authority (CTSA)

While the IGC is also designated as the requisite safety authority under Article 16 of Directive 2004/49/EC, it is the Channel Tunnel Safety Authority (CTSA), as established under Article 11 of the Treaty, which is responsible for all safety matters. This includes making safety proposals to the IGC, drawing up, monitoring and enforcing safety regulations, and investigating and reporting on any safety incidents.

UK and French delegations

The UK and French governments each appoint half the members of the IGC. It must include at least two representatives of the CTSA, which is also composed equally of British and French government representatives. Three members of the UK delegation to the IGC (the respective heads of the delegations to the IGC and CTSA and an economic delegate) are nominated by the Secretary of State for Transport on the advice of the ORR, which acts as the secretariat to the UK's IGC and CTSA delegations but has no decision-making role in either body. The head of the UK delegation to the CTSA is automatically a member of the UK delegation to the IGC. The chairmanship of the IGC and CTSA alternates annually between the head of each national delegation but neither can chair both bodies at the same time.

The French arrangements are different, with their delegations to both bodies being drawn directly from their ministry of transport. There is no formal role for the newly established independent regulator, the Autorité des activités ferroviaires (ARAF) or the safety authority, the Établissement public de sécurité ferroviaire (EPSF). Decision-making by the two national delegations must be unanimous, otherwise inter-governmental consultations must begin under Article 18.

Revision of the Treaty of Canterbury

43. Some of our witnesses were cautious about revising the Treaty. The ORR warned that, "if you put all your effort into changing the structure rather than making it work, you lose some time and you have to be quite careful on that".[69] Eurostar also urged caution, stating that the existence of a unified regulator had proved effective for their purposes.[70] The Government and Eurotunnel went further and argued that the governance structure of the Channel Tunnel had been sufficiently flexible to accommodate subsequent British, French and EU developments over time.[71] The Minister stressed that there would have to be a "very compelling case for saying that all the hassle, all the resources, all the energy needed to unpick the Treaty of Canterbury is really worth doing".[72] Eurotunnel suggested that any governance problems emanated from the approach of the IGC and national regulators rather than defective provisions in the Treaty.[73]

44. Others suggested that governance structures were out of step with EU requirements and should be reformed, necessitating revision of the Treaty. Professor Vickerman was clear that the current structure was "no longer fit for purpose" and considered the IGC to be a redundant layer of bureaucracy in light of the subsequent EU measures adopted since the signing of the Treaty. He stated that the managing organisations for the Channel Tunnel should be "nested within the structure of the new arrangements rather than entirely separate from them".[74] DB Schenker Rail and the Rail Freight Group also argued that the current arrangements were inadequate. The latter, however, conceded that renegotiating the Treaty would be difficult. It advocated a gradual approach, with the economic and safety regulation of the Channel Tunnel being transferred to the UK and French national regulators in the short term, with the IGC being "abolished completely" in the long term.[75] Deutsche Bahn agreed, noting that the existence of the IGC had "not proved to be particularly helpful". It also suggested the nomination of an independent figure to mediate between the two sides should the need arise.[76]

45. While the terms of the Treaty of Canterbury may have been adequate at the time the Channel Tunnel was first conceived, the Treaty has been overtaken by events including the growth of EU legislation and the liberalisation of the market. The 25th anniversary of the Treaty provides an opportunity for the UK and French governments to review the terms of the Treaty, with reference to the EU legislative and regulatory framework.

Achieving better bi-national regulation

DECISION MAKING

46. Network Rail told us that the IGC operated too slowly[77]. Deutsche Bahn agreed and argued that this was caused by the need to coordinate its decisions with two Member States and their national regulators.[78] While Eurotunnel told us that they had a positive relationship with the IGC and CTSA, with whom they meet every two months, they also stated that the IGC's processes in authorising new services could be quicker.[79]

