House of Commons Transport Committee...EU 09 Liverpool John Lennon Airport Ev 118 EU 10 Railfuture Ev 120 EU 11 European and External Relations Committee of the Scottish Parliament

HC 467 Incorporating HC 581-i-iv, Session 2003-04

Published on 1 April 2005 by authority of the House of Commons London: The Stationery Office Limited

House of Commons

Transport Committee

European Community Competence and Transport

Ninth Report of Session 2004–05

Report, together with formal minutes, oral and written evidence

Ordered by The House of Commons to be printed 23 March 2005

£20.00

The Transport Committee

The Transport Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Transport and its associated public bodies.

Current membership

Mrs Gwyneth Dunwoody MP (Labour, Crewe) (Chairman) Mr Jeffrey M. Donaldson MP (Democratic Unionist, Lagan Valley) Mr Brian H. Donohoe MP (Labour, Cunninghame South) Clive Efford MP (Labour, Eltham) Mrs Louise Ellman MP (Labour/Co-operative, Liverpool Riverside) Ian Lucas MP (Labour, Wrexham) Miss Anne McIntosh MP (Conservative, Vale of York) Mr Paul Marsden MP (Liberal Democrat, Shrewsbury and Atcham) Mr John Randall MP (Conservative, Uxbridge) Mr George Stevenson MP (Labour, Stoke-on-Trent South) Mr Graham Stringer MP (Labour, Manchester Blackley) The following Member was also a member of the Committee during the inquiry: Mr Gregory Campbell MP (Democratic Unionist, East Londonderry)

Powers

The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk.

Publications

The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at www.parliament.uk/transcom. A list of Reports of the Committee in the present Parliament is at the back of this volume.

Committee staff

The current staff of the Committee are Eve Samson (Clerk), David Bates (Second Clerk), Clare Maltby (Committee Specialist), Philippa Carling (Inquiry Manager), Miss Frances Allingham (Committee Assistant), Miss Michelle Edney (Secretary), Henry Ayi-Hyde (Senior Office Clerk) and James O’Sullivan (Sandwich Student). All correspondence should be addressed to the Clerk of the Transport Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6263; the Committee’s email address is [email protected]

1

Contents

Report Page

Report 3

Formal minutes 5

Witnesses 6

List of written evidence 7

Reports from the Transport Committee since 2002 8

3

Report

1. We announced our inquiry into the European Union’s responsibility for transport policy—European Community Competence and Transport—in November 2003. The rationale for increased European involvement in transport policy was not always clear to us. We wanted to explore the extent to which the European Community's responsibilities were appropriate, and their likely extent in the future. We were also interested in the suitability of European transport competence to the UK situation, as well as subsidiarity and proportionality. We sought to refer to particular policies and legislation in our discussions. In particular, we examined the still unconcluded air service agreement negotiations with the US, the European Commission's proposals on road user charging and the proposals for legislation on pollution from ships. During the course of our inquiry, we also touched on many other areas.

2. The Committee received over 20 memoranda in response to the announcement of the inquiry. Over four sessions, we took oral evidence from a wide range of representatives of the aviation, marine, road and rail sectors, as well as from the Secretary of State for Transport. We are very grateful to all those who submitted evidence, whether oral or written. We are also grateful to our Specialist Advisers, Professor James McConville and Mr Laurie Price.

3. In a memorandum to the Modernisation Committee, the Leader of the House stated that the Government wanted to “enhance the way in which Parliament engages with European matters”.1 He suggested that the House of Commons might hold Commissioners to account, and maintained that the Government was “committed (…) to greater accountability of EU decision making to the national parliaments of member states”.2 Following the appointment of the new European Commission, the Committee secured an appointment to meet Vice–President Barrot, the Transport Commissioner. Unfortunately we then had to cancel our planned visit to Brussels because consideration of the remaining stages of the Prevention of Terrorism Bill was subsequently scheduled for Monday 28 February 2005.

4. It would be unwise for us to publish a definitive report about the range of responsibilities of the European Community without discussing the matter with the European Commission. We do not expect to have the opportunity to reschedule our meeting with the Vice–President during this Parliament. However, we do not want the evidence we have taken to be forgotten. We have therefore decided to publish the written and oral evidence we received and highlight certain matters which our successor Committee might wish to pursue further.

5. Our inquiry has led us to explore many issues, but we believe the following issues in particular are worth further consideration:

1 Select Committee on Modernisation of the House of Commons, Scrutiny of European Matters in the House of

Commons, Government Memorandum from the Leader of the House of Commons, HC 508 [2003–04], paragraph 1

2 ibid., Conclusion

4

whether recently–acquired exclusive external Community competence for negotiating air service agreements is exercised in the UK’s interest;

whether the European Commission’s assessment of the impact of its legislative proposals in the transport sector, and the Council and European Parliament’s amended texts, is adequate;

whether the European Commission’s proposals for legislation in the rail sector are suited to the geographic position of United Kingdom or the circumstances of the British rail industry; and

whether the European legislation on transport which is made is strictly necessary, or whether it is proposed and agreed simply in order to increase the competences of the European institutions.

5

Formal minutes

The following Declarations of Interest were made:

Mrs Gwyneth Dunwoody, Member of the Associated Society of Locomotive Engineers and Firemen, and former Member of the European Parliament

Mr Brian H. Donohoe, Clive Efford and Mrs Louise Ellman, Members of the Transport and General Workers’ Union

Ian Lucas, Member of Amicus

Miss Anne McIntosh, interests in British Airways, BAA plc, BAE Systems, RAC, Railtrack, Eurotunnel, First Group, former Member of the European Parliament, and Industry and Trust placement with Network Rail

Mr Graham Stringer, Member of Amicus and Director of Centre for Local Economic Strategies

Wednesday 23 March 2005

Members present: Mrs Gwyneth Dunwoody, in the Chair

Mr Jeffrey M. Donaldson Mr Brian H. Donohoe Clive Efford Mrs Louise Ellman

Ian Lucas Miss Anne McIntosh Mr Graham Stringer

The Committee deliberated. Draft Report (European Community Competence and Transport), proposed by the

Chairman, brought up and read. Ordered, That the draft Report be read a second time, paragraph by paragraph. Paragraphs 1 to 5 read and agreed to. Resolved, That the Report be the Ninth Report of the Committee to the House. Ordered, That the Chairman do make the Report to the House.

[Adjourned to a day and time to be fixed by the Chairman.

6

Witnesses

Wednesday 5 May 2004 Page

Mr Mike Toms, Group Planning and Regulatory Affairs Director, Mr Steven Hardwick, Director of Public Affairs, Mr Alan Cruickshank, Head of Aviation Policy, BAA; Dr Jonathan Bailey, Head of Government and Industry Affairs,Manchester Airports Group plc; and Mr Keith Jowett, Chief Executive, Airport Operators Association

Ev 1

Mr Andrew Cahn, Director of Government and Industry Affairs, British Airways plc; and Mr Barry Humphreys, Director of External Affairs and RouteDevelopment, Virgin Atlantic Airways Limited

Ev 9

Sir Roy McNulty CBE, Chairman; Mr John Arscott, Director, Airspace Policy, and Mr Alex Plant, Head of International Aviation Policy, Civil Aviation Authority

Ev 13

Wednesday 19 May 2004

Mr Roger King, Chief Executive, and Ms Karen Dee, Director of Policy, Road Haulage Association

Ev 23

Mr Simon Chapman, Chief Economist, Mr Chris Welsh, General Manger, Campaigns, and Mr Damian Viccars, European Affairs Manager, Freight TransportAssociation

Ev 30

Mr Mark Brownrigg, Director-General, Mr Edmund Brookes, Deputy Director-General, and Mr Donald Chard, Manager of Legal Affairs, Chamber of Shipping

Ev 35


Rt Hon Alistair Darling MP, Secretary of State for Transport, Mr John Stevens, Head of Europe Division, and Mr Michael Smethers, Head of International Aviation and Safety Division, Department for Transport

Ev 42

Wednesday 16 June 2004

Mr David Waboso, Executive Director, Technical, and Mr Giles Thomas, Director, European, Strategic Rail Authority; and Mr Paul Plumber, Director of Corporate Planning and Regulatory Affairs, and Mr Andrew McNaughton, Chief Engineer, Network Rail

Ev 60

Mr George Muir, Director General and Mr Richard Lockett, Director of European Standards, Association of Train Operating Companies

Ev 68

Mr Graham Smith, Planning Director, English Welsh and Scottish Railway Ev 74

7

List of written evidence

EU 01 Department for Transport Ev 79

EU 01A Further memorandum by the Department for Transport Ev 86

EU 01B Further memorandum by the Department for Transport Ev 90

EU 01C Supplementary memorandum by the Department for Transport Ev 96

EU 02 T-Systems Ev 99

EU 03 Transport for London Ev 101

EU 04 States of Guernsey Board of Administration Ev 105

EU 05 Railway Forum Ev 105

EU 06 British Airways Plc Ev 108

EU 07 Freight Transport Association Ev 112

EU 08 BAA plc Ev 116

EU 08A Supplementary memorandum by BAA plc Ev 118

EU 09 Liverpool John Lennon Airport Ev 118

EU 10 Railfuture Ev 120

EU 11 European and External Relations Committee of the Scottish Parliament Ev 121

EU 12 The Royal Society for the Protection of Birds Ev 122

EU 13 Virgin Atlantic Airways Limited Ev 126

EU 14 Singapore Airlines Limited Ev 130

EU 15 Civil Aviation Authority Ev 131

EU 15A Supplementary memorandum by the Civil Aviation Authority Ev 140

EU 16 Manchester Airports PLC Ev 141

EU 16A Further memorandum by Manchester Airports Group Ev 144

EU 17 Airport Operators Association Ev 146

EU 18 ICS/ECSA/OCIMF/INTERTANKO Ev 149

EU 19 Institute for European Environmental Policy (IEEP) Ev 151

EU 20 Chamber of Shipping Ev 155

EU 21 British International Freight Association Ev 159

EU 22 Freightliner Group Ev 161

EU 23 English Welsh Scottish Railway Ev 163

EU 24 Road Haulage Association Ev 166

8

Reports from the Transport Committee since 2002

Session 2004–05

First Report Work of the Committee in 2004 HC 251 Second Report Tonnage Tax HC 299 Third Report Disabled People’s Access to Transport: A year’s

worth of improvements? HC 93

First Special Report Government Response to the Seventeenth Report of the Committee: Cars of the Future

HC 377

Fourth Report The Departmental Annual Report 2004 HC 409 Second Special Report

Government Response to the Eighteenth Report of the Committee: Galileo

HC 410

Fifth Report Rural Railways HC 169–I Sixth Report The Performance of the London Underground HC 94 Seventh Report Road Pricing: The Next Steps HC 169-I Eighth Report Search and Rescue HC 322

Session 2003–04

First Report Traffic Management Bill HC 144 Second Report The Departmental Annual Report HC 249 Third Report The Regulation of Licensed Taxis and Private

Hire Vehicle Services in the UK HC 215-I

Fourth Report Transport Committee Annual Report 2002-03 HC 317 Fifth Report The Office of Fair Trading’s Response to the

Third Report of the Committee: The Regulation of Licensed Taxis and Private Hire Vehicle Services in the UK

HC 418

Sixth Report Disabled People’s Access to Transport HC 439 Seventh Report The Future of the Railway HC 145-I Eighth Report School Transport HC 318-I Ninth Report Tenth Report Eleventh Report Twelfth Report Thirteenth Report Fourteenth Report First Special Report Second Special Report Third Special Report Fifteenth Report Sixteenth Report Seventeenth Report Fourth Special Report

Navigational Hazards and the Energy Bill The Work of the Vehicle and Operator Services Agency and The Vehicle Certification Agency National Rail Enquiry Service British Transport Police The Rail Regulator’s Last Consultations The Work of the Maritime and Coastguard Agency Government Response to the Eleventh Report ofthe Committee: National Rail Enquiry Service Government Response to the Ninth Report of the Committee: Navigational Hazards and the Energy Bill Government Response to the Twelfth Report of the Committee: British Transport Police Financial Protection for Air Travellers Traffic Law and its Enforcement Cars of the Future Government, Health and Safety Commission and Executive, and Office of the Rail Regulator Responses to the Seventh Report from the Committee, on the Future of the Railway

HC 555 HC 250 HC 580 HC 488 HC 805 HC 500 HC 1132 HC 1133 HC 1134 HC 806-I HC 105-I HC 319-I HC 1209

9

Eighteenth Report Galileo HC 1210

Session 2002–03

First Report Urban Charging Schemes HC 390-I Second Report Transport Committee: Annual Report 2002 HC 410 Third Report Jam Tomorrow?: The Multi Modal Study

Investment Plans HC 38-I

Fourth Report Railways in the North of England HC 782-I Fifth Report Local Roads and Pathways HC 407-I Sixth Report Aviation HC 454-I Seventh Report Overcrowding on Public Transport HC 201-I Eighth Report The Work of the Highways Agency HC 453 Ninth Report Ports HC 783-I First Special Report Government and Office of Fair Trading

Responses to the Seventeenth Report of the Transport, Local Government and the Regions Committee, The Bus Industry

HC 97

Second Special Report

Government Response to the Committee's Fourth Report, Railways in the North of England

HC 1212

Session 2001-02

First Special Report The Attendance of a Minister from HM Treasury before the Transport, Local Government and The Regions Committee

HC 771

Second Special Report

Government Response to the to the Fifth Report of the Transport, Local Government and the Regions Committee, Session 2001-02, European Transport White Paper

HC 1285

Third Special Report Government Response to the Eighteenth Report of the Transport, Local Government and the Regions Committee, Session 2001-02, National Air Traffic Services Finances

HC 1305

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Transport Committee: Evidence Ev 1

Oral evidence

Taken before the Transport Committee

on Wednesday 5 May 2004

Members present

Mrs Gwyneth Dunwoody, in the Chair

Mr JeVrey M Donaldson Ian LucasMr Brian H Donohoe Miss Anne McIntoshClive EVord Mr Graham StringerMrs Louise Ellman

Witnesses:MrMike Toms,Group Planning and Regulatory AVairs Director,Mr Steve Hardwick,Directorof Public AVairs, Mr Alan Cruickshank, Head of Aviation Policy, BAA; Dr Jonathan Bailey, Head ofGovernment and Industry AVairs, Manchester Airports Group plc; andMr Keith Jowett, Chief Executive,Airport Operators Association, examined.

Chairman: Good afternoon, gentlemen. A little bit Q3 Chairman:Mr Toms?Mr Toms: Thank you, Chairman. We at BAA andof housekeeping first, please.UK airports generally recognise Europe as a keyMembers having an interest to declare?part of our framework. We cannot ignore it, weIan Lucas: I am a member of Amicus.probably encourage it at our peril, but we do have toMr Stringer: A member of Amicus, Director of themanage it. In that sense, we are comforted by theCentre for Local and Economic Strategies.underlying principle of the Treaty of Rome which isChairman:Mrs Dunwoody, ASLEF.securing the free movement of people and goods.Mr Donohoe: Transport and General Workers’Europe has had some important benefits to aviation.Union.The three packages of liberalisation have beenClive EVord: Transport and General Workers’instrumental in reducing air fares and increasingUnion.choice for travellers in Europe. The EU should haveMiss McIntosh: BA, BAA, BAE.further benefits for aviation as it strengthens the EUnations in dealing with third parties outside, and inthat instance the EU/US relationship will be anQ1 Chairman: Thank you very much. Gentlemen, important test. However, to realise these benefits

those of youwho have appeared before undoubtedly Europe does need adequate, competent with a smallknow the House rules. If you agree with an answer, “c”, and expert staV resources to help it manage itsplease do not repeat something that has already been part of the negotiations. It does need to avoid thesaid. If you want to catch my eye, please do so. temptation to delve in what are truly nationalFirstly, would you identify yourselves starting at the matters. One final point I would like to mention isend of the table. that we at BAA have a principal topical concern inMr Cruickshank: Alan Cruickshank from BAA. Europe at the moment, which is to help thisMr Hardwick: Steven Hardwick, Director of Public Government to implement its White PaperAVairs for BAA. commitment to have aviation incorporated in theMr Toms:Mike Toms, Planning Director, BAA. EU emissions trading scheme. We believe climateMr Jowett: Keith Jowett, Chief Executive of the change is a legitimate concern and we believeAirport Operators Association. emissions trading provides the greatest opportunity

for firmly capping emissions whilst allowing peopleDr Bailey: Jonathan Bailey, Head of Governmentto travel and we hope that the European Union willand Industry AVairs, Manchester Airports Group.pick up the baton provided by the BritishGovernment.

Q2 Chairman: Thank you very much for coming. Ithink you are all going to have to belt it out a bit Q4 Chairman: That is very helpful, Mr Toms. Drmore because this is a room that absorbs sound and Bailey, you wanted to say something?youwill realise, I am sure, that we are taking a record Dr Bailey: Thank you, Chairman. I would like toof what you have to say. Did anybody want to say focus on just two areas, the EC regulation ofanything before we begin? aviation generally and the negotiation of Air ServiceMrJowett:Chairman, in the interests of brevity, and Agreements in particular. Aswe noted in our writtento avoid repeating ourselves, we have agreed, as a evidence, we believe the majority of the legislationteam, that I would invite my colleague from BAA in brought forward by the Commission in relation tothe first instance and then fromManchesterAirports aviation has been enormously beneficial to theGroup in the second to make some brief opening industry and also to consumers. There has always

been a strong argument for dealing with issues thatstatements without duplication.

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Ev 2 Transport Committee: Evidence

5 May 2004 Mr Mike Toms, Mr Steve Hardwick, Mr Alan Cruickshank, Dr Jonathan Bailey and Mr Keith Jowett

transcend national boundaries at the Community Mr Toms: On the slots?level. The Commission’s tendency to constantlyrevise legislation can at times be unhelpful. Turning Q7 Chairman: On that particular Directive.to the negotiation of Air Service Agreements: we Mr Toms: It is never easy to reach consensus inhave previously expressed support for the EU taking Europe, I think it is fair to say. There was a greatresponsibility for negotiations with major aviation deal of to-ing and fro-ing, particularly on the latestpowers, in particular theUS. In our written evidence version of the slot allocation regulation.we also raised concerns about delays to theimplementation of Air Service Agreements with Q8 Chairman: Let us take the Ground Handlingother states caused by lack of any administrative Directive first which is quite an interesting example.machinery to deal with the approval of these Was it easy to reach agreement?agreements. The draft regulation designed to handle MrToms:No, it was not, it took a great deal of time.this has been adopted and we expect it to enter into It is fair to say that what resulted was probably lessforce within the next few weeks, however the than perfect because it was a compromise.procedure, even if it works, represents yet anotherbureaucratic hurdle for the industry. We are also Q9 Chairman: Are there specific agreements at theconcerned about the practical implications of the moment that you do not agree with?Commission’s wish to extend its negotiating Mr Toms: It is diYcult to put my finger on it. I willmandate to countries other than the largest aviation ask my colleagues in a second whether they canpowers unless it proves possible to negotiate with identify anything. It is diYcult to put our fingers onsignificant blocs. Part of that is practical. With 25 anything specific at the moment although we areMember States the number of ASAs would be truly watching developments. We have some concerns inenormous. If you imagine just 50 per country then particular in relation to passengers of reducedyou are up to over one thousand agreements and mobility, which is an issue coming up the Europeanthat just simply is not manageable. The Commission agenda. I will ask my colleagues whether they havealso does not have, and is unlikely to get, the any examples they want to bring forward.resources to deal with that. Manchester AirportsGroup would therefore prefer to see Member States Q10 Chairman: What about denied boarding?retaining responsibility for negotiating most Air Mr Toms: I think you have a very good point there.Service Agreements outside the major trading blocs Denied boarding is a problematic piece of legislationwithin the framework of EC law. Thank you. inasmuch as it is going to allow the consumer to

recover rathermore than the air fare which they paidin the first place. I believe my colleague fromManchester probably has greater expertise in thisQ5 Chairman: Thank you, that is very useful. I havearea than I do.no doubt that we will come on to the European

Commission and the question of Air ServiceQ11 Chairman:Dr Bailey, do you want to commentAgreements later. What do you think is importanton that?about those particular measures that you have beenDr Bailey: Only to say that at the levels it is set thementioning, some of which you say have beencompensation, which is based on distance travelled,helpful? Is it their content or is it the fact that theyis sometimes several-fold higher than the averageare actually being made at European level?fares being charged by the airlines.MrToms: It is both the content and the fact that they

are made at European level. My colleague, DrQ12 Chairman: Thank you, that is helpful.Bailey, made a very good point in relation to theGentlemen, you have had a second or two to reflect,number of separate negotiations which would behave you thought of anything else before we moverequired if some of these matters were to be dealton?with on a bilateral basis with, I think it is now, 25Mr Cruickshank: If I may, Chairman. In individualEuropean states. 25 to the power of 25 is a numberpieces of legislation there are parts of those that wethat I cannot comprehend but that is the number ofwould not necessarily fully agree with. The one thatnegotiations which would be needed, for instance, tois in my mind at the moment is the emphasis on thedeal bilaterally with the issue of slot allocation or thesomewhat complicatedly defined new entrantissue of ground handling. Europe does, at the veryprovision in the slot regulation which was aimed toleast, allow a simpler mechanism for dealing withimprove competition within Europe but actually hasthose issues. I have to say also that although therenot achieved that result and we do not believe it is anare many imperfections in Europe on issues such asappropriate way of doing that. There are pieces ofground handling and slot allocation, the content oflegislation which we fully support but as an overallthe European legislation whichwe now have in place piece of legislation there are elements which we feelhas generally been beneficial in creating a more are probably less than ideal.

transparent and open market for the provision ofairport and other services.

Q13 Chairman: What about this instance? That isquite an interesting example, is it one on which youthink it is easy to reach a consensus or not?

Q6 Chairman: Let us take that particular instance. Mr Cruickshank: I am sorry, could you repeat thatquestion, please?Was it easy to reach consensus?

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Q14 Chairman: Is that a particular instance in which Q20 Mr Stringer: Can I move on to the negotiationof Air Service Agreements with countries like theit would be possible to reach a consensus opinion in

the committees discussing it? United States. Dr Bailey touched on that earlier.What have been the real practical problems involvedMr Cruickshank: I think that would be very diYcult

indeed. I have been party to the many discussions on so far? You have given us some written evidence butcan you explain it to the Committee.issues relating to slot allocation or ground handling

and other matters and I do see the plethora of Dr Bailey: To start with, what happened was theopinions that are expressed. Usually a compromise Commission produced a draft regulation to handlecan be found but it takes a long time. the situation because it was being pragmatic in that

it understood that the world could not stopnegotiating Air Service Agreements and updatingQ15 Chairman:How long did it take on the Ground them, but at the same time it wanted to make sure

Handling Directive from beginning to end? How that they were compatible with EC law. That took along are we talking about, Mr Toms? long time to set up. I understand it has been adoptedMrToms: Several years. Wewill give you the precise in the last few days. That will mean once it isnumber separately, if we may. published in the oYcial journal this regulation will

come into force after 30 days. In that regulationthere are a number of points that they make. TheyQ16 Chairman:More than five?will set up an advisory committee and everyMemberMr Toms: It must have been around about five; fiveState which is allowed now to go and negotiate withor more.its bilateral partners, provided the Commission isnot already negotiating with them, first of all will

Q17 Mr Stringer: Mr Toms, you have given some have to notify the Commission that it is going to gospecific instances of where EU regulations have and do that, it will then have to do the negotiationcaused you problems and you have welcomed the and when that is concluded it will have to go back tofree market aspect of it but your written evidence is the Commission and submit the agreement for itsmuchmore anti than that. You say that you are very approval. TheCommissionwill come upwith a draftworried that the European Union is anti air travel decision which will be put to the advisory committeeand prefers rail. Would you care to expand on that which will give its opinion and then the Commissionstatement? will make a final decision. It is quite a lengthy andMr Toms:Yes, I will. The particular point which we bureaucratic procedure. You asked for specifichad in mind in raising that issue with the Committee examples where that hinders us. In terms ofwas the European White Paper on Aviation and Manchester Airports’ development, we haveTransport which espoused a general principle that it discussions with airlines, predominantly foreignwould be a good thing if travel was diverted from air airlines, in a number of countries. Take HongKong,to rail as a general principle. Whilst we can that agreement was recently renegotiated betweenunderstand the broad reasoning which might tempt Britain and Hong Kong and, unfortunately,you in that direction, that is a very heavy attempt to although in theory it can come into operation priordistort and manage the market with a not very clear to the approval of this Commission advisorypurpose behind it and a not very clear notion ofwhat committee it is not being operated, and the reasonits consequences might be. We were concerned by for that is the Hong Kong Government does notthe tone of the White Paper. That is probably the want to implement the agreement and then find it isbest example. overturned by the Commission at a later date

because of the heavy investment required by CathayPacific, for example, if it starts a new route toQ18 Mr Stringer: Your argument is that aviationManchester, where there is huge demand. We had ashould be treated in exactly the same way as rail inservice there and at its peak in 1996 100,000terms of emissions and impact on the environmentpassengers were carried. We estimate the marketgenerally?from Manchester to be 140,000 now from CAAMr Toms: I think our argument was slightly morestatistics and so on. There is definitely a market forfundamental than that, which was that there neededat least a daily large aircraft service, but any plansto be a clearer analysis of what the costs and benefitswhich the airlines may have to serve that market areof individual forms of travel were before anycalled into question by the intervention of theconclusion was reached, and that the CommissionCommission.and Europe in general should think twice before

attempting to direct travellers to the form oftransport they should use. Q21 Mr Stringer: So let us be clear, from what you

have just said and from your written evidence youare saying that there are delays in establishing routesQ19 Mr Stringer: Do you see what is contained infrom Manchester to Hong Kong, to Pakistan, tothe White Paper as being potentially a greaterBeijing and South Africa?burden than the benefits given by a free market inDr Bailey: Yes, some of those are potential delays.Europe?We also have a problem in that we are having toMrToms:Wedo not see that at present as theWhiteconvince the international aviation negotiation partPaper currently stands, but were this tone and thisof the DfT that the policy on liberalising the regionaltrend to become more firmly in legislation it would

become increasingly problematic, yes. airports set out in the recent White Paper and,




indeed, also in the 1985 White Paper should Q25 Mr Stringer: It is actually in operation at thepresent time, is it not?encompass the granting of fifth freedom rights on

which we have relied. Every single one of our long Mr Toms: It is in operation at the present time, yes.haul routes, apart from those across the Atlantic,has been started on the back of fifth freedom rights, Q26 Mr Stringer: You do not know how manyso the liberalisation point is very important to us. routes it is covering at present?What I would say is that the Commission’s Mr Toms: No. We will give you a specific answer.intervention here could slow things down. Manycountries refused to accept the community Q27 Mr Stringer: You can provide it?designation clause, for example. If you are Pakistan Mr Toms:We can provide it.and Britain comes and says, “Look, we want to Mr Hardwick: There are two route developmentupdate the agreement and we would like you to give funds, one which is operated by BAA Scotland,access to your market to the carriers of 25 European which is £60 million, and we do know what we arecountries”, not many people would turn round and doing with that but the number of routes is verysay, “That is a very good idea”. They are very small because a number of the carriers who are flyingconcerned about their airlines and whilst that may to and from Scottish airports were looking to havebe protectionist, you can understand the position those funds used on services to Londonwhich do notthat they are in. One of the things we have thought need support whereas what we were wanting to dois if perhaps the Commission were able to enable was expand access from Scotland to many otherMember States to oVer reciprocity on this, in other destinations. The second fund is the one you arewords access for the country they are negotiating referring to from the Scottish Executive but that iswith to the 25 Member States, that might get round something which they administer in partnershipit, but I can say that then you would be into a major with the airlines, so wewill be informed about it, andnegotiation among Member States of the type that we can give you a note on that, but we will not bemy colleague, Mr Toms, described. directly involved in negotiation, I am sure.

Q28 Mr Stringer: I did not realise there were twoQ22 Mr Stringer: You describe something thatfunds. Can you explain how those are not caught byappears to be becoming a barrier to access tothe Charleroi decision?regional airports. Do you have an alternative? WhatMr Toms:We had some premonition that Charleroido you think the Commission should do?might be raised today given that the decision is beingDr Bailey: I think the alternative would be to letpublished today.We have not had a chance to reviewMember States continue with negotiating, whichthe decision in detail but we have a certain amountthey are trying to do, but without threat ofof foreknowledge of its content. My understandingwithdrawing agreements. The other way round thisis that there are two primary grounds upon whichmight be if the Commission were to haveCharleroi is being held in breach. The first is that thecompetence then it would work on an Open SkiesoVers made exceeded five years in duration, in otherbasis with blocs of nations. That would be a verywords they were too long-term. The second is thatlengthy process. They are working with Singapore,they were made to one carrier without beingAustralia and New Zealand, for example, on theavailable to all carriers on equal terms. Ourcommunity designation clause. Potentially that isunderstanding is that neither the Scottish OYceone way round it but all of these things are very timefund, if I can call it that, or indeed our support wouldconsuming and that is one the problems that airportsfall foul of that provision.face when they are trying to develop services, they

need rights to be available here and now so thatairlines can incorporate those into their thinking. Q29 Chairman: Because both of them have a degreeFor us at Manchester, for example, and I speak of openness that would be available were it requiredmainly forManchester rather than the other airports by some other carrier?in our portfolio, we have a significant number of MrToms:Yes, they are both open and they are bothtransatlantic services and that has been open since short-term.1996, as you know, and airlines can think and planaccordingly. Q30 Mrs Ellman: In your written evidence, BAA

identified three areas of problems with currentEuropean Commission legislation. Can you say anyQ23 Mr Stringer: Can I just ask BAA a question.more about those and where you would like to seeThere are funds provided by the Scottishchanges?Development Agency for route developmentMr Toms: These are the three issues described inthrough your airports in Scotland. Can you tell usparagraph 12 of our evidence. The first is thehow much money?temptation to over-legislate or tinker. The GroundMr Toms: I would need to confirm it but myHandling Directive is a classic example of that andrecollection is it was £6 million.in a second I will askmy colleague,MrCruickshank,to talk on that particular issue. The second, the one-size-fits-all problem, is a significant problem for anQ24Mr Stringer:Howmany routes does that cover?

Mr Toms: I think the number of routes depends on institution in which airports vary in size from a fewthousand passengers a year to 64million. Clearly thehow many people bid. We may need to give you an

accurate paper on that. same degree of regulation is not appropriate to




airports of those diVerent sizes, and routes, of Dr Bailey: I think what would improve it in thisparticular case would be if Member States werecourse, varying from London-Paris in thickness and

quantity down to those very small regional routes. given competence back to deal with, say, thebilaterals within the framework of EC law and youThe third point, which is a point I made in my

introduction, is the one about having enough people did not have this vetting process which is a verylongwinded process. You would do two things then.in the Commission of the right calibre to support

their activities. I think that is exemplified by the One, you would shorten the process and make itsimpler than the one that they have put forward andproblem of the bilaterals andEU competence where,

with all due respect to the good, sound people there that they are going to implement. Two, the MemberStates have the resources and they know which Airare in the Commission, this is a huge and complex

area where you need to be steeped in the history, the Service Agreements they need to update, which areimportant to their consumers and their industry.negotiating styles and the chemistry of these

negotiations before you can really perform at your They understand that better than anybody. TheCommission will not be able to prioritise thingsvery best. I say this as one who has done this for

some years.Without that fine tuning of expertise and properly, I believe. The alternative is to say, “Look,these are the rules within which you need toexperience you can be disadvantaged. Could I ask

my colleague, Mr Cruickshank, to say something on negotiate” and leave it to the Member States, andperhaps an audit can be done from time to time. Toground handling.have this procedure for each and every littleagreement—One example I gave was that we justQ31Mrs Ellman:What I would like to know is howwant the British to extend the fifth freedom traYcyou would like to see the legislation changed torights to an airline. It already has them, it just wantsavoid the problems that you have identified?to add some services, but instead we have got to goMr Cruickshank: In this particular area, and mythrough a British negotiation, and a diYcult onecolleagues from AOA andManchester may want tobecause you are adding in the Communityadd to this, for me there are two issues. One is adesignation, and then this rigmarole at thedesire for legislation to go too far. There is anCommission where you have got to notify them andexample at the moment of a possible piece ofcheck them. Bring that back to the Member States,legislation which both deals with some matters oflet them get on with it and deal just with the blocs,important principle in relation to passengers withlike the US, at EU level.reduced mobility flying but then it potentially goes

too far in inflicting a single organisational solutionto how we accommodate those passengers at Q34 Mrs Ellman: What will the consequences be ofairports. It can go so far but then potentially go too 25 Members of the EU in relation to the issues youfar. The second example I would give is where have identified? Does it call for a change in thehaving established a piece of legislation, and this is procedures? Would it make any diVerence?where the ground handling one comes in, there is a Mr Toms: It will certainly make a diVerence ofvery great temptation to review that after a few degree in the sense that there will clearly be moreyears, to go through a major process of study, partners who have to be satisfied before legislationconsensus building and then try to develop can be passed, unless more legislation is going to besomething slightly better. Whilst it could be made passed by majority voting. It is possible to overstateslightly better, the eVort imposed on all parties may the additional burden which will be placed onnot warrant the minor improvement. legislation from this bearing in mind the fact that

although ten additional states are being added, IQ32 Mrs Ellman: How would you like to see that think it is a much smaller proportion of populationsituation change? Is it to do with the way individuals or GDP than that and that most of these states aredeal with the situation or is it to do with the not characterised by the complex web ofprocesses that are gone through? international air service that you would get inMr Cruickshank:My immediate response is both. I France, Germany or the UK. It will make it morethink it requires encouragement from Member diYcult but not to the power of 25 over 15.States to the Commission to focus on the areas ofgreatest importance, and clearly one of the biggest

Q35 Mrs Ellman:What would the impact be on theones is Air ServiceAgreements andwhat thatmeans,decisions by majority voting if that is the way weand not to focus on smaller improvements to smallerwent in terms of UK aviation?areas. Maybe that is where a benefit could comeMr Toms: It is very diYcult to forecast that becausefrom—Member States encouraging focus init would depend which way the majority went,particular areas.frankly.

Q33 Mrs Ellman: Manchester Airport, you made avery strong point about the problems you had in Q36 Chairman: If your commercial opponents in

another country decided that it would be convenientimplementing the bilateral agreements because ofthe diYculties in the process. I was not clear if you to block something, particularly something as

obvious as fifth freedom rights, which you alreadywere saying that another system would be better orthat things had not been operated properly. You possess, would that not be tantamount to stymieing

all development for anything other than a large blocreferred to an alternative but then spoke about theproblems of that. arrangement at EC level?




Mr Toms: I think the point you make in principle their own states and had to be persuaded that therewas a necessary case for the UK alone. On thismust be correct, which is the more people who have

a vote then the more people who have the power to occasion they were so persuaded, but it is easy to seecircumstances in which they would not have beenblock. How far that will apply in practice is diYcult

to see so far given that the major bilateral issues, or persuaded and might not be in the future. That justmakes our case about one size not fitting all. Themajor EU/non-EU service issues, are not those

which aVect primarily, say, Lithuania but those situation in the UK, particularly on slots andcongested airports, is particularly unique and itwhich aVect the major airports.needs a particular solution and, in our view, theCommunity should restrict itself to dealing withQ37 Chairman: That is an assumption that thosematters of principle and framework legislation,countries will not begin to require internationalleaving the individual states to interpret thatroutes or will not begin to ask for exactly the sameappropriate to the local need.sort of developments. Is there any guarantee at all

that Riga will not start demanding the same kind ofaccess that Manchester wants? Q42Mr Stringer:On that point, the last time we had

representatives of the Commission here, they told usMr Toms: There is no reason why not and that iswhy I say the proof will be in the pudding on this and that what they objected to about the secondary

market trading in slots was that it was notthe situation may evolve over time.transparent. Does that mean that it is nowtransparent?Q38Mrs Ellman:Have you any views on the currentMrCruickshank: It is not as transparent as a numbersituation on the negotiation for secondary trading inof people within the industry and withinslots? Is that an example of something that isGovernment want it to be. The existing situation isproceeding successfully?continuing with the amended regulation but aMr Toms: As you can imagine, this is an issue ofnumber of people, including ourselves, are lookingsome considerable interest to us at Heathrow. I amto see how we can make that process morerather fortunate in that I have to my right one of thetransparent.Community’s top experts in slot allocation, for

which reason I am going to hand this highlytechnical area over to him, if you do not mind. Q43 Miss McIntosh: Mr Toms, you spoke at the

opening about the staYng of the Commission. It ispossible for national administrations to secondQ39 Chairman: Mr Cruickshank, we would love tonational experts. Would not a way forward be forhave a complete lecture, but not today.each main administration to second as part of aMr Cruickshank: It proved to be a very diYcultnegotiating committee within the Commission asubject to reach consensus on in achieving thenational expert? You said that there is not muchtechnical amendment which is due to become lawprospect of having permanent staYng levelsvery shortly. Secondary trading is increasinglyincreased within the aviation division of therecognised as having some value at a number ofCommission.congested European airports. At the end of the day,Mr Toms: There must be scope for morethat value was accepted and allowed to continue,secondment. There are real experts out there that thepending a much more radical consideration of slotCommission should try and obtain from nationalallocation which we are all due to embark upon ingovernments if it can.the months to come.

Q44MissMcIntosh:Have you argued that case withQ40 Mrs Ellman: Does that mean that you arethe present Government?satisfied with the negotiations?Mr Toms:We have informally discussed it with theMrCruickshank:We are satisfied with the end resultpresent Government; we have not made anon this technical amendment. In the sense it hasenormous play of it.allowed the situation to continue, yes, we are

satisfied.Q45 Chairman: Mr Toms, it is not very realistic toassume that the Commission, which alreadyQ41 Mrs Ellman:Does that suggest that the presentemploys vast numbers of civil servants of its own, ismechanisms can work, and do work, in most cases?going to happily adopt other people’s national civilMr Toms: The present mechanisms do work in theservants, not without some enormous sea change,sense that they allocate slots and slots are allocatedwhich certainly I see no sign of?eVectively. The challenge is tomake sure that if thereMr Toms:My understanding is that there are someis a legislative change it improves the allocationnational civil servants seconded into thesystem rather than damaging it, which is theCommission at themoment and that there should beobjective we set ourselves and why we were pleasedscope for doing more, particularly where it is awe got the outcome we did, because the alternativequestion of building up expertise in the permanentwould have been more damaging.staV.Mr Jowett: I think your question was really aimed at

do the Community processes work, in which case wemight say about the slots regulation that it could Q46 Miss McIntosh: Mr Jowett, in your written

memorandum you referred to the cost to industryhave fallen because of objections from numerousstates who saw no benefits in secondary trading for incurred by reviews such as that recently on the




Ground Handling Directive where there may be no MrToms:My colleague fromManchester may wantto add to this. All other things being equal, Europecertain benefit going to the consumer. How do youin total should be a stronger negotiating partneraddress that particular issue? Who absorbs thethan any individual national government because itcosts?has more to oVer on the table and, therefore, shouldMr Jowett:The individual industrymembers absorbbe able to take more back. In principle, I see that asthe costs, particularly, I suspect, the largerbeing one of the great strengths of Europecompanies because they have the large resourcesnegotiation. However, in practice the test will beavailable to address the issues and to respond. Thewhether Europe is as strong as its strongest nation attrade bodies, like ourselves, get very activelythe negotiating table or as weak as its weakest nationinvolved over a long period of time on these issuesand that has yet to be tested. So far we get no clearbut this is being multiplied by twenty-five timessignal out of the negotiations with the Americansacross Europe. The concern with the Groundbut we are very open-minded on that outcome yet.Handling Directive is that it has not been in the view

of many in this state fully implemented to dateelsewhere in Europe.We do feel that there should be Q49Mr Donohoe:Why do you believe that will be asome motivation on the Commission to ensure its better way of going forward? In addition to whateVective implementation across Europe before it you say to get to a solution, given that all thegets involved in more detailed and potentially interests there are across Europe attempting to dodestructive reviews. The initial proposals that are something and get agreement out of that, do youcoming out of the review look as though the honestly think you are going to get that?Commission is intending considering cascading the MrToms:As I said, it is too soon to judge. There areGround Handling Directive down to smaller two powerful forces pulling here. There are thoseairports, which would multiply its impact across states who will want a settlement on relativelyEurope many times, and that would be a significant unadvantageous terms because they have particularcost to airports in the one million to two million national interests in the short-term, and other statescategory where they are usually struggling just to get who will want to hold out for the best.to that serious breakeven, serious player level andthis would hit them hard in achieving that.

Q50 Mr Donohoe: Why has the EU failed at thisstage in terms of securing agreement?Mr Toms: Can I put the question the other wayQ47 Miss McIntosh: Finally, Dr Bailey, if you takeround and say one of the most important points isthe Air Service Agreements as regards the overallthat the EU has not failed in the sense that it has notimpact on Manchester, whether it is an Air Servicegiven away an agreement that will beAgreement with the US that hopefully will includedisadvantageous to Europe and, if you like, that is atcabotage or fifth freedom rights with Pakistan andleast a minimum position which should give us someSingapore, what will the net impact be of those?Willtemporary comfort. Whether or not it will carry thisthey be broadly similar on an airport likeforward remains to be seen.Manchester?

