Back in June we wrote about a consultation on amending the Railways (Access, Management and Licensing of Railway Undertakings) Regulations 2016 (2016 Regulations) to take account of a 2016 EU Directive which is part of the Market Pillar of the Fourth Railway Package designed to open up the railways to more competition.


Our article Updating Rail Markets Regulations has the detail but in essence the UK had to implement the 2016 Directive by December 2018 otherwise it would be open to infraction proceedings for not enacting it in time (remember we haven't left the EU yet).

The government has decided to implement the 2016 Directive as set out in the consultation, by amending the 2016 Regulations rather than adopting the usual "copy out" approach, where the wording of the Directive is replicated in UK law.  This is because the 2016 Regulations did not follow the wording of the original Directive that they implemented, but the industry is familiar with the wording in the 2016 Regulations so the government wants to stick with it.

What's interesting about this is that the government have adopted a "sunset" approach which means that the new Regulations, the Railways (Access, Management and Licensing of Railway Undertakings) (Amendment) Regulations 2019, will only apply until 31 December 2020.  This allows the UK to avoid infraction proceedings by enacting the Directive into UK law (more or less) on time, but then gives it the flexibility to change the way the rail market works in future once we are no longer part of the EU.  This is to take account of the Williams rail review (see our article, Railways Under Review) which is carrying out a "root and branch" review of the rail industry; and means the UK can change its law according to whatever the review recommends without being bound by EU legislation.

But in the meantime the government still has to deal with Brexit.  The consultation also looked at how the UK's rail legislation would need amending to take account of a "no deal" Brexit.  The new 2019 Regulations will themselves need amending by way of another statutory instrument to remove references to EU institutions; and two more statutory instruments will be needed: the Railways (Licensing of Railway Undertakings) (Amendment) (EU Exit) Regulations 2019 (which are currently in draft) and EU Regulation 1370/2007 (Public Service Obligations in Transport) (Amendments) (EU Exit) Regulations 2019. 

Finally, a word about the new open access test, ensuring the "economic equilibrium" of a franchise is not compromised.  At the time of the consultation, the details of this test were still being negotiated by the EU.  According to the consultation response, the UK government "managed to secure changes that we felt brought the proposed test more into line with practice on our rail network" and "negotiate the Commission to a position that our stakeholders are supportive of and broadly reflects current practice".  The implementing regulation came into force on 1 January 2019 and the ORR have been consulting on draft guidance on the new Economic Equilibrium Test, with the final guidance expected shortly.

Key contacts

Paul Hirst

Paul Hirst

Partner, Head of Transport
United Kingdom

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Bruce Kilpatrick

Bruce Kilpatrick

Partner, Head of Competition
London

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Al Mangan

Al Mangan

Managing Associate, Competition & Regulation
London

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Anna Sweeney

Anna Sweeney

Senior Knowledge Lawyer, Projects & Infrastructure
Leeds

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