RECENT IMPROVEMENTS

47. Brian Kogan, the UK economic delegate to the IGC, recognised that there was room for improvement in the way that it functioned and stated that making the existing regulatory framework work better was its priority. It noted some areas of progress: the IGC now published its decision-making procedures, including complaints and appeals about their decisions, as required under the First Railway Package.[80] He also highlighted the IGC's work with Eurotunnel to prompt the development of a performance regime, another legal requirement[81], as well as its efforts to incentivise improved performance from Eurotunnel and other operators.[82] High Speed 1 praised these recent improvements[83] but called for greater transparency regarding the Channel Tunnel's regulatory and contractual arrangements, as well as their alignment with EU rail measures.[84]

THE FRENCH REGULATORY APPROACH

48. Brian Kogan stressed that the bi-national nature of the IGC sometimes generated problems when each country approached regulatory issues differently, but argued that some degree of bi-national oversight would always be necessary.[85] He did not, though, consider that the French regulatory approach undermined the effective management of the Channel Tunnel and pointed to the recent establishment of an independent regulator as a positive development.[86] Roy Griffins, head of the UK Delegation to the IGC, contrasted the UK's pragmatic approach to the regulatory framework with France's less flexible approach. In light of this, he concluded that any changes would have to be "evolutionary rather than revolutionary".[87]

49. In the short-term, the UK delegation to the Intergovernmental Commission should seek to ensure that decision-making methods are quicker and more transparent and that it complies with the Railway Packages in full. The delegation should also seek to ensure fair and open access through the Channel Tunnel.

50. In the long-term, we support direct governance of the Channel Tunnel by the UK and French national regulators. This should be considered as part of any review of the Treaty of Canterbury. Such arrangements would be less cumbersome, would minimise delays in the provision of new services, and would be in line with the management of other cross-border rail infrastructure within the EU.

Conflict of interests

51. Brian Kogan flagged up the potential conflict of interest between Eurotunnel and the operation of its freight subsidiary, Europorte, because of its responsibility for granting access and allocating capacity to other freight operators[88], but stated that progress was being made in this area by the IGC.[89] Eurotunnel assured us that its corporate structure ensures that the undertakings are kept completely separate in terms of legal and management structures, decision-making and accounting. It emphasised that, as Europorte only represented 10% of rail freight traffic through the Channel Tunnel, discriminatory practices would be counter-productive. Furthermore, it noted that operators could appeal to the IGC if they felt unfairly treated.[90]

52. The Commission are not convinced by this explanation, as reflected in the terms of the recent infringement proceedings. The UK and French governments' direct involvement in the IGC as the economic regulator is also under scrutiny in this respect, with another conflict alleged to arise due to their majority interest in Eurostar as a railway undertaking.[91] We do not seek to suggest that either arrangement stands in the way of authorisation being granted to competitor freight and passenger services in the Channel Tunnel, but there is an arguable perception of unfairness. We understand that the UK Government and LCR are open, in principle, to selling their share of Eurostar, which would presumably resolve this particular conflict of interest.

53. The alleged conflicts of interest concerning the UK and French governments and Eurotunnel raise sensitive commercial and legal matters. These fall within the scope of the infringement proceedings, which we will monitor with interest.

Safety Issues

54. There have been three fires in the Channel Tunnel—in 1996, 2006 and 2008—all of which involved heavy goods vehicles on board Eurotunnel shuttles. Since the last fire on 11 September 2008, Eurotunnel has invested in a "new and revolutionary fire-fighting system", to suppress fires on shuttles. It was confident that this should significantly reduce the risk of infrastructure damage in future, facilitate passenger evacuations and allow better access for the emergency services.[92]

55. In the past, inclement weather has resulted in trains becoming stuck in the Channel Tunnel, including an incident in December 2009 which resulted in some passengers being stranded in the Channel Tunnel overnight in unpleasant conditions. An independent review subsequently recommended that Eurostar improve its communications and emergency procedures to avoid future incidents of this nature. These incidents serve to emphasise the importance of maintaining high safety standards in the Channel Tunnel.