Dr Bailey: In terms of getting traYc rights for, say,Pakistan International Airlines, you mean? In terms Q51MrDonohoe: Some of theMembers States haveof the US, that is open for us, so if the EU negotiates already got agreements, have they not?a more liberal agreement with or without cabotage, Mr Toms: They have, yes.the impact onManchester would be less than if therewere a greater number of Open Skies agreements

Q52 Mr Donohoe: Therefore, it should be simple inwith other carriers simply because we have gotthat sense to get the remainder and have that settledfurther down the track of liberalisation. A dailyearlier rather than later?service fromManchester to the States operated by aMrToms: It should, except for the fact that for thoseforeign carrier runs into millions of pounds a yearstates that do not have agreements what is left on thefor us in terms of the benefit and it is roughlytable are very significant items indeed. On theequivalent whichever airline is operating, provided United States’ side there are very large issues about

they are successful and attract suYcient traYc. ownership and control which go to US domesticMiss McIntosh: Have you as an industry, politics which are very diYcult negotiating issues forparticularly in regards to Air Service Agreements, the Americans. On our side, of course, there arehad time to assess the implications of the merger of issues such as Heathrow access and CommunityKLM with Air France? designation which are also very big outstandingChairman:We want to move on from this. I assume issues.all those shakes of the head mean no.

Q53 Mr Donohoe: When do you expect thisQ48 Mr Donohoe: Can I continue with the agreement to be concluded?negotiations and the fact that there is a change in the Mr Toms: Frankly, it is impossible to say. There isbilateral negotiations, or an intention. What do you an old saying about war between Russia and Chinasee as the advantages to shifting from national to the being inevitable but inconceivable and I thinkEU in particular to conduct the negotiations with settlement between the EU and the US is in the same

category.the US?




Q54 Mr Donohoe: I have asked this question before Dr Bailey: It is less because individual companiescannot be represented at the EU and you have to goand the answer has not been satisfactory, and that isas a trade association, so airports are represented bynot your fault, but is it not possible in thethe ACI, and Alan sits in that arrangement, whereascircumstances that in trying to get this settlementwith the UK negotiations it is perfectly acceptablesooner rather than later that if what we get is afor British airports to attend negotiations, although,weaker agreement than we otherwise would get itby and large, they would attend only a few of thewould be a failure of the whole concept of having themost important ones at that level.EU negotiate rather than the UK negotiate?

Mr Toms: If that happens that would be a failure.Q58Mr Donaldson:What do you thinkmight be theThat is the eventuality which we all have to beeVects of liberalising access to Heathrow on thealert to.European aviation industry as a whole?Mr Toms: I will give a broad comment on that and

Q55 Chairman: Are you afraid that the European my colleagues may want to join in. As theCommission will give away its strongest card in Committee is well aware, the biggest issue aboutorder to get some kind of agreement? That is what liberalising access to Heathrow is the limit onwe are really asking. Will they be prepared to accept Heathrow’s capacity and what it says for how thatany agreement even if it is not as good as the one that capacity will be used, whether it can be used morethe individual states had before in order to get an eVectively by more US service coming intoagreement? Heathrow, bearing inmind that up until such time asMr Toms: You cannot discount the possibility. It there is additional runway capacity, any additionalrequires eternal vigilance on behalf of national service to the United States will potentially displacegovernments and members of the industry to make other valuable service, but it is diYcult to speculate.sure that does not happen. We know what a lot of the individual operators

would like. US airlines currently excluded fromQ56 Mr Donaldson: Just following on from those Heathrow would like to get in and that would

increase the level of US service and that, in turn,answers on the question of an agreement with thewould probably reduce fares on the US, but ofUS, do you feel that the governments of theMembercourse there would be knock-on consequences forStates within the EU and the aviation industry arenon-US services, including, for the sake ofsuYciently involved in those negotiations?argument, short or regional services, so you can see aMrToms: I will get my colleagueMrCruickshank togeneral shift under that over time tomore long-haul.comment more on this because he has actually been

at the negotiating table here, but perhaps I can justQ59 Chairman: So you can get in from Cincinnati,give you an overview. I think the governments of thebut not from Belfast?European Union are pretty actively engaged in thisMr Toms:Well, I would not speculate on a situationissue because they all have significant nationalwhere Belfast is not served to London, Madaminterests at stake. One of the problems is that theirChair, but the general proposition that undernational interests are slightly diVerent.liberalisation there might be more long-haul and lessMr Cruickshank: Perhaps I can move on to theshort-haul is pretty diYcult to contest.second part of your question and say that, as

industry representatives, we would like greaterQ60 Mr Donaldson: So it is possible that regionalopportunity to observe and to some extent take partservices within the UK might suVer in terms ofin those negotiations, but on a reality test we acceptaccess to Heathrow in order to accommodate theand understand why we might be excluded, becauseimpact of opening up access to the US and otherit would be very diYcult for hard negotiations tocarriers?take place with such perhaps a plethora of interestsMr Toms: I think you have to say that there is thatin the room, so we would like more, but we possibility, yes. It depends very much on the termsreluctantly accept that that is the way it is. under which any liberalisation is agreed.Liberalisation would be much easier to

Q57 Mr Donaldson: How does your involvement at accommodate at Heathrow if it took place in athe moment compare to your involvement when phased way over time rather than if we were facedthere were bilateral agreements negotiated by the with, I think it is, all 16 US services from GatwickUK? landing at Heathrow on one morning.Mr Cruickshank: Our involvement is less. Perhaps Chairman: Thank you very much, gentlemen; youDr Bailey could add to that, but our involvement at have been very helpful and I am very grateful to

you all.the moment is less.



Witnesses:MrAndrew Cahn,Director of Government and Industry AVairs, British Airways, andMr BarryHumphreys, Director of External AVairs and Route Development, Virgin Atlantic Airways Limited,examined.

Q61 Chairman: Good afternoon, gentlemen. I am duplication, any increase in European regulationshould be matched with a decrease in parallelsorry to have kept you waiting, but, as you will

realise, this is rather a fascinating subject and it will regulation imposed by the individual MemberStates. Thank you, Chairman.take some time. Can I ask you to identify yourselves.

Mr Cahn: I am Andrew Cahn, Director ofGovernment and Industry AVairs at British

Q63 Chairman: In what particular way would thatAirways.current US oVer disadvantage United KingdomMrHumphreys: I am Barry Humphreys, Director of airlines?External AVairs and Route Development at Virgin Mr Cahn:Well, it oVers no access, Chairman, to theAtlantic Airways. US domestic market. In eVect, what America hasoVered is their traditional bilateral Open Skiesagenda plus the Community designation clause,Q62 Chairman:Did either of you have anything youand, in return for that, they are oVering no access towanted to say?government traYc since their Fly AmericaMr Cahn: I have some short opening remarks. Iprogramme will still be in place, they are oVering nowould like to thank the Transport Select Committeeability for European airlines to buy US airlines, theyfor inviting us to give evidence today and I believeare oVering no opportunity of liberalisation in thethat this hearing is especially timely, given thecargo area and the area of wet leasing; they areincreasing degree of European involvement in thekeeping their market hermetically sealed against theregulation of aviation and in the Commission’sEuropean airlines, whereas the US airlines, becausecurrent negotiations with the United States. We atof the way the Open Skies model works, would haveBritish Airways fully engage with the EU at variousfull access to the European single market.levels. Our Chief Executive was President of the

Association of European Airlines last year and weare one of the very few airlines to have a full-time Q64 Miss McIntosh: Would you see any advantagerepresentative in Brussels, so we take Brussels very whatsoever to theUK concluding an agreementwithseriously both because we have to and because we the US which did not have either cabotage or accessbelieve it to be potentially a force for good if, and it to ownership of foreign carriers?Would there be anyis a big “if”, the Community had the right objectives benefit to the UK, in your view?and the right policies. With regard to current EU Mr Cahn: I believe that the key objective of theand US aviation negotiations, British Airways European Commission, when exercising itssupported the mandate given to the Commission. mandate, should be to obtain an ownership andWe believe that the Union will have more power to control provision whereby European carriers couldnegotiate en bloc than that of the individualMember own 51% of an American carrier. What that wouldStates and that this should enable more balanced do would, in eVect, begin to create a single marketdeals to be achieved with large countries like embracing both Europe and America. We have seenAmerica. However, we are concerned with the in both Europe and America that a single marketoutcome of the recent talks and we do not feel that drives innovation, drives consumer choice, drivesthe Commission is using the collective leverage of competition and drives eYciency and that is what wethe Member States eVectively enough in securing a need. Cabotage would be a nice thing to have, buttrue and open aviation area. The oVer on the table for me it is less key than a 51% ownership andfrom America is not at all balanced and would control provision.significantly disadvantage some European airlines,particularly British ones. Where Europe doesacquire competence for a policy area, it must use this Q65Miss McIntosh: Just turning to climate change,power to create a transparent and eYcient single does the US Government have any plans to includemarket. This will enable airlines to compete on a fair aviation within its emissions trading or climatebasis and produce greater consumer benefits. change proposal and do you believe that theProgress has been made in some areas, such as the Government here should include aviation within it?establishment of the European Aviation Safety As you know, airports are rather keen on the benefitsAgency and the European Single Sky. However, the to the airlines and the consumers.benefits of these schemes are yet to be realised. Mr Cahn: The airports are keen, but they have notAnother point to make there is that poorly drafted yet done it. We actually have done it. We, at Britishconsumer legislation, such as the new Denied Airways, are part of the voluntary British EmissionsBoarding Compensation Regulation, is detrimental Trading Scheme and we fully support that and weto producers and consumers alike. The aviation strongly support the declared intention of the Britishindustry contributes to the economic vitality of the Government to try and press forward the European-Union and Europe should be focused on taking the wide Emissions Trading Scheme during theirviews and well-being of the airlines into account Presidency of the EuropeanUnion in the second halfrather than pursuing what at present appear to be of next year. As to what the American Governmentinstitutional objectives of gaining power. It should is doing, I do not know the answer to that question,alsomake best use of the negotiating expertise which but I would bet a lot of money that they have nohas been developed inmanyMember States. Finally, intention whatsoever of introducing an Emissions

Trading Scheme.in order to avoid costly and burdensome



5 May 2004 Mr Andrew Cahn and Mr Barry Humphreys

Q66 Miss McIntosh: Finally, Mr Humphreys, do consult us and I deeply regret that and I hope it willchange that. I think they also simply do not yet haveyou prefer your airline included in the Open Skies

policy and do you have a view as to the timing of suYcient expertise. They do have quite a lot ofnational experts seconded fromMember States, butwhen an eventual agreement might be?

Mr Humphreys: It is an unusual position for us to the individuals who are responsible for thenegotiations have been changing rapidly and we aretake, but I am afraid we agree completely with

British Airways. I am sure that will not last! now in the rather absurd position of the two senioroYcials responsible for negotiating with the USAhaving been moved out of their posts to diVerentQ67 Chairman: Perhaps you would like that printedjobs and coming back on a part-time basis toin large type and underlined in gold, Mr Cahn!conduct the negotiations with America. This is not aMr Humphreys: As to the timing, we have alwayssensible and serious way to do business. I still believethought that this would be a long and diYcultthat the systemwhich has been set up may yet well innegotiation, a minimum of 18, maybe 24, monthstime work properly, but for the moment it is ratherand really the negotiation has only just started,unsatisfactory.which makes it all the more surprising that there

appear to be some pressures from the Commissionto do an early deal. We think there is a lot more to Q71 Mrs Ellman: Would you say that the UKbe gained from keeping at it and doing a full deal Government is less involved in promoting aviationcovering all areas. interests?

Mr Humphreys: No, I do not think so at all. I thinkQ68 Chairman: Have you expressed that to the they are fully involved and fighting the UK corner.Commission and to Her Majesty’s Government? Obviously they are only oneMember State and thereMr Humphreys:Many times, Chairman. aremanymore involved. I think, if anything, theUK

is more vociferous and more active than any otherQ69 Mrs Ellman: The European Union committee Member State in Europe on this issue.needed to approve bilateral agreements has not beenoperating. What problems has that raised?

Q72 Mrs Ellman: What diVerence will 25 MembersMr Humphreys: I think one of the problems is thatmake?the Regulation which will govern this is not yet inMr Cahn: I do not think it will make any diVerence.place. There is a great deal of uncertainty and lackI do not think that there are going to be many flightsof clarity as to what should happen. Foreignfrom Vilnius to Cape Town or Tokyo. The onlygovernments around the world are faced with theseMember State which is going to make a substantialdemands from the Europeans, but the Europeans dodiVerence will be Poland and I do not think it willnot have in place a mechanism for dealing withactually be particularly more diYcult to getthem, so there is confusion and the airlines and theagreement. The Commission has long experience ofconsumers are the ones to suVer. We, at Virgin,seeking to negotiate on behalf of many Memberhoped to gain from the bilateral arrangement withStates and many economic interests and they are inHongKongwhichDr Bailey referred to. That wouldmany areas, trade, for example, or agriculture, reallyhave given us the opportunity to operate torather good at it. They are not yet good at it inAustralia viaHongKongwhich has long been one ofaviation because they have not got the experienceour ambitions. That has been held up now for manyand they need to gain that experience, but when theymonths and there is no immediate sign that it will beare, I think they will be able to find common groundcleared until the new Regulation comes into forcenot least because most of the new Member Stateslater this year, so we think that is unfortunate andwill have common interests.the consumer is the one to suVer.

Q70 Mrs Ellman: What would you like to see Q73 Mrs Ellman: Have you any concerns aboutchanged? Is it the system not working eVectively or likely internal European aviation legislation comingwould you like a diVerent system? in the future?Mr Cahn: I think the system simply is not in proper Mr Humphreys: Yes, mainly because we do notoperation yet. The reason that the committee is not know what it is. We are always concerned aboutworking is because the relevant piece of legislation future legislation and the legislation we have seenhas not worked its way through the rather complex over the last year or so has been of particularBrussels legislative machinery. I think it is too early concern to us, the Denied Boarding Compensationto say that the system does not work, but there are Regulations, for example, and other issues as well.certain things which undoubtedly are not working. As Mr Cahn said, the Commission does not alwaysOne of them is that the Commission is not taking full listen to the industry even when the industry canenough account of the interests of the industry. All show it the reality of the world, if I can put it thatthe airlines around Europe have been used to way. So yes, we are concerned and that is why weworking closely with the national governments in keep a very, very close eye on what is happening.ensuring that the bilateral agreements are negotiatedin the full knowledge of the commercial impact on

Q74 Mrs Ellman: This is a general concern, so arethe industry and the impact on consumers. Thethere any specific things which you think may beCommission is simply not prepared to learn as much

about the commercial realities of the industry or to coming up?




Mr Cahn: I think the whole of our industry now has not think they have shone, mainly because they arenew to the game. They will learn, but they need tothe concern that the balance between the regulation

of airlines and regulation of supply industries, such keep in there.Chairman: Learn at somebody else’s expense!as airports, air traYc control and CRSs, is out of

kilter. The Commission find it easier and perhapsmore popularly acceptable to regulate us and they Q79 Mr Stringer: Mr Cahn, can I ask you the samehave not really gone back on things like the Ground question which I asked BAA because you said thatHandling Regulation and reviewed that and come there is the same bias towards rail as BAA did.up with sensible new proposals. I think also they Would you be arguing for a level playing field withhave got it slightly out of balance in terms of regards to environmental impacts with rail or wouldconsumer legislation where very often voluntary you want the Commission to have a diVerent view?commitments would work more eVectively than How would you like them to regard aviation?heavy-handed and poorly drafted legislation, like Mr Cahn: I would like us to operate on a levelthe Denied Boarding Compensation Regulation. I playing field with other transport modes. A goodalso think that they do need to come forward and example would again be the—regulate in the environmental area, for example, theEmissions Trading Scheme, so it seems to me that

Q80 Mr Stringer: Would you define it bythe Commission has not got a clear policy forenvironmental impact or in some other way?fostering and encouraging the European airlineMr Cahn:Well, in many diVerent ways. I think thatindustry and ensuring that the conditions of theyou of course need to look at the environmentalindustry will work and are best at maximisingimpact of aviation and aviation must deal with thecompetition, eYciency and good service.environmental issues that its operations create, butthen so must the rail industry. I was simply saying

Q75 Ian Lucas: Do you think that the Commission that the presumption that the rail industry isis less sympathetic to your industry than the British somehow environmentally green and the aviationGovernment? industry is somehow environmentally polluting isMr Cahn: I think it is less knowledgeable, but no, I simply a mistaken assumption which is often madedo not think it is less sympathetic. Then again I do by policy-makers. If I may give another example, thenot think I want sympathy, but I want Denied Boarding Compensation Regulation applyunderstanding and I want the right objectives. I to aviation and they do not apply to rail, but whythink the Commission has a prejudice in favour of should they not? They do not apply to ferries, butsome other transportmodes, feeling that rail must be why should they not? There are many other forms ofgood and aviation cannot be as good as rail, and regulation which apply to the aviation industrythere is no basis for such a position, and I think it has alone and it is that sort of level playing field we aretended in the past to devote more attention to other looking for.transport modes. In their White Paper in 2000 therewasmore space devoted to inlandwaterways than to Q81 Mr Stringer: You said previously in answer tothe aviation industry which seemed to me slightly Mrs Ellman that the current system of dealing withodd, but I think the Commission is getting more third countries’ Air Service Agreements was notinterested in aviation, not least because they see it as working because the mechanism had not been put inan area where they can exercise their competence. place properly. Do you think it should be at the

Member State level rather than the European level?Mr Cahn: I think that there is potentially real valueQ76 Ian Lucas: Why do you think the Commissionin the European Commission on behalf of allis pressing for an early deal with the US?Member States negotiating with some thirdMr Humphreys:Well, I do not know the answer tocountries. We supported the mandate to negotiatethat. I can only surmise that they see political benefitwith America and, in principle, I still do, but I justfrom their perspective. I think what we are engagedwish theywould do it better, but I think it is right andin at the moment is a power play in Europe betweenproper that they should because they should be ablethe Commission and Member States and being ableto negotiate a better agreement. In the same way, weto showa quickwin, albeit not a very impressivewin,in the industry have a real problem with Russiathey see as in their interest. Obviously we see that inwhere we are all charged overflight charges when wevery diVerent terms and, asMr Cahn said, what is onfly across Russia and this is against internationalthe table at the moment from the Americans is reallyconventions, it should stop, and the Europeanno win at all, and it has been available for a longCommission has much more power to stop thistime.happening than the individual Member States. Inthe sameway I think there is something to be said for

Q77 Ian Lucas: Is that shared across the industry? Europe at a European level negotiating with itsMr Humphreys: Yes, very much so. neighbouring countries in an attempt to enlarge its

single market, so it can have a larger free market. Ithink, on the other hand, there is absolutely no pointQ78 Ian Lucas: Across Europe?

Mr Humphreys: Yes, and I think the industry has Europe trying to negotiate, say, with Australia andNew Zealand where liberalisation has been achievedbeen very disappointed with the negotiating stance

taken by the Commission. They are up against some by Member States and they are like-mindedcountries. I see no value in trying to negotiate withvery experienced and very good negotiators and I do




countries like Gabon where there is only one carrier Q86Mr Stringer: That is about quality of procedureand doing it properly; it is not about having higherinterested in flying, so the Commission should focus

its energies and eVorts on those areas where it can standards of the internal design of the fuselage.really add value. Mr Humphreys: Sorry, I misunderstood what youMr Humphreys: I think the negotiations with the were meaning. I am afraid I find it diYcult toUnited States are very big negotiations. We would comment on that—I am not an expert in that area—like to see the Commission focus very much on that but certainly I do not recognise the statement thatsingle negotiation in addition to the example of safety standards in the United Kingdom areRussia and the peripheral countries around Europe. necessarily far in advance of many other EuropeanIf they reach an agreement with America, that will countries. I think most European countries have aaccount for something like 60 or 70% of worldwide very similar standard of safety these days.aviation, a very big bloc. I think what you wouldthen see very rapidly are other countries wishing to

Q87 Mr Stringer: That will be less true now than itjoin that club and that would have a dramaticwas a week ago, I assume. What regulatoryimpact on aviation globally. So the focus, we believe,standards do you believe should be left to Membershould very much be on the United States. Get thatStates, and do you not think that, while there is aright and most of the rest will fall into place.divide, you as an industry will end up paying twiceboth for the European regulations and for nationalQ82MrStringer:Will the EuropeanAviation Safetyregulations?Agency result in better safety standards which areMr Humphreys: That is precisely one of the pointsapplied throughout the EU or will they be unevenlythat we raised with the regulator. We wereenforced by national authorities?concerned that there would be double charging, andMr Humphreys: Well, we already have very highwhat we were looking for was increased eYciency,safety standards and the one thing we do not wantnot increased charges. I think the regulators areis any diminution in those standards, but we do seeaware of that and are doing their best to address it,EASA as potentially beneficial in reaching commonbut it is a diYcult issue to address.standards and possibly potentially also reducing the

costs to the industry. Providing the safety standardsthemselves are maintained, that has to be a good Q88 Mr Stringer: The Commission reachedthing. I think we have in the past expressed some agreement with the United States on securityconcern that national safety authorities have not arrangements last month, and as soon as theyaddressed the implications of the creation of EASA reached agreement the European Parliamentas much as they might have done, but certainly the decided to take it to the European Court of Justice,UKairlineswere very pleased that the Civil Aviation in eVect challenging it. What problems is thatAuthority has now set up a joint working group with causing for you?the industry to examine that issue. Mr Humphreys: It is not causing us any problems at

the moment but it could do. Basically we want to beQ83Mr Stringer: “Maintaining standards” is a very toldwhat to do.We canmeet the European rules andinteresting phrase because in previous inquiries we the American rules; what we cannot do is meet bothhave had, I think we have managed to establish that rules if they are inconsistent, so what we encouragebecause we do have high standards in this country, the governments to do is get together and agreeactually things have come to a halt at our level among themselves. The Commission and the Unitedwhile other countries catch up with us. Do you States government did that and from purely ourthink that is satisfactory when there have been commercial point of view we can live with therecommendations after various air disasters that agreement they came to. There is a disagreementcertain standards should be improved? with the European Parliament, as you say, and weMr Humphreys: I do not think the search for safer hope that will be sorted very quickly.aviation ever stops, either with the regulator or theairlines. I really do not. It goes on constantly.

Q89 Mr Stringer: Currently are you implementingthat agreement or are you waiting for the decision ofQ84 Mr Stringer: But that is not quite true, is it? Itthe European court?is stopped at the present time because there haveMr Humphreys:We are implementing it, yes.been no new agreements across Europe, have there?

We are stuck at the levels of four or five years ago,or ten or fifteen years ago. Q90 Mr Stringer: Does that apply to you?Mr Humphreys: I honestly do not recognise that Mr Cahn: That applies to us, too. We would not bestatement. There is constant striving for allowed to fly to America if we did not.improvement and I do not believe—

Q91 Chairman: So you are transmitting all the creditQ85 Chairman: Give us just one example in the lastcard details and all the personal information you arefive years.asked for?Mr Humphreys: It is very diYcult. On a day-to-dayMrCahn:We are providing the information that thebasis airlines are constantly looking at their safetygovernment and regulators require of us. It would bestandardswith the regulator, and it is diYcult to pick

on any— very improper of us not to do so.




Q92 Mr Stringer: Does that not mean that, if you Mr Humphreys: This is not just the United Stateswere going to implement what the American and Europe. Governments around the world aregovernment said anyway because you wanted to fly introducing these demands. It just seems to usinto Washington, New York, San Francisco or common sense that those governments get togetherwhatever, the negotiations would be bogus? and agree a common standard, and then we canMr Cahn: Not at all. We have been talking very comply with that.closely with the British authorities and with the Chairman: Gentlemen, you have been very helpful.European Commission and have followed their If we have other questions I think we should directguidance. We are in a position where the them to you by letter—with gold lettering! ThankCommission negotiated a solution with the you very much for your help.Americans and, of course, we have followed them.We have done what our regulator tells us to do with

The Committee suspended from 4.00 pm to 4.20 pmthe knowledge and approval of the Britishgovernment. for a division in the House.

Witnesses: Sir Roy McNulty, CBE, Chairman; Mr John Arscott, Director, Airspace Policy, and Mr AlexPlant, Head of International Aviation Policy, Civil Aviation Authority, examined.

Q93 Chairman: Good afternoon, Sir Roy. Did you get you there better. For example, in a situation witha country like Russia, where it has been quite clearhave something you wanted to say to us before we

get into questioning? that the Russians are not particularly keen tonegotiate with the Commission and they do not evenSir Roy McNulty: Very briefly, we submitted a

memorandum covering the five areas we thought recognise their competence in this area, it wouldseem that it would be perhaps fruitless for themight be of interest to the Committee. As regards

those topics, John Arscott has been particularly Commission to seek to negotiate and it would bebetter to pursue the bilateral route to get someinvolved in the development of the Single European

Sky programme, and Alex Plant has been involved additional services into place. In the CAA we seethese as twin tracks keeping both routes open, andin the Air Service Agreement negotiations and the

development— looking on a case-by-case basis to decidewhich trackis best.

Q94 Chairman: He has not gone white yet!Q97 Chairman: You do suggest the GroundSir RoyMcNulty:Not quite!—and he is working onHandling Directive has not made a great deal ofthose. That is really all I had by way of introduction.diVerence to the United Kingdom?We would be happy to try to answer any questionsMr Plant: That is true, partly because we alreadythat the Committee would like to put to us.had a relatively competitive market.

Q95 Chairman:Which is the best way of negotiatingQ98 Chairman: You are actually suggesting that itan international agreement? Is it better for us to dohas been a deteriorating rather than an improvingit Member State by Member State, or is it better forsituation. Is that worth anything at all, then?Europe to do it as Europe?Mr Plant: It is worth something in that if you lookMr Plant: I think it depends on the circumstances ofat the eVect it would hopefully have across Europe.the case; you cannot have a one size fits all policy forWe have a situation where United Kingdom airlinesthis. My view is that where the Europeanare being disadvantaged because of monopolyCommission can bring added value throughpositions being in place in other airports in parts ofbringing its greater weight of negotiating power toEurope. Now, if the GroundHandlingDirective canbear in a particular area, then itmay be better for thehave the eVect of bringing up the level ofCommission to negotiate on behalf of all Membercompetition across Europe—States, and that is certainly the scenario we thought

was in play in relation to the US negotiations. Butequally I think it is important to recognise that in Q99 Chairman: Has that happened?other areas you need to preserve the ability to have MrPlant: I think it is beginning to happen. There area bilateral agreement negotiated by Member States diYculties in terms of how eVectively that regulationdirectly. has been implemented.

Q100 Chairman: Where? Where can you see aQ96 Chairman:Where does the line come, then?Mr Plant: Really where most value is added. If you positive advantage in the Ground Handling

Directive?look at certain countries and blocs of countries,there are areas where and, as I said, the US is one Mr Plant: I cannot give you an example of a

particular airport in Europe where it has alreadyparticular example, the Commission probably hasmore chance of getting a deal working collectively. been implemented. We could perhaps look at that

and come back to you; I do not have the informationBringing together the positions of all the MemberStates of the European Union is something that is a to hand, but the spirit of the regulation is in the right

lines. The reason it had little eVect in the Unitednegotiating chip with the US, but it really dependspartly on whether or not a bilateral agreement can Kingdom is we have already got there.



5 May 2004 Sir Roy McNulty, Mr John Arscott, and Mr Alex Plant

Q101 Chairman: I am interested in this concept of got anywhere. The US is a particularly toughnegotiator, and we thought that bringing theaviation as being a spiritual subject. I know the

Commission is talking about what it calls Commission in would give you the best chance ofgetting a truly liberalising deal which is what we had“horizontal” negotiation, which I assume means

negotiating lying down, but could you go away and been trying to achieve. So the conclusion was reallybased on looking at the position of the country wethink hard about a single place where you could

demonstrate that the Ground Handling Directive had been negotiating with, in this case the US, andcomparing our chances of success on our own ashas produced a positive result, and let us have that

in writing? opposed to the chances of success if we were goingas a bloc, and in our view there was a better chanceMr Plant: Certainly.of success in going as a bloc.

Q102 Chairman: Does the Commission want toincrease its control of slot allocation? Q107 Mr Donohoe: But is it not the case that aMrPlant: I think the Commission’s position on slots number of Member States at present haveis one where it has asserted it has competence over negotiated a better deal than we have, and if we wereslot allocation issues, and clearly the work it has to go into that set of negotiations and agree thebeen doing on the technical amendments that have lowest common denominator instead of the mediumjust come to pass over the last few months, and or the upper quartile, we would be in a problemindeed looking at a more radical change which will situation handing away something for nothing instart later this year, shows its interest in this area, so return?it is an area where the Commission sees it has a role, Mr Plant: I agree, that is a clear risk, and thequite clearly. mandate the Commission were given was very

clear—that what they had to be negotiating was adeal that was not that lowest common denominatorQ103 Chairman: You say that it shows some desirebut was a radical liberalising deal which would bringto increase their regulatory control of slots?benefits to the EU as a whole, and certainly that isMr Plant: Yes.the position we had been trying to take in givingadvice to the Commission and to the Government,Q104Chairman:But theUnitedKingdom and otherand our position in the negotiations thus far is thatlike-minded states have been successful in resistingwe must not slip back to that lowest commonthe change—and this is secondary trading in slots—denominator position but instead ensure thatso would it be beneficial to the United Kingdom if,anything we get is balanced, and takes us towards ain fact, this was to be taken over by the Commission?liberalised future.Mr Plant: Well, the Commission already have

control of it. The additional regulatory control wewere trying to block was their attempt to outlaw the Q108 Mr Donohoe: In any of the negotiations thatexisting grey market in slots that exist, which we in go on, in terms of Member States continuingthe CAA and colleagues in government found very negotiations with other countries, what is the dangerodd if the ultimate goal was to introduce open in these agreements of Member State findingsecondary trading. themselves in the position where they are invalid;

that the agreement have been rejected by theCommission?Q105 Chairman: Contradictory?Mr Plant: That is quite a diYcult area because thereMr Plant: Indeed, yes. So that was something wehas been real uncertainty over the last year or so,opposed, but I think it would be sensible to look tofollowing the European Court’s judgment on thethe future onwhere wemight gowith this because weOpen Skies cases. There has been a period when wewere able to head that oV which is good news, andare operating under a draft regulation, so quitethe recent messages coming out from thewhere the dividing line is between what a MemberCommission are that they may be in the light of theState can do bilaterally, legitimately, as it were, andreport they commissioned from the consultantswhat the Commission might consider to beNERA, moving towards a position where theysomehow contrary to common transport policy haswould actually be changing the regulation to be surebeen an area of doubt, and it is something that hasthat secondary tradingwas, in fact, a lotmore clearlybeen problematic over the last year. A newacceptable–regulation is about to come out. I have not yet seenChairman: That is an even more fascinating subject.it but I understand it is soon to be released. We hopeWe will be wanting to ask you about that.that this will provide a greater amount of clarity, andhopefully also recognise the fact thatMember StatesQ106 Mr Donohoe: How do you come to theshould be allowed to pursue bilateral routes to agreeconclusion that the negotiations that are about totheir air services agreements with third countries, astake place between the US and Europe are bestlong as that does not somehow get in the way of asuited to being negotiated by the Commission andwider deal.not by individual states?

Mr Plant: I think really the conclusion we came towas partly judged on the fact that we had had a long Q109 Mr Donohoe: With all these individual

countries there are companies who have givenperiod of time where we had been trying to negotiatea more liberal agreement with the US directly, evidence that suggests they are frustrated with the

whole process. There is also the question of alwaysUnited Kingdom-US, for many years and had not




running oV to court which suggests that there is a Q115MrDonohoe:But you suggest in your evidencethat the Commission might seek sole competence tocharter for lawyers to make a few bob—at the end of

every process there seems to be a lawyer. But in negotiate Air Service Agreements at some point.Mr Plant: Yes, and in the long term that may be theterms of the CAA and its involvement with the

individual airlines or, for that matter, any other case. If the situation occurred that the Commissionwas able to agree with the US a genuinely radicalinterested party, what indication, if any, are you

getting that you are likely to end up in court more liberalising deal, that I think would be a major step,and what you might start to see then is the extensionfrequently than is the case now, and who bears the

burden of the cost of that? of the Commission taking on negotiations with blocsof countries—Australia, Singapore, New Zealand—Mr Plant: Certainly there is a possibility that there

may be more legal proceedings about the exact in addition to the peripheral EU countries, andultimately you might end up in a scenario where thelegality of a bilateral deal because of this issue of

mixed competence which has been established by the Commission can say, “We are at the point nowwhere we are close to completing a globalcourt ruling. Presumably you are imagining a

situation where a legal proceeding was taken against liberalisation; there are a few outliers left but we willtake those on”, so in the long term we may go there,a Member State for concluding a deal that the

Commission thought was not in accordance with the but that is some way oV.position as set out by the European Court of Justice(ECJ). I am really not clear as to where the cost Q116 Chairman: Has anybody ever done a costwould lie. I presume it would be the government of benefit of any of this, apart from the fact thata Member State defending the action against a presumably whoever is in charge of that divisionprosecution by the European Commission. contemplates a small increase in civil servants of

about 2 or 3,000%?Mr Plant: Do you mean for the Commission?Q110 Chairman: Have you seen this regulation in

draft?Mr Plant: I have not. There is an existing draft Q117 Chairman: Yes.regulation which people have been operating under, MrPlant: I do not know the answer to that question.but there is a further version which I have not seenwhich hopefully, once in force, will clarify some of Q118Chairman:The last timewe had thembefore usthese areas of doubt as to what Member States can they were very endearing and polite but they knewand cannot do. nothing about aviation at all. They were quite

honest.Mr Plant:We have sought to help them to improveQ111 Mr Donohoe: In order to avoid all these legaltheir knowledge by seconding one of our own intochallenges, is it more probable that in the future allthe negotiating team in the US.of this will be handed carte blanche to the

Community; that Member States will not in anycircumstances be able to do any negotiation of any Q119Chairman:And how successful have you been?form, and will be in a situation where we are relying Are you part of the negotiating team?on the Community to bring forward any agreement Mr Plant: The core negotiating team itself is threeof any nature. members of the European Commission.Mr Plant: I do not think that is the case. I think thatthe Commission recognise that it would be just Q120 Chairman: So you are not part of theimpractical for them to take on all air servicing negotiating team. Would you have been if it hadnegotiations on behalf of Member States. There are been a bilateral between the United Kingdom andsome 1500 or so of them. the United States?

Mr Plant: Had it been a bilateral between the UKand the US, yes.Q112 Chairman:What makes you think that?

Mr Plant: That the Commission recognises theimpracticality of it? Q121 Chairman: So your experience and your

evidence would have been part of the negotiation?Mr Plant: That is correct.Q113 Chairman: Yes?

Mr Plant: Partly from discussions with theQ122 Chairman: But you are endeavouring to trainCommission oYcials themselves. They do not seempeople who are neither experienced nor have anyto my mind at least to have ambition to take over allpracticable experience of that kind of negotiation?bilateral negotiations, at least at this stage. I thinkMr Plant:Well, we have, as I said, seconded one ofthey have ambition to extend their competence inour CAA staV.certain areas but not to the extent of negotiating,

say, the Dutch bilateral with Swaziland—Q123 Chairman: Someone you do not like,presumably?Q114 Chairman: But if they want to take over, whyMr Plant: He is a very nice chap indeed.should they not start negotiating one particular set

of Air Service Agreements?MrPlant: Partly because I do not think that they see Q124 Chairman: I did not say he was not.

Mr Plant: I like him very much, and he is a memberthat would be a sensible way forward. I think theysee that as well. of the negotiating team. One of three.




Q125 Chairman: He actually sits at the table? Sir Roy McNulty: I think that possibility remainsopen. When the European Aviation Safety AgencyMr Plant: Yes.(EASA) was set up we sent them quite a long list ofseveral hundred additional special requirements thatQ126 Mr Donohoe: Will that continue as itwe felt were valid and should be considered by theenlarges itself?European Aviation Safety Agency (EASA), andMr Plant:He is on a four year secondment and, as Ithose special requirements have remained in place.understand it, the plan is to keep him on the USThe European Aviation Safety Agency (EASA)negotiations as his main task.have now begun to review those and the initialindication is that, where we have a good technicalQ127 Chairman: But he is not representing you, of case, they will accept that these special requirementscourse? He is not wearing a CAA hat. should be added and should be applied acrossMr Plant: No. He is a detached national expert. Europe.

Q128 Chairman: He is a nebulous international Q133Miss McIntosh: So where is the single market?expert. There is a particular situation which I think we areMrPlant: I’m not sure he is nebulous, but that is not all familiar with of Ryanair flying into a particularthe point. The point is that he brings with him a good United Kingdom airport but registering its aircraftknowledge of international aviation negotiations. in Ireland. Will that situation, to your view, beChairman: He will not last long! dealt with?Sir Roy McNulty: I think the single market will

Q129 Miss McIntosh: Just for information, was it evolve at a common level of standards, and thethe Maastricht Treaty which amended the original situation I described earlier is one where we areprovisions of your own treaty with regard to seeking agreement from the European AviationCommon Transport Policy? Safety Agency (EASA) that some particular thingsSir RoyMcNulty: I do not know the answer to that. that were peculiar to the United Kingdom will be

applied everywhere. So the standards will be thesame through the surveillance process that theQ130 Chairman: This is the result of a court case inEuropean Aviation Safety Agency (EASA) has, andthe European Court of Justice, is it not?by audited inspection of the way things are done inMr Plant: That is correct.each country. I think that is the second part ofChairman: It is an extension which the Commissionmaking sure that similar standards are appliedhas taken upon itself and it is precisely this sort ofsimilarly everywhere, but it will takemaybe ten yearsEuropean creep that we are investigating. It is not into cover the whole spectrum of aviation safety. Theythe Maastricht—are starting primarily with aircraft certification;Miss McIntosh: I think you will find it was theeventually areas like personnel licensing, airportsMaastricht Treaty. It was 1992—and air traYc control will be covered, but that isChairman: This particular thing was not written in.probably 8–10 years hence.They have interpreted it.

Q134 Miss McIntosh: In terms of manpower doesQ131 Miss McIntosh: Can I ask you about thethe European Aviation Safety Agency involve theEuropean Aviation Safety Agency? Could you tellsame number of oYcials that was involved in thethe Committee what the benefits will be in terms ofJAA, or increasing?implementation over its predecessor, the JAA?Sir Roy McNulty: No. In the European AviationSir Roy McNulty: Our expectation is that it willSafety Agency itself there are currently 50 peopleprovide much more uniform implementation ofand the published plan at the moment is to go tosafety rules across Europe. For many years throughabout 200 people. The best estimate of the numberthe Joint AviationAuthorities we have had commonof people engaged in safety regulation throughoutaviation standards within the main part of Europe,Europe is about 6,000, so all that the Europeanbut the problem was that it was a voluntaryAviation Safety Agency plans to do at the momentarrangement, and there is no doubt that theis to set the standards and to provide an audit of thestandards of implementation of those commonlyimplementation of those standards, but the day-to-agreed rules has varied enormously.With the settingday implementation and surveillance throughout allup of the European Aviation Safety Agencythose countries will be done by the national aviation(EASA), with the legal muscle of the Europeanauthorities as at present.Commission behind it, I think we will find that

implementation will become much more uniformand we will be much closer to the level playing field Q135 Miss McIntosh:Would you specify which bitswhich I think is the aim that United Kingdom you believe are best dealt with by the nationalaviation has in this area. authorities?

Sir Roy McNulty: I think the surveillance day-to-day on the ground, and making sure that the rulesQ132 Miss McIntosh: If an aircraft is given an

internationally accepted certification standard, will that have been agreed are applied properly in eachcompany that is operating, be it an airport or airlineyou insist in future that special conditions are added

on to meet a specific British civil aviation or whatever; and that the personnel licensing is doneto the agreed standards. I think that is the split. Theairworthiness requirement?




rules are set centrally; the application of those rules boundaries. You could have larger, more compositeareas managed by somebody. If you do that, thenis largely monitored nationally, subject to audit by

the European Aviation Safety Agency. you cannot depend solely on national regulatoryauthorities, either economic, safety or otherwise;you have to have some common way of regulatingQ136 Mrs Ellman: How are air traYc managemententities like that.systems likely to change in the future?

