The European Commission published the draft Guidelines on State Aid to railway undertakings. This draft is open for consultation by Member States and stakeholders. The Commission aims to adopt these Community Guidelines during the first semester of 2008.

These draft Community Guidelines aim at providing guidance on the compatibility of the EC Treaty State aid rules regarding railway undertakings. Rail transport is a safe and non-polluting transport mode, which confers many advantages to it. The sector which is in the process of liberalisation is confronted with a strong competition of different transport modes and thus raises important challenges regarding Community law of State aid. These draft Community Guidelines acknowledge the railway sector's specificities and aim at bringing along the liberalisation process of the railway sector and contributing to reinforce its competitiveness.

The text proposes, in particular, to grant regional aid for the purchase and renewal of the rolling stock for passenger transport, by removing a prohibition included in the guidelines regarding regional aid for the period 2007-2013. Indeed, such aid could favour the modernisation of the railway transport, in particular in the new Member States and contribute to the regional development as well as to the objectives of competitiveness, interoperability and environmental protection.

In addition, the Commission proposes to adapt the applicable rules concerning the restructuring of firms in difficulty to the situation where a freight division of a railway undertaking faces severe economic difficulties and cannot be restructured with the help of the railway undertaking as a whole. These draft Community Guidelines propose to derogate to certain aspects of the horizontal rules in order to take into account this specific situation but also the situation of freight railway undertakings which recently have been hived off within larger railway groups. In this respect, the text aims to adapt the decision-making practise of the Commission concerning the railway sector to the adoption of the 2004 general restructuring guidelines and to the fact that several railway undertakings have recently hived off their freight divisions.

Moreover, the Commission wishes to frame the possibilities for the State to write off debts of the railway undertakings. Such possibility derives from Community legislation, but cannot derogate to the application of State Aid rules provided by the Treaty. The proposed text includes certain conditions under which debt write off can be considered compatible with the common market.

These draft Community Guidelines also clarify the general legal framework applicable to railway transport. Thus, general criteria applicable to the public funding of infrastructure are recalled. The proposed text specifies the conditions for the application of Article 73 of the treaty regarding aid for the co-ordination of transport.

In particular, the draft framework proposes, on the basis of the existing decision-making practise, a methodology to assess the compatibility of aid favouring the use of railway infrastructure, the reduction of external costs, interoperability, security or research in the railway sector. In addition, the text codifies the Commission's practise concerning possible elements of aid in public service contract, for the transitory period until the entry into force of the PSO Regulation, adopted recently.

Finally, these Community Guidelines address the issue of the guarantee which railway undertaking still benefit in several Member States. In general, unlimited State guarantees constitute State aid and are not compatible with the Treaty. These draft guidelines that is open for consultation put forward an agenda in order to abolish unlimited State guarantees in the railway sector by January, 1st 2010.

On the basis of the text published today, the Commission now undertakes consultations with Member States and stakeholders, who will be able to provide the Commission with their comments until 25 January 2008.

In general, these Community Guidelines should improve the transparency regarding public funding and legal certainty in railway undertakings. These guidelines provide with the necessary adaptations taking in account the specificity of the rail sector while ensuring coherence with the general applicable State aid rules.