COMPETING SAFETY STANDARDS

56. The safety standards applied to the Channel Tunnel by the IGC are distinct from those outlined by the ERA, as contained in the Safety in Railway Tunnels Technical Specifications for Interoperability (TSI).[93] Box 5 contains more information on TSIs. Some witnesses considered that these differing standards could present a barrier to greater competition[94]; others saw no reason why the existing safety rules should not apply to the Channel Tunnel in full.[95] The Rail Freight Group was especially critical of this arrangement, and endorsed a letter from the ERA to the IGC which challenged this situation, disagreeing with the IGC's position that the Channel Tunnel was a 'special case'.[96]

BOX 5

Technical Specifications for Interoperability (TSI)

TSIs are the standards set for specific items of rail infrastructure or equipment in order to ensure interoperability across the European rail network. TSI-compliant equipment, such as trains, are automatically authorised to run on infrastructure that applies the relevant TSI. They are made, on request of the Commission, by the ERA after consultation with national regulators and should normally prevail over national rules that apply to Trans-European rail networks such as the Channel Tunnel.

57. Many witnesses, in contrast, argued that the Channel Tunnel was indeed unique and therefore required specific safety standards. For Alstom, the extensive undersea portion made it unique; a point with which the Minister agreed.[97] Eurostar agreed that specific standards for the Channel Tunnel may be necessary and pointed out that the Safety in Railway Tunnels TSI permitted specific safety rules for tunnels more than 20 kilometres in length, which included the Channel Tunnel at more than 50 kilometres.[98] Deutsche Bahn stated that while some of the Alpine tunnels were longer than the Channel Tunnel they were nevertheless still TSI-compliant.[99] The ORR did not consider the Alpine tunnels and the Channel Tunnel to be necessarily comparable.[100]

58. Some contributors disagreed strongly with the justification. The Rail Freight Group considered the special case pleaded for the Channel Tunnel to be disingenuous.[101] Professor Vickerman stressed that length was the key consideration; for him, "being several hundred metres underneath the top of a mountain and being several hundred metres under the bed of the sea does not make a huge difference".[102]

59. Despite the operation of distinct rules, there is regular cooperation between Eurotunnel and other infrastructure managers, which is welcome. This was particularly the case regarding the construction of the Lyon-Turin high-speed rail line, which will include a 57km base tunnel under the Alps, and we heard that some Eurotunnel staff had recently been seconded to the project's contractors.[103]

IGC SAFETY REVIEW AND THE ERA'S TECHNICAL OPINION

60. During 2009, the IGC consulted on proposed changes to the Channel Tunnel-specific passenger train safety rules.[104] After these were notified to the Commission in December 2010, the IGC requested a technical opinion from the ERA regarding their compliance with the Safety in Rail Tunnels TSI and other EU measures. The ERA stated, in their 21 March 2011 opinion, that there was no justification for the IGC to exclude trains from the Channel Tunnel which conformed to EU safety and interoperability standards—including the Safety in Rail Tunnels TSI—and they made a number of suggested changes to the regulations on this basis.[105] Most of these recommendations have not yet been put in place, except for that permitting the use of trains using distributed power, which was implemented in June 2011.[106] This would include Deutsche Bahn's ICE trains, which it intends to run through the Channel Tunnel from 2013. However, though the ERA stated that Deutsche Bahn's proposed use of shorter rolling stock should not be prohibited due to prescriptive IGC rules, this matter remains outstanding.

61. Caroline Wake, head of the UK delegation to the CTSA, explained that both delegations to the CTSA were committed to working with the ERA to address some of their concerns.[107] However, the ERA said that it was still waiting for any economic and safety justifications for why distinct rules should apply to the Channel Tunnel, so that these could be reflected in any changes to the Safety in Railway Tunnels TSI. The ERA suggested that, as the IGC was small in comparison to national safety authorities, it had found it more difficult to engage in their working parties.[108]

62. EU-wide Technical Standards for Interoperability (TSIs) set out comprehensive safety standards. We have not been convinced that the Channel Tunnel is a unique safety case requiring its own safety standards, and so the TSIs should be applied in full. The Intergovernmental Commission should respond fully to the matters raised in the European Railway Agency's technical opinion as a matter of urgency. Unduly burdensome safety requirements must not deter new entrants to the market.

63. To achieve a fully liberalised and interoperable rail network, common standards must be applied consistently, with minimum derogations only when absolutely essential. The Intergovernmental Commission and Channel Tunnel Safety Authority should work with other long tunnel managers to exchange best practice and to ensure consistency across the whole network.

