Regulating Europe's single railway market: Integrating performance and governance

Regulation of the European railway sector remains a central issue in the framework of the current liberalization process. From a regulatory perspective, the patchwork of national legislations and the delays in transposing and implementing the European Directives bears witness to the difficulty of creating a single European railway market. The paper argues that, as a result of failing to consider the importance of the technical nature of railways, the notions of coordination and regulation are too often looked at from a single perspective – mostly economic performance. Policy-makers should ask the question “what to regulate for”? Indeed, the type, the scope, the timing and the required institutional setting of regulation will differ largely depending on the kind of performances one desires to achieve – these can be, among others, financial, social, technical or operational. The answer to this question not only has important implications on the regulation of national rail sectors but also on achieving the creation of a single European railway market. The paper is divided into five sections. The first section briefly traces back the history of European rail and shows that the European railway network is quite specific in international comparison. The second section describes the salient points of the European railway liberalization program. It highlights the heterogeneous nature of the sector. The next section identifies a number of challenges which arise from the confrontation of Europe's historical railways and the current policy objective and liberalization process. It uses as an example of governance issue the development and implementation of a new pan- European signalling technology – the European Rail Traffic Management System (ERTMS). The fourth section describes regulatory objectives (including regulating for economic, operational, social or technical performance). The last section asks whether the current regulatory framework answers the challenges posed by the fragmentation resulting from the historical and political evolution of the sector and how the objective of a European single railway market can be achieved in the current institutional setting. It proposed to develop a regulatory governance specific to the European railway sector based on a broad notion of performance.