Sir Roy McNulty: That is very hard to say today.What the Single European Sky provides for is a Q140 Mrs Ellman: So that is what you meant?policy direction towards interoperability, but could Sir Roy McNulty: Yes. An example of that is theI invite John Arscott to speak on this? Maastricht control area which stretches acrossMr Arscott: The interoperability mandate given to Germany, Holland and Belgium. They have anEurocontrol to produce a draft EU regulation is the arrangement, albeit specific to that area, to handlebasis upon which there should be greater things in common in a regulatory sense. I think if thecommonality in equipment standards and Single European Sky is successful and that kind ofinteroperability across the whole of Europe. It is common management of air traYc areas comes toearly days; we are involved in the setting up of the pass, there will be a greater need to have commonimplementation rules, and clearly National Air approaches to economic regulation, safetyTraYc Services (NATS) are involvedwith us.We are regulation, and airspace management.hopeful that we will get some sensible standardswhich will improve the interoperability, which

Q141Mrs Ellman: So how would you see the role ofcurrently is really quite limited.the Civil Aviation Authority changing?Sir Roy McNulty: I think, as is beginning to happenQ137 Mrs Ellman: What about regulation of thewith the European Aviation Safety Agency, therenew system?will be a redefinition of what we do. There will beMr Arscott: As you know, Eurocontrol has been atsome things we do at present which will be donethis for about 30 odd years with onlymodest success,centrally in Europe, but a lot of the detailedand therefore what Eurocontrol has not been able toimplementation will remain with the nationaldo is enforce the rules that, by consensus, they haveauthorities.got from the Member States. What the European

Union and the Commission brings to this are thosepowers of enforcement so we are hopeful that, Q142 Mrs Ellman: Could you indicate which thingsproviding the rules are sensible and we seek to you think will move away from you?influence those to the greatest extent possible, they Sir Roy McNulty: I think already with the Singleshould be implementable and enforceable a great European Sky programme they are setting policiesdeal more quickly than has been the situation with which will be common across Europe for air traYcEurocontrol, so we are hoping that standards management in a number of senses. They probablycommon across Europe will apply. Coming to your will set some standards for interoperability andquestion about regulation, that, as Sir Roy was things like that, so our discretion and total controlsaying, is the diVerence between the rules being set of those things will no longer be here in the Unitedand the national supervisory authorities, in this case Kingdom.the CAA, enforcing them to a common standardacross the whole of Europe, and we would like to see

Q143 Mrs Ellman: So what would the role of theother states having as eVective enforcementCivil AviationAuthority be?Would it still be neededmechanisms as the CAA does.at all?Sir Roy McNulty: The role of the Civil AviationQ138 Mrs Ellman: You have written about the needAuthority will be to provide an expert input into thefor a central European body of some kind. What dodeliberations that lead to these common standards,you have in mind? You have said that future of airand then to make sure they are properly andtraYc management might be diVerent and it isoYcially applied within our own sphere of influence.possible that “national competence in this area mayMrArscott: In this whole debate one has to considerneed to be ceded to a central European body of somethe sovereignty issue and the involvement of thekind.” What would that mean?military who are excluded from the Single EuropeanMrArscott: I thinkwe are only envisaging that at theSky but have to be brought in through nationalrule setting level, if I understand the point correctly.arrangements, and that is what the governmentshave agreed. Clearly a body like the CAA is ideally

Q139 Chairman: It says, “Some form of centralised placed to bring those interests of all air space usersbody, either within the EC or as an independent to bear and to take them forward into the Europeanregulatory agency set up by the EC, may be needed forum as a single activity.to carry out economic regulation of air navigationservice providers”.Sir Roy McNulty: I think that is pointing at the fact Q144 Chairman: When these things like

administrative arrangements, control of airspacethat one of the concepts within the Single EuropeanSky is the concept of functional blocks of airspace, and its provision, and all aspects of interoperability

move away from you, will you become a muchthe idea being that airspace can be organised andmanaged not solely aligned with national smaller organisation?




Sir Roy McNulty: I would expect so, yes. ownership rules which currently restrict EUownership of airlines in theUS. Indeed that has beenpart of the press releases that the Commission haveQ145 Chairman: And you would expect, forput out at the end of each round of negotiations. So,example, air traYc to be controlled not by you butthere is a risk there and it is a fear understandablyby some European institution?and one we must guard against, but I have not seenSir Roy McNulty: Not in so many words. As I wasanything from the Commission that says they aretrying to explain earlier, I think there will be agoing to accept the current US deal.division of activity between rules set centrally and

local implementation, so I think we will retain adegree of influence but not the total control of these Q150Mr Stringer: “Or” is a huge word in that sense.matters that we have had heretofore. Are you saying that the Commission are likely to

accept either a change in ownership rules, whichwould allow European operators to own more ofQ146 Chairman: For example, are the CAA safetyAmerican airlines, or freedom to supply within theregulations accepted in the European AviationUS but not both?Safety Agency (EASA) regime?Mr Plant: I think at the moment the US have saidSir Roy McNulty: We are comfortable so far withthey would not accept either.what we have seen the European Aviation Safety

Agency (EASA) coming up with. Largely they haveaccepted the standards and rules that had previously Q151 Mr Stringer: We understand the Unitedbeen set by the JAA. We are satisfied with the States’ position, but what is the Europeanregulations they have so far issued, but so far they Commission’s position and the CAA’s position inhave only begun their task. As I said, it will be relation to that?probably 8–10 years before they cover the whole of Mr Plant: Looking at the European Commission’saviation. position, clearly there is an element of diYculty

because they are in the middle of a negotiation sobeing very hard-line about what they would orQ147 Mr Stringer: Can we go back to negotiationswould not livewith is something they have been keenwith the United States, because I am slightly puzzlednot to do, but their statements have said there musthaving listened to Virgin and British Airways. Theybe something that improves market access for thewere very unhappy about what the EuropeanEU. The CAA view has been that either there has toCommission were prepared to accept in terms of thebe something like freedom to fly within the US, theagreement between the United States and thesort of cabotage rights that we have talked about, orEuropean Commission, yet you seem to be willing tothere has to be a shift in ownership and control rules.accept it. Should you not, in your role as the CAA,The CAA view has been that, if you are going to getbe saying very loudly to the European Commissiona liberalised deal with the US, it is unlikely you willthat what they are doing is not acceptable?get everything in one go and it probably needs to beMr Plant: I have not heard anybody from thea phased deal. But what will be crucial is for that firstCommission who says they are prepared to acceptphase to be a big enough step to represent a balancedthe sort of deal the United States have outlined. Ideal, one which is good news for United Kingdomhave not heard that from them so that, I think isand European airlines. That has to mean the USunfair. In fact, what the Commission have said, andgivingmore than they are prepared to at themomentindeed Madame de Palacio has said publicly on thisand, if they do not, the CAA view is that we shouldissue, is that the current deal oVered by theUS is justnot accept a deal.not good enough.

Q152 Mr Stringer: So we would, or you would, beQ148 Mr Stringer: So you do not think they areprepared to accept an asymmetric deal in which thetrying to rush to come to a conclusion on the deal?Americans would own a larger chunk of EuropeanMr Plant: I hope not. It is a risk that we in the CAAairlines and the European airlines could ownhave identified, andwe have been saying very loudly,American airlines, with freedom to fly in bothas have many members of the Special Committee ofplaces?Member States that advises the CommissionMr Plant: We have not considered something asnegotiating team, that rushing to an early deal woulddetailed as that.be short-sighted and harmful to the interests of

United Kingdom aviation and EU aviation. What ismore important is to get a good deal rather than an Q153 Mr Stringer:With respect, that is not a detail.early deal. Those are the two fundamental issues in the

negotiation.Mr Plant:What I think we would be wanting to seeQ149MrStringer:Andwhat response have you had,

because our other witnesses have not had that is a balanced deal. To my mind that means there hasto be some give from the US, and to my mind that isimpression?

Mr Plant:As I said before, the Commission seem to more likely to be on ownership. I think the cabotageissue is more diYcult and less likely to be deliveredbe keen to try to keep the negotiation going forward

but they recognise the point we have made. They because of the political situation in the US. Onownership there is more potential for the US tohave said to the US that there has to be something

additional on market access, either through move, and I have not been taking a position where Iwould countenance an unbalanced deal onsomething like cabotage or through a change on




ownership. I have been imagining something which Mr Plant: Yes, as indeed would a move from 25 toallows ownership restrictions to be lifted on a 49% which they are currently tabling, and that is areciprocal basis. Currently the US has a 25% foreign diYcult hurdle, but I think it is important that we doownership limit and the EU 49%. 51% both ways not sign up to anything until we are clear that a realwould be an excellent result because it would be a change in market access has been delivered.first step towards a fully liberal arrangementbetween the EU and the US.

Q159 Chairman: Precisely. In other words, we mustnot give anything away until we know what we areQ154Mr Stringer: I am still not sure, so I will ask thegetting.question one last time. Would you be willing toMr Plant: I agree.accept diVerent ownership regulations for

European/British owned businesses in the UnitedStates than American businesses have here, diVerent Q160 Mr Stringer: Sir Roy, last time you were hererights, or diVerent rights for cabotage between the you sent us a note explaining that your costs asEuropean Union and United States? regulator to the aviation business have gone upMr Plant: It would have to be considered in the higher than the rate of inflation. Is not thecontext of what the total deal was, and the reason I conclusionwe can draw fromMrs Ellman’s questionam being hesitant is I am trying to think through that not only have your costs been going up forexactly what it might mean. What strikes me as regulation in this country, but there will be an extrapossible is that the US could say, “We are prepared cost of your European regulation on top of that, andto go to 51% ownership” which would allow what are you going to do to cut those costs?European operators to set up an airline in the US, Sir Roy McNulty: I think the discussion we had lastfor example, or take over an existing US airline. But time related to a particular aspect of our regulationthe US airlines already have, as you will be aware, which is the regulation of airports, and that is veryvery considerable rights to fly within Europe on a much governed by the cycle in which we do thekind of cabotage basis, so that is an existing regulatory reviews. At times it is lower, and at timesimbalance. I could probably think of something like it is higher when there is a lot of activity. I think thethat where the US opening up their ownership CAA’s costs overall have been coming down in realrestrictions and maintaining their ability to fly terms. There is an issue to which we do not yet knowwithin Europe, so there was still an imbalance of the answer as to the eVect of something like thesorts as the EU would not have cabotage rights in European Aviation Safety Agency (EASA), wherethe US. But, crucially, what would be diVerent you are creating at a European level a new layer ofwould be that EU companies would have a way of regulation and the national aviation authorities stillaccessing the US domestic market which currently is have responsibilities to exercise. The CAA is uniquecompletely closed oV to them. They would have to within Europe in that we recover all our costs fromdo it in a particular way; they would have to go and the industry, so we have a very active dialogue goingbuy up an airline or set up a subsidiary or something, on within the industry. I think the airlinebut it is a way in and I could probably live with representatives earlier referred to a joint reviewsomething like that even though there was still an

which we are undertaking with them as to what willimbalance.be the eVect of the European Aviation SafetyAgency (EASA), when will it happen, and what

Q155 Chairman: That would, of course, require a should the CAA be doing to reduce its costs in thatchange in legislation. situation. Many of the answers to that are notMrPlant:Yes, it would, and that is themost diYcult available today because there is not enormouselement of this and, as the US negotiators spend no clarity as to how fast the European Aviation Safetylittle time telling us, they have to get Congress to Agency will evolve, but we are conscious of the needagree and that is a very diYcult process.

to keep our costs to the industry to a minimum. Weshare a lot of data with the industry as to what our

Q156 Chairman: And there is absolutely no costs are, and we will continue to work at that toindicationwhatsoever of any change in the situation. provide the best value for money that we can.MrPlant:That is probably right.We carry on tryingto lobby and speak to Congress—

Q161 Mr Stringer: The previous witnesses we hadbefore us today all identified a prejudice againstQ157 Chairman: But you will understand what I amaviation within the European Commission. They dosaying to you, will you not? You are saying it isnot believe they have a level playing field comparedsimply a 2% in the negotiating procedure—to inland waterways or rail. Do you agree?Mr Plant: It is a huge diVerence.Sir RoyMcNulty: I think we can detect that at timesand, frankly, even within this country as well. SomeQ158 Chairman: It is an enormous change andpeople have prejudices as to which kind of transportAmerica is maintaining, from the American point ofis better than others. Because aviation is relativelyview very successfully, protectionist policies thatsuccessful, both economically and in terms ofmean that would require a legislative changegrowth, some people see it as a fair target to receivethrough both houses, who in the past have made ittheir pet schemes. I would agree with what one of thevery clear that they have no intention of doing

anything of the kind. airline representatives earlier said, that we would




like a level playing field both within Europe as Q165 Clive EVord:What about this issue in terms ofEU legislation and how that has an impact?between diVerent modes of transport and, indeed,Sir Roy McNulty: The consultation beingwithin this country.undertaken at the moment is within the current EUframework where there is the opportunity to

Q162 Mr Stringer: And what are you doing to try introduce public service obligations. It is widely usedand achieve that? in some countries like France; less widely used inSir Roy McNulty: We represent as best we can other countries.within Europe the views we have concerning thedevelopment of the aviation sector and, as has been Q166 Clive EVord: With the potential delay of tenmentioned several times in this session, the years before there is a new runway at one ofEuropeanCommission has a lot of catch-up learning London’s airports, will the CAA use this regulatoryto do on aviation matters. Similarly within this oversight to ensure the United Kingdom is able tocountry we express our views as best we can, both to maintain a balanced network, and could the EUthe department with which we principally deal and trans-European network programme be used toalso more broadly and publicly, that if there are achieve this?issues which are common to diVerent transport Sir RoyMcNulty: I am not aware of anything in themodes they should be dealt with commonly. trans-European network programme that is going to

impact on that issue within 10 years. I think the onlyarea where it is likely to come into play is within theQ163 Mr Stringer:You have said that when there iscontext of the Single European Sky and perhaps thea European regulatory framework you trust anddevelopment of common air traYc control systems.hope that that will be implemented evenlyThere is some talk about trans-European networkthroughout the 25 countries of the EuropeanUnion.funding being used to assist that but that is the onlyWhy should aviation be diVerent from virtuallycase I know of.every other area of regulatory activity within the

EU?Q167 Clive EVord: What about in the moreSir Roy McNulty: I accept that as partly rhetorical.congested areas around Heathrow and Gatwick?All I can say is that I think we have a reasonableSir Roy McNulty: I am not aware of any discussionhope that it will be better than what we have at thein that context. In so far as there is a solution in themoment, because while a lot of good work has beennear term to air traYc control capacity in the southdone by the JAA to set common standards, in aeast, it will come through the investment and eVortsnumber of countries the application andwithin National Air TraYc Services (NATS) toimplementation of those standards leaves a lot to bebolster their capacity in the next 5–10 years.desired—a great deal to be desired. I think the clear

intention of the European Aviation Safety AgencyQ168Clive EVord:And is there any scope for the EU(EASA) is to ensure not only common rules but alsoto intervene in your charging to BAA in terms of themuch more common implementation; there will bepressure on you to accelerate their investmentan audit mechanismwhich, from initial signs, will beprogramme?an eVective one to check how implementation isSir Roy McNulty: That certainly has not been thegoing, so we will have something to bolstercase to date. Obviously the investment programmeimplementation which we have never had before.that BAA have at the moment in Terminal 5 is beingfunded through the charges levels we set at the

Q164 Clive EVord: I am tempted to ask you what we moment. As and when they come forward withcan do to improve theCommission because each and projects to expand capacity at Stansted and/or

Heathrow, then obviously the charges we set will beevery one of our witness has questioned the breadthset at levels that allow that investment to be paid for.of knowledge that the Commission has in this area,

but I think I will pass on that and leave it on the tableas a rhetorical question!What is theCAAviewof the Q169 Clive EVord: And that will be done purely onapplication of public service obligations under EU the basis of your judgment?legislation to protect United Kingdom regional Sir Roy McNulty: That can be done within theroutes to Heathrow and Gatwick? existing regulatory regime which we operate under

statutory provisions here. It is not a EuropeanSir Roy McNulty: As you know, the Department isscheme.in consultation on this. The White Paper said that

the Department would look afresh at the use andapplication of public service obligations (PSOs) Q170 Chairman: Sir Roy, you said that publicwithin the United Kingdom. We in the CAA would service obligations are a bit of a last resort. Have you

seen the advice that has been given to government intend to see public service obligations as a bit of a lastrelation to charging at airports by the Nationalresort but at the same time we recognise that leavingEconomic Research Association?things open to the commercial market does notSir Roy McNulty: No, I have not seen that.provide all the answers.We will submit our evidence

to the Department as part of this consultation, andhopefully by later this year the Government will Q171 Chairman: It is quite important because it ishave arrived at some greater clarity on the way suggesting that European airports are under-used,

and one way in which you can increase the use offorward.




airports is to develop a market slot, and presumably Mr Plant: There was such an amount paid for slotsat Heathrow. If you had a more fluid, properallow people simply to bid and the highest biddersecondary market, part of that value may be drivenwill then get the slots they want at the airports theydown further compare to the current quasi marketwant. That must have quite an eVect, must it not?we have in place.The consultants are reporting to the European

Union to the eVect that any European airports couldbe significantly reorganised on the basis of that kind Q178 Chairman: You mean they might only haveof open slot market? paid £5 million instead of £10?Sir Roy McNulty: As I say, I have not seen it. MrPlant: Possibly. Once you have amarket in place

you have a way of better dealing with the beginningposition. But to come to your end position, as Sir

Q172 Chairman: Have you seen it, Mr Plant? Roy said, we recognise that in not every case wouldMr Plant: I have seen the NERA report. I have not it deliver everything you want, and that is why youread it all, I must admit, because it is quite long, but might want to look at whether you can use publicI have read some of it and have heard a presentation service obligations in certain circumstances.by one of the authors which explained some of theheadline messages. Q179 Chairman:Would you be discussing anything

like that with the Commissionwho, after all, have noexperience of this at all, do they?Q173 Chairman: And what would be your view ofMrPlant:We have rather more been discussing withthat report and its conclusion?the Government about how the forthcomingMr Plant: Certainly the position that the CAA haveconsultation will be framed, and we will be puttingtaken on the desirability of having a secondaryour views into that consultation when it comes out.trading market in slots is one that the NERA report

seems to broadly support, so I would to that extentQ180 Chairman: Do not be coy! It will becomebe in agreement with that element of it. Where youpublic. Would you be of the opinion that publichave a scarce resource, as at Heathrow, having aservice obligations should be written in, or wouldfluid secondary market would seem a better way ofyou be of the opinion that trading in slots?allocating—Mr Plant: I think my opinion would be that publicservice obligations can be a necessary step in certain

Q174 Chairman: And therefore, in general, you circumstances, but you need to use them quitewould agree with the idea that only larger planes carefully otherwise you may have a proliferation ofwhich are fully booked and are capable of doing long public service obligations which can have somehaul trips would be preferable, because that would hidden costs on the eYcient operation of airports. So

yes, in certain circumstances.automatically of course impact on any regional airflight, would it not, and Sir Roy has just told us thathe thinks public service agreements are bit of a last Q181 Chairman: What is the CAA view on theresort. introduction of the trans-Atlantic common

aviation area?Mr Plant: There would be an impact. Our startingMr Plant: It is something we would supportpoint would be to say that where you have a scarcestrongly.resort like that you need some way of trying to see

how you can most eYciently use it, and the startingpoint would be to say— Q182Chairman:Andwould it cover the whole of the

EU and the USA?Mr Plant:Yes, that would be the aim. It would be a

Q175 Chairman: I know where you are starting single market, such as we have in Europe, butfrom. I am only interested in where we are going to bringing the US into that single market.finish up.Mr Plant: Clearly, if you have a market in slots it Q183 Chairman: Since decisions can be taken by adoes not necessarily deliver everything you might qualified majority vote, how would you protect thewant. interests of the British?

Mr Plant: There is a certain legal complexity to anyagreement because it would be a mixed agreement.Q176 Chairman: I think we could say that, after 18Some elements of it are the Commission’syears of Conservative transport policy.competence and some elements remain withinMr Plant: There may be some areas where thenational competence, as I understand it.market does not deliver you what may be a desirable

outcome, but it is a good place to begin because itQ184 Chairman:Given that life is never simple, howallows those who value the slots most to use them socan you protect the interests of the British people,you get a more eYcient usage at the starting point,the consumer and the British airlines?but it does not necessarily give you everything youMr Plant: Absolutely. Firstly, the best way ofwant.ensuring that the United Kingdom’s interests as awhole are protected is to engage vigorously with the

Q177 Chairman: Would you agree that QANTAS, Commission through the Special Committee, whichwe attend along with our colleagues from thefor example, paid £10million recently for their slots?




Department of Transport, and recognising the fact Q190 Chairman:What happens if they say “No”?Sir RoyMcNulty: I think if we havemade a properlythat the United Kingdom has 40% of the total EU/reasoned technical case they will accept it. That soUS market, I think the UK has a strong voice infar is the indication from the cases they have so farthose discussions.reviewed; they will accept it.

Q185 Chairman: We did control the whole of the Q191 Chairman: You have a Greek belief in logic.fishing, but it did not seem to produce very good Sir Roy McNulty: We have to get by somehow,results. Madam Chairman.Mr Plant: I cannot comment on the success orotherwise of the fishing scenario. Q192 Chairman: I am always interested in a man

who has been as long in public service as you have,who still retains his illusions! Can I ask you this,Q186 Chairman: So you are playing an active role,finally? We are aware of at least three diVerenteither through the Safety Regulation Group or theincidents, and I will not name them now, whereDirectorate for Airspace Policy in developing acommercial arrangements that would have been inSingle European Sky air traYc control, are you?place already had it simply been a matter of BritishSir Roy McNulty: Very much so, yes.control are being held up by the fact that theCommission has given no decisions. Are you awareof particular commercial instances where BritishQ187 Chairman: How many people do you haveoperators are being disadvantaged by the fact thatworking on that?they are awaiting decisions at European level?Mr Arscott: Not continually but about 20 or 25.Mr Plant: One that springs to mind is the HongKong deal, on which I was a member of the

Q188 Chairman: What percentage of the work at negotiating team, and we negotiated a provisionalCAA these days is directly connectedwith European deal which was held in abeyance until theUnion issues? Commission had ratified it, but that has not yetMr Arscott: In the Directorate of Airspace Policy I come to pass.would have thought about 20%.

Q193 Chairman: There are at least two others. Isthere any evidence of any cost benefit analysis of anyQ189 Chairman: Finally, if the CAA accept thatof these absurd changes—these fantasticallyaircraft have an internationally acceptedunnecessary changes?certification standard, are going to insist on theMr Plant: I have not seen a cost benefit analysis, no.special conditions to meet British civil airworthiness

requirements? Q194 Chairman: Is there anyone either amongst theSir Roy McNulty: Where we think there is a valid operators or in the industry who is ever going to docase to be made, we will put to the European a calculation of what these changes are costing?Aviation Safety Agency that they should encompass Sir Roy McNulty: I have not yet seen anybodyin their regulations some of the special requirements addressing their mind to that.we have. We understand that a number of othernations, including the French and the Germans, Q195 Chairman: It is nice to be rich! Thank you,have put forward similar special requirements and gentlemen. You have been very helpful and we are,the European Aviation Safety Agency will consider as always, extraordinarily grateful and delighted tothose. So that if we think there is something needed see you.to maintain our safety standards, we will seek to get Sir Roy McNulty: It is, as ever, our pleasure,

Chairman.the EuropeanAviation Safety Agency to adopt that.




Members present


Mr JeVrey M. Donaldson Mrs Louise EllmanMr Brian H. Donohoe Miss Anne McIntoshClive EVord Mr Graham Stringer

Witnesses: Mr Roger King, Chief Executive, and Ms Karen Dee, Director of Policy, Road HaulageAssociation, examined.

Chairman: Good afternoon. If you will forgive us, be a very good reason. Bans of course can causeproblems where, for example, perishable goods areyou know our rules, we have a little housekeepinginvolved, in addition concerns about security ofservice to perform before we start. Members havingvehicles, loads and drivers forced to stop for longan interest to declare.periods of time waiting for the ban to be lifted andClive EVord: I am a member of the Transport andtraYc to be resumed. So if we are looking for anGeneral Workers’ Union.integrated road transport system throughoutMiss McIntosh: I am a former MEP and I have anEurope, Member States having various views oninterest in the RAC.weekend bans is not the way to go about it and theChairman: Oh, well, I also am a former MEP. I didCommission needs to ensure that it has controlnot think it was of interest to anybody. ASLEF andover such issues. In terms of drivers’ hours, that isa former MEP, member of the parish council,clearly a safety issue and therefore is a case formember of the Totnes Borough Council. I mean, ifagreement at EU level. The rules are complex,we are going to declare it all, daughter of Baronessalthough fairly well understood, althoughPhillips of Fulham. Perhaps we could go on forenforcement is a diVerent matter. Enforcementsome time.throughout Europe, and I guess the arrival of theMrs Ellman: Louise Ellman, member of the10 new Member States will make this worse, is veryTransport and General Workers’ Union.imprecise, to put it bluntly, and many hauliersMr Stringer: Member of Amicus and a director ofwould be the first to admit that the UK is foremostthe Centre for Local Economic Strategies.in enforcement of drivers’ hours. If the rules are notagreed at EU level, that is the new drivers’ hours,Q196 Chairman: Thank you very much indeed. Mrit will be diYcult to check behaviour of visitingKing, may I say welcome to you. You are welldrivers. So unless we have a European system itknown within these hallowed halls in yourwould be impossible to ensure that Continentalnumerous capacities but thank you for coming thisdrivers, foreign drivers coming into this countryafternoon. Could I ask you first, for the purpose ofwere complying with the rules of operation. The bigthe record, to introduce not only yourself but yourissue for us, of course, is the Working Time Roadcolleague.Transport Directive. We maintain this is not aMr King: Yes. My name is Roger King. I am chiefsafety issue. The European Commission has said itexecutive of the Road Haulage Association andis a safety issue and therefore it overrides humanKaren Dee on my right is our director of policy.rights and everything else. We say it is not a safetyissue for the very simple reason that it excludes the

Q197 Chairman: Did you have something you self-employed. If it is a safety issue it would involvewanted to start with, Mr King? all drivers. We believe it is just as disastrous to beMr King: I think in terms of the impact of killed by an employed driver as it is a self-employedEuropean legislation we believe that the primary driver and therefore legislation should apply tofunction of the European Commission, certainly in everybody. The self-employed are due to come interms of what it is trying to legislate for throughout in 2009 unless a review in 2007 suggests that theyEurope, must aVect safety and competition and do not come in. We would say the whole thing isthose are the two areas which we think it should a nonsense. It gives us a two tier playing fieldconfine itself to. There are a number of issues between employed drivers and self-employedcurrently that the European Commission is drivers blows a hole right through the concept ofconcentrating its eVorts on which cover both those European legislation primarily motivated towardsparticular areas and if I may just draw the safety in this particular area. It also causesCommittee’s attention to issues like weekend bans, problems for competition as there are many areaswe welcome the establishment of clear principles of derogation that Member States may interpret infor Member States when they are applying a diVerent ways. We had hoped that all legislationweekend ban for the movement of goods vehicles coming from Brussels’ directives would seek tobut the proposals, which have failed to go oVer a level playing field. Obviously that is inanywhere for lack of agreement, do not force everybody’s interest.Member States to bring them in. They say that ifa Member State wants to introduce a weekend ban Q198 Chairman: What did you base that foolish

hope on?on the trans-European network system there must



19 May 2004 Mr Roger King and Ms Karen Dee

Mr King: Well, some imaginary kind of legislature trying to stop you. If at the end you think you havemissed anything, by all means raise it, but it juston the Planet Zog I think would be appropriate,

because I do not think it is happening in Brussels. seems a bit of a waste of time. I want to go backto the beginning, before we get on to some of theWhat we have got is a Working Time Directive but

there are a number of individual national detailed points that you have raised. I want to askyou something quite fundamental. Do you thinkinterpretations. Many of these we welcome, but

what it means is that we are going to end up with the European Commission is less favourabletowards the development of road freight than other15, probably 25 diVerent Working Time Directives

for mobile workers throughout Europe. For modes of transport?Mr King: We believe that, yes.instance, the reference period can be fixed or it can

be rolling depending on what the Member Statewanted. It can be 17 weeks, it can be 6 months. The Q200 Chairman: Why do you think that?night time working element can be diVerent. The Mr King: We believe that there is an over-archingcore night time working hours can be diVerent. For determination to move goods onto the railways.instance, if you are a Northern Ireland haulier the We believe that by so doing, or trying to movenight time working suggested by the UK goods onto the railways, it will relieve theGovernment is between midnight and 4.00 am. We obligation of Member States to provide enhanceddo not know what southern Ireland is going to opt road infrastructure and also to reduce levels offor. I did hear from the Irish Road Haulage congestion and therefore the necessity of having toAssociation that they are looking at 2.00 am to 6.00 provide better road infrastructure. Road chargingam. Is a Northern Ireland haulier working to the of whatever kind is the magic ingredient whichUK Working Time Directive when he goes south would enable Member States to price roadof the border or does he have to comply with the transport in such a way that railways might besouthern Irish Working Time Directive, in which attractive as an alternative.case he becomes a night worker and subject toseparate restrictions? Actually, when we questioned

Q201 Chairman: Are you taking this from yourthe European Commission on enforcement policyexperiences of dealing with the Commission directthey had no idea either. They were not aware thator is it a Government policy, or are you of thethere were diVerences of interpretation in this wayopinion that this is an indication from a committeeand they had no idea whether a British driver inlike COREPER that all governments agree thatFrance had to comply with the French Workingprecedence should be given to the railway systemTime Directive or the British Working Timeas opposed to the road system?Directive. The nearest we could get was, “Well, heMr King: I think the International Road Transporthas to comply with laws over there, driving laws,Union, of which we are a member, which has adriving hours, which are cross-Europe anyway,”substantial number of people in Brussels, takes theand we said, “Yes, you can provide evidence on theview that there is a belief that the over-archingtachograph of a driving infringement there andpolicy is to make rail more competitive comparedthen but how do you check his working time?” Hewith road. It is diYcult to do that at the momentdoes not carry that information in the cab and itgiven the cost of charging for the use of the roadis not recorded. It is recorded back at his base andsystem. A “Eurovignette”, which would set out aback at his base the UK operator would becharging regime for the trans-European roadworking according to the UK Working Timenetwork at least and possibly a large number ofDirective, not to the French, Italian, Spanish orother roads as well, is a way in which that can beany other Working Time Directive. So we are lessachieved under our belief that road transport doesthan a year away from something that is supposednot cover its social and environmental costs. Theto be uniform and not even the oYcials know quiteirony of it is that in the UK we probably comehow it is going to be. As a result competition maynearer to covering those costs than they dobe aVected, certainly in terms of self-employedelsewhere in Europe.drivers (and considerable numbers of Spanish

drivers are self-employed) where they operate in acollective group of five and are considered to be Q202 Chairman: So are you really saying that whenself-employed, although we perhaps would you ask for harmonisation you believe that isinterpret them as a company. They are obviously desirable but only if it is properly policed and it isgoing to be better oV in exploiting the opportunity genuinely accepted as being tightly drawn? Is thatof the longer hours they can work for than those what you are saying?who are covered under the employment Mr King: Yes. We believe there is ample scope forregulations. Road user charging is another big issue harmonisation, certainly on costings of roadthat is now coming to the fore that the European transport, and you will doubtless be aware of theCommission has set out some thoughts on. question over the high cost of fuel in the UK

compared with elsewhere in Europe.

Q199 Chairman: Mr King, what I think I need todo really is to stop you because I think what you Q203 Chairman: Wait a minute. Are there forms ofare doing is you are raising all the things we want harmonisation? Are you suggesting that businessesto question you on, so it would actually be just as should have common forms of taxation right the

way across the Community?sensible for us to proceed to the questions. I am not




Mr King:Well, we believe that fuel is probably one Q208 Mr Donaldson: So you would like to see theEU go further then in terms of harmonisation onof those items where there should be.this specific issue, but then are you saying youwould like less EU intervention in other areas that

Q204 Chairman: Other than fuel. Fuel we impact on road haulage?understand, but anything else? If you are calling for Mr King:We have no problems with the Europeanharmonisation, are you calling for harmonisation Commission setting safety standards and settingright the way across business overheads or are you standards for a competitive level playing field.simply saying, “Fuel is one of the important things There are obviously standards of vehicle design andand we need it to be harmonised”? construction which are obviously useful because we

live in a single transport market. The whole ofMr King: No, I think the direct operating costs, asEurope is like that. So of course we support aopposed to the indirect ones, we would want to seeharmonisation of as many areas as possible. Wheremore harmonisation on so that we would havewe have diYculty is when directives that are set outmore of a chance of a level playing field.to harmonise seek to give a great deal of derogationEmployment costs and various other things, healthand opportunities by Member States to introducecosts, pension costs, they are going to be the subjectadditional add-on taxes and benefits. That does notof Member States individual taxation, corporationdo a great deal for seeking to produce a leveltax and so on, but the basic cost of using the roads,playing field in costing.accessing the roads, burning fuel and vehicle excise

duty should be within a harmonised band. It wouldQ209 Mr Donaldson: What impact do you feel thebe absurd to think that aviation fuel was diVerentfailure of the EU to harmonise the levy on fuel hasin every country, subject to tax, because it wouldhad on the road haulage industry in Northerndistort the market. We have the same kind ofIreland?market in road transport these days.Mr King: Well, it has placed it under enormouspressure. Of course, Northern Ireland operators,

Q205 Chairman: Are there ways in which hauliers being Northern Ireland operators, will go south ofthe border and fill up. So to some extent it is thehere have a better competitive position than otherExchequer or the Treasury that is foregoing incomeEuropean Union States?from duty that it would have got had the price ofMr King:Well, we certainly have a less competitivefuel remained competitive with that in southernone as a result of high fuel costs in the UK, whichIreland. It is to the benefit of the southern Irishare considerably more than can be found anywheregovernment that large numbers of Northernelse. You have only got to see what happens inIreland hauliers will fill up south of the border.Northern Ireland, where you can see this in stark

reality compared with southern Ireland.Q210 Mr Donaldson: Are they not also registeringtheir vehicles now south of the border as well and

Q206 Chairman: Given that we have already relocating a large aspect of their operations?discussed that, are you in a better competitive Mr King: I am not aware that that is somethingposition in any other way? that has been reported back to us as being the case.Mr King: Are we in a better competitive position? Ms Dee: Not in large numbers.No, I do not believe so.

Q211 Chairman: Would you have a look at that,Mr King, and see whether you have got the

Q207 Mr Donaldson: You made reference to the statistics and just give us a short note?problem in Northern Ireland and you will be aware Mr King: Yes, certainly.of a significant problem with cross-bordersmuggling of fuel. You have made some negative Q212 Mrs Ellman: I am not very clear about yourcomments about the role of the European Union views on derogation. You seem to imply that youin undermining the road haulage industry. Do you supported that, yet when you commented on thethink the European Union has a role in terms of Working Time Directive you implied there was aharmonisation in dealing with the problems that problem with derogation, particularly in relation toarise from diVerentials in levies on fuel in terms of the new states. Could you clarify exactly whattackling the huge problem of smuggling? you mean?Mr King: I believe the European Commission has Mr King: We have a Working Time Directiveattempted to. It has set a minimum rate of fuel duty which sets out a number of objectives theand would like to see a maximum amount of fuel Commission wanted to see, the average 48 hourduty but Member States, of course, will not give up week with the maximum of 60 hours in any onetheir right of setting their own duty levels so it has week, but 48 hours average working week, notnot got very far. But the Commission is well aware driving, must be the target from 23 March nextthat some kind of harmonisation on fuel duties is year over a 17 week reference period. In thelong overdue. Now, one way around that is to look legislation it gave the option to states to selectat another system of charging that compensates for whether it would be a fixed 17 week referencefuel duty and lorry road user charging is certainly period or a rolling one. So the last 17 weeks a driver

worked you would check to see that it averaged outthe UK’s attempt to address that.




at 48 hours a week. We have actually successfully Q217 Mrs Ellman: Would you challenge thefindings of the regulatory review by thegot it up to 6 months now, as a result of the

Government conceding that it will accept a Department for Transport, which showed that theDirective would have improved safetyworkplace agreement either between trades unions

or the work people to have a six month rolling consequences?Mr King: The only thing I would say to that is thatreference period. We welcome all of that because it

takes a little bit of the sting out of the rather more we have asked the Government for evidence thatthe restriction on working hours would improverestrictive requirements of the Working Time

Directive. So to a degree we welcome that element road safety in the UK. The Night Time WorkingDirective was originally going to limit night timeof derogation. What concerns us is that the

European Commission has produced this working to 8 hours. We got it to 10 and now, as Isay, it is 12 hours if a workplace agreement can belegislation, MEPs have looked at it and the whole

ethos of the legislation is to control working hours arranged. The European Commission said it was toreduce accidents at night. We said, “Where are thebut it is almost an impossibility to do that for a

mobile worker driving a truck because nobody figures for accidents at night involving commercialvehicles?” and none are actually provided. There iscontrols the influence upon external factors like

traYc conditions, hold-ups, accidents, delays at the number of total accidents but none that showsthere is a rise of accidents because of night driving.depots. It is not something that can be controlled

in that way. We would far rather have seen further So we would question that. We would also questionthat if you are going to reduce the night timeattempts to restrict the driving hours if necessary,

because that is checkable and that is policeable, but working, which is still going to be the case, you willget more traYc on the roads at day time so anyworking time is something which is going to be very

diYcult to enforce, very diYcult to understand and saving of accident rates will be neutralised byincreased traYc flow in the day time.therefore has added considerably to the

complexities of operating a business.Chairman: Mr King, we have got lots of questions Q218 Mrs Ellman: Could you give any examples ofand you are going to have to be briefer. You can current European legislation which assisted yourbe ruder but briefer! members?

Mr King: I am thinking hard here.Ms Dee: It is diYcult to find any that actually haveQ213 Mrs Ellman: Does that mean that you areprovided benefits, I think. The weekend ban one Isupporting derogation?think would help but that does not seem to beMr King: In this case we do support it, yes. making much progress.

Q214 Mrs Ellman: Could you give me cases where Q219 Mrs Ellman: What are the things that haveyou are not supporting it then? An area where your been unhelpful, apart from the things you havemembers have suVered because of directives? mentioned?Mr King: We would not support a system that Mr King: Well, I think we have covered road userintroduced road charging which enabled a wide charging, working time, fuel duty. There are othersvariety of options for additional charges like extra that are on their way. There is a Training Directive,charges for areas of environmental sensitivity, of course, which is working its way through, alongzonal charges, regional charges, variable charges with several other directives and rules andduring the course of the day. Those would be left regulations. That will not come into eVect forto Member States to decide and that is something another two or three years, but again it places awhich worries us. huge cost burden on the industry to train people in

an industry where we do train people. They haveto be trained because—

Q215 Mrs Ellman: So does that mean thatdepending on what the issue is your view on

Q220 Chairman: What about the driving licence?derogation would change?Mr King: The driving licence in terms of photoMs Dee: I think the point is that we do not supportidentity?the Working Time Directive. We think that it

would have made more sense on safety grounds toQ221 Chairman: If there were harmonisation inconcentrate on better enforcement of drivers’terms of safety, the hours driven and the qualityhours.of driving?Mr King: Well, of course that is helpful from the

Q216 Mrs Ellman: Yes. I am asking you about point of view of having a common arrangementderogation. and we have said that we welcome anything thatMs Dee: Given that we have to have the Working encourages safety and encourages fair competition.Time Directive, then we support derogation That can only be a good thing, to have a commonbecause it gives us more flexibility in working with arrangement, although we have to express oursomething that we do not think actually is going to concerns in the case of the digital tachograph,achieve any safety benefits. So we support it which was going to usher in new opportunities.because it will make it slightly less onerous on our That is still awaiting introduction. It has been some

10 or 12 years in its gestation period, a fairly simplemembers.




straightforward first generation technology which Q226 Miss McIntosh: But you would see it as anadvantage to have the digital tachograph? Youhas now really been surpassed by improvedwould welcome that?technology.Ms Dee: Yes. I think it is a simpler system. I thinkit will bring advantages.

Q222 Chairman: What about vehiclemanufacturing standards?