The authorisation of new international passenger services through the Channel Tunnel

64. There are reportedly high levels of interest from operators, including Deutsche Bahn, to take advantage of liberalisation and provide new services through the Channel Tunnel.[109] High Speed 1 cited economic factors and existing entry conditions as hindrances to the introduction of new services[110], and the ORR warned that "these nascent developments will be smothered" if these barriers are not removed.[111]

THE CURRENT STATE OF THE MARKET

65. There are few examples of competition on international rail routes.[112] Nevertheless, Eurostar is enthusiastic about the opportunities provided by market liberalisation and increased competition. It intends to provide more services to other Member States as well as increasing its market share of other routes.[113] Deutsche Bahn also wants to expand its long-distance network, in light of research suggesting that there was substantial untapped demand on the routes it planned to develop between Amsterdam and Frankfurt to London.[114]

66. Eurotunnel was hopeful of further developments; as a private operator, it stated expansion was "very much in our interest", which it was "very, very keen to see happen as soon as possible and in as continuous a manner as possible". It also suggested that it had been ready and willing to accept international passenger services since 2006, when it had made its contractual, safety and tariff conditions public.[115] However, Roy Griffins gave a different perspective, stating that the IGC was applying pressure on Eurotunnel to become more transparent in terms of economic regulation, and to provide more information to operators. He also considered that Eurotunnel had been slow to take liberalisation seriously until pressed to do so by the IGC, despite the "new dawn" for international passenger liberalisation which began in January 2010.[116]

THE AUTHORISATION PROCESS

67. Before new international passenger services can run through the Channel Tunnel under the open access rules, potential operators must enter negotiations with the relevant regulatory bodies and infrastructure managers in order to obtain the requisite licenses, safety certificates and authorisations. In addition, they must also satisfy a number of security requirements and demonstrate how they will comply with UK immigration and customs law. This is a complicated process and the Government have produced a guide to assist potential new operators in this regard.[117] Despite this assistance, some of our witnesses considered that the authorisation process was too long-winded.[118]

68. As we have already heard, Deutsche Bahn is engaged in this authorisation process to run its ICE trains through the Channel Tunnel. It said it had "good working relations" with the IGC and CTSA and was optimistic that the authorisation would be in place so that it could commence the new service by the end of 2013.[119]

69. The Minister was very supportive of new international services, and was not aware of any significant problems that might delay the schedule to which Deutsche Bahn was working.[120] Eurotunnel told us that it had played a "central role" in this process since January 2010, and had been working closely with Deutsche Bahn on the company's bid. This included work with Deutsche Bahn on its application to the IGC for a safety certificate on 11 July 2010 and assistance with test runs through the Channel Tunnel, including a full evacuation.[121]

70. We were disappointed to hear from Eurotunnel that the anticipated schedule might not be adhered to. Eurotunnel explained that Deutsche Bahn had not yet received its safety certificate from the IGC and that there was no "certainty" as to when it would be received. It explained that if the safety requirements for the Channel Tunnel were based on the Safety in Rail Tunnels TSI, this part of the process would have been significantly more streamlined. It thought that this protracted safety approval process may discourage other, smaller, operators from coming forward with applications for authorisation, as only major operators such as Deutsche Bahn had "the time, patience and courage" to persist with such an undertaking.[122]

71. We welcome the interest from new providers of international rail services, including Deutsche Bahn's proposed services from Amsterdam and Frankfurt to London. Authorisation should be granted without delay. All parties should work together to ensure that the prospective new international passenger services are introduced on schedule.

67 Q 334 Back

68 Professor Vickerman, RFG, DB Schenker Rail (UK) Ltd and Deutsche Bahn thought it did, while Alstom, Eurotunnel, Eurostar (Q 53) and the Government did not. Back

69 Q 185 Back

70 Q 75 and Eurostar Back

71 Government, Q 347 and Eurotunnel Back

72 Q 283 Back

73 Q 348 Back

74 Q 32 Back

75 DB Schenker and Q 309 Back

76 Deutsche Bahn Back

77 Network Rail Back

78 Deutsche Bahn Back