Q227 Chairman: It is a simpler system but moreMr King: Common sense would say that we wanteddiYcult to change in any way?the same construction and use of regulations forMs Dee: Well, I do not know about the technicalevery country that a vehicle would go through, yes,diYculties for the manufacturers in switching over.obviously.There may be problems, I understand, in fitting thenew technology to existing vehicles.Mr King: I think we would welcome the fact thatQ223 Chairman: So you would want common typeit would be easier because the enforcementapproval?authorities would have the right equipment to readMr King: Yes.quickly whether a driver had exceeded his drivinghours and rest periods and in particular, of course,

Q224 Mrs Ellman: What has the eVect been of the with foreign drivers and trucks in the UK it woulduncertainty on digital tachograph equipment? be much easier to monitor their working envelope,Mr King: Figures will diVer on that. I think the as it were.uncertainty really lies more with the truckmanufacturers, who were expected to provide this

Q228 Miss McIntosh: Thank you. Could you telltechnology and have not got any technology tous how—it is known as cabotage—the domesticprovide, and that has caused them some concern.routes are operating at the moment, both for non-As far as our members go, it is not a big issue.British lorries and their access to our domesticWhen the changeover arrives then they willroutes and other EU countries’ domestic routes toobviously have to embrace it. Oddly enough, inBritish hauliers. Are you happy with the way it isanticipation of the digital tachograph last August operating at the moment?many companies engaged in analysing the existing Mr King: We are not happy. The evidence that we

tachograph system packed up business, so we now seem to have from our members is that the rulesfind that there is a shortage of capacity for reading are being somewhat—I will not use the wordtachographs in this country, the card system, as a “flouted” but there is very little enforcement by theresult of that. We are struggling to make up the authorities as to what actually happens and goesshortfall, but it is because of all the procrastination, on with a foreign operator in the UK, who may bedelays and chaos in Brussels which has caused a here for up to 10 days or so with 1,500 litres of fuelvery important safety factor to be put under stress. in his vehicle. He can go for 2,000 miles before he

needs to get back across the Channel. But thereseems to be growing evidence that they are oVeringQ225 Miss McIntosh: Why has it taken so long, intheir services for hire and reward whenever there isyour view, to introduce the digital tachograph if thean opportunity and members who are bidding fordecision was made in principle in 1998?work find that a Continental operator has actuallyMr King: I think there has basically been a problemoutbid them. As the vehicle works its way back toover developing the technology. It is fairlythe Channel ports it oVers a very low rate.straightforward as it is. Also, there seems to have

been a problem with finding suppliers who areQ229 Miss McIntosh: Just to understand thatprepared to design and develop the equipment. Ascompletely, what you are saying is that as aof last August, I think I am right in saying onlyconsequence of there being cheaper fuel and lowerone, a French supplier, had come forward withduty on mainland Europe they are able to undercutanything for approval and the Europeanyou and bid against you for both domestic routesCommission then felt it could not go ahead within this country and for those that British hauliersthe introduction of the system until at least thereare taking to other EU countries? Is that what youwere two suppliers approved and time wasare saying?available to allow these to be put into productionMr King: Yes, absolutely correct. You cannotand installed on new vehicles. Even now I believecompete with someone with considerably cheaperthat the arrangements made to suspend thefuel than you can buy and up and down the land.availability of the tachograph has yet to be doneCertainly in the south-east, there is a substantialby the European Parliament, has it not?number of Belgian tractor units coming into theMs Dee: There has been a letter. My understandingcountry to tow containers from ports that haveis that the Transport Commissioner wrote totaken business away from indigenous KentMember States to say that there would not be anyoperators.enforcement action taken against Member States

that did not translate the law. Similarly, I thinkthat the Transport Minister here announced to Q230 Miss McIntosh: What is the currentParliament that he would not be taking any diVerential between a litre of diesel in Belgium and

a litre of diesel here?enforcement action within the UK.




Ms Dee: About 26 pence a litre, roughly. a diVerent interpretation on some elements of theWorking Time Directive which will add to thecomplexity.

Q231 Miss McIntosh: So if the Chancellor wentahead with the projected increase in September it Q235 Mr Stringer: The Irish Governments, Iwill be even higher?

presume, have published their regulations?Mr King: Yes. Mr King: Not that I know of.

Q232 Miss McIntosh: Could I ask how your Q236 Mr Stringer: I must have misunderstood you.members are finding the recruiting of non-British, Mr King: What I said was that, for instance, weother EU drivers? have been told by the Irish Road Haulage

Association that their core night time workingMr King: That is an interesting question in thatobviously with the expansion or enlargement of the might be diVerent from ours.EU some operators have looked to recruiting eastEuropean drivers. The diYculty seems to be at the Q237 Mr Stringer: So that is something that couldmoment one of insurance. They might have the happen but we do not know it is going to happen?competency to drive a vehicle and may well have Mr King: Yes.the required driving licence but insurancecompanies appear to be somewhat reluctant to Q238 Mr Stringer: You also talked aboutallow them to jump into the cab of a right-hand enforcement or the lack of enforcement on foreigndrive UK truck and start driving over here. There drivers picking up in this country. Usually theare schemes afoot, I think, to oVer familiarisation charge is that in this country the enforcement ofcourses for would-be east European drivers coming European legislation is tougher than elsewhere. Dointo the UK but it has not proved an instant you believe it is tougher or weaker than elsewheresolution and I think the industry is still working in this country and can you give an illustration?on it. Mr King: I think in terms of the Working Time

Directive, to give the Government credit it was onour side in trying to get the self-employed in in theQ233 Miss McIntosh: Finally, if the working timefirst instance, its approach has been helpful in thatrestrictions do take eVect would you like to placewe are saddled with this arrangement but it is goingon the record the number of additional drivers youto prove a bigger challenge for the UK with aimagine would be needed?history of long working hours. One does not defendMr King: Opinions vary. The Department forthat and our argument is that we would like to haveTransport’s own calculations, I think, was roundseen this phased in over three or four years. Weabout 20,000 extra drivers needed. We did someasked for that some while ago. The Governmentfigures a couple of years ago and thought 60,000has indicated a benign touch in enforcement toextra drivers over and above those that are loststart with. We welcome that. Of course, we will notthrough natural wastage anyway. So there is noknow exactly how benign that touch will be untildoubt that the restriction on working hours is goingit is actually up and running but it is not seeking toto put a great strain on the workforce. Thecome and haul trucks oV the road and interrogateunknown quantity is what use can be made of thedrivers over their working time. So we aretemporary driving force in this country, people whoreasonably content about that, but how long thathave one job but drive at weekends, because ofposition will remain is unclear. As to othercourse their work during the working week wouldcountries in Europe, we do not know what theircount against the working hours they have left toenforcement procedure is going to be.do any driving.

Q239 Mr Stringer: How does the British roadQ234 Mr Stringer: You gave a very vivid haulage business compare in eYciency? We haveillustration about the diVerent ways the Irish been given some evidence that our industry is betterGovernment and our Government are proposing to at getting the loads going both ways, going thereimplement the Working Time Directive. That did and coming back. Is that true and do you havenot to me show any advantage to either Ireland or evidence to support that?the United Kingdom. Are there any ways in which Mr King: I think we have been successful in gettingcountries are implementing the Working Time empty running down by 2% or so. It was about 25Directive diVerently that are either to the and it is about 23% now, which perhapsadvantage or disadvantage of this country? demonstrates a greater use of IT technology whereMr King:We do not know at this stage because all you can access websites and see what return loadMember States are going through the same might be in the area that you have delivered certainconsultation process and publication of goods to and you are going back to your homeregulations. We will get our final regulations, I am base. So that development has worked quite well,told, at the end of May, beginning of June, but obviously for very many vehicles they eitheralthough we know basically what the Government leave the depot empty and come back full likeis thinking in terms of reference periods, night time refuse carts or they leave the depot full, like petrolworking and so on. But it does seem the tankers, and come back empty. So there is always

going to be empty running. As to your question onopportunity is there for other Member States to put




the level of transport eYciency, I think the logistics cannot park up and wait for a cheaper charge touse a particular road or come into a city. Theindustry full stop, which involves road transport, is

considered to be extremely eYcient on a world customer wants the goods and the factory needs thecomponents. They will have to pay that congestionbasis.charge, so it will not actually have any diVerencein being able to regulate traYc flow because ofQ240 Clive EVord: Have you ever done anvariable charges. It will be another tax. Therefore,assessment of just how much fuel that is in lorrieswe are not terribly keen to see that element of theoperating in the UK is actually bought on thelorry road user charge ever see the light of day.Continent? Have you ever done a survey of your

members to see just how much they try to takeadvantage of the lower fuel costs on the Continent? Q244 Clive EVord: That is with specific referenceMr King: Well, those that are obviously travelling to the UK charging scheme?in Europe will fill up before they come back into Mr King: That is specific reference to the UKthe UK. There are still fuel runs, I think, which use because the UK’s charging proposal is very muchup spare car ferry time late at night or at the ahead of everybody else’s in Europe.weekends when they pop across and fill up andcome back, and of course there is a substantial

Q245 Clive EVord: So is your concern then thatmigration of traYc from Northern Ireland intobecause a greater proportion of your members’southern Ireland to fill up there, but for mostbusiness will take place in the UK they will haveoperators it is not really an opportunity.to meet these additional charges on a more regularbasis than anyone coming from abroad? TheQ241 Clive EVord: For those who operate in Kent opportunity to cross-subsidise your businessand in the south-east and who face the brunt of the through your business operation is greater forcompetition from across the Channel and across someone operating from abroad than it is forEurope it is an option, is it? someone in the UK?Mr King: It is a limited one because it depends on Mr King: Well, someone operating from abroadthe vehicle. If you are a long distance haulier then will pay the same charge when they come into theit is worth your while filling up with 1,500 litres of UK. They will pay the charge. That is the idea. Iffuel, but that is a considerable weight to carry they buy fuel in the UK they will get a rebate onaround. It is not very environmentally good. The that fuel; if they do not then they will just pay theaverage tank on a vehicle is 400 litres, therefore by charge. We support that because at long last therethe time you have taken into account the movement might be a system where the Continental operatorof the vehicle across the Channel, the filling up and will pay the going rate for using the infrastructurebringing it back there may be some costs savings and the UK haulier will pay the same fuel costs asbut not a great deal. that Continental operator plus the lorry charge.

Q242 Clive EVord: But nobody has ever done anyQ246 Clive EVord: I am still not clear. If you aredetailed analysis?saying that it is going to be a level playing field andMr King: I think it would be very diYcult to dothat does not matter, why is that a problem forthat as such.you?Mr King: Well, it is not a problem. That part of itQ243 Clive EVord: Okay. What is preventing thewe do not have a problem with. It is a basic,introduction of lorry road user charging in the UKstraightforward tax-neutral, revenue-neutral switchand do current plans reduce the argument in favourof taxation from fuel duty to a lorry charge. Weof fuel tax harmonisation?welcome that and that levels the playing field. WhatMr King: Well, we welcome the first phase of thewe do not want to see are all the additionallorry road user charge in that, as the Chancellorincremental costs that a charging regime, accordingassured us three years ago in the Commons, orto the Government’s procurement programme, willwhen he spoke about the introduction of the lorrybe allowed to charge.road user charge he said that it would be tax-

neutral, that the charge would be oVset by a fuelreduction, and we welcome that. We have worked Q247 Chairman: Mr King, if there was a

straightforward set of controls on the driving ofwith Customs & Excise, the Treasury and theDepartment for Transport to help develop the lorries right the way across the European Union,

which is 25 countries, would your members bescheme. What we are less happy with and wouldnot wish to see proceeded with is what was rolled delighted because that would mean automatically a

number of extra taxes, a harmonisation of the rightout last week at the procurement presentation bythe Department for Transport and the Treasury of to enter and leave various towns? You might get

agreement only on the basis of various countriesphase 2, which includes time variations, furtherbands for the road system and zonal, regional and putting into place direct charges. Are you really

seriously saying that you would prefer, because ofarea charges. Now, we cannot see how that can allremain tax-neutral and that was not something that diVerences between Member States, to have a set

of rigid rules applied from the centre which wouldwe signed up to originally, so we are ratherconcerned that we are moving on to what in eVect apply to every vehicle driven within the 25

countries?will be another tax-garnering system because lorries




Mr King: We would have no problem with a set 25 states come into play, where you remove therights of individual cities, individual countries todirective of charging, electronic charging, which setapply things which they believed to be necessary toout the rights of Member States to make a chargeprotect the environment and their own areas?for the use of that vehicle on their roads. ThatMr King: Well, we certainly believe that Europe’swould be eminently understandable. You wouldstrategic road network should be subject to aknow in Germany it might be 3 pence a kilometre,common charging regime which could vary fromin France it might be 4 pence. You would knowstate to state depending upon the charge. Certainlywhat that was. Where we have a problem is thatthe charge is going to be greater in the UK thanthe “Eurovignette” also says that you can have aanywhere else in Europe because of the magnitudelot of other additional charges at various times ofof the fuel rebate balancing that the Governmentthe day on certain routes of environmentalwill have to do. But everyone will pay it, that is thesensitivity. There could be area or zonalmain thing, and you will know what you areadjustments for the level of the charge. How wouldpaying. Where we part company is if Memberyou ever know when you are quoting or travellingStates are given permission to put all kinds ofEurope what actually your charge was going to bevariable rates at diVerent times of the day and inif you had all these derogations and multiplicity ofdiVerent zones of the country. That is whencharging bands which would vary throughout theinternational road transport and movement withinwhole of Europe?the Community becomes an almost impossible taskto perform and to know what it is costing you.

Q248 Chairman: Do you ever see your kind of Chairman: Thank you very much indeed. You havenirvana existing where there are only such basic been very helpful. Ms Dee, you are going to have

a look at some of those statistics for us. Thank you.charges that none of those attitudes throughout the

Witnesses: Mr Simon Chapman, Chief Economist, Mr Chris Welsh, General Manager, Campaigns, andMr Damian Viccars, European AVairs Manager, Freight Transport Association, examined.

Q249 Chairman: Good afternoon, gentlemen. I Q252 Chairman: Is there any particular piece youwould identify?apologise for keeping you waiting. Would youMr Welsh: One example is clearly the major modesplease identify yourselves.of transport, including road transport whereMr Welsh: Thank you, madam Chairman. Mypreviously we had a quota system for vehiclesname is Chris Welsh. I am head of campaigns forcoming into and out of each particular Memberthe FTA. On my right is Simon Chapman, who isState. Air transport policy is probably a classicour chief economist, and on my left is Damianexample where we have stripped away the bilateralViccars, who is our manager of our Brusselssystem within Europe, where we now have a muchoperation.more open and competitive air transport system. Somost modes of transport that are predicated on

Q250 Chairman: Thank you. Mr Welsh, did you national lines within Europe are now competinghave anything briefly that you wanted to say? within a single market and that has been of great

benefit to the Community in terms of promotingMr Welsh: Yes. I will try and keep it as brief asand driving European trade. So we welcome thatpossible, madam Chairman. Firstly, we very muchbroad framework of moving from a highlywelcome the opportunity of submitting evidenceregulated and often restricted transport industry totoday to your Committee. We have been heavilya much more liberal and competitive broadinvolved in the development and evolution oftransport industry. That has been fine up untilEuropean transport policy over the last 15 or 20probably the beginning of this decade, where theyears or so. That is demonstrated by the fact thatCommission, having adopted the commonwe have our own Brussels oYce, where Damiantransport policy aimed at liberalising Communityresides.transport, appears to be shifting towards turningthe clock back, to try to apply a more regulated

Q251 Chairman: I am sure he has done something approach to dealing with some transport problems.to deserve it!Mr Welsh: As a result of that, we estimate that Q253 Chairman: What makes you think that?some 60% of legislation aVecting the UK transport MrWelsh:Well, the Commission published in 1991industry emanates from Brussels. So we have been the equivalent of its 10 year transport plan. Withinheavily involved as the Commission has developed that it sought to execute a modal shift, movingits transport policy. The only thing we probably freight from road onto rail and sought to makewould say is that one of the key benefits of better use of other modes of transport includingdeveloping common transport policy has been that short sea shipping and so on. We have noenacting the Treaty of Rome it has enabled the particular problem there. Our members use allCommunity to take some positive steps to liberalise modes of transport and we are very keen to havetransport over the last 10 to 15 years or so, moving a very eYcient and eVective railway system and

better use of short sea shipping and all modes ofaway from national protection of markets.



19 May 2004 Mr Simon Chapman, Mr Chris Welsh and Mr Damian Viccars

transport. The problem has been that the Q260 Chairman: Anything else?Mr Chapman:Well, I think the previous people whoCommission’s method of doing that has been to

penalise one particular mode of transport and that gave evidence suggested there would be an increasein the number of drivers required in the industry andis road freight transport, which by and large is the

one that is delivering the vast majority of goods that would exacerbate the skills shortages that weare already facing.and services to industry right across the

Community. That is having some negative impactsin terms of performance within the economy. Q261MissMcIntosh:What impact do you think the

co-decision procedure between the Parliament andCouncil of Ministers has upon your decisionQ254 Chairman:Yes. I think I am going to stop youmaking?there,MrWelsh, because otherwise you are going toMr Welsh: Well, it has made it extremely complexdo the same thing; you are going to ask and answerand very, very long-winded. In earlier evidence youthe questions and that is cheating! Towhat extent dohave heard there are some pieces of legislation thatyou think the Commission’s ambitions conflict withhave literally taken 10 years to get through thethe UK Government’s intentions and our interests?sausage machine.MrWelsh:Well, of course the UK Government has

the voice of 1 in 25 now and has been heavilyQ262 Chairman: VAT took 18!involved in the development of CommunityMrWelsh:Our experience now is that the additionaltransport, so I do not necessarily see it as a sort oflegislative procedure of going through a co-decisioncompetition between what is the Community’sis very time-consuming and very, very onus uponinterest and what is the national interest.business and industry in terms of being able toinfluence that process. It is a relatively new learning

Q255Chairman:Yet you have genuinely said, in fact experience for everybody but it is certainly leading toyour colleagues have said the same thing, that you some unexpected circumstances where withbelieve the Commission has a specific bias towards proposals that we previously might have beenthe rail industry? having to do a deal with just through the EuropeanMr Welsh: Well, that is self-evident from the Commission suddenly common positions come outCommission’s White Paper itself. of the European Parliament. So we are often having

to deal with diVering amendments and pieces oflegislation from the diVerent institutions, whichQ256 Chairman: Yes, but that was 1991. Whatfrom an industry point of view where we are tryingwould you say they have done since 1991 that has ledto present a case in terms of what is best for ouryou to believe that they actually meant more than anmembers is often extremely diYcult.expression of goodwill and candy for everyone?

Mr Chapman: I think the concern is that since 1991the Commission has almost turned the clock back, Q263 Miss McIntosh: Would you not expect theas Chris has said, and the 2001 White Paper, which European Parliament to be perhaps more receptiveis the current 10 year plan which we are working to, to the views of your organisation and other similarhas said, “Hold on, you know the liberalisation of bodies across the European Union?transport markets and in particular the Mr Welsh: Well, yes, we find the Europeanliberalisation of road has been almost too successful Parliament receptive to our ideas and we canand rail freight and other modes of transport need to probably claim some success with elements ofbe nurtured as well.” What we have got is the brakes legislation that have gone through the Parliament.having been put on a market-driven progressiontowards the development of road freight transport. Q264 Chairman: So all elected representatives are

not diYcult, Mr Welsh, it is only some of them? Isthat it?Q257 Chairman: In exactly what specific way haveMr Welsh: No, you are all very easy to get on withthey put the brakes on the development of aand deal with, madam Chairman.commercially successful road industry?Chairman: A rapid recovery there!Mr Chapman: Two specific items are firstly the

introduction of the Working Time Directive fromQ265 Miss McIntosh: I think you have got perhapsMarch 2005—the posting of the UK representation in Brussels inmind. In your view, how widespread does the

Q258 Chairman: Even though it appears to be European Commission consult on road transportsomething which can be interpreted flexibly policy?between states? Mr Welsh: Well, not as much as we would like. AMr Chapman:Well, even with those derogations in classic example probably was with the wholeplace there will be a cost penalty to the UK evolution of the Working Time Directive, whichlogistics sector. when the social partners were presented with ideas

by the Commission 10 years or so ago when it wasfirst proposed both sides were very unhappy with theQ259 Chairman:What percentage?

Mr Chapman: Well, we believe the cost of the draft proposals that came out at that time. It isprobably fair to say that both sides had very littleWorking Time Directive to be in the region of about

£1 billion per annum to the logistics sector. impact in altering the Commission from that




original concept that it had about how it was going serious about doing any work on promoting it. Theymake these comments but they do not seem to haveto apply the Working Time Directive. So our

experience is that in order to make that impact in been doing very much about it and the WorkingTime Directive, certainly the drivers’ hours, wasEurope you have to be almost there before the

Commission starts to publish the formal proposal if being discussed not just in 1991 but when I was aMember of the European Parliament, I can assureyou are going to influence the type of policies that

come out of the Commission. Equally, with the you, and that is going back a bit. Are you reallysaying that what is happening is that theconsultations the Commission organised in relation

to the 1991 White Paper that we were talking about Commission is following a political agenda which isnot that of the Council of Ministers?earlier the Commission called together a

consultation of all industry interests. I took part in MrWelsh:Well, as you know, the Commission itselfhas its own institutional powers to decide legislationthat particular consultation and it is fair to say that

business as one across all diVerent modes of and bring forward its own agenda and that is whatthe Commission has done. Business is dissatisfiedtransport said they were very unhappy with the

shape of the policy the Commission was developing, with the current development of Communitytransport policy. Recently the Director-General ofbut that was just ignored and the Commission, after

nearly 18 months of internal deliberation, came DG TREN, the transport directorate, has indicatedthat he will review that 10 year plan and hasforward with their White Paper.

Mr Chapman: Another example, just to add to your admitted that there are some shortcomings in theway the Commission has pursued it, or that there arecollection, is the revisions to the drivers’ hours rules,

which are currently being considered by the Irish some unexpected consequences which they had notanticipated. If that is the case, we welcome thatpresidency and by the Commission. Again, the

unions and the operators were dissatisfied with the because I think we do need to stand back.social sector dialogue consultation from theCommission. The Commission’s original draft Q268 Chairman: Yes, but I want to be quite clear.published in October 2001 fell far short of the You are actually saying the Commission is ignoringoriginal aims to clarify, to simplify and to update the the view of the Council of Ministers, who cannotdrivers’ hours rules. More recently, the European come to a consensus, it is embarrassed by theParliament has had its say. They have tabled 243 decisions taken by the elected Members of theamendments reflecting the inadequacy of the European Parliament and has now accepted that atoriginal proposals. We have now got the situation least there is something wrong? Is that what youwhere the Council is unable to reach any consensus, are saying?as it has been unable to do so for about two years, Mr Welsh: Well, I think the Director-General hasand the Irish presidency is desperate to push ahead recognised that it is time to review his own 10 yearwith the dossier and it is now considering trying to plan and he has said recently to various industryget a vote going through the Transport Council in stakeholders, “There are some problems with theJune, even though a lot of the mechanisms which existing plan and we want to review that.” So we willreally needed a lot of detailed ironing out are still not want to take that up.in place.

Q269 Miss McIntosh: Just to pursue that line ofQ266 Miss McIntosh: Do you think a lot of the thought, we heard from the previous witnesses thatproblems could be resolved if organisations like bizarrely the self-employed driver is excluded fromyourselves were more proactive both with the one of the two directives, the Working TimeCommission at the time of the initial draft and with Directive I think it is. If you take that as an example,our own home department, in this case the have you put pressure on the Commission, theDepartment for Transport, through both the European Parliament and the Council of Ministersorganisation here in the UK and representation in through our home ministers here to include self-Brussels? employed drivers?Mr Welsh:Well, we think we do our job as best we Mr Welsh: The issue of self-employed drivers hascan and we certainly have our oYce in Brussels to not been very prominent amongst the concerns ofassist us to do that, but I think the perception we our members. Our main concern has been to ensurehave is that theCommission had a preconceived idea that the UK Government adopts the most flexiblein terms of the 1991 plan about what it wanted to do, approach to the application of the Working Timeand what it wanted to do in that case was to get the Directive. The recent announcement that ministersfreight oV the road and on to rail and promote rail, made has given some confidence that as it concludeswhich we supported, but it had under-estimated the it consultation it will give the required level ofscope for rail to be able to solve the problems that flexibility and that has been welcomed by all sides ofthe Commission— industry, including the trades unions and employers.

Q270Mrs Ellman:Will the Working Time DirectiveQ267 Chairman: Mr Welsh, I think it would be anentirely laudable point of viewwere it not for the fact improve safety?

MrWelsh: That is diYcult to say because obviouslythat the Commission is directly responsible for therail division between the infrastructure and the it has not come into full force. In terms of the road

freight industry, what is more relevant is the drivers’operating in this country, which is why it is such amess, and there is frankly no indication that they are hours rules because they are the rules that actually




have been designed specifically to look after the Mr Welsh: I will ask Simon to deal with that.Mr Chapman: Yes, we do want to see thesocial and safety aspects of the actual driving itself.

So we had under drivers’ hours rules eVectively a 45 approximation of taxes and charges across theEuropean Union. I think we feel that the currenthour week for some considerable time. So the main

issue for employers is how we utilise that time that level of fuel duty that we have got in the UK isundermining the UK’s road freight transportwe have available for drivers and that is why we

require the flexibility because of diVerent types of competitiveness and it is a thorn that has been inthe industry’s side for a long time and it is onelogistics operations.which we are very pleased to be starting to addressthrough the introduction of lorry road userQ271 Mrs Ellman: Do you accept that thecharging. Whilst lorry load user charging in therestrictions on drivers’ hours have improved safety?form that is being considered by the UKMr Welsh: We support the existing drivers’ hoursGovernment is welcome, it does not get away fromregime, yes. I think it has been quite important inthe fact that even though foreign hauliers will beginterms of ensuring standards of safety and that thoseto pay something towards the cost of using the UKstandards are properly enforced. Yes, we wouldroad network, the UK will continue to be a high-support that.taxed environment in which to move freight.EVectively introducing lorry load user charging on

Q272 Mrs Ellman: Will the restrictions have a a tax-neutral basis will just simply move a tax ongreater impact on drivers in this country than in fuel to a tax on road usage. So yes, we do welcomeother European states? lorry road user charging but let us be absolutelyMr Welsh: Again, it is too early to predict. I think clear, it is not going to reduce or improve thethe view is that provided we get the required level of freight transport eYciency in terms of cost of theflexibility for operations that I have referred to UK operators.earlier and we have an appropriate lightenforcement touch, again there have been Q277 Mrs Ellman: Do you really wantindications that enforcement organisations will harmonisation or is this all about having lower fuelfocus on those that are likely to exploit rather than duties?those lawful operations; in other words it is targeting Mr Chapman:Well, I think there is a good case forthe use of enforcement. having a level of taxation across Europe which more

accurately reflects the costs that trucks impose onthe road network. Now, in the UK we feel that weQ273 Mrs Ellman:What do you anticipate to be theare over-taxed at the moment and when we areimpact of the expansion of the European Union oncompeting with operators on the Continent andthis issue?operating in a single market then we feel that theMr Welsh: I cannot really answer that. It is just toolevel of tax that we face should be broadlydiYcult a question to tackle at this particular point.comparable with the taxes that our competitors face.

Q274 Chairman: You must have made someQ278 Mrs Ellman: What do you see as the currentestimate because one of the constant complaints ofproblems related to introducing lorry road useryour members is that they are undercut by driverscharging in the UK?who are working for people able to take them on inMr Chapman: I think the main ones are in terms ofwhat are now the newMember States at much lowertrust and getting the freight transport community,rates of pay?which is clearly a very practical industry andMrWelsh:Well, our members are not just pure roadtherefore a very sceptical industry, to buy into thehauliers, they are own account operators andidea of a road user charge. So there is the trustindustry that uses all forms of transport. We wouldelement and the Chancellor and the economichope that in fact any benefit there is fromsecretary have said that it is going to be tax-neutral.enlargement would be that where we have seriousFine, but it also needs to clearly minimise red tape.skill shortages in this country, and clearly driving isSo there is the trust element, there is also aone, maybe that could be an attractive careertechnology element and the need for the on-boardopportunity.units and the trucks to be able to integrate with theother telemetric applications in the vehicles. There is

Q275 Chairman: What you are really is that you also the transparency argument and it is absolutelyhave not chosen to inspect too closely some of the essential that the operators of trucks are able toeVects which might be deleterious to some of your make rational decisions about when and where theymembers as well as the advantages of the entry of move freight in the UK.new states? You have done no estimate of the eVect Chairman: I want to bring Mr EVord in before wethat would have on the terms and conditions of finish.drivers?Mr Welsh: No, we have not. Q279 Clive EVord: Your members I think consign

about 90% of freight which travels on rail. Are theysaying to you that they would rather use the roadsQ276 Mrs Ellman: You want to see the

harmonisation of taxes and charges across the more? Is that the reason for your criticism of theCommission’s policy?Union. Can you tell us why?




MrWelsh: In fact our members have been using rail Q283 Chairman: Just very briefly,Mr Chapman.Weare pushing our time.more and they want to continue to do so. In the UK

the rail freight story has been one of relative success. Mr Chapman: Thank you. Just one point ofclarification on the trade issue. Clearly, foreignWe have seen a 15% increase in the uptake of rail

freight. trucks are coming into the UK because they takeadvantage of their lower cost base, but the issue is asmuch about the exchange rate against the euro thatQ280 Clive EVord: So that would suggest thethe pound has as anything else and because we are soCommission is moving in the right direction?strong as a currency against the euro at the momentMrWelsh:Well, whereas it has been a success in thewe are sucking in an awful lot of imports from theUK in terms of making services attractive toContinent and that is doing wonders for foreign-customers where there is a much more customer-based international hauliers coming into the UK.focused approach, on the Continent they just have

not got the same ethos in terms of customer focus.As a result of that, in fact industry on the Continent Q284 Clive EVord: Do we need an EU charginghas been moving away from rail freight because the arrangement before we bring in the UK lorry roadservice just does not work and the latest figures that user charging scheme?came out from the European Commission showed a Mr Chapman: The answer is yes, we need some sort1% drop in rail freight despite the liberalisation of framework in which a UK charging regime ismeasures that are taking place. It may be due to the based in that it makes no sense at all for operators tofact that many of the traditional railway operators be having to deal with one set of criteria, one set ofon the Continent are very slow to adapt to this new technology and one set of charging administration inchanging market opportunity. one country and then having to do something else in

a diVerent Member State. We have got to haveQ281 Clive EVord: You saying that there are consistency of approach across the EU 25.concerns about the level playing field and the impacton the road haulage industry in this country, but do

Q285 Chairman: Finally, is there anything we oughtthey not carry still the vast majority of the tonnageto know about the change in the tachograph regime,that travels by road in this country and is not mostany lessons to be learned, briefly?of the reduction actually due to an expansion in theMrWelsh:Briefly,madamChairman, yes. There hasmarket on roads?been a debacle right from the very beginning. AsMr Welsh: Yes, I would agree with that, althoughyour previous witnesses made clear, the fact is thatthere is evidence that some businesses are moving tothe Commission has introduced the directive torail because they now see it as part of their logisticscome into force from August this year, when theoperations and because we have on our majormanufacturers of the equipment have not been ablemotorways high levels of congestion for manyto produce the digital tachograph, which basicallybusinesses that are moving over long distances. Railmeans that legally UK operators and indeedfreight is often now, and indeed increasingly shortContinental operators in their country and thissea shipping, a by-pass for the congestion that wecountry are not in a position to comply with the law.have on our major roads. So yes, there has beenWe have urged the European Commission to resolvesome growth there but most of the new business hasthat problem by amending the directive to set a newcome from new opportunities and the newdate for the introduction of the digital tachograph.entrepreneurial spirit that prevails in the railwayThey are duty bound to do that under the directivesector.and they have not done that. We have taken somepreliminary legal steps to hold the Commission

Q282Clive EVord:The assertion has beenmade here liable for any additional costs the UK industry mayon several occasions now that UK hauliers operate bear as a result of that and we are still awaiting aat a disadvantage because of the tax regime and reply from the Commission. Whilst the UKbecause of fuel duty, but actually the evidence of the Government has made clear what its enforcementproportion of the market share that they still hold regime is going to be, and that is welcomed, theand where the growth in the market has been does Commission has announced a moratorium for anot actually bear that out, does it? For instance, the year on the introduction. The problem for UKbalance of trade is that there is more coming from industry, particularly those operators who operatethe Continent to the UK, which positions those outside of the UK, is that you are likely to havecompanies on the Continent in a better position to diVerent enforcement interpretations of thatpick up that freight? gentleman’s agreement.MrWelsh: That assumption would be right if it wasall predicated on price or on cost. A lot of choices aremade on the basis of does it work and is it eYcient, Q286 Chairman: This argument has been used

several times and you will forgive me, but as aand so on. The perception still for many operators,many shippers, is that rail is not providing the degree businessman you operate in diVerent countries

irrespective of the European Union. Do you notof service and the quality of service that is required.It is still unreliable, it is not measured, and so on. So have to comply with the rules that apply within that

country? If youwere, for example, to be selling to thethere is amajor perception problem that people havewith rail freight. I do not know if Simon wanted to sub-Continent, would you then not have to comply

with Indian or with Pakistani law?come in on that.




Mr Welsh: Well, you would, but I think when you Mr Viccars: We are in a single market, madamChairman—are operating potentially across three or four

Member States making one delivery it is veryQ288 Chairman:Oh,MrViccars, who told you that?diYcult—Mr Viccars:We would like to add that it would bebetter within a single market to have as smooth anoperation across the Continent as possible and that

Q287 Chairman: Yes. Do businessmen not have is the benefit of it.considerations where they have to have diVerent Chairman: Well, all I can say to you, gentlemen, is

thank you very much for coming and bonne chance!rules for a diVerent country?

Witnesses:MrMarkBrownrigg,Director-General,MrEdmund Brookes,DeputyDirector-General, andMrDonald Chard, Manager for Legal AVairs, Chamber of Shipping, examined.

Q289 Chairman:Gentlemen, I apologise for making views and do you think theCommission has the rightattitude or are the processes generally inadequate, oryou wait. I am afraid that when we do get interesting

questions going our next set of witnesses suVer is there something else?Mr Brownrigg: I think the answer is probably aslightly. May I ask you firstly to identify yourselves.

Mr Brownrigg: I am Mark Brownrigg, Director- curate’s egg. In some areas it works very well, inother areas it gives cause for concern. I think theGeneral of the Chamber of Shipping.

Mr Brookes: I am Edmund Brookes, his deputy and main area we wanted to focus on in this was theinterrelationship between what happens at an EUtechnical man.

Mr Chard: I am Donald Chard, the legal manager. regional level compared with the rather extensiverange of sophisticated world-wide regulations thatexists through, in particular, the InternationalQ290Chairman:That is very helpful.MrBrownrigg, Maritime Organisation.

did you have anything you wanted to say?Mr Brownrigg: We are very happy to be here,madam Chairman, and I think we are happy to go Q294 Chairman: Why, because you think it isstraight to your questions. inward looking?

Mr Brownrigg: No. It is a group of countries whichsees as part of its purpose finding a uniformQ291 Chairman: That is exceedingly tactful! It gives interpretation of wider regulations. When it comesyou brownie points before you start! How successful to that, firstly there are practical problems ofhave the European Commission and the Transport implementation in a common way and a consistentCouncil been in reconciling northern Europe’s open way, but also there may be other particulartrading philosophy with some of the more priorities, maybe politically driven, maybe issueprotectionist traditions? driven, which arise in any one issue and so at thatMr Brownrigg: I think that over the last decade and stage there may be a conflict between a regionala half they have been quite successful. There was intent and compliance with the wider internationaldefinitely a split between north and south Europe in regulations.the 10 and then gradually the 15, but certainly going

back to the mid-’80s there was a positive package ofshipping policy proposals which began to open up Q295 Chairman: Let me understand it. You are notintra-Community trade and that was followed later saying that you think that overall they have got thein the early ’90s by a regulation opening up cabotage wrong attitude, what you are simply saying is thattrades. So I think by and large the Commission and one of their priorities is in eVect to form a regionalthe Community as a whole have moved in the right block and that that can lead to competition with thedirection in terms of liberalisation. aims that you as maritime world businessmen would

have? Is that correct?Mr Brownrigg: I think that is broadly right.Q292 Chairman: So we are talking about cabotageShipping is international from the start. Even in aand what else would you say is particularlyregional context we have non-EU operatorssuccessful?operating not just in Europe but also on the UKMr Brownrigg:Movements betweenMember Statescoast. So it is international right from the start andas well. So internally within individual Memberhistorically it has operated under a internationalStates and between Member States, and they haveframework of standards, whether under the IMO oradopted also quite a liberal approach in their foreigneven labour relations through the Internationalpolicy in shipping. So in the WTO, for example, it isLabour Organisation or others in diVerent ways.quite a positive approach, albeit that is taking quiteWhat is important, and by and large thea long time to bear any fruit.Commission has got it right as a starting point butthen on individual issues it may change, is that theEU maintains a balance in which it puts its ownQ293 Chairman: Then could I ask you, do you have

any concerns about the European activity on priorities in perspective. In particular it is importanttomaintain that multilateral principle so that by andshipping policy that results from the Commission’s



19 May 2004 Mr Mark Brownrigg, Mr Edmund Brookes and Mr Donald Chard

large across the whole of the world’s industry we the International Maritime Organisation, and thenratified and broadened. So in specific contexts withbring up the weaker nations to a standard which is

accepted on safety. specific sensitivities there is clearly a space fornational and indeed regional action. There is anChairman: I suspect that may be a bit beyond them.example on the regional side where, despite initialreluctance in the ferry sector, the northern EuropeanQ296 Mrs Ellman: What specific problems havestates, following the Estonia incident in the earlybeen created by the EU setting rules which are’90s, agreed that there should be an arrangementtighter than those agreed internationally?covering the northern states of Europe which wentMr Brookes: In our written evidence we havebeyond the international because of the particularhighlighted two or three instances where thesensitivity in that region.European Union has taken legislation further than

the International Maritime Organisation. We feelthat this is misguided and in some instances can be Q299 Mrs Ellman: Would you say that the UKdetrimental to the UK. Could I give an example? national government is suYciently active in these

areas?Q297 Mrs Ellman: Yes. You do refer to a couple of Mr Brownrigg: I think so and in some cases veryexamples. Could you focus perhaps on pollution? I constructive.think that is one of the key areas.Mr Brookes: Could I focus on air pollution as one

Q300 Mrs Ellman: If the EU interpret internationalparticular issue which we have drawn attention to.regulation more severely than perhaps other areasThe International Maritime Organisation sevenwhy would that be a particular problem for UKyears ago brought out a new annex to theshipowners? Would it not apply elsewhere?International Convention on the Prevention ofMr Brownrigg: I think I have mentioned already theMarine Pollution called AnnexVI toMARPOL anddesirability of a multilateral approach to shippingthis was to cut down air emissions, very, verystandards because it brings a higher standard acrossbeneficial. That annex still has not come into forcethe world as opposed to a very high standard in onebecause the correct number of governments have notpart of the world, and we have had negative impactsratified it. The United Kingdom Government hasof unilateralism in some cases in the past, fornot ratified it.We hope it will be ratified this year andexample in the United States forging ahead andcome into force next year. However, in themeantimeimposing its position on certain things. At the samethe European Union has developed its owntime it is important that you do not have lots ofregulation which is being updated at the moment,diVerent unilateral legislations imposed around thewhich intends to set tighter limits on the emission ofworld because as world traders youwould have to becertain products, particularly sulphur, and this wefamiliar with 101 diVerent standards and that isfeel is wrong. The real way forward should be toalmost impossible to do. So the important thingratify the International Maritime Organisationfrom a shipping point is to adopt the multilateralConvention and then work within that organisationapproach and raise standards across the board andwith all the other 100 plus countries to update it. Werespond, as my colleague has said, to a specificwould agree it needs updating and would lead to aincident. If it requires a deeper investigation andcut in the overall level of sulphur in fuel, but not tohigher standards, to respond in thatmultilateral waythe degree which the European Union is nowas far as possible.proposing, particularly for ships in ports.

Q301Mrs Ellman:Within the European Union whyQ298 Mrs Ellman: If there was a problem identifiedshould there be a particular problem for thiswould you expect national governments to takecountry?action ahead of waiting for the time inevitablyMr Brownrigg: There is not a competitive probleminvolved in getting an international agreement?as between ourselves and other Member States, ifMr Brookes: Well, the United Kingdomthat is the gist of your question, it is more theGovernment has a very long reputation ofdisruption that it creates in that wider context.supporting the work of the International Maritime

Organisation, it is just across the road from here,and we prefer to work on international regulations Q302 Chairman: Are you really saying that thebecause our members trade worldwide and regional Commission is hung up on legislation and does notor domestic rules will work against us trading freely go for enough voluntary agreements?throughout the world because it might encourage Mr Brookes: No, that is not what we are saying.other countries to adopt equally unpalatable Obviously in certain areas we as companies andregulations. organisations work ahead of legislation. We shouldMr Brownrigg: Could I just add that equally there have legislation but it has to be international. Imay be occasions when national action, or indeed would just come back to the previous question.regional, can be helpful. It is all a question of Ships on the British register trade worldwide. Theybalance—to take, for example, the instance of the have to abide by UK legislation.Braer, which was a ship which foundered oV

northern Scotland. After that the UK produced avoluntary routing guide around the UK and that Q303 Chairman: Yes, I think you have made that

point.measure was then taken to the international forum,




Mr Brookes: But if they are then competing with internationally agreed provisions throughMARPOL. We think that that influence is nowother countries which do not have to meet that

particular requirement then they are at a cost beginning to work and we are hoping that there willbe a successful outcome, but if it did not work thendisadvantage.

Chairman: Sure. we would have diVerent provisions in Europe asopposed to diVerent parts of the world.

Q304MrsEllman: Should individualMember Statesbe members of the IMO or should it be the Q307 Mr Stringer: That is a very good example and

I think I understand what you are saying. So why doCommission on behalf of all the states involved?Mr Brownrigg: We believe that the present we need Europe involved in this area of regulation

and law making because you have been answeringarrangement whereby individual Member States arefull members of the IMO is probably the best way Mrs Ellman’s questions by saying that actually it is

better to go to the IMO and to have one standardforward. You can juggle the advantages of a singlelarge voice against 25 smaller voices. I am not sure which slowly improves worldwide rather than a

separate European standard? If that is the case, if Ithat the EU is yet in a position to wield that largevoice as fully as some others. So whatever other amunderstanding your arguments correctly, are you

not really arguing in the case of ship-sourcearrangement might be made for the status of the EUtowards the IMO, or indeed any other organisation, pollution and other examples you have given that

the EuropeanCommission should not be involved inwe would prefer the individual Member States toremain plenipotentiary. this area at all?

Mr Brownrigg: I do not think we are going that far.Q305 Mrs Ellman: Could not the strong voice,though, be in a better negotiating position? Q308 Mr Stringer: Can you tell me why not?

Mr Brownrigg: Well, I think I can, because firstlyMr Brownrigg: It could, and there are otherexamples. In trade policy it is a fact that individual implementation in a consistent and early way of

properly constituted international regulations is astates are subsumed in the Community approachand that works both in the WTO and in maritime good objective and to get a consistent application

across 25 countries is one hell of an input into theagreements with China, for example, but at thisstage and at the stage of the development of the implementation of any international regulation. But

I appreciate that is a reactive response to yourCommission’s bureaucracy in terms of expertise andsophistication in the detail of some of the issues we question. The active response is then to decide that

okay, implementation, but what about theare talking about, we would prefer individualMember States to have their full say. constitution and the establishment of those

international regulations? There I think it is a muchmore balanced question and there is no easy answer.Q306 Mr Stringer: Just following up that series ofIt will depend on the individual issue. In ourquestions, are you really saying that there is no rolejudgment, if there is a specific European dimensionfor the EU at all in this area, it is better left to nationto it, whether driven by the fact of potentialstates and there is no advantage in having higherpollution within European waters or the sensitivitystandards imposed by the EU so why does the EUof ferry operations or whatever it is, then there isnot just disappear?every reason for Europe to look at that but what weMr Brownrigg: I have said I think there is a balancewould like it to do is to work all the time, if you likein this and in individual questions you may find thatas a driving force, within the international forum.it leads in one direction or another.

MrChard:One of the problemswe have been havingover the last year, I think, is that a directive has been Q309 Mr Stringer: Was it not reasonable for the

Commission and the European Parliament whendeveloped through Brussels on ship-sourcepollution. Now, ship-source pollution has for many there was the oil spillage oV the north-west coast of

Spain, I cannot remember the name of the ship, toyears been regulated through internationalagreement under the Convention for the Prevention say, “We want higher standards in Europe and we

do not want this very high level of pollution causedof Pollution fromShips,MARPOL for short. All theEU Member States are signatories for that by an oil tanker sinking in very deep waters”?

MrBrownrigg: I will ask EdmundBrookes to go intoConvention and therefore they have all applied it intheir domestic legislation. The Commission looked this in a little bit more detail. You have to recall that

the Prestige incident followed three years on from aat that and decided that it wanted to incorporate theConvention into the Community law but in doing so previous incident which was the Erika oV north

France and there was a whole sequence of legislativeits proposals, certainly at the beginning, went muchfurther than the requirements laid down in the main proposals which flowed from the Erika sinking. In

the context of Prestige we would argue that thereConvention. For example, after an accident at sea ifthere is a spill the results do not usually give rise to was little new in the Prestige and it was more likely

to be down to national failings than failings ofcriminal oVences but the original provisions in theShip-Source Pollution Directive would in fact have international regulation, but if I could ask Edmund

to expand on that.made them an oVence. We have been working veryhard and I have to say that the UKGovernment has Mr Brookes: If I could throw a bit more light on

that, I think here we look at the United Kingdom. Ibeen constructive in trying to modify the content ofthe directive to bring it much closer to the am happy to go on record to say that if the Prestige




incident had happened in this country that vessel particularly by two countries in response to thePrestige issue, which as we say should not really havewould not have sunk. We have the SOSREP in this

country, of which we are all justifiably proud. happened.

Q314 Clive EVord: When you say that the PrestigeQ310 Chairman: We are not using terms like that,would not have happened, what would not haveare we?happened?Mr Brookes: I apologise, the Secretary of State’sMr Brownrigg: It should essentially have beenRepresentative. He has powers to direct how shipsbrought into a safe harbour and surrounded bymay be dealt with and in this instance he would havebooms and dealt with when it was in trouble andtaken control, taken the ship into a safe haven, itasking for assistance.would have been repaired, the cargo would have

been taken out and she might still be sailing theseQ315 Chairman: The vessel was pushed back out todays. So that, I think, is one aspect of that.sea and that actually tore it apart?Obviously as a result of the loss of the vessel theMr Brownrigg: Yes.Prestige there were serious concerns in Spain and in

France and here I think we have an example ofEurope going very near to the wire on international Q316 Clive EVord: Are you saying that theregulation. They developed a new European regulation should be dictated by the lowest commonregulation, very much advanced, for the withdrawal denominator rather than the highest?date for single hull oil tankers and then eVectively Mr Brownrigg:No. Well, I do not know if it was thechallenged the International Maritime Organisation right or wrong denominator. You can argue that,to match it. In the event, four months ago in but a considered common denominator had beenDecember that is what happened at the agreed and then a political imperative drove it into aInternational Maritime Organisation across the higher standard.road. I feel that was a retrograde step.

Q317 Clive EVord: It is the word “political” becausewe have had it used several times and I thought youQ311 Mr Stringer: They accepted the double hull?were going to use it. Is it a euphemism for publicMr Brookes: They accepted the double hull. Weopinion?already had dates for the introduction of double hullMr Brownrigg: I think it was a lot broader than thattankers, something like 2015, though the date varies.on that occasion.That has been brought forward, it varies for the type

of ship, but by 2009 as a result of the Prestigeincident and the action of the EU in developing a Q318 Clive EVord: Were not the public demandingnew regulation. It then went to the IMO and in that more action was taken and earlier action takenDecember at a meeting of the Marine Environment in order to clean up the act of the oil industry inProtection Committee it was accepted with one or terms of oil tankers, the shipping industry?two very minor amendments. Mr Brownrigg:Well, what we are saying is it should

have been prevented, not allowed to happen.Q312 Mr Stringer: You were saying that you

Q319 Clive EVord: But that was not the onlythought that was a bad thing but you did notexample of a single hull tanker causing seriousexplain why.environmental concerns. This is the real “p” wordMr Brookes: I think it was a bad thing in twothat we are talking about here?respects. First of all, the Prestige accident, as itMr Brownrigg: Yes.ultimately turned out, should not have happened. If

it had been dealt with as it would have been in theUnited Kingdom the vessel would have been salved. Q320 Clive EVord: Is that not just a response toThe Sea Empress oV Pembroke a few years ago is an public concern and public demand that politiciansexample of that. Therefore, it is wrong to have a take action?knee-jerk regulation to a problem. We should Mr Brownrigg: Exactly.address the real problem, which is why the vessel wasnot correctly treated at sea and in port, and then Q321 Clive EVord: So to say that this is political, aslook at those consequences before you suddenly if it is something that has just come out of the ether,start to change international regulation through the is not really accurate?force of the European Union. That is why I hold to MrBrownrigg:Well, no, I am not saying it has comethose views. out of the ether. What I am saying is that had it been

dealt with diVerently there would have been nothingfor the public to respond to and that was not in theQ313 Mr Stringer: But is it not a good thing to haveoperator’s hands. What I would also add is that thedouble hulled oil tankers earlier? Are not the worldCommunity put this piece of legislation in placeseas safer from pollution if you have those oilbefore it went through the IMO.tankers plying the waves earlier rather than later?

Mr Brownrigg: Could I answer? The long-termjudgment on that is yes, because that is where the Q322 Chairman: It is an example but it is a bad

example because in this case you were actuallyinternational community was going, but it set itsinitial timetable in, if you like, the cold light of day as pushing for a better standard, whereas what you are

really saying is that you do not want to see theopposed to in the political heat which was generated




situation where the Commission goes ahead with MrBrownrigg: I do not thinkwe havemade a formalrepresentation, although our views are known to theinternational standardswhere itmight necessarily be

diVerent, not necessarily good or bad. That is really Department for Transport.Chairman: It is not good enough, Mr Brownrigg. Ifwhat you are saying?

Mr Brownrigg: Yes, in a word. What happened was it is one of your masters it is not good enough thatwe know your views, is it?that the international standard came to the

European standard. Miss McIntosh: I was trying to establish the generalprinciple.Chairman: Good. As long as we are clear.

MissMcIntosh: I think one of you, it must have beenMr Brookes, said that after the Braer disaster the Q329 Chairman: I know very well what you wereUK introduced a voluntary routing guide, which doing, madam. I am trying my own line. Mrwas then approved by the IMO. Was it not the case Brownrigg?that the Prestige did not follow that, that they had Mr Brownrigg: We have supported representationsno safe haven that we would have identified by the by the European Community Shipowners’Secretary of State’s Representative? Associations. It is on behalf of a Greek national.Chairman: Forgive me, Mr Brookes, I really do not Chairman: I see. Miss McIntosh, you may nowwant to go back to the Prestige. pursue your line.

Q330 Miss McIntosh: There is a general principle ofQ323MissMcIntosh: I think it is quite important. Itis just a yes or no. Is that a yes? concern here though to your members?

Mr Brownrigg: Of course, yes.Mr Brookes: The Prestige accident happened afterthe Braer incident and again it was not taken into asafe haven. Q331 Miss McIntosh: Is the price of fuel and theMr Brownrigg: There were no rules about safe additional cost of concern to your members?havens then. MrBrownrigg:Yes, but we have yet to see that come

through fully. The price of fuel has been very volatileover the years and we have had to live with that.Q324 Miss McIntosh: But now there are?

Mr Brownrigg: Yes.1Q332 Miss McIntosh: I think you refer in yourmemorandum rather elliptically, if that is the rightQ325MissMcIntosh: Is it the case that the master ofword, between the diVerence in approach tothe Prestige has not returned home, he has not beenshipping between northern European countries andallowed to return home yet?southern European countries. I do not know if itMr Brownrigg: Correct, yes.aVects your particular members but has thissituation of access to domestic routes around the

Q326 Miss McIntosh: Is that of any concern? Is that Greek Islands been resolved?a goodmessage or a badmessage to your colleagues? Mr Brownrigg: There was a timetable set, the clockMr Brownrigg: It is of considerable concern but that was ticking and that time has expired, so yes.is a national issue.Well, it is an international issue aswell. It is not a European issue is what I mean

Q333 Miss McIntosh: Have British ships got accessspecifically, but it is of considerable concern that ato plying the trade around the Greek Islands?master can still eVectively be debarred fromMr Brownrigg: In formal terms, yes. I am not awarereturning home this length of time after an accidentwhether British operators have tried hard to get intoin which no charge has yet been brought. Sorry, athose routes.charge has been brought but there is no charge—

Q334MissMcIntosh:Do you have any strong viewsQ327 Chairman: You have made these about the European Intermodal Loading Unit?representations presumably to the British Mr Brookes: I do have strong views about it and IGovernment and also to the European institutions, think it is a completely unnecessary proposal frombecause after all what you are saying is not the European Commission. I have explained brieflyirrespective of the situation in relation to that in our evidence why that is the case and perhaps Iparticular master, you are saying that this sets a could just say so now. For international worldwideprecedent? transport there is the International StandardsMr Brookes: It is not, unfortunately, the only Organisation—ISO standard containers. There areexample where this has happened. This has 17 million in free circulation in the world. In Europehappened in Pakistan. there is what is called a “swap body” which is an

intermodal loading unit but which can take moreQ328 Chairman:No, on this one, Mr Brookes, have pallets because it is slightly wider. The Europeanyou made representation to the United Kingdom Commission had decided there should be a new unit,Government and are you pursuing it vigorously? which is described as the European Intermodal

Loading Unit, to solve this problem. Quite frankly,1 Note by witness: The EUDirective 2002/59/EC of June 2002 the problem has been already solved by commercialrequired member state to be prepared to ensure that ships in shipping lines who have developed containers whichdistress may immediately go to a place of refuge. More

will go down the cell guides of ships and yet are palletdetailed guidelines were issued by IMO in its ResolutionA.949(23), adopted in December 2003. wide and they can carry two standard pallets across.




So there is no need at all for this legislation and we containers? Why is it that they think they arefeel that in moving it forward it could hinder in fact proposing a solution which is better than thatthe development of intermodalism rather than let proposed by the industry itself?the ISO standard and “swap bodies” develop as Mr Brookes: I wish I knew the answer to thatthey have. question. I have been to Brussels with a whole range

of people and gone through the proposals in detailwith them and explained that the solution to theirQ335 Miss McIntosh: Thank you. You are quiteproblem exists and has already been developed.damning in your memorandum that the

Commission does tend to focus in its EU shippingpolicy on interventionist activity which is of

Q342 Chairman:And are you telling us they ignoredquestionable value or practicality?those representations?Mr Brownrigg: I think we were talking about theMr Brookes: Yes.relationship between political interference and the

issue approach. There are lots of issues on whichCommunity action has been highly— Q343 Chairman: Were you using any languageChairman: Mr Brownrigg, we have a little diYculty which was recognisable to the Commission?because you are interpreting “political” as being Mr Brookes: They fully understood the points thatsomething— were being made, I can assure you of that.Clive EVord: Evil.

Q344 Chairman: Do you have other instances inQ336 Chairman: Yes. “Political” is a word we mustwhich the Commission have waded in with theirdefine carefully. As I understand it, it means of thewellie boots on a misinterpretation of what waspeople. That was its root, was it not?going on internationally? Those seem to be two quiteMr Brownrigg: No, I think it was more in the sensemassive and important changes.that Mr EVord brought forward.Mr Chard: Madam Chairman, may I come in? Wehad an instance some years ago, again following theQ337Miss McIntosh: So are you happy that there isErika incident, when the question of compensationa level playing field in the world of EU shipping? Ifor oil pollution was very high on the agenda. Therecannot record a smile, Mr Brownrigg.have for many years been treaty conventionsMr Brownrigg: There is the opportunity for a levelproviding arrangements for compensation whichplaying field currently if you are talking about statewere agreed through the International Maritimesupport and assistance and it is then down toOrganisation (IMO). The IMO compensation levelsindividual governments to choose whether they playwere increased. The agreement to increase them waswithin that opportunity.taken in the year 2000. The actual increase becameunconditional last year. But at an earlier stage theQ338 Miss McIntosh: And on issues like light duesEuropean Commission decided that they wanted toand paying for the full facilities, do you continue tohave a much higher level of compensation formake representations to our own Government?Europe and they proposed to plant on top of theMr Brownrigg: I would love to bring out all ourinternational agreement a European arrangement.themes, madam Chairman, but yes, we do.That then was put into abeyance because a numberof Member States, including I think the UK, wereQ339 Chairman: I do think I need to ask you whyrather concerned about the implications foryou think the Commission got the business aboutinternationalism. There were certain diYcultiesthe Intermodal LoadingUnit totally wrong.Do theywhich I will go into if you wish but which made ithave not suYcient expertise in your subject?rather more diYcult for the IMO to increase theMr Brookes: I believe they have the misguided viewrates of compensation again at an early stage and athat by developing this unit they will develop a newsolution had to be developed whereby we now haverange of containers which in the long term will takewhat is called a third tier or supplementary fund ofover from the International Standard Organisation,compensation, which is on top of the IMOstandard 20 and 40 ft or 45 ft containers.provisions. That is expected to come into force laterthis year or possibly next. That tier of compensationQ340 Chairman: Why do they think that, Mrwill apply in states looking for a higher level ofBrookes, is what I am asking you? Is it because theycompensation. While it does maintain and preservedo not know how the shipping industry works?the internationalism of the arrangements, it is likelyMr Brookes: I do not think they understand inthat only certain states, particularly in Europe andsuYcient detail the way the international containerperhaps some other highly developed states, willmovements take place.follow that provision. So, although we will haveinternationalism, to some extent we have fracturedQ341 Chairman: But why do they not? Presumablythe basis of it. The European Commission feels thatthey have to deal with you? You have just beenit approved and it encouraged the increase but onedemonstrating to us that they feel suYcientlyjust wonders whether the increase will be counter-competent to bring in other standards than thoseproductive in the longer term because it stands nowagreed at international level. Why do they notin danger of creating diVerent compensation bolt-onunderstand the whole problem of the size of

containers and the harmonisation of the size of arrangements elsewhere in the world.




Q345Chairman:Yes.Does itmatter if this diVerence Q347 Chairman:Well, I ask you again what seems toexists as long as ships that are operating in British me to be the very important question. Do you feelwaters, or within European waters if we are using the level of expertise within the Commission is equalthese terms, have to comply with the same to that which you would expect to deal with either inregulations? your own national government or, alternatively,Mr Chard: If they have to comply with the within an international organisation dealing withregulations in Europe that is one thing, but the idea shipping?of the international compensation scheme is to try Mr Brownrigg: I think we are in a period ofand bring as many countries into the system as transition there, madam Chairmanpossible and for them to provide whatever they canaVord and that has to be at a reasonable and

Q348 Chairman: Mr Brownrigg, I think that meansproportionate amount. If a figure can be set forno, does it not?application on a global basis then it is immaterial ifMr Brownrigg: It means immediately no, but therethe incident occurs in the English Channel orhas recently been established the Europeansomewhere on the other side of the world; you stillMaritime Safety Agency, which is designed to givehave the same level. Once you start having diVerentprecisely that kind of knowledgeable input to thearrangements then it is not quite so clear any moreCommission’s relatively small staVed division.what will be the situation or what will be required.

Q346 Chairman: Airlines told us that a singleQ349 Chairman: Are you therefore hopeful that theCommunity negotiating position for the EU gavesituation thatMr Brookes described, which is one ofEuropemore clout on the world stage. Is that not thesome considerable interest, where detailed andsame thing for shipping?specific information was given to the CommissionMr Brownrigg: As I said before, I think it isand they then ignored it will not arise again?debatable. We hold the view that it will not. I thinkMr Brownrigg:We are.airlines are slightly diVerent. I know there are manyChairman: Gentlemen, you have been very helpful.more private airline operators now but it still comesWe are very grateful to you and again I can onlyfrom a baseline of inter-governmental agreements,apologise for keeping you waiting. Thank you veryso I think the position in the aviation sector may be

significantly diVerent from ours. much indeed.

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Members present


Mr JeVrey M. Donaldson Mr John RandallMrs Louise Ellman Mr George StevensonMiss Anne McIntosh Mr Graham Stringer

Witnesses: Rt Hon Alistair Darling, a Member of the House, Secretary of State for Transport, Mr JohnStevens, Head of Europe Division, and Mr Michael Smethers, Head of International Aviation and SafetyDivision, Department for Transport, examined.

Chairman: Secretary of State, you are most warmly Q355Chairman:With your usual care and attention.Mr Darling: Absolutely. I thought that my views onwelcome here, as always. As you know, you are not

only our most important witness but our most the various things that I have views on would best beexplored through your questioning.valued witness.We are delighted to have you with us

today. Forgive us if we have a little housekeeping todo before we start. Are there members having an Q356 Chairman: How extraordinarily tactful.interest to declare? Mr Darling:However, if you would like me to makeMr Stevenson: Member of the Transport and a half-hour introduction, I would be only too happy,General Workers Union. I suppose.Miss McIntosh: Interest in Eurotunnel, Railtrack,BA, BAE, BAA, and RAC. Q357 Chairman: I feel that, on this very rareMr Stringer: Member of Amicus and a director of occasion, perhaps we might forego that pleasure.the Centre for Local Economic Strategies. Are the UK and the European Commission’sChairman: ASLEF. transport policies aligned?Mrs Ellman:Member of the Transport and General MrDarling: They are on some places and are not onWorkers Union. others, is the answer to that.

Q358 Chairman: And which are which?Q350 Chairman: Secretary of State, am I to take itMr Darling: Perhaps I could make a generalthat you have some words of wisdom to tell us thisobservation. That is, I strongly believe our startingafternoon, before we begin?point ought to be the position of subsidiarity. InMr Darling: That is always possible during theother words, where a Member State, the Unitedcourse of the afternoon, but perhaps I couldKingdom, can best sort things out for themselves,introduce John Stevens, who is the Divisionalthen we ought to do that. However, undoubtedlyManager for the Europe Division of thethere are other areas, which you will no doubt wantDepartment.to explore—for example, in aviation negotiations, inthe question of the Eurovignette—Q351 Chairman: Divisional Manager? Is this a new

title?Q359 Chairman: I apologise for interrupting you,Mr Darling: I believe so, yes.Secretary of State, but before we get into specifics,does the Department have some clear line of

Q352 Chairman: What happened to the old Civil demarcation for subjects that can be described asService designations? Do not answer, Mr Stevens. being subsidiarity and non-subsidiarity? How doPlease continue, Secretary of State. you, as a Department, decide what is yourMrDarling:You may like a separate seminar on the responsibility and what is the responsibility of thegrades of civil servants, which is something of a European institutions?mystery tome after seven years!Michael Smethers is Mr Darling: The first point of reference are thethe Head of International Aviation and Safety treaties to which you are a signatory, which specifyDivision within the Department. these things, but there is a whole substructure of

jurisprudence.Q353 Chairman: Is he not a manager?Mr Darling: He is not designated as a manager, but Q360 Chairman: I know about the theory, Secretaryhe probably is a manager for the purpose of these of State, but I was interested in the practice.things. Mr Darling:When you look at a particular issue—a

question may arise as to whether we should do it orwhether it should be a matter for the EuropeanQ354 Chairman: Never mind, Mr Smethers. We all

have our crosses to bear! Secretary of State? Union or the European Commission—if there is anydoubt about it, the first point of reference are theMr Darling: I was not proposing to make an

introductory statement. Obviously I have followed treaties and the various jurisprudence madefollowing that. As I said to you earlier, before youyour proceedings, inasmuch as I have been able to,

and— got your tackle in first, my general presumption is



26 May 2004 Rt Hon Alistair Darling MP, Mr John Stevens and Mr Michael Smethers

that if we can do it ourselves, that is the best thing; know, the issue before us is whether or not we cannegotiate a genuine—and I use that wordbut there are clearly areas where we do need to co-

operate, or there is an interest where we co-operate. advisedly—Open Skies agreement. At the moment,there are a series of bilateral agreements, includingI mentioned aviation, pollution, the Eurovignette.

They are examples where there is clearly a wider the Bermuda 2 agreement, and the decision that wastaken last year was that a mandate would be given tointerest and, if we are going to have a single market

or we are going to get the full benefits of a political the Commission to try and negotiate something. Theadvantage of having a Europe-wide position is thatand economic alliance, thenwe ought to use Europe.

Obviously, where things are best left to Member there is more on oVer, if you like; but that will onlywork provided the European Union takes fullStates—for example, the railways—as you know,

there are some European directives but there is an advantage of it and plays to the strength of its handin negotiating with the United States, which, as youawful lot which we are looking at which, frankly, are

best dealt with here. will know, for many years now has been notoriouslyunwilling to open up itsmarkets to entry, nevermindfrom Europe—from anybody else. The advantagesQ361 Chairman:Do you think that the Commissionare therefore tremendous, provided we exploit thatis anti-roads and anti-aviation?advantage to the full. I have made the point thatMr Darling: I have heard it said. If you look at thethese negotiations are at an early stage. What hasplan they produced in 2001, on one view there was abeen oVered by the United States so far, in my view,bias towards railway and I suppose some peopleis far from adequate. It is a lopsided deal. It wouldsaid, because of that, there was a bias against roads.not give us access into the American market. MySince that White Paper was published we and otherultimate objective, the Government’s ultimateMember States have pursued a policy—which isobjective, is that we have a completely liberalisedcertainly our Government’s policy –that you have tomarket in aviation, which we have in just abouthave a measured and a balanced policy: one thatevery other industry. In my view, it is nonsense thatrecognises the importance of railways but alsothere are still these restrictions in place.recognises that the vast majority of journeys are by

road. I am not aware and do not have any evidenceof there being people sitting in the Commission who Q364 Mr Stevenson: I think that those commentsspend their time plotting the downfall of roads. will be very reassuring, but of course, in terms of theThere will undoubtedly be individuals who take a Bermuda 2 bilateral, the real jewel in the crown isstronger pro-rail view than others, but that is no Heathrow. That is particularly important to theUK.diVerent than you will find in this country. How do you see the UK protecting this, what I call,

“jewel in the crown”, Heathrow, and the intereststhere? That is, in a situation where by definition theQ362 Chairman: So you would not say that thereCommission is negotiating, and their tendency is towas an enormous divergence between the views oflook for compromises and then identify what thethe Department on transport priorities andproblems may be, as distinct from exploiting what isresponsibilities and the Commission?a reasonably strong position in the first instance andMr Darling: No, I would not say that there is anprotecting UK interests.enormous divergence. Of course, on theMr Darling: You are right to emphasise theparticulars—the Eurovignette is a case in pointimportance of Heathrow. From our point of view,where there is a diVerence of opinion between us and40% of the EU-US aviation trade is through thethe Commission, but there is by no means aUnited Kingdom; most of that is through Londonunanimous view within the Council of Ministers.and most of that is through Heathrow. From theThe general thrust of Commission policy ought to beAmerican point of view, it is Heathrow they wantto attend to those things where you do need someinto, because it is geographically well placed andpan-European approach, and then to leave mattersbetter connected compared with some of the otherthat are properly the province of Member States forairports. We had a very robust exchange at the lastthem to get on with.Council of Ministers in relation to this. It was wellChairman: We like conditional tenses in thisreported at the time. There were some who said,Committee, Secretary of State.“Let’s take what the Americans have got on oVer”.My view is that what the Americans were oVering isQ363 Mr Stevenson:What advantages do you see inthe standard oVer they make to anybody who goesthe European Commission negotiating our servicesand asks them for an Open Skies agreement. Whatagreements—Bermuda 2, for example—and whatwe have to do is to make sure that we remain robustdisadvantages could there be?in our negotiations. The Americans would expectMr Darling: The advantage of the European Unionno less.negotiating is that, in principle—the negotiation

here is in the EU-US context at the moment and Iwill address my remarks to that, and I will certainly Q365 Chairman: But you are not doing the

negotiating, Secretary of State.go on to the other areas if you would like me to—potentially you are talking about by far the single Mr Darling: No, I am not. As I said in reply to Mr

Stevenson earlier on, a decision was taken—thebiggest aviation market in the world. It is a questionof whether or not you can get more leverage by advantages to the Americans of getting into the

whole of Europe is that there is a huge market there.negotiating on behalf of the whole of Europe inthose negotiations with the United States. As you So there is arguably a far greater negotiating power.




There are also other issues why we did it. As you Mr Darling: They are important issues.know, prior to all that, the EuropeanCourt held thatthe Member States, when entering into bilateral

Q369 Mr Stevenson: . . . on which we have takenagreements, had to designate all European carriersevidence before, are vitally important to the UK.rather than just their carriers. That would have beenMr Darling: They are important. It is just when youvery diYcult to have negotiated bilaterally. Inuse the phrase “red line”—as I say, that is commonlyrelation to the EU, I think the leverage that isused in relation to the discussions which are takingpotentially there is very substantial. I was justplace now in relation to the Treaty discussions. It ismentioning the discussion that we had in March.not quite the same thing.Happily, quite a large number of other countries

took the same view as we did: that, in anynegotiation, to take what is oVered immediately is Q370Mr Stevenson:Wehave taken evidence on this,probably not going to get you the best deal. It may and it has been very clear that the UKGovernment’stake time to achieve a successful outcome, and I do position has been that these are things that mustnot think that the Americans seriously expect happen in negotiation. I need to be clear on this. AreEurope to have accepted what was on oVer at the you saying—and I will not use “red lines” again—end of the first round of negotiations. that there may be elements of that package which we

may compromise on, or not?Mr Darling: Until there is a package in front of us,Q366 Mr Stevenson: Yes, that is interesting,it is very diYcult for me to say whether it will beSecretary of State. Transport Council decisions areacceptable to us or not. It could be, for example, thator will be by qualified majority?we look at a whole range of things that are ofMr Darling: They are.concern to us—and just suppose, for the sake ofargument, that nine out of ten were met—we would

Q367Mr Stevenson: So clearly there is an issue there have tomake a judgment as to whether the tenth onefor us. There is a lot of talk about red lines at the was actually so important. What I am very clearmoment, in another context. Would it be fair of me about, however—and you were right to mentionto put to you that the UKGovernment’s position on those issues, because they have been mentionedthe bilateral Bermuda 2 is that red lines are: the before by the Department and they are the ones thatremoval of foreign ownership restrictions around we have put in the Transport Council, and so on—US airlines; access to the domestic market; access to is that they all add up to the same thing: can we getAmerica’s Civil ReserveAir Fleet policies; and cargo a genuine Open Skies agreement? Is it a liberalisingandwet leasing arrangements?Would it be fair ofme measure or is it—as was certainly the first oVerto describe those as red lines? which was made to the Commission, and indeed theMr Darling: I think that we have to be careful here. same oVer that has been made to this country fromThe red lines, commonly talked about, are in a time to time—not particularly, as it seemed to me,rather diVerent context. They are things that we open skies? We will continue to take a robustbelieve are properly the province of Member States, attitude so far as that is concerned. As to the detaillike tax, social security, foreign policy, and so on. of anything on oVer, obviously at this stage youLet us just be clear about that, therefore. In relation would be very unwise to say in advance that youto the EU-US aviation negotiations, we want to get were not prepared to look at any of the detail. Ofthe best possible deal we can. You mention access course we must look at that. We would expect thebeyond the first port of call, so that one of our Americans to look at what we are doing. But it hasairlines could, for example, fly to New York and to be a genuine Open Skies agreement.then on to Chicago. That is important to us. Yes,ownership is equally important. There are a number

Q371MrStevenson:Doyou believe that the aviationof other issues that are important. In a negotiation,industry is suYciently closely involved with theobviously there are some things we will get and someCommission in these negotiations?things wewill not get.What I am vehemently againstMrDarling:That depends. The aviation industry, ofis a situationwhere you get anOpen Skies agreementcourse, does not speak with one voice as far as thisthat is open skies into Europe but is pretty closedis concerned. They have diVerent views, dependingwhen you get to the other side of the Atlantic. Thaton how they are placed. I think that the aviationis not an Open Skies agreement. In relation to all theindustry—put it this way—is getting more involvedthings thatmight be discussed, however, some thingsthan it was at the outset, because it could havewe might agree now; some things we might have toserious implications for them, depending on wherework towards. Similarly from the Americans’ pointthey are. Whilst it is very important that theof view, if you look at what they want out of Europe.Commission does keep in touch with what theThese are things that may have to be discussed.industry thinks, we should not lose sight of the mostWhat I am pretty clear about is, if you are going toimportant people in all of this, and that is passengersnegotiate an Open Skies agreement, it has to be anor freight carriers—the customers, in other words.Open Skies agreement; it cannot just be one whereThey are the most important people.basically they can come here but we cannot go there.

Q372 Chairman: They are not represented at all inQ368 Mr Stevenson: Nevertheless, those issues Ihave identified— these negotiations, are they? Not in any language.




Mr Darling: No, but Ministers and Member States you have these negotiations. This was fairly wellreported at the time. Not just us, not just me, butare supposed to represent the people that elect them.

That is why we are there. That is the most important others made it very clear that, if we were going to dothis thing and given the importance not just for thething. In relation to Open Skies, and why the UK

Government will continue to take a very robust line EU-US, these negotiations would be looked at bythe rest of the world, and the position eventuallywith our colleagues in the Council of Ministers and

with the Commission, it is because we believe that reached at the end of these negotiations will belooked at by the rest of the world as a benchmark aswhat we should be after here is a genuine liberalising

measure, in the same way as the liberalising to what might follow—which is why it is soimportant that we get these things right. My guess ismeasures in the 1990s opened up Europe and

allowed the low-cost airlines in. It is the same giant that, if we can reach a deal on the EU-US, then othermarkets will follow.step we need to take, frankly.

Q373 Mr Stevenson: The notion we should reach Q377 Chairman: Particularly if it is one that is to theagreement with the US on a European Union basis advantage of the people with whom you arethat does not satisfactorily resolve these vital issues, negotiating. I do not think that there is any diYculty.when 40% of the world’s aviation market is the It will be warmly received as a benchmark.United States, seems certainly to many of us to be Mr Darling: If it is a good deal, it would be.bordering on the unacceptable. Finally, do you Chairman: Yes, the definition of a “good deal” is anthink that the European Commission have suYcient interesting one.expertise to conduct these negotiations?MrDarling:Again, the picture is mixed, in that they

Q378Mrs Ellman:Are you satisfied with the way thedo have some very good, skilled people. Most of theCommission carries out impact assessments of itsexperience, if you like, of negotiating these thingsproposals?tends to rest with Member States because they areMrDarling: The answer to that is we would prefer itthe ones who have been doing the negotiating. Forto carry out more rigorous assessments and—example, within my department we have long

experience of negotiating, not just with the UnitedStates but also with other countries. I think that the Q379 Chairman: “No”, in other words?

Mr Darling: I will answer the question. If you wishEuropean Commission in this case is getting a lotbetter in these things. The issue here is not just the to answer Mrs Ellman’s question, then by all means

go ahead!individual skill in negotiating, but actually havingthe political will on the part of the Commission tomake sure that we get the best possible deal for the Q380 Chairman: We might get some morepeople we are supposed to represent. That is actually satisfactory answers.the most important thing. It is a matter of politics, I Mr Darling: It depends from which point of viewthink, rather than blaming the civil servants. you are looking at it. I think that the answer is that,

of course, yes, there are some cases where they do itQ374 Chairman: Does that exist? properly, but there are other cases—railway safety isMr Darling: The will? I certainly hope it does. a case in point, where a third directive is beingCertainly at the discussion we had at the Council proposed at the moment—where we want to be veryearlier this year, in March, a large number of sure that, before there is any directive, people haveMember States made it very clear that they expected properly looked at the costs and the impact and thento get a better deal than the one that was being decided whether or not the thing is justified. So, yes,oVered. Given that we are at such an early stage— it is a qualified answer, Mrs Dunwoody, but, like so

many things in life, they are not black or white.Q375 Chairman: Why is there therefore this verystrong view, echoed in a letter which I received from Q381Mrs Ellman:What are the areas where you areBritish Airways this week—and which I am sure has concerned that the impact assessments were notbeen received by other members of this done properly?Committee—that the Commission are about to do a Mr Darling: I mentioned railways just now.deal which will not encompass any of the points thateither Mr Stevenson or you have just made?

Q382 Mrs Ellman: Is that the major one?Mr Darling: British Airways are understandablyMr Darling: Let me give you one example. This isconcerned that they should not be disadvantaged insomething that has been proposed—for example,relation to any—that there should be a common system ofcertification or training for drivers. I understand theQ376 Chairman: But they are not alone, are they,rationale for that. If you have a driver taking aSecretary of State?freight train from southern Italy to the north ofMr Darling: They are not. Indeed, I can think ofScotland, you would like to think that he isoccasions when we have been negotiating bilateralcompetent to drive all through these things.deals when diVerent airlines in this country have

feared that we were going to be doing things.Sometimes they lobbied privately; sometimes they Q383 Chairman:Youwould like to think that he got

a rest!lobbied publicly. That sort of thing goes on when




Mr Darling: And maybe a rest in between times. think these figures are right because you have nottaken into account this or that”. Let us face it, inHowever, if the proposal meant that all drivers had

to be certificated to do that, then you have to ask most propositions, if someone is against you, one ofthe first things they will dispute is the independenceyourself whether the man who drives the train from

Kyle of Lochalsh to Inverness really needs to be of the consultant that was hired. Equally, whenothers produce their consultants, we will criticisecompetent to drive the train down to Naples if he is

never going to take his train anywhere near them as well. I am afraid that is just a fact of life.Edinburgh, let alone Naples. So that is an exampleof where you need properly to assess whether or not Q386Mrs Ellman: The assessments of the proposalsthe benefit you are allegedly going to get is justified. for the European Intermodal Loading Unit haveThere are places where that has been done; there are produced very diVerent reactions, have they not?places where, frankly, we would like to do more. Mr Darling: Yes.This is probably a very good example. As you know,there is a live issue within our own country as well as Q387MrsEllman:The industry disputes the findingswithin Europe. of the Commission. What would you put that down

to? Is it something wrong in the way it was assessedor is it just diVerent interests?Q384 Mrs Ellman: The Commission’s proposalsMr Darling: It could be a number of things. This isvery often change significantly through the variousa measure where I can see why you would want toprocesses of negotiation and discussion that takeavoid a situation where, within a few years, thereplace. Do you think there is a need for more impactwere lots of diVerent types of containers or thingsassessments at later stages of proposals?that move people about. As you know, there areMr Darling: If they change and if there has not beeninternational standards at the moment. Thean impact assessment, it should be done. I think thatquestion you have to ask is, why do you need amy starting point would be that, before something isEuropean level on top of that? But I suspect it isproposed, one of the first questions you should asksomething where you will get a diVerence of opinionyourself is “What is the impact of this? What is thebetween diVerent people. Our view is, whatever thecost? Is it justified?”. I am sure that there are manyoutcome of these various consultants’ findings, weproposals that, had they been looked at at the start,need to be sure there is a justification for doing thesethey would not have had to be amended quite sothings. That comes back to the point that I mademuch along the subsequent procedure. So what isright at the start. You need to ask yourself on eachimportant is that you do it at the start but also, asoccasion why is this thing being done and is ityou reach the conclusion, and this looks like theactually necessary. If it is not necessary, you shoulddirective that is going to be implemented, thennot be doing it.perhaps you should double-check. If you go round

the country, as I am sure all of us do, and speak topeople in business and they complain about red tape, Q388 Mrs Ellman: How important do you thinkan awful lot of it comes from European legislation. Members of the European Parliament are inOne of the things we have done, and it is one of the decision-making?things that we are pursuingwith the Irish presidency, Mr Darling: They are important because, over theand the next presidency through our own years, they have been given power to amend or topresidency, are the measures that I hope will result make proposals in relation to various directives, andin our having a real assault on that red tape. As I say, there are a lot of areaswhere there is co-decision. It isit is very easy, when you are making the rules and important. It is an example of where the quality and,regulations and you are far away from the people dare I say, the political beliefs of MEPs actuallythat you aVect, to forget that these things do have a matter, because they can influence things. That iscost and do have an impact. The question is do you something that has been in place for a number ofget a better benefit as a result. These things need to years now.be tested.

Q389 Mrs Ellman: How do you communicate withthem? Do you have any fixed system, where they areQ385 Mrs Ellman: If it is the Commission whoaware of your concerns?appoint the consultants to assess its own proposals,Mr Darling: Yes.can those results actually be trusted, or is there any

way of dealing with it other than to repeat theexercise? Q390 Mrs Ellman: How does it work?

Mr Darling: We maintain our relations with allMr Darling: The answer to that question, I think, isyes. Of course, with all of these things, you can hire MEPs. Obviously the Department does it, and

therefore it is with all MEPs. It is not ones of one57 consultants and get 57 diVerent answers.Successive governments have hired consultants and political party. We keep them up to date with what

we are doing and the issues that are coming. Wheresaid, “This is our evidence”. Others, who oppose aproposition, will hire consultants and they might there are things that are of concern to us, then we

lobby them: sometimes successfully; sometimes not.come upwith something diVerent. What you have todo is get consultants, or do it yourself, or whatever, We cannot tell them what to do, obviously. Even

here we have problems from time to time, as youand you say, “This is the impact”. It is then open,and quite rightly so, for others to come forward and know, instructing people what to do! It is even more

diYcult in the European Parliament. But, yes, we dosay, “That’s actually a load of rubbish. We don’t




keep in touch. As in this place, there are areas where corner—and the negotiations are not yetconcluded—we can influence things. I will give youparticular members maintain an interest and we will

talk to themmore—because they come to us and ask another example of where we should have been inearlier: the Working Time Directive, which had itsto be kept informed—than othermembers, whomay

have little interest in whatever the subject happens genesis about 10 years ago. Had we got in thereearlier and been engaged when the thing wasto be.formulated 10 years ago, then some of the things wehave had to fight to negotiate—depending on whichQ391Mrs Ellman:Do you think they have suYcientview you take of these things, of course—to try to getaccess to information from the Department, asa more flexible approach would have been a lotmatters proceed?easier. Those are two examples, if you like: one thingMrDarling: I think that they do; or, to put it anotherwe could have done better; one thing that we haveway, they have not complained to us that they havedone. There are lots of examples of things that arenot. On the occasions when they have said, “Couldhappening throughout Europe at the moment.you tell usmore?” then, within the normal bounds ofSingle skies, for example—that is at a very earlywhat we can do, we will tell them. I think that isstage. We think that we have a good regime here inthe case.terms of air traYc control and air safety. It is onewhere we are engaging in Europe, through NATSQ392 Mrs Ellman: The Draft Constitutional Treatyand at a governmental level. It is an example ofhas some new provisions on looking at subsidiaritywhere we share the objective. Given the importanceissues. How would that aVect the way you operate,of having a good air traYc control systemif it went through as it is now?throughout the whole of Europe, we need to makeMr Darling: It depends on what the thing looks likesure that we get in there and influence it in a way thatin its final form. Do you mean in communicationswill be beneficial to us.with the European Parliament?

Q395 Miss McIntosh: In relation to the bilateralQ393 Mrs Ellman: Yes, on how issues to do withnegotiations with the US, you refer to political will.subsidiarity would be identified, and early warningHow has the US demonstrated it has any degree ofsystems—how they would operate.political will in these negotiations, when to agree toMr Darling: Whatever the new system happens tothe three key factors—of Fly America, access tobe—and, as you know, these things are all beingcabotage and access to foreign ownership of USdiscussed—we will clearly need to look at ourcarriers—would require fundamental changes in USprocedures more. I think that it comes back to thelaw? How open do you think they are actually beingpoint I made right at the start. It is important thatin these negotiations? Where is the political will onour starting point should be that subsidiarity is key.their side?The question is, can we do it here? Is there anyMr Darling: I do not think you should confusereason for anyone else to do it? These are thingspolitical will with diVerence of opinion. As you wellwhere there are a variety of things we need to do, toknow, the view of successive American governmentsbe in there at the start. One of the things at which weand the aviation industry there is that they would beare getting progressively better is getting in therevery reluctant to allow a substantial liberalisation.before the decisions are made, or before minds startOn the other hand, because of the huge pressures onto firm up, rather than waiting for something to bethe US airlines—they have huge financialtabled—which, as you know, in most procedures ispressures—one of the things they would like to belate in the day. It is much better to be trying toable to do is to get into the very large market that isinfluence opinion at an earlier stage, rather than at athe European Union. We have made clear that iflater stage.they want into the European market, then there hasto be some kind of quid pro quo: we have to be ableQ394 Mrs Ellman: Could you give any exampleto get access there. However, you are right. I do notwhere the UK’s involvement at an earlier stage hasthink that anyone would fool themselves intomade a diVerence?believing that this is an easy negotiation and thatMr Darling: I will give you one example, which Ithere are not diYcult issues to be tackled, andthink you are looking at, in relation to shipping andstrongly held views. It depends to whom you speakthe oil spills after theErica and thePrestige.Wewerein the United States but, as you know, the USinvolved at an early stage. We are a maritime state.aviation industry has gone through a very diYcultAs you know, there is this tension betweentime. A lot of their companies have financialMARPOL, which is an international agreement,diYculties. I have always taken the view that thisand the proposal from the Commission, and therenegotiation, and moving forward towards a genuineare some Member States—France and Spain, forOpen Skies agreement, is something that will takeperfectly obvious reasons—who say, “That’s nottime; but it is worth taking time to achieve becausenearly enough.Wewant to get an awful lot further”.the benefits, if it will work and if you get it through,Our concern is to make sure that we do not get toowould be very substantial.far away from international obligations, for obvious

reasons. Although, like any state that is surroundedby water, we are very conscious of the potential Q396 Miss McIntosh: Perhaps I may press you on

that point, Secretary of State. Are you convinced, indamage that could be caused. However, it is anexample of where, getting in there and arguing our your own heart of hearts and in your ownmind, that




the US Government would push through the law Mr Darling: That is on the ships.change that is required? The Chairman will recallthat my husband did work for an American carrier Q399 Miss McIntosh: Yes. In particular, I gatherfor 23 years and now, by choice, is no longerworking that there is a suggestion that the Commission isfor an American airline. Do you really think that proposing that confiscation of a ship orthey can deliver on a change of law, to agree to a imprisonment would be a sanction for a pollutionliberalising scheme? incident. Does it concern you that the master of theMrDarling:The answer to that, I suppose, would be Prestige is eVectively under house arrest to this day?that, if an agreement could be reached, it would Mr Darling: There are two things here. First, thedepend upon what was on oVer. The Americans question of criminal sanctions is a matter forwould ask, just as wewould ask on this side, “What’s Member States. I was referring to the fact that whatin it for us?”. One of the things that American the Commission is more exercised with at theAirlines, for example, would weigh in the balance is moment is defining what the oVence is. As you“What do we get out of this? Is it advantageous to know, under MARPOL there are circumstancesus?”. If there was not much on oVer then, you are where discharges are permitted, for saving a ship orright, they would be very diYcult. If, on the other saving lives at sea or if there is a collision and it is nothand, there was a lot on oVer, in terms of getting into your fault—I generalise, but you know what Iwhat would certainly be the largest economic union mean—whereas they are proposing a rather stricterin the world, then they might be interested in that. It liability. In relation to the position of the captain inis very diYcult for me to speculate as to what the Spain, that really is a matter for Spain and the

process has been overseen by the Spanish judicialoutcome might be; but you are right in saying thatauthorities. I am not in a position to pass commenttheAmericans, historically, have been very reluctanton it, one way or the other.to open up their aviation market—in contrast to

ourselves, for example, where we have operated afairly liberal regime for some time. It is just one of Q400Miss McIntosh:Returning to the Commissionthese things you have to work your way through. possibly going further thanMARPOL and usurpingHowever, suppose we take the view, “There’s the role of the IMO, are you not in a unique positionnothing we can do. Therefore we will just carry on to use your good oYces to press the Commission towith Bermuda 2, and maybe Bermuda 3 in another stay with the MARPOL provisions?few years’ time”. I think that would be to miss an Mr Darling: We aren’t. We are not the only oneopportunity. It is well worth making an attempt to either: there are other Member States that areget an agreement, but an agreement has to be a equally concerned. Our position is that we shouldgenuine Open Skies agreement and not one that is broadly try to stay within the internationallopsided, as I said. agreement, which is MARPOL. I have to say,

however, that you should bear in mind that thiscould happen to any coastal state—and we are the

Q397 Miss McIntosh: Have you made an most coastal of all the states. One of the things thatassessment, in terms of delivery of policy through the French and the Spanish are concerned about is,the European Commission, of what diVerence it will how do you get at the owner who wilfully neglects tomake having only one Commissioner from the maintain his vessel, so that it becomes a rust bucketautumn? That is, the fact that Britain will only have in eVect, with the result that if something goes wrongone Commissioner in the new Commission? it could break up in bad weather? Arguably,Mr Darling: No, I do not think that it will make a MARPOL is primarily aimed at dealing with thesubstantial diVerence. Taking my own experience, if negligent master of a ship, although you canyou look at transport, yes, there may be occasions obviously aVect ship owners as well. There thewhen youwant to speak to theBritishCommissioner Spanish and the French, for example, say, “We needand say, “Can you help us here?”, but most of your to go further than that, because we believe that therediscussions tend to be, in this case, with the are these ships which are sailing up and down theseCommissioner who deals with transport. Given that waters and the same thing could happen again as

happened with the Erica”—which broke up oV thethe European Union now has 25 members, ifFrench coast. I am not unsympathetic with whateverybody had two Commissioners then thethey are trying to achieve; however, I think that weCommission would become a very large body. Thisneed to avoid a situation where we get too far awayis the whole argument about having an agreement asfromwhat are our international obligations, becauseto how to operate Europe. One of the diYculties youshipping is a pretty international business; it is nothave, for example with a presidency that changesjust European. At the moment, there are discussionsevery six months, is that you can be moving alongcontinuing; we are actively engaged in them.and then the next person takes over. These are thingsBecause we are a maritime state, we have a lot ofyou just have to work through, and what isexperience in the matter. We are trying to get animportant is that the Commissioner for the relevantagreement that would bring together those concerns.area is fully engaged and alive to all the issues.In other words, basically you take MARPOL asyour starting point. There is a legitimate concern,

Q398 Miss McIntosh: In your replies this afternoon however, on the part of some of these otheryou have said that the Commission is seeking to go governments. To put it another way, if the Erica or

the Prestige had broken up oV one of our coasts,further than the MARPOL provisions.




then I suspect questions coming from this place covers all the things that we need to cover, includinghaving the right procedures to sort these things out;would not be, “Why aren’t you sticking to

MARPOL?” but “Why aren’t you going a damned also, because it is important that all Member Statesimplement these powers. As you know, these shipssight further?”. These are diYcult issues, therefore.

They are examples where we are fully engaged. In can be registered just about anywhere. They call intoseveral diVerent ports. We want to make sure thatfact, the Irish presidencywants to reach a conclusion

in June, and I hope that we can, because it is in all there is a consistently high standard. We have highstandards in this country, born of experience ofour interests that we do. This sort of thing could

happen any time. tankers—for example, Milford Haven, Shetland,and so on. What I was saying, Mrs Dunwoody, wasthat I am sure that our systems could always beQ401 Chairman: If these vessels had broken downbetter but, in the light of the experience we have, weoV our coast, do you not think that some of thedo have quite a good system—which would meanquestions coming from this place might have beenthat, hopefully, if there was an incident like thedirected to the quality of the services that were calledPrestige, it would be handled diVerently and wouldinto operation by the nation state?not result in the sort of pollution that we saw on theMr Darling: I think that you are right, MrsSpanish coasts.Dunwoody, but our procedures—if you take the

Prestige, for example, which got into distress oV theSpanish coast, then had to sail out to sea and then Q405 Mr Stringer: You must be exhausted,broke up—are that, basically, if a ship gets into answering questions about the US negotiations, butdistress, if you can secure it and take it to a place there are two or three things that I would like towhere you can manage the problem, that is the right clarify. You said that it was qualified majoritything to do. I hope that, were such a thing to voting. That means that it is therefore possible forhappen—a tanker to get into distress, andwe needed the Commission, with the support of the Council ofto do something about it—we would have the Ministers, to come to a conclusion that you do notprocedure to deal with it. The other thing is that, I like.think it was following theMilfordHaven inquiry, we MrDarling: That is always possible. The objective isset up a position where there is an individual called to try and avoid that unhappy situation.the Secretary of State’s Representative, who is myrepresentative, who has the statutory power to takecontrol over any incident. Q406 Mr Stringer: We tried to get out of Mr Plant,

at our last-but-one evidence session—Mr Darling:Mister who?Q402 Chairman: In other words, Secretary of State,

we have perfectly eYcient systems, which have beenbrought into operation based on experience, and Q407 Mr Stringer: . . . Plant, at our last evidencetherefore, as far as we can see in the United session, whether or not he thought that it was likelyKingdom, there is no conceivable reason either to that there would be a deal made just on theexpand or to change those existing systems? ownership issue, and to leave cabotage—becauseMr Darling:No, it would be complacent to say that those are the two big issues. What would be yourwe would be in that position. position, Secretary of State, if the Commissioner

came back and said, “We’ve got a deal onQ403 Chairman: No, not complacent, Secretary of ownership. The Americans will relax on ownership,State—factual. but not on cabotage”?Mr Darling: I hope we have a good system and, for Mr Darling: Can I just make two points? I hope youexample, the Secretary of State’s Representative is will forgive me for saying this, but it is not a terriblyinvolved every year in a number of incidents where good idea for me to reveal my negotiating positionships get into diYculty. What we have found is, well in advance of where we might be. Thesebecause he has the power to take control and order proceedings, thankfully, are public. The proceedingsa ship to go to one place or to another, that has of your Select Committee are read the world over,removed some of the diYculties that have occurred including in the United States. I am thereforein other countries, where there may have been reluctant to get into a position at this stage where Idiscussions between various people who might have start setting out, “I’ll take this. I’ll not take that”,had some sort of role—and, all the time, the ship is and so on. As I said earlier to Mr Stevenson, thegetting into deeper and deeper trouble. negotiations ought to proceed. Let us see whatChairman: Sowe certainly would not need European develops. The test I apply is, is there a gain? Is therelegislation on that then, would we? a benefit for passengers and the freight operators—

the people whom we are there to represent? What Iam reluctant to do, here, in advance of theseQ404 Miss McIntosh: Are you not concerned that

the Prestige disaster could happen again, because negotiations reaching a conclusion, is to set out whatour negotiating stance might be. Never mind whatthey do not have a Secretary of State’s

Representative and they do not have safe havens? the EU-US stance should be, but what we might sayto theCommission. The other thing to say in relationMr Darling: As I was saying to you earlier, Miss

McIntosh, I am not against—far from it—the to your first point is that one of the things aboutQMV is that it is just that, and equally it cuts twoproposed legislation from Europe. There are two

reasons for that. One is to make sure the legislation ways: there could be an agreement which is reached




that we like but which another Member State may there was a period a couple of years ago when Inot like, in which case it would be diYcult to see how started this where the process had rather stalled. Ion earth it could work, if there was unanimity. think it is important that whilst this goes on we do

not end up with a freeze. I want to see far moreagreements. As I say, my whole philosophy is weQ408 Mr Stringer: I understand the argumentsshould be opening up the market not closing itabout qualifiedmajority voting. Can I interpret yourdown.answer this way, Secretary of State: that you would

consider a less than complete Open Skies deal andless than a change in ownership?

Q412Mr Stringer:During the evidence we took twoMrDarling:No, you could not do that. What I haveor three weeks ago we had witnesses telling us thatsaid to you is that my objective is to get the bestbecause the committee had not been set up, whichpossible deal, and whatever we do we must bewas to look at these new agreements which hadmoving towards a liberalised market where,failed to agree a Community clause, there was aultimately, what I would like to see is people beingdelaying process.able to set up business and operate routes withoutMr Darling: I am not sure—governments having to enter into treaties to achieve

it. I am very liberal when it comes to these things butI think it is good for people, generally, as we have Q413 Mr Stringer: Are you saying they are wrong?seen within Europe. So the test I apply is this: is the Mr Darling: The regulation that allows these thingsagreement an Open Skies agreement moving to happen is about to be put in place; it comes in attowards a more andmore liberal market? I am going the end of this month.What it provides for, amongstto reserve my judgment as to what I think about other things, is that if you negotiate with anotherparticular propositions until I actually see them.We country and they say “We are not having atook a very robust line when we met in March and Community clause. We do not understand what thiswe will continue to take that line. is all about, we just want to fly to your country”, we

report that to the Commission. Given the time lag itQ409 Mr Stringer: Can I move away from the takes to set up these flights anyway, I am not awareAmerican negotiations to the other implications of it has held things up particularly, as far as we arethe judgment of the European Court of Justice, concerned. I am not saying it has not been held upwhich was the Community clause. You are familiar elsewhere. Michael, are you aware of—with that? Mr Smethers: There is one agreement, it is anMr Darling: Yes. agreement with Hong Kong, but that was at the

request of the Hong Kong authorities.Q410 Mr Stringer: Can you take us through what Mr Darling: Not Europe.the BritishGovernment’s role has been since the idea Mr Smethers: We are allowed to provisionallyof a Community clause was introduced, I think it implement that agreement and then take it to thewas just twelve months ago? Commission when they set up a committee, but theMr Darling: That is right. Basically, after the Hong Kong authorities said “No, we do not want toEuropean judgement which held that there had to be do that, we want to wait until the Commission—a Community clause—it did not say that MemberStates could not negotiate bilaterally but it did saythere had to be a Community clause—there was Q414 Mr Stringer: That was because of theessentially political agreement reached that the uncertainty caused by there not being a regulationCommission would try to negotiate an Open Skies and there not being a committee set up, was it not?agreement with theUS but in themeantimeMember So it would be wrong to say that this process had notStates would carry on negotiating bilateral deals but delayed something?that they had to oVer the Community clause. If they Mr Darling: The Hong Kong agreement has beenwere not able to do it then they had to say that the delayed. As I say, it was at the request of the Hongagreement was conditional on the Commission Kong authorities. Yes, the Hong Kong people wantsaying that was okay. Actually, that position has some certainty about these things. The point I wasbeen formalised by a regulation that is about to be making is that with a lot of these agreements that wepromulgated. Since this we have negotiated a have entered into it takes some time to get all thesenumber of bilateral deals— things set up for the flights to actually happen. Now

that we have got this regulation coming into forceQ411 Mr Stringer: Since when? next week then, obviously, we would like theMrDarling: Since this procedure was agreed in 2003. Commission to get their procedures in place so theyWhat we do with the negotiations, as other Member can be cleared as quickly as possible. It is not just us,States do, is say there is a requirement for a every other Member State enters into theseCommunity clause but if the other contracting party agreements and, indeed, there is a lot of interestdoes not accept that then we report that to the across the world in entering into these agreements atCommission. I cannot tell you oV-hand how many the moment.bilaterals there have been across Europe, obviously,but within our own country we know which ones we

Q415 Mr Stringer: Have there not also been delayshave entered into. However, the point is it hasallowed bilateral deals to be entered into, whereas with Pakistan International Airlines?




Mr Smethers: There has been no delay. has been taking over from the InternationalMaritime Organisation; in aviation it is taking overindividual agreements and we are now just about toQ416 Mr Stringer: That is not what we were told inhave health and safety legislation to take overevidence previously. We were told that there hadworking time regulations that were in existencebeen delays to Pakistan International Airlinesbefore. It now appears that there are proposals toapplying for freedoms for Manchester Airport.force the introduction of random breath tests on thisMr Smethers: There have been negotiations aboutcountry. Is that not a much more accurate reflectionthat but there has been no delay as a result of theof the relationship between this Member State andCommunity clause in the ECJ ruling. It has notthe European Union than the theoretical answerbeen agreed.that there are very clear lines, and actually theMrDarling:Mr Stringer, theManchester agreementbalance is moving one way?rings a bell. I think you discussed this with me aboutMrDarling:No, I do not think so. In my experience,twelvemonths ago. I do not think it was this thatwasfrankly, if people like what has come from Europeholding it up. If it would help I shall write, perhapsthen they say it is a jolly good idea and if they do notto you, Mrs Dunwoody, copied to Mr Stringer—they say it is Euro-creep. I may generalise but I thinkit is not an unfair generalisation.Q417 Chairman: I think you should know, Secretary

of State, we were specifically told that this was beingheld up, not that it was in the process of negotiation; Q423 Mr Stringer: That was not the question, tobecause Pakistan was unable to accept this be fair.Community clause it has been held up. MrDarling:Whether you like it or not, I think that isMrDarling:My recollection is that it was something my general response. If you look at any one of theseelse that was holding it up, but I will write to you in measures that you mention, you have to deciderelation to that. whether or not it is necessary in order to make the

single market work and whether it is convenientQ418 Mr Stringer: Are we using in this country the because it is better to do these things at a Europeansame rules and some processes to deal with this new level. If you take the example of breath testing,Community clause as other countries? criminal law is something for Member States. I amMr Darling: As far as I am aware we are. thinking of another example where, I suppose, there

will be argument in relation to the directive that willbe coming along soon on driving licences andQ419 Mr Stringer: We have been told that otherdriving standards. Obviously that is a primarycountries have worked round this clause and are notconcern between Member States. However, it is inusing the same process.our interests that somebodywho drives a lorry from,MrDarling: Before this agreement was entered into,say, the Eastern side of the European Union andI think I am right in saying that there were otherdrives it up and down the streets of Manchester iscountries, before the ruling of the court, that werecompetently taught, that the driving licence is hiscertainly entering into agreements that did not havedriving licence and not somebody else’s and that hea Community clause in them. But the new regulationknows what he is doing. That is an example of wherewhich comes in next month is absolutely clear onone person might say that that is an imposition andwhat all Member States have to do, and if they doanother might say that might be a jolly good idea ifnot do it then those agreements are challengeablewe are going to have a single market. So you can runin law.those arguments both ways, I think.

Q420 Mr Stringer: There are, of course, thosecountries who refuse to negotiate with the Q424 Mr Stringer: You can run the argument inCommission, are there not? favour or against them both ways, but what youMrDarling:Yes. Well, they do not want to; I do not cannot have both ways is the amount of spaceknow that they have actually said they refuse, as covered by those arguments. The fact is that thesuch. European Commission is taking more responsibility

for more areas, and the list I gave you is evidenceQ421 Mr Stringer: They have said they do not of that.recognise— Mr Darling: In all the areas we have covered inMr Darling: Yes, but what these countries tend to aviation and safety at sea there are good argumentssay is, “We want to negotiate with you, the Member for saying some of this ought to be dealt with at aState, rather than the Commission”. You are right, European level. I have touched on railways, andthe Russians take a particularly strong line on that. interoperability, for example—making sure that the

markets are open. That is fine and something whichshould be dealt with at the European level. There areQ422 Mr Stringer: You have given model answers,

Secretary of State, on subsidiarity and the other things that, frankly, are properly the provinceof the Member State. In each case you have to reachboundaries between national government and

Commission responsibilities. However, the evidence a judgment on what is appropriate. I am not sayingthere are not people in Brussels, in the Commission,we have had has not shown that to be the case. We

have had people—they have not used this word but who would dearly love to extend what they do. It isup toMember States to be vigilant, tomake sure thatI will use it—saying, in eVect, there has been Euro-

creep; that in maritime matters the European Union Europe does what Europe is good at and does not




start doing things which, frankly, Member States Q430 Mr Stringer: Do you believe they exist?ought to be doing. In relation to the space that these Mr Darling: Yes.things take up, as you know, Europe takes up a lotof space in political discussions in this country, andthat is just a fact of life. Q431 Mr Stringer: This is not a theoretical question

I have asked, because the predecessors of theseRegulatory Impact Assessments were EuropeanQ425 Mr Stringer: Will you resist random breath Economic Impact Assessments which weretesting if the Commission proposed it? supposed to be attached to every piece of European

Mr Darling: I read this in the newspaper at the legislation, and I have never met a Commissioner, orweekend and the Home Secretary made the position a member of the Commission, who has ever seenquite clear that we do not think that is justified.one.Again, we must not be complacent, but our recordMr Darling: They do exist and within theon road safety is good in this country—perhaps, onedepartment I think I am right in saying that one ofof the safest in Europe—and we think that themy ministerial colleagues has a very happy existenceregime we have in relation to being able to stoplooking at the things. The way we organise the workpeople and breath-test is the right one. Of course, wein the department, there is a lot of legislation thatwill always keep these things under review. We docomes from European proposals, and so on, and Inot think that randombreath testing is a particularlylook at some and I deal with diVerent aspects of itgood way of dealing with risks; in this country theand other ministers deal with other ones. I willpolice know the sort of areas that they are far betterhappily have a word with my ministerial colleague,targeting. I am not sure that the Commission hasand it could be that he has been tellingme all the timemade a proposal, as such, in relation to that. I knowthat he was not looking at them, but I certainlythat right across Europe—in France, for example,believe that he was looking at them. I certainly lookthe French Government, because of the very highat assessments of these things, especially the bigroad casualty rate has recently put in a lot of eVortissues that I have to deal with. If somebody told youinto tightening up their drinking and driving laws.they do not exist, I know it is diYcult to prove aThat is a matter for France if that is something theynegative, but if you would like to tell me which oneought to be doing—something I would encourage asdoes not exist I will certainly see if I can find it.somebody who has occasionally driven through

France because it is in my interest we should havesafe roads—but something like that is really, I would

Q432 Mr Stringer: I have searched for them in ahave thought, better dealt with by theMember State;previous existence and never actually found one.it is a matter of criminal law, after all.MrDarling:Wedo consult people in relation to that.I would have thought that if you were right that they

Q426 Mr Stringer: As I understand it, it is a non- did not exist them somebody would have pointed itbinding Recommendation at the present time which out to us.the Commission are considering enforcing. Mr Stringer: Thank you.Mr Darling: There is a huge diVerence between aRecommendation and a directive.Recommendations can be filed in the top drawer. As Q433 Chairman:Not necessarily, Secretary of State.I said, the Home Secretary made it pretty clear at the I can think of nothing better than sitting in theweekend, which is when this thing hit the Department of Transport and looking at somethingnewspapers, how the Government thought of it.

that does not exist and giving reports thereon!Mr Darling: It is an important point. When you getone of these proposals we consult. I would find itQ427 Mr Stringer: One final question. In reply tohard to believe that the various people we consult,Mrs Ellman’s questions on Regulatory Impact

Assessments, you said that, basically, they were not who are pretty well equipped to do that, would notas good as you would like them to be. Have you say “Where is your assessment?”seen one?MrDarling:Have I seen one? I would not pretend tohave studied one in great detail. The department sees Q434 Chairman: We can save all this, actually,them and I have read our assessment of them, yes. Secretary of State. You have got people doing this;

perhaps you would give us a one-page note whichtells us which particular assessments have been

Q428 Mr Stringer: So you have not actually seen looked at in the last year.one?Mr Darling: Even better, I will send you some.Mr Darling: I do not think I have ever sat down and

studied one from start to finish.

Q435 Chairman: How kind. We would like thenumbers of others as well, not just the only one youQ429 Mr Stringer: Can you tell me which one youcan find.have looked at?Mr Darling: If you want—is it feasible to send everyMr Darling: No, I cannot, oVhand. As I said I have

not looked at one. single one we have got?




Mr Stevens: Yes. Q444 Mr Randall: Do you think UK road hauliersare justified in their complaints about their inabilityto compete with hauliers from other EU states?Q436 Chairman: No, no, I will be quite happyMr Darling: I think you need to look at costs andknowing the numbers of papers that are thrown outtaxation in the round. For example, if you are aby the Commission, and quite happy with a list ofFrench haulier it is more expensive to hirethe numbers that have been looked at and anemployees, because the cost of hiring an employee inexemple.France is more than it is in this country. VAT ratesMr Darling: How will you know if they really existcan be higher in other European states than they areif we do not send them to you? Let me see what isin this country; even personal taxation rates arefeasible and, perhaps, send a sample. How aboutdiVerent. The second thing is this: youwill rememberthat?in the year 2000 that one of the reasons weintroduced the Lorry Road User Charging system is

Q437 Chairman:Yes, perhaps a little organigram on that it charges on the basis of distance travelled. Thishow many of your civil servants have been having was one of the things that the industry themselvesyou on in the last five years. wanted because they said that is a fairer way ofMr Darling: I might even send you along—perhaps making sure that continental operators coming ontoI should not inflict this on my ministerial colleague UK roads paid to use UK roads, whereas theirfor whom too much of his life is engaged in looking argumentwas that they load upwith petrol inCalais,at these things. orwherever, and they did not necessarily have to buyChairman: We always like to contribute to the fuel from this country at all. So the LorryRoadUsereducation of our colleagues. Charging system has huge benefits also to us but

actually, so far as the industry is concerned, it issomething they very much welcome.Q438 Mr Randall: Secretary of State, how have

measures to improve the single market benefited theUK transport sector? Q445 Mr Randall: You would rather take the viewMr Darling: The regime that was changed to allow that the road hauliers over here are looking at onelow-cost airlines is one example. issue, and that there are some pros and some cons.

MrDarling:As in everything in life, you have to lookat things in the round.Q439 Mr Randall: Can you think of any more?

MrDarling:There is one currently going through, asyou know, in relation to the European vignette, for Q446 Mr Randall: Do you think road hauliers haveexample, which would allow us properly to made the most of the opportunities that the EUimplement the Lorry Road User Charging scheme oVers them?which is in support of the freight industry, which is Mr Darling: Some have, I suppose, and some haveanother example of where the single market not. What do you have in mind?operates. There are others as well. For example, theregime that has allowed cabotage. That is good for Q447Mr Randall:What does the Government do inUK hauliers and it is good for consumers in this the way of helping them take advantage?country. There are many examples of where a large Mr Darling: We will do anything we can to helpmarket is beneficial and where opening up access to hauliers in that regard, but basically this is antransport is also beneficial as well. example of where we need to be careful in trying to

usurp the function of the market, or standing in theshoes of a particular haulier. It surely must be forQ440MrRandall:Do you think that a single markethauliers to exploit markets as best they can, just asshould require the harmonisation of fuel duty usedthey do in this country. If people want help in termsfor road haulage?of explanation or education or in terms of havingMrDarling:No, because tax is a matter forMemberdiYculties within aMember State and they need ourStates. I am absolutely sure about that. We werehelp, of course we stand ready to give it. What wetalking about red lines earlier, and taxation is one.cannot do is be their marketing department, if youlike, and they would not want us to be, I suspect.Q441Mr Randall:Would you not say, in a way, that

aviation fuel is harmonised throughout the worldQ448 Mr Randall: Do you have a specific area orbecause it has an exemption already?some facility where UK road hauliers might sayMr Darling: That is part of an international treaty“Can you give us some help on how we can take thereached in the late 1940s, I think.best advantage of going into Europe?”Mr Darling: As you know, we maintain regular

Q442 Mr Randall: You do not think there is contact with a number of trade associations, atanything that should be done for road hauliers’ fuel? oYcial level and also at ministerial level as well, andMr Darling: No, because I think matters of when they raise matters of concern if we can helptaxation— thenwewill certainly dowhat we can. I am not going

to say to you we could not do better—there arealways things that we could do better—and if thereQ443 Mr Randall: I understand that.

Mr Darling:—are not up for negotiation. So the are specific proposals that the industry or individualhauliers have in mind, of course we stand ready toanswer is no.




help, but our objective is to try and ensure that we Q452 Chairman: Congestion charging.Mr Darling: We do not, generally, hypothecate inhave as open a market as possible so that UK

hauliers, for example, and many of them do, can this country and successive British governments andmost continental European governments take thetake advantage of the skills and prices they can oVer

in continental Europe and not just here. That is the same position, especially their finance ministers, forobvious reasons.whole rationale behind the single market.

Q453 Mr Randall: Finally, could you tell me whatparticular challenges the transport sector has posed

Q449MrRandall: Secretary of State, youmentioned to the recent expansion of the EU?the Lorry Road User Charge. Is there anything to Mr Darling: I suppose negotiating a satisfactorystop the UK introducing that in advance of EU Eurovignette is one; we have mentioned the EU/legislation? US—that is another one. There is a whole range ofMr Darling: I think we probably could do it but issues where something has been proposed that wethere is a view that the 1999Directive needs updating need to work hard on to make sure that it fits withbecause the concept of road user charging was pretty what we would like to see. It is a question of beingundeveloped even five years ago. It would be much vigilant on all fronts, really.better if we had a directive that cleared up a lot of thethings that are not clear at the moment. The answer

Q454MrRandall:There is no way, particularly, thatis we could do it. As it happens, because it is due tothose countries that were in the former Eastern Bloccome in, I think, in 2007–2008, I hope there will beimpact on the transport sector?a new directive prior to that time. It would have beenMrDarling: I think the big impact, I suppose, as younice if we had reached agreement in March, but itwould expect, with a lot of the accession countrieswas not possible to reach agreement then and I thinkwhich have pretty elementary infrastructure, is thatwe are going to have another go at it in June.they are looking to see what additional funds theycan get to help them develop. The whole argumentof a European network tends to be the way—the newcountries tend to look at it from the point of view of

Q450 Mr Randall: EU legislation is not necessary what help can they get and the older countries tendbut obviously would be preferable? to look at it from the point of view of how do weMrDarling:Yes, because with anything like this you contain this budget?want legal certainty.We could introduce the scheme.It may be that there would have to be amendments

Q455 Mr Randall: There is nothing specific?slightly to take account of the existing directive, butMr Darling: There is nothing new there.I think it would be better if we could get a new

directive because then that would deal with a lot ofthematters that were not about in the late-1990s that Q456 Mr Randall: There is nothing that has landedwe know about now and need to be sorted. on your desk recently that has arisen from the—

Mr Darling: No, on the contrary. Actually a lot ofthe newer countries are quite open to some of thethings. If you take our view on liberalisation of

Q451MrRandall: Is theGovernment opposed to the markets, some of them are actually very helpful toprinciple of hypothecation of revenue raised by road us.user charging, or the agreement of anyhypothecation at European level?

Q457 Mr Stevenson: Secretary of State, theMr Darling: Yes, we are and that has been theCommission seem to be intent on representing, orposition of successive British governments. I thinkattempting to represent, all Member States on suchthe problem, really, is this: that in continentalbodies as the International Civil AviationEurope there is a history, in some countries, of tolledOrganisation and the International Maritimeroads whereby you collect a toll and the money thenOrganisation. What is the Government’s view ofgoes back into that particular road or into roadsthat ambition?generally. Until the M6 opened at Christmas time,Mr Darling:We think that is really a matter for thewith the exception of some river crossings, we didMember States who are members of it, in that thesenot have any tolled roads in this country. So forare truly international organisations and theycountries that have that history of tolled roadscomprise Member States. That has been ourhypothecation is not a problem because that is whatposition. I know the Commission has, from time tohappens. When you go further than that—supposetime, wandered in to the IMO for example, and I amyou were going to have a wider system of Lorrynot sure if it has been unanimous but certainly theRoad User Charging and you then hadmajority view of Member States is that they shouldhypothecation—it completely changes the way inremain members.which we fund public expenditure generally in this

country. We do not hypothecate in this country,generally speaking (there is one big exception, I Q458 Mr Stevenson: With regard to the European

Safety Agency, which will take on the responsibilitythink, and that is the penny on National Insurancewhich went into the health service)— of air safety from this year—




MrDarling: It will be dealingwith some aspects of it. Q462Mr Stevenson: I think we all support that. Youtalk about flexibility, Secretary of State, and there isconcern about such things as the distinction made

Q459 Mr Stevenson: It does not alter my question. between employed drivers and self-employedMy question is two-fold: how are we going to guard drivers. It would be interesting to know why thatagainst duplication and how are we going to extension is there. Are you concerned about it?maintain the high standards we have in the UK in There are many in the industry that suggest this isthose areas that are transferred? going to mean that many employers will be movingMr Darling: They are both very important points. their employees over to self-employed status andAgain, it comes back to this point: what do you need that would be detrimental. Are you concernedto be concerned about at a European level? If you about that?take aviation, for example, we want to make sure, Mr Darling: I would be concerned if that happened,for example, that the same standards are applied in but the directive will apply to self-employed peoplerelation to airworthiness or things ultimately like from 2009, I think, to give them time to makechecks on aircraft and so on. We want to be satisfied appropriate arrangements. Frankly, if you arethat aircraft coming fromother parts of Europe, and another road user, pedestrian or driver, it does notindeed other parts of the world but in this sense matter to you whether the truck coming down theEurope, flying into Heathrow, for example, are road towards you is driven by an employed or a self-properly checked. So there is a good argument for employed person. Obviously, in order to make thishaving common safety provisions. However, it is thing work and to be reasonable, my recollection islikely to be the case for some considerable time to that originally it was not going to apply to self-come that the actual policing of this and checking employed people at all because, of course, thewill rest with Member States—in our case the CAA. legislation, generally speaking, looks at theOn your second point in relation to cost, yes you employer/employee relationship, but given that soneed to be very clear we do not end up paying twice many drivers, not just in this country but onfor the same thing. I think we have somebody on the continental Europe, are self-employed, it wouldEuropean Safety Agency. have been odd if they had been exempted. Indeed,Mr Stevens:We have a chairman on theMaritime— had you exempted them I think precisely that moveMr Darling: But on the European Air Safety one? you have described would have happened. I do notMr Stevens: On the Air Safety one we have people think, simply because there is such a short timescale,attending. that it is likely to happen in quite the way that some

people fear.Q460 Mr Stevenson: I thought it was Michael.Mr Darling: If the costs go up, here is your man! Do Q463 Mr Stevenson: Are you satisfied there will notyou want to say something about the costs? be a disproportionate adverse eVect on the UKMr Smethers: We are obviously very concerned to haulage industry by the inconsistent application ofavoid duplication of costs. this Directive throughout the European Union,Chairman:Order. The Committee stands adjourned. given that some states, as I understand it, have gotSecretary of State we need to ask you some more certain exemptions?questions. Mr Darling: We have negotiated a flexibility that,The Committee was suspended from 3.59 pm to 4.10 generally speaking, UK hauliers, no matter whatpm for a division in the House their status is, have welcomed. I think people

recognise that there has to be some framework togovern these things.Wewanted tomake it as flexibleQ461MrStevenson:One further area, if Imight, andas possible, recognising the peculiarities of drivingthat is theWorkingTimeDirective and lorry drivers’heavy goods vehicles.hours. Why was it necessary to extend the Working

Time Directive to lorry drivers, given that we hadEuropean regulations governing drivers’ hours in Q464Mr Stevenson:The eternal question: how is the

Government going to ensure to the maximumplace already?MrDarling: I think it was primarily driven by safety. possible degree that we have got a reasonably level

playing field in the European Union?If I remember rightly, when the Working TimeDirective was first promulgated in 1993 there were a Mr Darling: You are right, no matter what the

regulation is we have to ensure, as best we can, thatnumber of exemptions in relation to transportworkers and it was felt necessary to bring lorry if there is a rule or regulation it is applied in the same

way in each Member State. The obvious diYculty isdrivers, in particular, within it. I think over the lastcouple of years or so we were trying to get as much that it is up to Member States to enforce their own

laws. Put it this way: if other Member States wereflexibility as possible, which is something that I thinkboth sides—employers and employees—in this complaining about the way in which we implement

laws then people would understandably be upset.country wanted. Indeed, when we published the wayin which we were going to implement it it was The right thing to do, though, is if you believe that

if the rules or regulations are not being implementedbroadly welcomed by both sides. I think it isnecessary simply because it is a safety measure. It in theway they should then you take it up in the right

quarters—and, ultimately, I suppose you could go tomust be in our interests generally to make sure thatwe do not have tired drivers driving lorries round the European Court or get the Commission to go

and do something about it. It is important that wethe country.




ensure that there is a level playing field. However, have an eVect upon safety. The diYculty was on theother side of the calculation; it was never easy tothe only way we can ensure that that is the case is to

have no rules and regulations at all, but I think most ascertain what the costs on industry would be. Ofcourse, we consulted our industry in this country,people would take the view that something that does

seek to ensure there is some control over the length but that is the way the debate progressed.of time that someone can drive a lorry or be on duty Mr Darling: Mr Stringer, you will recall that justis probably sensible, providing it is implemented in about every summer we have incidents of coachesa sensible way. going oV the road where it has either been found or

suspected that people have fallen asleep at the wheel.Proving these things—you can do the eyes and theQ465 Mr Stevenson: The Working Time Directiverest of it—can sometimes be diYcult. I think thereapplies to many other industries, but in all otherare two things: one is safety when we are talkingindustries, I think, there is an individual opt-outabout road haulage, but I also suspect that when youwhereby an individual employee can opt to worklook at these things it is also to do with a desire tomore hours, which will not be available when thishave reasonable employment provisions. I suspectDirective is implemented next year for lorry drivers.there is a bit of both in it.Why is that, given that one could make a safety

argument, presumably, if you worked in asteelworks, or whatever it maybe? Is it solely on Q468 Mr Stringer: This is the application of one setsafety grounds? of rules to a situation where there are alreadyMr Darling: I think it is predominantly safety. I drivers’ regulations, so I think although there has tosuppose the answer is if youwork in a steelworks you be an element of theoretical calculation about thetend to work on a shift and the shift comes to an end number of lives that are going to be saved, I amat some point—people go home. If you are driving a trying to get to how many lives you believe will belorry from Greece to Britain and back again you saved, because the haulage industry say none.want to have some sort of rule that puts some sort of Mr Darling: I am interested in how they can be socheck on how long someone can actually be working definitive as to say none.behind the wheel. You could construct an argumentto extend theWorking TimeDirective to some otherindustries, or even I suppose you could say “Well, we Q469 Mr Stringer: To be fair, they say it is not aneed even more opt-outs in transport”, but I think safety issue, you said it is, so I would like to know,what we have got is a sensible compromise. As I said in your assessment, how many lives you estimate,earlier, if you go right back to the roots of the given all the diYculties there are about—Working Time Directive there were a number of Mr Darling: I am not in a position to tell you howthings that were pre-1993 which, frankly, had we many lives I think it will save. What I am saying tobeen better engaged on it then, would have probably you, though, is that, intuitively, having some sort ofbenefited us. However, in relation to lorry drivers, I control on the amount of hours that somebodythink we have come up with something that is works must be the right thing.flexible and something that is good. It was fairlywarmly welcomed which is not necessarily the case

Q470 Mr Stringer: But they are already regulated,on everything we do, as you know.are they not? Is that not good enough, Secretary ofChairman: I think, Secretary of State, if we want toState, in this matter where extra costs are going to berelease you we are going to have to ask for shorter,put on business?sharper answers.Mr Darling: You are right, but remember that thegenesis of this is the agreement reached in 1993, so

Q466 Mr Stringer: Just following Mr Stevenson’s we are stuck with that. It was agreed by thelast couple of points, the hauliers, whenwe had them government—I am not saying we would not havehere last week, said that they did not believe the reached one but I think we might have tried to do itintroduction of this new measure was a safety issue in a diVerent way. There then followed thisat all.Was there a regulatory impact assessment that dreadfully named Horizontal Amending Directiveassessedwhether this would improve safety? If so, by which implemented these things. What we havehow much? sought to do is try and implement it in a way thatwasMr Darling: Can you answer that, because I do not satisfactory, both to the employers and employeesknow oVhand? and the self-employed. As I said to Mr Stevenson, IMrStevens:There was, Chairman. TheCommission

think, on balance, we managed to do the best wedid produce some evidence of that at the time but Ipossibly could. If we had our time over again, werehave to say it was always in debate as one of thewe negotiating this in 1993 would we have come tothings that was constantly under discussion as toa diVerent solution? Possibly, but that is reallyhow far there would be benefits or costs from this.impossible to say.

Q467 Mr Stringer: I do not think there is any doubtQ471 Mr Stringer: So you cannot tell us how manyon whether there are going to be costs; the issue islives the Government believes this implementationwhether there are going to be safety benefits.will save?Mr Stevens: There was never any doubt about theMr Darling: It is terribly diYcult to come up with asafety side; I think people understood that this

would reduce working time hours and that would definitive number on something like this.




Q472Mr Stringer:To be accurate it is but you know Q477 Mr Stringer: Just on a diVerent one of MrStevenson’s questions, you were talking aboutaswell as I do, Secretary of State, that when there arebringing air safety standards to the same level ininvestments made in the railways, when the case onEurope. Are you not concerned that when, in thehealth and safety is made, there are standardevent, we have high standards traditionally and informulae: cost against lives, and it is a verysouthern Europe and the newer states to theunpleasant process—European Union they have had lower standards, weMr Darling: As you know, they are the subject ofare delaying improving our safety standards?some criticism.Mr Darling: No.

Q473 Mr Stringer: They are, and I wondered whichQ478 Mr Stringer: Are you not concerned that theones you were using. If you are saying that this is arecommendations made after the Manchester airsafety issue I assume you would not be saying it wasdisaster, for instance, by the Air Investigationa safety issue without knowing who was going to beBranch have not been implemented, by and large?saved or roughly how many people were going toOne of the reasons why, we have heard in otherbe saved.evidence sessions, is because we are waiting forMrDarling: It is very diYcult to say. If I told you theeverybody to get to the same level. Are you notanswer was 42 you would quite rightly raise yourconcerned about that?eyebrows and say “How on earth do you knowMr Darling: I would at least look at the precisethat?”allegations you are making in relation to theManchester air crash, as to which ones have not

Q474 Mr Stringer: All caveats say “This is how the been—this is the engine fire in 1985? I would need tocalculation is done”, and of course it cannot be check that. I do not want to answer oV-the-cuV

accurate, which is what is said in every safety case in because it is rather important that we get it right. Theevery factory, applying to the railways, applying to general point is that we do have high standards hereaviation and applying to every other sector of and there is no reason on earth why if something wasindustry. That is how government does its case.Why required following an AIB report, or something likeis the case not made in this example? that, where we needed to increase safety that weMrDarling: I have explained the history of this. The should not do it. Indeed, all the time we are doing it.Working Time Directive was entered into 11 years I am not saying there are not some things that, forago and it was subsequently amended.Whatwe have one reason or another, do not get implemented—notsought to do is to try and get something of because of what is happening in Europe but theresatisfaction to both sides. It is terribly, terribly may be other reasons—but safety in aviation isdiYcult to be certain as to what the eVect will be. absolutely paramount; we have a good record andTrying to prove a negative is actually very diYcult. we need to make sure that we maintain that good

record. If you have any evidence that we are notdoing something because we are being held back byQ475 Mr Stringer: I do not want to labour this, others then I will happily look at it, but I will check

Chair, but I am not asking for certainty I am asking that Manchester position.what case lies behind it. We all know that predictinghow investment in safety will work is not an absolutebusiness, but I also know that when taking decisions Q479 Mrs Ellman: You referred earlier to thein every other industry and in most of transport importance of influencing proposals before they arethese assessments are made. I ask this question actually published. Would you say that there isbecause the practitioners themselves say that this is enough discussion with the transport industrynot a safety matter. You are saying it is, I am trying before the Commission does produce proposals?to get to the bottom of why you disagree with me. Mr Darling: Not always, no. There are some casesMr Darling: The rationale for regulating the hours where there is and there are some cases where therethat somebody can drive is predominantly safety. I is not. We have just had an exchange with Mram happy to send you all the papers—presumably Stringer in relation to the Working Time Directivetheywere not locked up under the last government— and the transport sector. Those discussionsI can get. obviously happened, to a large extent, after the

original directive was put in place. So the answer toyour question is sometimes there is discussion butQ476Mr Stringer:Was theWorking TimeDirective sometimes there is not. Obviously, of course, there

not originally social policy? Has it not been applied will be cases at times when there are discussions butin this area where there were already regulations no agreement. That might not be a bad thing and itmade on safety issues? Is that not why there is no sometimes is inevitable if you are going to doassessment? something that you think is right but others, for oneMr Darling: I said to you just a few moments ago reason or another, do not.that if you look at theWorking Time Directive itselfits genesis was partly safety measures in transportand, also, partly because of a desire to regulate Q480 Mrs Ellman:Why do you think that happens?relations between employer and employee. So, yes, I Do you think the Government can assist in enabling

more discussion to take place?do agree with that.




Mr Darling: I think they probably can because Mr Darling: I think the civil service code probablysays that there should be other procedures that—governments are closer to the ground than the

Commission is.Q487 Chairman: That is the other thing that is notstandardised throughout Europe.Q481Mrs Ellman:What does theGovernment do toMr Darling: The serious point in this is that if wework with the industry to ensure that they do havewant to get the Commission to start looking atall the available information?things in the way that we would look at them, one ofMr Darling: We work closely with tradethe best ways of doing it is making sure that we haveorganisations, trade unions and with various groupsgot middle-ranking and low-ranking as well asin relation to transport, of course, as well as listeningsenior civil servants seconded there. This is ato individual organisations—companies and sogeneralisation, but in this country, generallyon—to make sure that we know what is concerningspeaking, when you elect a government thethem and we try and keep them informed. As I saidpoliticians come up with ideas and the civil servantsin answer to previous questions, I am sure that allthen translate them and tell them why they are all sothese things we can do better thanwe are doing at thediYcult and all the rest of it and try and make thingspresent time.work. In a lot of continental Europe there is atradition whereby the civil servants generateQ482 Mrs Ellman: What conclusions can we drawproposals which are then discussed by thefrom the delay on digital tachographs?politicians, and that is basically how Europe worksMr Darling: The conclusion is that the Commissionon a number of occasions. I think it is terriblyshould have moved faster. It cannot do anythingimportant that we use our influence in Europe to tryuntil there is a standard and that standard is not nowand get them to, firstly, work outwhat is the problemgoing to be in place until a year, come August. Thatyou are trying to solve rather than: “What is theis not a satisfactory situation.We have been pressingsolution and let us then look for a problem”. Youthe European Commission—I think it was a coupleneed to get in there with the bricks, and so secondingof years ago—trying to get some progress there, andcivil servants is important. Do you know oVhand,they have not. It is an example of where theJohn, how many civil servants we have from theCommission did need to do something, did not do itDepartment of Transport?and they need to do it better.Mr Stevens: Six, at the moment?

Q483 Mrs Ellman: With hindsight, is the fault only Q488 Chairman: What levels are they? Not thiswith the Commission or is there something the UK afternoon, but can we have a note, please, on theGovernment could have done to make this happen numbers of people and their levels?quickly? Mr Darling: Sure.Mr Darling: No one is ever going to say there isnothing we could ever have done. I think we did our

Q489 Chairman: It is perfectly true that when thelevel best. If this is going to work there has to be aFrench civil servants are seconded they remainpan-European standard, because all the lorries weFrancinere, do they not? It is made very clear to themare talking about are driving all over Europe. This isthat failure to live up to the interests of their mastersa classic case of where, frankly, only thewill have a direct eVect upon their civil serviceCommission could do it; it cannot be donecareers.unilaterally.We can use all the influencewe have andMrDarling: I cannot possibly comment on that,Mrsthe Commission will, no doubt, say that there are allDunwoody.sorts of things with technical problems and all the

rest of it, but I think it is extremely unfortunate thatQ490 Chairman: You do not know any French civilwe do not have a common standard because withoutservants, obviously.that common standard people cannot produce theMr Darling: I do not, but Mr Stevens tells me thatkit that is necessary.there are ways of keeping in touch with our people.They are all going to come back, actually.

Q484Mrs Ellman:Does the department second staV

to the Commission?Q491 Chairman: You want to go and I want to askMr Darling:We do.you an important question. The Commissionappears to be determined to take over the role of the

Q485 Mrs Ellman: How does that work? Does that various Member States in the IMO, and youhelp to get quicker information to us or is the answered some aspects of that earlier on. Frankly,communication better? how many other Member States apart from usMr Darling: The way I would put it—it is not like believe it is important to uphold the supremacy ofwhere you have a spy in the cab, and someone pulls the IMO?you up and says “By the way you ought to look at MrDarling: I was going to say, before you said that,this”— that we do have a majority, I think, who take ourMr Stringer: That would be useful view. Of course, these things may change from time

to time but we do have a majority. Obviously, themaritime states are more focused on this than thoseQ486Chairman: It would be useful if it was standard

practice in most other Member States— that are not, but we do have a majority. With all the




things the Commission is up to, I do not detect a Q495Chairman:One talks about subsidiarity (whichis another one of these uncomfortable words). Is thismood amongst the majority of Member States tojust a grand principle which everybody agrees andshift on that position.then totally disregards?Mr Darling: I do not think that is the case at all. We

Q492 Chairman:We have been talking about Euro- think we do have to be vigilant to make sure that theCommission concentrates on things that thecreep because that is what concerns this CommitteeCommission can and should do.and we are very concerned that the existence of an

EU Framework Decision on “penalties whichQ496 Chairman: That would be unique, would itapply”—for example, in ship-source pollution—not, in my experience?might result in the Commission taking competenceMr Darling: I do not think that is the case, but I doin these areas by the back door. Is that not the case?think you need to be vigilant. If you look at theMrDarling:As I was saying earlier, that is one of thegeneral point that has been put to you by manythings that I thinkwe have to be pretty clear about—people, there are some things that Europe can do tothat criminal matters and penalties are a matter for the advantage of Britain and British business, and

Member States. Going back to the spillage point, the there are other areas where we need to guard againstCommission, interestingly, has now tried to the growth of red tape which imposes costs, andintroduce another procedure through the Justice where there is not a clear benefit.and Home AVairs Committee because it recognisesthat this is, again to use the Euro-jargon, a Third Q497 Mr Stevenson: Very quickly on this becausepillar area which is an area which is reserved to unless I ammistaken subsidiarity was a concept thatMember States. flowed out of the Maastricht Treaty, which was

1992, and try as I might, as an individualMember ofParliament, I have not been able to identify a single

Q493 Chairman: Something that goes along with measure that has been enacted under subsidiarity.this “Horizontal Mandate”. Now I do not put that forward as any definitiveMrDarling: I am afraid there is a lot of Euro-jargon. research, I want to hasten to add, my question/

request would be, because it is again reassuring tohear, Secretary of State, you have put so much

Q494Chairman: It certainly is not English. Secretary emphasis on subsidiarity, it would be interesting forof State, it does seem to us, particularly in the field the Committee if yourDepartment could identify anof transport that there is more and more targeted issue that has been the subject of subsidiarity sinceeVort on the part of European institutions to the concept was established in, I think, 1992,

following the Maastricht Treaty?interfere in this particular field. Can we just haveMrDarling:Again, I will have to send you a note butfrom you a very simple statement that the UnitedI suppose road safety springs to mind.Kingdom Government has no intention of ceding

responsibility without making it very clear to peopleQ498Mr Stevenson: It would be interesting to knowthat any change is justified and can be defended?becausemy researchers, limited as they are, have notMr Darling: As I said to you right at the start, mybeen able to find them.starting point is a presumption that subsidiarityMr Darling: I will turn over the limited researchapplies, and that is that if there are things that arefacilities of the Department for Transport toproperly within the province of Member States then producing a note for you.

we ought to deal with them and we ought to deal Mr Stevenson: Thank you.with them alone. However, there are other areaswhere it is very much to our advantage to have co- Q499 Chairman: Secretary of State, you are alwaysoperation from the rest of Europe. The general not only very courteous and helpful, always verythrust of what you are saying in relation to making fluid and we are always delighted to see you. Somesure that the European Commission does not extend day we might even be surprised by your answers!competence into areas where it should not be is one Thank you very much.

Mr Darling: Good afternoon.that I would agree with.

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Wednesday 16 June 2004

Members present

Mrs Gywneth Dunwoody, in the Chair

Mr Brian H Donohoe Mr Paul MarsdenClive EVord Mr John RandallMrs Louise Ellman Mr Graham StringerIan Lucas

Witnesses:Mr David Waboso, Executive Director, Technical, and Mr Giles Thomas, Director, European,Strategic Rail Authority, and Mr Paul Plumber, Director of Corporate Planning and Regulatory AVairs,andMr Andrew McNaughton, Chief Engineer, Network Rail, examined

Chairman:Good afternoon to you, gentleman. You like: the first package, which was the separation ofinfrastructure from railway operations, and then theare most warmly welcome. We have one bit of

housekeeping before we begin this session, members second package, which was largely around safetytargets, setting up the European Rail Agency, andhaving an interest to declare. Mr Stringer?

Mr Stringer: Member of Amicus and a Director of the third package, which is currently undernegotiation. There are these packages of legislation,the Centre for Local Economic Strategies.

MrDonohoe:Member of the Transport andGeneral and they have two principal eVects: one is topromote inter-operability, which is literally trainsWorkers Union.

Ian Lucas: Member of Amicus. being able to move across borders betweencountries, but as far as we are concerned, in theChairman: Dunwoody, ASLEF.

Mrs Ellman:Member of the Transport and General short-term, the major eVect that we are seeking, themajor advantage we are seeking to gain from this isWorkers Union.about eYciency around simplifying our acceptanceprocesses, for example, for new equipment becauseQ500 Chairman: Thank you very much, gentleman.a lot of the equipment we buy these days comes fromFor those of you who have been here before perhapsmanufacturers who are based across Europe, notyou will not be too surprised at our rules of play, canjust selling services to one country.I ask that where you agree with one another if you

would be kind enough to keep quiet and where youQ502 Chairman:We had noticed—want to raise a diVerent point, if you seek to catchMr Waboso: So if we can achieve better processes,my eye, we will give you the opportunity to get yourmore eYciency, bigger markets: because currently ifword in, and we promise note to bite! We are not asyou are serving one small market in one country youbad as we are portrayed. At least some of us are not.tend not to get huge volumes, huge scales ofCan I ask you, firstly, to identify yourselves for theeYciency. If we can utilise this process to get biggerrecord, perhaps starting on my left and your right?markets, get standardisation, we believe there areMr Waboso: My name is David Waboso. I ambig eYciencies for the UK rail networks in theExecutive Director, Technical, of the Strategic Railshort term.Authority.

Mr Thomas: My name is Giles Thomas. I amDirector European, Technical, for the Strategic Rail Q503 Chairman:Why should it be any diVerent, MrAuthority. Waboso, because most of the people from whomMr Plummer: My name is Paul Plummer. I am you buy rolling stock at the moment are inDirector of Corporate Planning and Regulatory continental European countries and, indeed, alreadyAVairs, Network Rail. award, so far as I can see, all of their contracts, onMrMcNaughton: I amAndrewMcNaughton, Chief the basis that they are built for Britain, somewhereEngineer of Network Rail. else in the world?

Mr Waboso: It will make a diVerence in the short-term, because it is as much to do with the processQ501 Chairman: That is extremely helpful. I amaround the actual—what ismade. A large amount ofassuming that none of you have a statement that youthe cost we have in industry at the moment is aroundwant to make before we start. Is that a correctthe process, not necessarily about the productionassumption? (All nodded) Thank you very much.cost itself. It is around the process.Can I start by asking you both, what extent does EU

legislation determine the way in which our railwayscan be managed and operated? Mr Waboso? Q504 Chairman: Why should that be simplified by

having a European directive on what is an almostMr Waboso: EC legislation, EU legislation, ishaving an increasing eVect on the way our railways entirely commercial matter?

Mr Waboso: Because the directives, for example,are managed and operated, specifically through thelegislation coming out aVecting inter-operability, give us an opportunity to simplify our acceptance

process; they give us an opportunity to haveand these directives come through the Europeanprocess, the European Commission. We have a standard specifications. So they do enable us to start

attacking the fairly large cost that sits on top ofnumber of directives in diVerent packages, if you



16 June 2004 Mr David Waboso, Mr Giles Thomas, Mr Paul Plumber and Mr Andrew McNaughton

product costs, and that is certainly the influence that we renew them, and we have got quite a long-scalerenewal, but certainly in the next five to ten years wewe are trying to bring to the overall acceptance

process, the specification process, in Europe. should see some evidence coming back through thesimplification of our acceptance process andthrough the standardisation and a bigger market.Q505 Chairman: Are you satisfied that the sameWe would certainly be expecting that.standards of safety would be involved, because there

must be a considerable gap between the way thatQ509Chairman:Why could you not have a standardspecifications are worked out for continental railwayset of specifications in this country instead of thesystems than for our own?type of frugal system that you have at the moment?Mr Waboso: The levels of safety in terms of theMrWaboso:We do have standards for this country,overall statistics between UK railways and Europebut what this will do is mean that the standards thatare largely the same; we are pretty much on a par. Inwe migrate to will be standards that are Europeanterms of the products themselves, they should not inwide. My colleague, Giles Thomas, sits on theany way diminish the level of safety.Article 21 Committee and perhaps he can saysomething.Q506 Chairman: In other words, what is there that

would be gained by European changes that does notQ510 Chairman: Giles, tell us about the excitementexist at the moment? Already there are a limitedof the Article 21 Committee.number of firms producing rolling stock. They areMr Thomas: There are two directives that relate toalmost, without exception, controlled by mainlandtechnical harmonisation. Those directives act, asEuropean firms. What would be diVerent then?David has said, in the area of standardisation ofMrWaboso: It is because we can get more eYciency,products, but they also require a standard type ofbecause although you are absolutely right that a lotassessment process to determine whether a productof the manufacturers are internationally based,is suitable to be put on the European market place.where we struggle is that they are exporting andThat is where these directives act, and that is the key,building equipment for specific markets, and if weone of the key benefits that comes out of thecan get a market that is bigger, that is able to haveEuropean legislation: because all the Europeanproducts where there are common specifications, forMember States know that once a product has beenexample, like the aircraft industry, which is anaccepted under this process we do not have to gointernational business because they have commonthrough the process again.specifications, if we can achieve that, we should get

significant reductions in costs and greater eYciency.Q511 Chairman: I am still not clear what that woulddo that would not happen at the present time. SinceQ507 Ian Lucas: Is there any evidence that thethese are mainly . . . Think of the firms supplyingstandardisation you are talking about is actuallyrolling stock in this country. Would you please tellreducing costs? Is there any reduction in cost to youme the name of one company in this country that isor the train operating companies?doing that but is not controlled by a EuropeanMrWaboso: It is a bit early to judge to be honest, buthead oYce?there have been some positive experiences. ForMr Thomas: I cannot give you an example.example, the opportunity to use whatwe call notified

bodies, which is a new form of acceptance body, hasproved to be quite useful in some of the cases we Q512Chairman:You cannot giveme an example. Sohave looked at. I would accept that it is too early to one ought to assume from that that almostsay definitively right now that we can evidence huge automatically those companies will be looking forreductions, but what we can say is that if there are, economy of scale across the whole of Europe, shouldif we can achieve common specifications, then the one not?evidence from other industries where they have Mr Thomas: I can answer that, if I may. The answerlarger markets, where they are able to make things is, yes, they may, but each company as it works inon a larger scale, for example, not just two or 300 but Europe will be required to go through a process inseveral thousand, where it becomes a production each of the diVerent Member States to acceptjob, not a prototyping job, the evidence from other whether it is safe and inter-operable. The fact thatindustries is that is when you can get significant those processes are harmonised saves us all money.savings in the process. So we are optimistic, but Itotally agree that we have yet to fully prove that is Q513Mrs Ellman:Other witnesses have told us thatthe case, but that is certainly the direction that we the European Commission is anti-aviation, anti-will be supporting in this process. road and very pro-rail. Do you see it like that?

Mr Waboso: I think it is fair to say there has been afair amount of legislation coming out of EuropeQ508 Ian Lucas: How long would you expect it to

take eVect before you see concrete results on your targeted at rail, and I think at one point theEuropean Commission did decide it was going topunt, if I can put it that way?

MrWaboso: It would depend on the asset, the type. promote rail and increase its market share. Whetherthat counts as pro-rail or not, I do not know, butFor example, in signalling and command and

control I would expect us to start seeing some certainly a lot of legislation has come out of Europethat is rail. What we do is when it comes out, weevidence of standardisation of the common

specifications in the next five to ten years, but it is as make sure that we try and manage it in a way that is




best for the UK. I certainly agree, there has been a component level, it cannot be at railway level, andtherefore, given the life of our railway, 40, 50, 60significant amount of legislation targeted at rail, but

I think it is all about trying to make the overall years for most of my infrastructure, we are talking40, 50, 60 years before we see a railway—European rail marketmore eYcient and certainly, as

far as we are concerned, we will be using it to try andget eYciencies. Q517 Chairman: I think we can hazard a guess that

you are probably going to last longer thanArticle 21,can we not?Q514 Mrs Ellman: Can anybody give me anyMr McNaughton: I do not know if I have the willexamples of European legislation or directives whichpower!have benefited rail in the UK?

Mr Plummer: I think that one of the things we aretrying to do in that respect is to influence across the Q518 Mrs Ellman: I am asking you what European

legislation or othermethods have done to help rail inwhole spectrum of the initiatives that are going on inEurope, and I will ask MrMcNaughton in a minute the UK?

Mr McNaughton: The area that has helped so far,to give you some specific examples. I think, in termsof the standardisation, there are some opportunities and here I would echo Mr Waboso, is in agreeing

some common acceptance processes for sub-there if we can get the common standards but alsothe right standards; and trying to influence those is systems. That may not sound very impressive, but,

on the other hand, given the diVerent legal systemsa key part of the work that we do in conjunctionwiththe rest of the industry and with the strategic rail across Europe, there have in the past been very

diVerent levels or requirements for diVerent pieces ofauthority and the Department for Transport. Thatrelates to work on the technical level in terms of software or even mechanical equipment so that

manufacturers have produced to a diVerentidentifying what the right standards are. Also thecost benefit analysis, working up that to ensure that standard, a diVerent specification.the benefits really do outweigh the costs andinfluencing through that process and making sure Q519Mrs Ellman:What sorts of items are involved?that the benefits that are there are not solely in the Mr McNaughton: Signalling software. Whatlong-term. If Mr McNaughton could give examples constitutes acceptable levels of safety within aof that, that would be helpful. software system? What constitutes an acceptableMr McNaughton: Through our involvement in level of safety in such things as “rail steel”, the basicEurope, and I have perhaps the dubious but the metal fromwhichwemake our rails? The rail that wepleasure of chairing the Committee of Technical now use on our main lines is a European standardExperts of the European Railways— rail section, so-called CEN 60, heavy railway

section. At least when we get that now we can tenderfor it. Our own, the British manufacturers, canQ515 Chairman: Which Article are you, Mrsupply that rail to European railways. It is more ofMcNaughton?an open market, and therefore it is not aboutMr McNaughton: Fortunately, I am not an article,producing a special little rail for what at the end ofprobably not even an indefinite one. This is thethe day is a relatively small rail system.railways own experts, not the governmental experts.

This is the Technical Railway Experts.Q520Mrs Ellman:Are there any other examples youcould give?Q516 Chairman: Surely you have a figure to matchMr McNaughton: There are not many that springArticle 21!to mind.Mr McNaughton: No. In fact we are figure-free,

hopefully though not fact-free! My colleagues haveQ521 Mrs Ellman: In any areas of rail?talked about standardisation. The word that seemsMr McNaughton: There will be examples of similarto be used somuch is “harmonisation”. The subtletyin nature across each of the systems, electrical, civilseems to be this. It is a simple fact that our railwaysand the like, but they are quite limited at this stage,are diVerent. It is not just that we are diVerent toand they are confined to the basic building blocks ofEurope because we have a diVerent structure gauge;a railway, such as the rail itself or the sleepers, allthe railways across Europe are all very diVerent. Thethose sorts of components, not to a finished article,traction voltage changes from country to country,like a train, or a bridge, or a railway system, or atherefore the traction system, the signalling system,signalling system.you may well be aware, changes from country to

country. Even the weight you are allowed to put ina train varies from country to country.We each have Q522 Mrs Ellman: Have the benefits been more to

continental Europe than to the UK?diVerent axle weights; therefore our engineeringchallenges are diVerent. Therefore it is a very diverse MrMcNaughton:The benefits must have been more

to continental Europe in the early decades whereand almost cottage industry that supports thenetwork of railways, and we end up having quite flows of traYc are across a number of borders. A

trunk freight flow from, say, Rotterdam to Milan,specific designs for each country. Our work,therefore, seems to be very long-term; I suspect one of the biggest freight flows in Europe, crosses a

number of borders and therefore crosses a numberrather longer than the five or 10 years that has beenmentioned so far: because if we start now with a of boundaries and technical systems and also

operational rules, and also, in some respects, safetystandard product of whatever sort it must be at




rules. That introduces cost into that operation and and those sorts of things the railways themselvesmakes that freight flow far less competitive against have harmonised around for very goodroad or other means. For us in our particular commonsense reasons. They have not done itgeographical location in Europe, that has less through legislation.impact in the shorter term.

Q525 Mr Donohoe: Has it been identified anywhereQ523 Mrs Ellman: There are proposals, are there within the system at this stage that perhaps what younot, for common driver licensing arrangements? have got is, almost because of the bureaucracy of theWould those bring benefit to the UK? Does anyone situation, an accusation being made of restrictivehave a view on that? practices being employed?Mr Waboso: We do not believe, and certainly the Mr McNaughton: I am not sure how best to answerviews of the industry are consistent on this, that a that really. You will see around the world railways,European based requirement for driver licensing and I hopewe are one of the best examples, where weimposed on the UK would have benefit. We believe have been quite open in our specifications, and otherthat if there were to be such a move it would be countries, where it is possible to suggest that thesomething the industry itself would do. We do not peculiarities of the national systemhave been used tobelieve it is appropriate for it to be imposed from keep a relatively closed supply market.Europe. Certainly that has been the view that hasbeen expressed by industry and has been taken backto Europe. There might be a case for international Q526 Mr Donohoe: But are you ever going to get totraYc, but one would have to say what is the benefit the stage where you get for the travelling publicover and above the already very stringent training value for money on the basis of restricting it in, say,and supervision of this process anyway; so certainly Europe, or is it better for you to be planning at thisdriver licensing is something that we do not believe stage, if you are talking of timescales of 30, 40, 50is appropriate, but what we do believe is appropriate years, where you sit down and look at the diVerencesis a consistentmeans of training and assessment, and across, not Europe, but across the world and try inwe believe that is what we have got. If we have not, that sense to have standardisation introduced acrossthen that is something for the industry to sort out, the globe rather than across Europe? It seems rathernot to be imposed by Europe. restrictive, to me anyway?

MrMcNaughton:We are trying not to adopt purelya European centric approach, although there areQ524 Mr Donohoe: Clearly as Mr McNaughtontimes when amongst the 23 countries which Iindicated, it would take 30 or 40 years to have thatchaired, this harmonisation group of technicalall as one, and that is the potential timescale. Whatrailway experts, seeking some sort of commonwould happen if in talking about economies of scaleapproach in 23 countries is quite demanding, but wethat was to widen beyond Europe? If you werehave put together experts also from Asia,looking at a comparator, for instance, in the carAustralasia and North America and are seeking tomanufacturing industry where economies of scalefind ways of achieving a worldwide harmonisation.mean that you get global market places where you

have got almost what could be described as globalmanufacturing, why not have the same in railways Q527 Mr Donohoe: What timescale would you putand not have all this nonsense of Europe becoming

on that? Where would you start it? Would you startinvolved?it, as you suggested, in the taxing system, or wouldMr McNaughton: I would not disagree with you atit be in terms of weight, or would it be in terms of theall. Were we starting out fresh to build railways as avoltage trains are required to operate on? Wherenew system, and you begin to see that in Europewould you start and how would you go about it?where new high-speed railways are built, then itMr McNaughton: We have sought to start on highwould be absolute commonsense to have one railvalue components, which is typically controlsystem. I think probably one of the most persuasivesystems, software, whether that be power control orexamples is that this year across the whole of Europesignalling control. We have sought to harmonise onsomething like 500 locomotives will be built, 500,radio systems. We are adopting in this country theprobably to about 40 diVerent designs at thesystem GSMR, GSM for railways, which we havemoment because of diVerent needs, and, as I say,taken a leading light with the other Europeanthere are diVerent historical networks. I do not thinkrailways in devising and which is being adopted inmany car manufacturers would regard 500 as aChina and therefore is probably the first railwayproduction run. It is virtually a series of prototypessystem that will be truly worldwide. Those are therunning about. Where it has been easy to adoptareas where the supply market itself is trulystandards, we have started to do so because it is justinternational, and we as railways would be ratherpure commonsense; but I come back to mentioningfoolish if we did not reflect that in our own design.the very basic material of which we produceThe area which will probably come last will be thosethousands of tons, which is the rail on which thethings which are really consequential upon thetrains run; and the world really has now coalesced,diVerent rules or background the railways arethe railways of the world, not through any specificcoming from or diVerent physical conditions, andaction, we have coalesced around about threethere are diVerent physical conditions around thediVerent rail sections for heavyweight traYc, for

main-line traYc or for more rural branch line traYc, world needing diVerent equipment.




Mr Waboso: Building on what Andrew has said, I way to view this is as a modern replacement forsuppose the only other thing is that when these assets traditional signalling, so it comes as one renews, notare procured, you mentioned earlier on that you felt something that is imposed ahead of that, and inthat there might be some restriction, but when they those timescales what we have to do is get the costsare procured, although it is a European standard, it down and make sure that we prove the value. Butdoes not necessarily restrict who is able to tender for certainly, to answer your question, there is a growingthat work. So there is genuinely a global market to consensus within a number of other Europeansupply these products but it is to a standard. So it is countries that the costs of this are currently too high.the standard that is European based, not just Mr McNaughton: May I add something to Davidrestricted to European supplies. Waboso’s answer? Is it feasible to do it? Yes. I

believe we have suYcient ingenuity to makeQ528 Ian Lucas: Is the introduction of a European anything work if we try hard enough. Is it financiallyrail traYc management system achievable in the viable? At the moment, no. The costs being quotedUK? for fitment into cabs, the cabs of locomotives, givenMrWaboso: Yes, but it is achievable only where the that every locomotive has two cabs, or nearly everyassumptions that are currently made around its one, is around half a million pounds a cab. Thatperformance are proven and critically where the seems to me to be about a million pounds worth ofbalance between the benefits that it can provide and locomotive. If we were required to fit that on thethe costs are made, and currently we are some way whole of our network, then I start to fear just howoV doing that. many buses could be bought for the cost of cab

fitment on secondary and rural railways and what itQ529 Ian Lucas: How far? would do for the viability of the railway that we careMr Waboso: I beg your pardon? for. Were we in the centre of Europe with cross-

border flows, then the economics might be moreattractive. We are watching carefully the trials beingQ530 Ian Lucas: How far? What sort of time scaledone in Switzerland, which have not been withoutare we talking about?incident and where retro-fitting of conventionalMr Waboso: The timescales we are currentlysignalling has taken place recently in order to rebuildworking to are we want to trial the system on thereliability of the service to their customers, but theseCambrian lines in North Wales, and we hope to

complete those around the end of 2008. Dependent are probably teething problems. It is the view, theupon what comes out of those trials, and we are widespread view of the railways of Europe thatlooking to demonstrate and stress a number of where new lines are being built the ERTMS productthings—and the whole point of a trial is you want to is probably now the sensible signalling system. Wesee whether it works and how well it works— have yet to prove to ourselves let alone to ourdependent upon what comes out of that and also funders and customers that there is a way ofwhat comes out of the on-goingEuropean,mainland migrating onto the existing network anything fasterEuropean trials, because there are a lot of than through a long-term replacement programmecommercial applications and also trials going on in as the existing systems wear out, and it may be thatEurope, then we will take a view at the end of that as for many parts of the UK network a lowerto how fast we can proceed, clearly very closely with specification, but still completely safe currentNetwork Rail and the train community; but it is signalling system, is the more aVordable option.certainly consistentwith a long-term technical visionfor the railway which is about getting the signal in

Q532 Ian Lucas: Do you share the concerns thatthe cab, removing the signalling from the waysideand putting a signal in the cab. It is definitely have been expressed about delays that may beconsistent with that vision. It is consistent with the brought about by the ERTMS, delays in thevision of reducing the amount of infrastructure that operation of the network that may be moreis trackside which has enormous cost and reliability attributable to the new system than exists at theadvantages, and it is also consistent with the types of current time?system that Andrewwas speaking about: GSMR. So MrMcNaughton: If the main purpose of a railway isit is certainly the right way to go, but I am sure that to deliver suYcient safety, reliability and at a cost thethere will be some further steps along the way to get country can aVord, then the system that is lessus there. Critically, we must address the costs of the reliable than the one it is replacing is not ansystem. The costs at the moment are too high. attractive system. I am not sure if that answers your

question.Q531 Ian Lucas: Do you think that there is any realappreciation of that by the EU, the level of costs?Do

Q533 Ian Lucas: It sounds to me like you are notyou think it is an unrealistic ambition?very keen on the new system. Is that fair?Mr Waboso: Certainly my experience of talking toMrMcNaughton: I will be keen on it when it is morecolleagues in the EU is that they do realise this; andaVordable and when its reliability is proven. Likealso a lot of other countries are exactly where we are,any new system, it seems, we go through two, orwhich is that the costs of the system are too high andthree, or four years of reliability growth, and I wouldcannot be justified by the benefits claimed; and thererather than happened elsewhere and, when it isis, I think, an increasing consensus now that this is

the right way to go. It is a long-term job, because the proven, consider adopting it in the UK.




Q534 Ian Lucas: Have you anywhere in mind? we control how we roll this out is that it will not betold, from Europe we will not be told, “You mustMr McNaughton: No.install this system by a certain date.” The way wecontrol this is we are able to put in our plan of whatQ535 Chairman: Is the Commission convinced thatit is we intend to do, and that is fine. The current planyour arguments are sensible ones?we have is that whichwas set out in the report, whichMr McNaughton:We seek to influence by—is around the timescales that are linked to a re-signalling programme that are verymuch at varianceQ536 Chairman: I am not doubting that you seek tofrom the initial suggestions, and that has proven toinfluence these things.What you are setting out, verybe perfectly adequate. I do not know if my colleagueclearly, is a statement that says this is a system that,wants to add anything, but in terms of controllingif it worked, if it did not cost a million pounds a timethe pace of roll-out, we will not be told, “You mustand if it could be used generally across the whole ofinstall it by a certain date.”the 23 countries, it might be a good idea. I do not

regard that as a whole-hearted approbation, butpossibly I am wrong. What I am asking you is yours Q542 Chairman:You are not controlling it if all youis a technical committee which presumably knows are doing is saying, “Well, at the moment we are justwhat it is talking about. Have you convinced the putting it oV”, are you?European institutions that they do not know what Mr Waboso: What we are doing is proving thethey are talking about? system.Whatwe are doing is on theCambrian coast,Mr McNaughton: We are seeking through the and that is why we did that trial.lobbying bodies that the European railways have topresent the facts to the European Union. Q543 Chairman: I see. So, with any luck, you will be

able to come up with some answer that says, “It isQ537Chairman:When has that ever influenced their unworkable. It costs a million pounds a shot”?decisions? Mr Waboso: What we are seeking to do on theMr McNaughton: I am not sure that is a question I Cambrian coast trial—should be seeking to answer.

Q544 Chairman: Apart from that, it is ideal!Q538 Chairman:What indications do you have that Mr Waboso:—is to prove the system does work.bear taking your worries seriously? Let’s put it adiVerent way round. There is enormous pressure, is

Q545 Chairman: Of course?there not, for ERTMS across the whole system? MrMr Waboso: If it does not, we will fix the problems.Waboso, do you have the answer to this politicalWe will also get a much better view of how much itconundrum? Is the Commission pushing thedoes cost, because it will be the first time it is done inERTMS with the same vigour that it has been up tothis country.now, or does it accept that Mr McNaughton’s

Committee are, in eVect, signalling very realQ546 Chairman: How long is this test going to run?problems?It is going to start in 2008?Mr Waboso: There is, I think, a pretty goodMr Waboso: 2006 it starts and it will finish—understanding in Europe of the challenges and issues

facing ERTMS implementation, yes.Q547 Chairman: It runs for two years?MrWaboso:—in 2008.Wewill know far more then.Q539 Chairman: They understand it?

Mr Waboso: Yes.Q548 Chairman: Could you not make a good

Q540 Chairman: Do they accept it? business case for the UK rail network being inter-Mr Waboso: They certainly accept . . . If we wind operable with its neighbours on the basis of whatback a little bit. When we produced what we call our you actually do, as opposed to some system whichso-called final report in 2002 that was a big step, might work?because it was the first time that people had actually Mr Waboso: I think we have—. There is a clearlooked at this and said, “Hang on aminute, there are choice in this. Before ETRMS came along andcost issues, there are aVordability issues, there are before we signed up to high speed directives, we didtechnical feasibility issues”, and I think at that time, try and produce a BRATP system. I think one of thefrom memory, the timescales being talked about in advantages, which perhaps we have not spokenthis country were about 2010. about this afternoon, of a European wide approach

to these things is that the research and developmentcosts to produce these systems, which are significant,Q541 Chairman: So we were pushing a systemwhich

nobody had tested and there was no cost benefit are pooled across a much broader range ofcountries. Therefore, if this system does work, and Ianalysis?

Mr Waboso: But we did point that out. That report fully accept there are significant problems still to besolved, but if this system does work, then you startwas ultimately very well received in Europe, and a

number of other countries are voicing exactly the getting the advantages over a long period of time ofthe fact that it is produced for a largemarket and thesame opinions now, that this system does cost too

much, the benefits are not proven and they have costs of producing it are shared across a largenumber of schemes.perfectly adequate national systems now. The way




Q549 Chairman: Does the European Rail Agency Does it make sense to do it? Howmuch is it going tofund the research? cost?”We will then go to the market and we will say,Mr Waboso: No, the European Rail Agency does “What are the prices coming back?” If the prices arenot fund the research. The products have been out of court, if it is unaVordable, we will not do it.produced, in some cases funding has come throughsome trials, some early trials, that were done in

Q556 Mr Marsden: You say that, but, with respect,mainland Europe, but the suppliers themselves havewhat is unaVordable? How do you know, forfunded a large part of this research programme.instance, that the European TSIs are not going to beset excessive high levels which might disadvantageQ550MrMarsden:On this issue of costs, I knowMrUKpartners?What is aVordable, and not aVordablePlummer has mentioned cost benefits, can you giveto industry? You say a million pounds per cab, perthe Committee some figures for each area, not justlocomotive. If that is what the figure is, that soundsthe ETRMS, but also for infrastructure, rolling-like an awful lot, but at the same time how manystock, and signalling. Can you set out what will belives would it save? There are two areas that I amthe costs of European harmonisation and what willconcerned about. Firstly the cost to industry and thebe the cost benefit analysis, to tell us in very simplecost then to the passengers, because no doubt theyterms where this is cost beneficial? Do not all rushwill get the cost passed on to them, Secondly how doat once!we engage with the public so that they understandMr Thomas: As part of the process for acceptingthis: because the Prime Minister uninspiringly saidTSI’s in Europe, each TSI comes with a costthe other day, “The European constitution is a greatbenefit analysis.thing for technocratic reasons”?Chairman:We do not want to give them a subject forQ551 Chairman: Technical standards for inter-debate. We just want to ask them the odd question.operability.

Mr Thomas: I beg your pardon, that is right,technical standards for inter-operability. Each one

Q557 Mr Marsden: With respect, how do we knowcomes with a cost benefit analysis.this is going to be a good thing?Mr Waboso: Perhaps others can add to this, butQ552 Mr Marsden: Is that broken down in the UKwhere there is a scheme for renewal or for upgradeor is that across Europe?we have pretty good estimates of how much theseMr Thomas: It is across Europe.things cost today.

Q553 Mr Marsden: How do we know it is a goodthing for this country, apart from an article of faith Q558 Chairman:We hope. Yes.that we should be involved in it? Mr Waboso: We hope. We understand fromMr Thomas: We have to assess them. As we are historical records how much it costs to re-signal perinvolved in the negotiations, we will assess them to kilometre, per signalling equivalent unit, how muchunderstand whether or not the impacts of those rolling stock costs. We understand that today.technical specifications for inter-operability have a Therefore there is a base line. We want to get thatpositive or negative cost benefit for the UK. down. There is constant downward pressure on

those numbers, but we do have a benchmark. If weQ554 Mr Marsden: So you do not have the costs at go to these new specifications and the prices come inthe moment, but as and when they arrive you will be significantly above that, there is not a case for doingable to publicise them, for instance? it: because the whole point of doing it is not toMr Thomas: Yes. penalise the railway, it is to make the railway more

competitive.Q555 Mr Marsden: Yes. I have got some shakingtheir heads and some nodding?

Q559 Chairman: I think, Mr Waboso, the point weMr Waboso: I think it is fully accepted that theare making is a very simple one. Some of us had theregulatory impact assessments that should be doneold-fashioned idea that you ought to do that beforewith these things that identify how much it is going

to cost, what the benefits are, could have been done you suggest it is a common standard rather thanbetter. I think that is fully accepted. One of the after you bring in a common standard and thenthings that the European Rail Agency will start to discuss whether or not you can aVord to do it andget its head around is how it can have better whether it works, which seems to me an elementarystructures to get this work done. It is fundamental thought but not one that is readily accepted atthat we do understand, as we go forward, howmuch European standards.it is going to cost and what the benefits are. Going Mr Plummer: Could I just comment on that?back to what Andrew said, we are talking when webring in these new assets to these new standards

Q560 Chairman: Mr Plummer, what we want toabout very long timescales and in those timescalesknow is are there any benefits to be gained fromwe control the implementation, we can decide wheninternational passenger service liberalisation?we implement it; and the way we decide when weMr Plummer: Can I comment very briefly on theimplement it is that on a particular scheme we will

say, “On this scheme this new standard applies. previous issue?




Q561 Chairman: Yes, very briefly? Mr Plummer: Certainly we have the issue within theUK anyway. The debate is to ensure there is nothingMr Plummer: I think these TSIs cannot just be

imposed by Europe. We work very closely with the inconsistent with what is happening at Europeanlevel that would cause us to do something diVerentrest of the UK industry, we have a very coordinated

approach across the rest of the UK industry to here.present and develop our view of the impact on theindustry of TSIs as they are being developed. Q568 Chairman: There are diVerent EU and UK

approaches to improving equipment, are there not?Are we going to be aVected in the sense ofQ562 Chairman: One would hope so, Mr Plummer,comparability of the EU and theUK safety regimes?but we still come back to the point that what we areAre we going to have confusion?saying to you is: is it not more sensible to do thatMr Waboso: I think it is fair to say, Madamassessment before we try and bring it in ratherChairman, that the acceptance process today couldthan after?benefit from a degree of simplification, and we seeMrPlummer:That is what I am saying we do. So thethe notified body process, for example, that weUK industry is working together to develop its case.spoke about earlier on, as providing an opportunityIt is presenting that case to Europe in the technicalto do that, if we do it in the right way, and we arediscussions and in the Economic Evaluation Groupworking very hard with industry to make sure thatbefore the TSIs are finalised and imposed.when we do take on board these new processescoming out of Europe that we do it in the right way.

Q563 Chairman: “Finalised”! In other words, thestructure is there, we are well along. They have been

Q569 Chairman: When the Railway Forum say,presented to you. The SRA has not done a test yet?“There is a danger that EU strategies promulgatedMr Plummer: They are developed very much by theby the ERA do not mesh with those of the StrategicEuropean rail industries themselves and thenRail Authority in the United Kingdom”, is that afinalised through the European process with a votereal worry?from the Member States as well, which brings in theMr Waboso: I think what we have to do is to makeGovernment side of it. So it is the railway industrysure that the vision and the long-term strategiesdeveloping it with the Government side of it at thecoming out of Europe are consistent with theend, and that includes the Department.strategies—

Q564 Chairman: I think we can conclude Mr Q570 Chairman: So, yes, it is a real worry?McNaughton has got a lot of positive work ahead of MrWaboso: It is something we will have towork on.him. Are there any real benefits to be gained from Mr Donohoe: Technically.international passenger service liberalisation?Mr Plummer: This is primarily a matter, I think, for

Q571 Chairman: I was not clear from your remarksATOCand for the Strategic Rail Authority. In termsabout the licensing of drivers whether you wereof the impact on Network Rail, we do not see aassuming that the present talks were not realistic andmajor problem with that.there was no advantage to us or whether you wereassuming that there was so much divergence

Q565 Chairman: Does it only make commercial between the various countries this was not at thesense if access charges are limited to marginal costs? moment a runner? Which of those two is right?Mr Waboso: This is part of the so-called third Mr Thomas: I think there are advantages to driverpackage area, and this is a classic area where we are licensing for international drivers, possibly. That ismaking sure that the full regulatory impact where the European Community have started toassessment is done and the full cost benefit is proven. look. They have also expressed an interest in doingCurrently that work has not been done. We would that for domestic drivers as well. That is where, Ionly support this if that comes out as positive. think, we feel that theremay not be a good argumentMr Plummer: Could I add something on that? for doing that.

Q566 Chairman: Yes. Q572 Chairman: So what you are saying is that youMr Plummer: The key point is what is ‘marginal are prepared to look at it at international level, butcost’ in this case? Does it take account of all of the you do not think it is necessary for the bulk ofcosts in the particular case? So does it take account drivers: because 90% of our drivers are notof the impact on performance of the other operators international drivers, are they?and all of the other incremental costs that running an Mr Thomas: That is an absolutely fair summary.extra service can impose? That is an issue we have The only other thing I would probably add to that iswithin the UK quite separately from the European that theremay be an advantage in having one systemissue and is an issue that we are dealing with. working in the UK for all drivers. That seems to be

a sensible thing to have too.

Q567 Chairman: You are debating that yourselvesbefore you get an agreement at European level as to Q573 Chairman: That would depend on the levels

and the conditions on which you decided that youwhether that should be a definition on which youall work? were going to standardise—




Mr Thomas: Indeed, it would. Q576 Chairman: I think you have made that veryclear?Mr Waboso: Yes.Q574 Chairman:—conditions, would it not, and we

are not at that point yet? Q577 Chairman: What about the eVect on freightMr Thomas: No. operators passing on to the infrastructure providerthe liability for compensation in case of delay?Mr Plummer:We are also concerned about that andQ575 Chairman: Just on mandatory quality

standards for freight contracts, are they going to making our views very clear on it.Chairman: Gentleman, you have been very helpful.eVect the operation of rail freight services in the

United Kingdom? Thank you very much indeed for coming. Next timelet us have a little equal opportunities, shall we? It isMr Waboso: If it goes ahead as currently

promulgated, yes, and we do not agree with it, we do like this Committee, where the women are very putupon!not think it is correct, we do not think it is right.

Witnesses:Mr George Muir, Director General and Mr Richard Lockett, Director of European Standards,Association of Train Operating Companies, examined.

Q578 Chairman: Good afternoon, gentlemen. I am Q581 Chairman: You do not have particularexamples that leap to mind?sorry to have kept you waiting. Could you identify

yourselves for the record? Mr Muir: No.Mr Muir: My name is George Muir, I am theDirector General of the Association of Train

Q582 Chairman: How successful has European railOperating Companies.legislation been?Mr Lockett: I am Richard Lockett, the Director ofMr Muir: To a degree quite successful. If I couldSystems and Standards.explain what Imean, it is based on a concept, that onthe Continent there are definite requirements

Q579 Chairman: Mr Muir, did you have something because of international traYc. The view is thatyou wanted to say before we begin? there was a series of over monolithic nationalMr Muir: Briefly, very briefly. It is in the nature of railways set up in Europe and that that structure hadrailways that they do require standardisation. This to be broken in order to free it up and to introducehas been true almost since railways began, and competition and other benefits. The nationalindeed across Europe in the nineteenth century there governments could have disagreed with this but theywas a fairly extensive system of standardisation and did not. They did agree that it was necessary to breaklatterly under the control of a voluntary body called up the monolithic European railways, and that wasUIP. It was simpler when railways were inherently essentially the purpose of the first railway packagemore simple. Railways are now much more but which required the separation of infrastructurecomplicated and the equipment is much more fromoperations. I think that is correct and should becomplicated. In continental railways, therefore, done. Similarly, I think it is correct and necessarywhere there is a need for international traYc, it is that TSIs do get created. I think, in general, I wouldinevitable that standardisation is required. The say, yes, it has been successful but it has to be donedangers are, however, inmy viewperfectly clear. The correctly, and that has not always been the case.first is an over enthusiasm by those setting thestandards to standardise and seek to regulate over

Q583 Chairman: A specific instance?too great a scope, and, secondly, perfectly obviously,Mr Muir: For example, you were asking earlierthere is danger of getting it wrong. When you setabout the ERTMS, which has not been a happyabout drafting TSIs—it could be between 500 pagesstory, and there are other instances, particularlyor 5,000—the scope for error is perfectly obvious,now, there are one or two examples now of what Iand the task is to make sure that we control thewould regard as an over enthusiastic scope ofpropensity to widen the scope for standardisation

and try to think carefully and make sure that they regulation. I would include driver licensingare correct. amongst it.

Q580 Chairman: Do you think that the European Q584 Chairman: Anything else other than driverCommission is against aviation and roads but for the licensing?railway system? Mr Muir: I think elements of the InternationalMrMuir:When I read through the transport White Passenger Rights Draft Directive.Paper, I have to say I did think that therewas an overcomfortable assumption that railways were

Q585 Chairman: You are opposed to those?necessarily better than the others, and I did not seeMr Muir: Some degree of passenger rightsany very rigorous analysis to demonstrate that. Iregulation is necessary, but the present draft tries topersonally think it is probably true, but I did not see

the rigorous analysis to substantiate it. mandate too much.



16 June 2004 Mr George Muir and Mr Richard Lockett

Q586 Chairman: Do you think that the relevant Mr Muir: What could be done? To make sure thatthe industry is strongly involved in the process.inter-operability standards would be to the benefit of

the UK?Mr Muir: Sorry, which ones? Q595 Chairman: Surely it is now. It has been told

you have got an industry committee that isQ587 Chairman: Inter-operability? European-wide. If there are 23 nationalities sitting inMr Muir:We did a study with the SRA, in January that committee it is diYcult to see how it could be2003, when the work on TSIs were just beginning much wider.and we got an assessment. There were 19 subject Mr Muir: At the moment the drafting is done byareas that were going to be covered by the TSIs and industry people. My colleague, Richard Lockett,we got and assessment done of whether in these 19 contributes to drafting—as do the people you metareas the TSIs were likely to be satisfactory or earlier—but the European Rail Agency will beunsatisfactory from a UK perspective. staVed by permanent staV. It will be, therefore have

a diVerent dynamic.Q588 Chairman:What conclusions did you reach?Mr Muir: At that time the conclusion was slightly Q596 Clive EVord:You are concerned that althoughdiVerent on all 19. But, with one or two exceptions, you will have an input at the initial stage you willERTMS being one, we generally took the view that have no influence over the outcome of the Agency?if we are careful the disadvantages could be Mr Muir:We clearly have influence, it is a questionminimised and that we would therefore get of degree.advantage from the process.

Q597 Chairman:Are they less likely to be responsiveQ589 Chairman:Who did that assessment? than equivalent British organisations?Mr Muir: The SRA led it, with our help, and it was Mr Muir: They have got a very big agenda. Whatdone by consultants called LEK. they are trying to do is extraordinarily ambitious;they are trying to specify the operation of railways

Q590 Chairman: Is that available to the Committee? across 25 countries in a moderate degree of detail. ItMr Muir: I am not sure what the form is. I am sure has probably got to be done but it is very ambitious.it was intended to be confidential at the time becauseit makes some—

Q598Clive EVord: I am just intrigued, because at theChairman: Having mentioned it, I am sure you willend of the day we are talking about market forces.understand, we would then expect to have access toIf the objectives of ERTMS, for instance, are provenit. Mr EVordthen will market forces not actually come into playbecause if they are cheaper because they are moreQ591 Clive EVord: On the European Rail Agencywidely produced that people will adopt it withoutand the inter-operability, you were talking aboutany need for any regulation whatsoever?people being over enthusiastic in your openingMr Muir: I think that is true. Yes, what you say isremarks. Who did you have in mind when you wereright. What you have got to make sure of is that asaying that?prescription does not appear which requires peopleMrMuir:Not so much a person, the European Railto do things which market forces or technicalAgency. The danger is that it you will be over-capability would argue against.enthusiastic in exercising its powers.

Q599 Chairman: So you are really saying it does notQ592 Clive EVord: From the agency, not thehave to be done? You said “of course it has to beCommission or even the Department of Transportdone”, but you are really saying no, it does not haveto adopt whatever comes out of the Agency?to be done.Mr Muir: It is a dynamic. It is not going to be onlyMr Muir: No, market forces are not alone enough.one or not another. But I think it is inevitable thatIn the railways we need both market forces andthere will be a tendency, at least if there is not astandardisation. Going back a long time, as Richardcountervailing force retraining it, that the ERA willwas saying in the taxi on the way here, while therelegislate in more areas than it ought to.were still railway companies in Britain there was athing, apparently, called the Central ClearingHouseQ593 Clive EVord: When it legislates you also referwhich defined standards, which had to be compliedto attempting to avoid getting it wrong.Do you havewith in the Great Western Railway and LNER.anything in mind that you think should be done in

order to avoid that?Q600 Chairman: Yes, it did it mainly in relation toMrMuir: I would like to see greater industry controlmoney, did it not,Mr Lockett? They were very goodover the European Rail Agency. At the moment, foron organising the diVerentiation between oneexample, TSIs are drafted by industry groups.company and another in terms of cash, as far as Iremember.Q594 Chairman: If we could call them TechnicalMr Lockett: They also set technical standards.Standards for Interoperability. I am sorry about it

but I think if people want to understand what we aretalking about it is helpful not to deluge them with Q601 Chairman:Which were, presumably, minimal

technical standards?sets of initials.




Mr Lockett: They were the ones necessary to give Q606 Ian Lucas: I was just wondering, is it not thecase that we are uniquely disadvantaged as far as thethem collective economic benefit. So they could rundrive towards standardisation is concerned becausecarriages from one railway network to another.of our position and because of our physicaldetachment?Mr Lockett: Clearly, unless we are building newQ602 Chairman: So are you saying standardisationlines, rolling stock to continental loading gauges is ais necessary but is more likely to be of benefit tonon-starter, especially in the short term.However, incontinental railway systems than to the Unitedall other respects we can still gain advantages. In ourKingdom? Is that what you are saying?particular circumstances, with a railway where weMr Muir: Yes.have 25 diVerent train operating companies we needsome way of managing our system architecture. It isreally stupid that every time theywant to bring a newQ603 Clive EVord:How do we avoid standards thattrain into service they have to go through severalare excessively high and disadvantage the Unitedmillion pounds’ worth of approval process when it isKingdom industry?almost exactly the same as something another trainMrMuir: I have got no very obvious answer to that.company has brought into service. So the EuropeanRichard?process whereby you have a single, simplifiedMr Lockett: I think it is important to read the acceptance process that gives you a tick for allDirective, which explicitly says that the basic routes, not just the ones that you particularly want

parameters of a TSI must be economically and to use as a train operating company, is a good thingtechnically justified before they are adopted, and the for us, and the fact that manufacturers are designingoverall TSI as a whole must be subject to a proper traction systems for the propulsion of trains andeconomic cost-benefit analysis and, finally, if a they design one system that is okay all over Europe,particular Member State is disadvantaged, like we rather than having to tweak it for 23 diVerentwould be if we had to adopt the continental loading countries and demonstrate all the sorts ofgauge, then you can apply for and obtain a specific complicated things like electromagneticcase. The challenge we all face in the current process compatibility, must mean we get more reliable andis this issue of the enthusiasm to have a standard cheaper trains on time. So it is about the detail, andwithout actuallymaking sure it delivers the objective the loading gauge is the easy thing to get right.of a more competitive railway. We, the UK, haveworked very hard to encourage our people involved Q607 Chairman:Mr Lockett, the diYculty about allin TSI drafting to work to those rules and, also, at of this is we have just been talking about thetimes to encourage the Commission to make sure ERTMS, have we not, and saying that as a systemthose rules are worked to rather thanmeeting a time- this is manifestly not tailored in the way that youscale at the expensive of quality or content. have just been talking about to produce really high

quality standards. This is the one instance where anattempt has been made, where standardisation was

Q604 Clive EVord: If they are not advantageous will set out, where a system was suggested—indeed,we not do them? more than suggested—and we now discover that itMr Lockett:We also have that option, but of course not only probably does not work but it is going toif you do not do them you end up with designing cost an awful lot and most people would not bring ityour own bespoke systemwhich gets more andmore in anyway.expensive over time. So the United Kingdom Mr Lockett: Indeed.industry together, round about the time of the LEKreport, concluded that TSIs generally must be a Q608 Chairman: That is not a very good omen, is it?good thing. America Railways— Mr Lockett: I think it is a lesson that we have got to

be in there andmaking sure they are working to theirown rules. It is actually because the railway industry

Q605 Clive EVord:You seem to be arguing that they as a whole has not paid particular attention to theare actually logical. financial aspects and because they haveMr Lockett: They are. I would argue that the reason automatically assumed that the system which is theEurope stopped moving forward its standards was right system for 350 kilometres-an-hour high-speedbecause—unlike America where the Association of passenger trains is automatically necessary forAmericanRailroads has done all this for commercial freight trains that we are in this problem. But it has

not been agreed yet.reasons and extended its scope to Mexico andCanada and had massive benefits fromstandardisation—if you have got nationalised Q609 Ian Lucas: Can I say that what is very diYcultrailway networks they are not totally focused on the to extract from the evidence is examples in the UKoverall collective commercial benefit. That is why of how this whole process is actually bringing aboutthe 500 locomotives built in Europe are significantly eYciency. Are you going to give me some examples?more expensive and significantly less reliable than Mr Muir: Can I give you two examples? The first isthe 5,000 built every year in America, which we now the NOBO process which refers to Notified Bodies.of course have imported into Britain with great Within the High Speed Directives there are

requirements for Technical Standards ofsuccess.




Interoperability. Attached to that is a specific Mr Muir: Distinguishing it a little bit, there areprocess through which you go to get confirmation advantages and disadvantages. I agreed withthat your equipment complies with TSIs and is, Madam Chairman that the main advantages, Itherefore, fit to run on the track. They are called think, are on the continental railways but that is notNotified Bodies. The requirement to use Notified to say that Britain does not get some advantage inBodies is being phased in in Britain, starting six or this process (and we gave some examples) GSMR isnine months ago. And that clear, structured process ultimately advantageous to the British Exchequer.is better than the one that we used to have and hasalready helped in the introduction of some

Q618 Mr Marsden: That is the point, though, is itequipment in Britain. I could give you a secondnot? There is going to be an outlay from theexample, which is an equipment one, which istaxpayer, no doubt, in subsidies to various diVerentGSMR, which is the new radio system that we arecompanies, to pay for this. Is it going to beimplementing.beneficial, for instance, to the passengers? If so how?Mr Muir: In the case of NOBOs the answer is yes.Q610 Chairman: Can we have its full title, please?

Mr Muir: I do not know what GSM stands for.Q619 Mr Marsden: How?MrMuir: Because it has already helped to introduceQ611 Chairman: There you are. Now then, Mr

Locket? trains faster, in some respects, in Britain than theyMr Lockett: Global— would otherwise have been.Mr Muir: General—

Q620 Mr Marsden: So those costs have been passedQ612 Chairman: One of you must know what you on to passengers?are talking about! Mr Muir: The benefit of having the train then hasMrLockett: It is the sameGSM as in the ‘phones we been passed on to passengers because they are sittingall use. in it.

Q613 Chairman: Okay. Fair enough.Q621MrMarsden: I know, but what about the cost?Mr Muir: This ‘phone is a GSM ‘phone. It can beMr Muir: The current costs are fixed for traingiven some extra functionality tomake it suitable foroperators, but in the long term if the cost ofa railway, and GSM has been one of the greatoperating the railway reduces, if a train operator’ssuccesses of European standardisation.costs reduce, that benefit will, on the refranchising,go to the SRA.Q614 Chairman: “GSM has been one of the great

successes.” Justify.Mr Muir: You can travel anywhere in Europe and Q622 MrMarsden:We are not going to have ticket-use this ‘phone. This is GSM. I am referring to price cuts, are we, as a result of all this? At the endEuropean, standardisation, not specifically on of the day the cost is going to fall on the taxpayerrailways but on telecommunications. through various subsidies and, the fare-paying,Chairman: It would be nice if we could use it on the long-suVering passenger. Where you are sayingBritish ones. That is the only advantage. there is marginal diVerence in terms of benefit, most

of it is going to go to continental Europe. Surely, itQ615 Mr Marsden: That is an absolutely excellent is not worth going down this costly route.example because is not GSMRbeing delayed? It was Mr Lockett: The very important principle thatgoing to be in by 2006 and now it is looking like underpins the whole process is that you do not2012. actually have to renew your equipment if you do notMr Muir: Not because of problems with the want to; you only have to apply the TSI as and whenstandard. you would otherwise have renewed. If we were

renewing our signalling equipment wewould have toget a particular manufacturer to design a particular,Q616 Mr Marsden: But the point is that there are

going to be extra costs accrued, which is why I need special bespoke system with all the features that,to come back to the question of costs. There are certainly on high-speed type lines, ERTMS alreadygoing to be costs associated with the beginning. You has, and that will be more expensive and we wouldsaid overall the whole process is beneficial. Towhom be beholden to the single supplier for 30-odd yearsis it beneficial? for the life of that equipment. The principle ofMr Muir: Just on GSMR, GSMR is being having a common, open standard where you areimplemented in Britain quite slowly, and indeed the encouraging competition from all suppliers,dates have been pushed back, but it is not the fault of especially those from outside Europe to stir thingsthe standard. There are lots of other reasons which I up a bit, shall we say, must be good. What we havecould go into. to be very careful about is there are no places where

we are obliged to do something that we would nototherwise have done or there is no net economicQ617MrMarsden:Overall, to whom is it beneficial?

The train operating companies? benefit.




Q623Chairman: So,MrLockett, what you are really Chairman: My problem, I must tell you, quitefrankly, both with your evidence and the evidence ofsaying is that the advantages of interoperability are

diVerent for the United Kingdom than they are for your predecessors, is that I believe now that rollingstock in this country is not made by Britishother Member States. Is that right?

Mr Lockett: I am saying the answer is yes, but, for companies, it is made by people working forcompanies who are controlled by continentalexample, Sweden has not gotmany borders, so it just

depends whether you are Luxembourg or Sweden railway companies. That is not necessarily good orbad—it is a fact—but if they are all buying andor Britain.building railway equipment, particularly rollingstock, on the continent, what do we have to gainQ624 Chairman: We are taking evidence about thefrom this set of very high standards that seem to beUnited Kingdom. Are you saying we will benefitnegotiated almost in a vacuum?from economies of scale in terms of supply and that

other railway systems will get the advantages ofQ630 Ian Lucas: Are you saying cheaper prices?being able to travel across borders?MrLockett: I am saying you are going to get cheaperMr Lockett: Yes.prices and more certainty about delivery datesbecause they do not have to keep redesigning

Q625 Chairman: You are quite clear that that is the equipment just to fit the British acceptance process.situation in this country, which is markedlydiVerent? You are saying that Nordic countries

Q631 Chairman: So we need European rail safetymight have the same problem but for the bulk ofstandards as well, rather than national ones, do we?countries that are on the end of railway systems,Mr Lockett: The purpose of a TSI is both to be awhich is what we are, are we not—we are an islandtechnical and a safety standard. If you need toout at the end of the continental railway system—theharmonise something for safety it is part of thediVerences will be very marked?Technical Standards for Interoperability. That isMr Lockett: Spain is the same, and the Nordicanother benefit: we get a combined safety andcountries. It is a portfolio across the diVerenttechnical standard.countries, which range between the benefits of being

able to run freight and passengers across borders toQ632 Chairman: Tell us a bit about driver licensing.the supply market and acceptance process.Mr Muir: The intention of driver licensing was tofacilitate cross-border driving. We, as the previousQ626 Chairman: Is it a good thing to have a witnesses indicated, think that there is an issue forEuropean Rail Agency and should they set all these international drivers but they are a tiny proportionstandards? How are you going tomake sure that you of our drivers—there might be 200 internationalcontrol them? drivers in Britain compared with 12,000 to 14,000Mr Lockett: I echo what George said; the important national drivers. We think there is no case for thething is to be careful about curbing the enthusiasm— Driver Directive in Britain. In Britain we alreadyhave standards for driving which can be audited and

Q627 Chairman: I know what he said were the inspected by the HMRI and we think that theproblems but how do you ensure that these technical standard process is adequate—standards are not set at excessively high levels whichdo not benefit us? Q633 Chairman: Her Majesty’s RailwayMr Lockett:We have to use all the tools available to Inspectorate.us, some of which have been reduced by the transfer Mr Muir: We think the standardisation process inof the control from the industry to government, and Britain is already suYcient and there is ampleto make sure they work to the rules. room for—

Q628 Chairman: Would not an alternative route be Q634 Chairman: Is that accepted by the Railsimply to have a bilateral between yourselves and Agency?France, or yourselves and Ireland, and get exactly Mr Muir: The Rail Agency does not exist now butthe same result without a lot of extra cost—the point the Commission currently does not agree with usthat Mr Marsden was making—and an and is persevering, to a limited extent, with less andimprovement in eYciency? less enthusiasm, I think, with the Driver LicensingMr Lockett: If you are going to have the benefits of Directive.a common and competitive supply base withinterchangeable components it has to be done at Q635 Ian Lucas:Would you think that, in part, theyleast on a pan-European basis, and obviously that is do not agree with the fact that we are an island or thea stepping stone to being a pan-world basis. fact that less of our drivers are international drivers?

Mr Muir: They believe their economic cost-benefitanalysis and we do not. They have done it, I haveQ629 Chairman: If you do not make money at

European level you can also not make money at seen the summary of it and I do not agree with them.They think that the cost is relatively small and theworld level.

Mr Lockett: The more competition the more likely benefits are large, even for the whole of Europe, andwe think they are wrong.you are to make money and get cheaper prices.




Q636 Chairman: Can we bring you on to the Mr Muir: Not obviously.establishment of common European obligations forcompensation, particularly to delay, injury or Q645 Chairman: To what extent do the benefits ofdamage to luggage. What is your view of that? common licensing depend on the extent to which theMr Muir: The standards in Britain, we think, are United Kingdom railway network is interoperablereasonable, so this is not going to add to the benefit with other networks?of passengers in Britain. So, to that extent, it is Mr Muir: This is common licensing of drivers?unnecessary for Britain. However, from theEuropean perspective, some degree of

Q646 Chairman: Yes.standardisation is required, but the proposedMr Muir:We have 200 drivers in Britain that drivestandard goes too far. It includes, for example, I amthrough the Channel and they are already—told (I have not seen it written), a requirement to

provide catering on international trains, which Ithink is an example of scope-creep in Q647 Chairman: You are saying that already existsstandardisation. and you would not expect any benefit beyond what

already exists?Mr Muir:Which already happens, yes. I spoke lastQ637 Chairman: What would you say if theweek to a director of Eurotunnel, or at leastEuropean Commission said they wanted toEurostar, and there is not an issue.determine compensation for domestic services?

Mr Muir: I think it is quite unnecessary.Q648 Chairman: Finally, can I ask you: do youdetect that the European Parliament is pushing theQ638 Chairman: Do they accept that? Are we thecompensation regime because of—I do not knowonly country saying that?what—the lobbying of consumer associations?MrMuir:No, I think most railways share our view.Mr Muir: Possibly. I do not know.But there is pressure in this regard from the

European Parliament for this Directive and for thescope in this Directive. Q649 Chairman: Have consumers raised with you

the fact they feel ill-treated?Mr Muir: Not international RPCs.Q639 Chairman: How do you gauge this “less andMr Lockett: We were talking with the Unitedless enthusiasm”, and why is there such pressure?Kingdom representatives of the newly formedMr Muir: The pressures come in the Europeaninternational equivalent of the RPC and it is aboutParliament. I am sorry, in the “less and lesscontinental Europe wanting the same sort ofenthusiasm” I was referring to driver licensing. Iprovisions we have got in the United Kingdom,think the enthusiasm for the Commission—because we lead in compensation whereas some ofthe more monolithic nationalised railways—Q640 Chairman: I see. They are gradually

abandoning common licensing in relation to drivers.Or they are not? Q650 Chairman: So we should not really have anyMr Muir: The new draft requires licensing for objection tomoves in this direction. Is that what youinternational drivers within, I think, three or four are saying?years and they then have a provision to think again Mr Lockett:Apart from the fact that it goes too far.with a tentative date for all drivers by 2015. So, as you do, people like the Commission tend to

try for everything and then settle for half, and if thehalf comes to where we already are we have noQ641 Chairman: So they have not really resiled fromproblem because we support the idea oftheir position, they have simply put it back?compensation.Mr Muir: They have put it back.

Q651 Chairman: So, in eVect, it is a negotiatingQ642 Chairman: That is not a real advance, is it?position.They are not persuaded of your arguments inMr Muir: If I can give an example: the currentrelation to drivers within the United Kingdom, asDirective requires or appears to require or open theopposed to those driving across continental borders.possibility for uncapped compensation to aMrMuir: They have thrown in a sort of review of itpassenger for delays. In Britain we have anafter they have done it for international, and I doarrangement whereby there is compensation ofdetect—we spoke to them last week—a little bit ofparticular kinds for a half-an-hour delay or ansecond thought about all this. However, it has nothour’s delay, but if somebody argues that as a resultchanged the Directive; it is still as you say.of their delay they have missed a major commercialtransaction, for example, and lost a million pounds

Q643 Chairman: What benefits might there be on they are not, in fact, able to sue us for thosecommon licensing to companies hiring drivers? consequences. You can have views either way onMr Muir: In the United Kingdom, none. whether that is a good thing. I think it is right we

have standard terms and conditions, but the currentDirective does appear to open the possibility ofQ644 Chairman: Would the drivers benefit in any

way? unlimited claims for compensation.




Q652 Chairman: Are there similar undertakings in Mr Lockett: I think the collective view of theEuropean railways is that in some respects thethe aviation compensation schemes? The aviation

industry is not violently in love with this system that Passenger Rights Draft Directive goes further thanthe provisions in other directives in other industries,is being pushed. Is this something that you have

studied? and obviously that is something we are concernedabout and seeking a level playing field on.Chairman:Gentlemen, you have been very tolerant.Thank you very much indeed for coming to see us.

Witness:Mr Graham Smith, Planning Director, English Welsh and Scottish Railway, was examined.

Q653Chairman:Good afternoon,Mr Smith.We are viable alternative to road transport and, in the caseof mainland Europe, canal transport more than theydelighted to see you.

Mr Smith: Thank you. did, say, ten years ago.

Q659 Chairman: What, in fact, do you think theQ654 Chairman: Would you like to tell us oYciallydevelopment of interoperability would have uponwho you are?the United Kingdom’s railway?Mr Smith: My name is Graham Smith, I amMr Smith: We support interoperability because byPlanning Director for English Welsh and Scottishhaving interoperable equipment we can access partsRailway.of Europe that we have not been able to accessbefore through freight services. Solely in domesticQ655 Chairman: Do you have something you want activity in the United Kingdom there is a risk withto tell us before we ask you questions? interoperable standards as anywhere else that it willMr Smith: EWS (English Welsh and Scottish impose standards and regimes which areRailway—but it is easier to say EWS) is an unnecessary. However, I think we should bear ininternational operator operating freight services in mind that in some cases the United Kingdompartnership with SNCF through the Channel standards are higher, perhaps too high, than is foundTunnel as well as being a domestic freight haulier. So in mainland Europe, and it could be thatwe approach the European dimension from two interoperable standards produce a more realisticperspectives: both from our domestic interests and, level of standards than we sometimes see in thealso, from how we should develop our international United Kingdom.services. The evidence we have put before you seeks

to reflect both of those issues, and hopefully I canQ660 Chairman:Yes, but how do we get from whereanswer any questions you have.we are to that marvellous nirvana?Mr Smith: Case-by-case, issue-by-issue, slowly and

Q656 Chairman: Do you agree that the European steadily.Commission is pro-rail, anti-road and anti-aviation?Mr Smith: I do not know whether it is anti-road or Q661 Chairman: So how long is it going to take toanti-aviation but I believe it is certainly pro-rail and

develop these interoperability standards?it is particularly pro-rail freight; the EuropeanWhiteMr Smith: It will depend on the ease of introductionPaper argues strongly for an increase in the marketand the amount of equipment that will come up forshare of rail in the movement of goods. It is only inrenewal. There will be some that are easy tothe United Kingdom where there has been anachieve—compatible braking systems—betweenincrease in rail freight’s market share in the last fewrolling stock, particularly on the freight side, thereyears, whereas on mainland Europe the share hasare some that would be extremely desirable, such asbeen diminishing.compatible loading gauge standards which, in theUnited Kingdom, are much smaller through reasons

Q657 Chairman: Would you say that is one of the of history than we have in mainland Europe, but thesuccesses that could be laid at the door of physical infrastructure changes there will take manydevelopment of European rail legislation? years and much expenditure.Mr Smith: It will only be a success if that reductionin market share in mainland Europe stabilises and Q662 Chairman:Do we need an interim system? Dothen increases. we need a nationwide, country-specific standard for

a kind of transitory period?Mr Smith: the European Union, I think, hasQ658 Chairman:What indication do you see of that

happening? addressed this through the concept of the trans-European rail network and freeways by identifyingMr Smith: I think there is a more vibrant European

rail freight business. The introduction of open access specific routes linking the United Kingdom withmainland Europe and within mainland Europefreight operators in mainland Europe now

numbering 300, of which 60 are in Germany, is where through common standards, more eVectiveborder crossing can be applied. So that, in theperhaps indicative that the end customer—and that

is who we are trying to serve—now sees rail as a United Kingdom, routes such as the West Coast



16 June 2004 Mr Graham Smith

Mainline, which will take a lot of international Q666 Mrs Ellman: There are diVerent EuropeanUnion and United Kingdom approaches tofreight traYc, need to have some compatibility withimproving equipment, are there not?elsewhere in Europe. Routes on the periphery of theMr Smith: There are.United Kingdom network probably do not need

that.Q667Mrs Ellman: Is that going to lead to confusion,looking at standards?Q663 Mrs Ellman: What about the European RailMr Smith: It will while they remain diVerent.Agency? Is it really going to bring benefit? Perhaps that, again, is another argument why

Mr Smith: The European Rail Agency, in terms of standardisation at a sensible level, neither carelesssetting common standards and safety, can bring nor over-prescriptive, is something that we wouldbenefit providing it is not just another administrative welcome. A lot of our international services andbody which duplicates activity. The introduction of domestic services will be hauling wagons which arethe ERA needs to be matched with a diminution in approved in various countries, throughout thethe role of the national agencies. Self-interest, I am United Kingdom. Some of these wagons will spendsure, will be diYcult to overcome. However, for a a few weeks solely moving around the domesticEurope that still cannot decide on its operations network. If they have standard approval, standardTechnical Standard for Interoperability—whether equipment and standard braking systems then thattrains should have one red lamp at the back, two red helps us to reduce the cost and improve the eYciencylamps at the back or, as the North Americans would of rail freight.have, you can do a lot of things with reflectors—perhaps getting to a point where national agencies

Q668 Mrs Ellman: Do you think that is likely toare willing to close themselves down in favour of thehappen under the present arrangements?European Rail Agency may take a little while to getMr Smith: Yes, it will happen but as was describedto. However, I believe that an ERA which dictatesearlier, and I repeat, when one is trying to getstandards of activity across Europe, in the same wayagreement between a number of still, essentially,that the Association of American Railroads has national railways, let alone the 300 small privatemanaged in North America, Canada and Mexico, sector operators and ourselves, that is not anmust bring ultimate long-term benefit if rail overnight task. To some extent I do not envy the(particularly rail freight) is going to compete with Commission in trying to negotiate a common view

road haulage which can run throughout any state in amongst so-called railway experts who, even if theEurope, and on ferries or through the Channel Commission was not present, would probablyTunnel into the United Kingdom without let or struggle to agree which was the best system for thehindrance. future.

Q669 Mrs Ellman: What about the plans forQ664 Mrs Ellman: Do you think there is enoughcommon driver licensing arrangements? Is thatconsultation to get these points right?likely to reap benefit to the United Kingdom?Mr Smith: There is an awful lot of consultation. TheMr Smith:We believe that common driver licensingproblemwe have is the capability and the capacity todoes have advantages. At present our drivers have toconsume that consultation and to give a sensible andleave the train in Calais and the train has to be takentimely response. The European commission doesover by a French driver and taken to the German ornot struggle to issue consultation documents of greatItalian border. There is some inter-working, forlength with a number of assessments in them.example, between the Belgian railways and theUnfortunately, as a non-government organisation,French railways. We believe driver licensing willwe are not properly equipped to deal with that; toincrease the ability to have inter-working and itsome extent we have to rely on other administrativewould, we would anticipate, see SNCF driversbodies within the United Kingdom, such as theprobably working as far as London. What we areDepartment for Transport, to represent ourtrying to do is be competitive with road to oVer ainterests. We try and focus on the issues that are keymore competitive product to the end customer. Iffor us in making our views known.that means that the train does not stop merely tochange train crew andmeans we can oVer faster end-

Q665 Mrs Ellman:Do you feel that the Department to-end journey times, that must be of benefit to thefor Transport does represent your interests? end customer.Mr Smith: TheDepartment for Transport, I believe,does do a good job in representing our interests. In Q670 Mrs Ellman: Would you say that in generalthis area, as in many others, they are not dealing European transport legislation is beneficial to yourexactly with homogenous, domestic interests. Those industry?operators who do not, and have no prospect or Mr Smith: It is something of a pick-and-mix. Thedesire to, operate internationally will have one view, opening up of mainland European railways to newwe may have another. That is why on the issues that operators, the ability to expand our business in duewe believe are important we will represent our own course in operating in mainland Europe isviews and make our views directly known to those something that we find attractive. There are hurdlesMembers of the European Commission involved in to overcome, which the Commission is seeking to

address. There are other issues, on which wethe legislation.




commented in our evidence and referred to earlier, Q675 Chairman: There is a want of something, MrSmith! If you never aspired to be a train driver youwhere sometimes the European Commission tries to

achieve a policy objective through inappropriate must have been a most unnatural boy.Mr Smith: She saw her dad spend 25 years on thelegislation—for example, the proposal to forcibly

impose performance standards in contracts between railways and thought she would try something else.I think the point here is that the Europeanrail freight operators and their end customers. It is

not just one way because end customers will also be Commission do sometimes try to dot too many “i”sand cross too many “t”s. They do try to be over-obliged to pay up to 25% of the amount they were

going to pay the train operator if they fail to load a prescriptive in the way they achieve something. Wedo not have any problem at all with both ourtrain on time. In the United Kingdom we have

grown our rail freight business significantly without domestic and our international drivers. We do notobject to having a driving licence which is accepteda standard performance measure between ourselves

and our customers; we agree performance regimes throughout the European Community when we aredriving our cars and there is no reason why trainon a bespoke basis, depending on the balance of risk.

We can see where the European Commission is drivers should not do the same; if they wish tobecome mobile throughout Europe, again, I do nottrying to get to because the performance standard in

some parts of mainland Europe is very poor. So they see why we should stand in their way to do that. Thepoint that you make, which is that the Europeanare trying to produce a mechanism which just

encourages rail freight operators to run more Commission does have this tendency to be a littleover-prescriptive in what it requires, is somethingpunctually and more reliably. Whether you do that

through imposed contractual mechanisms I am not clearly we have to tackle through our conversationswith the Commission.absolutely convinced. It is an issue that we have, and

on some other things as well, that something whichis targeted at the mainland states, particularly the Q676 Chairman: You do not think we are gettinglarger states in Europe, catches the rest of the into the odd situation where people talk a lot aboutEuropean Union because we are part of the Union. subsidiarity but, in eVect, are constantly looking toThe Commission does not seem able to be selective concentrate powers in the centre? Why should thein its approach. That is the nature of the way it is European Rail Agency micro-manage the railconstructed. system?

Mr Smith: I suppose it comes back to the EuropeanQ671 Mrs Ellman: Would you say, overall, the Commission’s underlying principle, which is thatUnited Kingdom has benefited or not? they see the use of rail, both passenger and freight,Mr Smith: I cannot speak for the entirety of the diminishing in the vastmajority of mainland EuropeUnited Kingdom but I can speak for English, Welsh states. They believe, as a policy objective, that albeitand ScottishRailway and I can speak for rail freight. for environmental or economic reasons there shouldIt is the view of English,Welsh and Scottish Railway be more use of rail, they do not see the railways inand our rail freight operators that we have benefited most Member States being able to tackle thatfrom European legislation which has opened up the problem and are, therefore, taking it uponEuropean market and it will, in time, attract more themselves to try and set standards and prescribetraYc to rail away from other modes. activity so they do get more use of rail. Taking, for

example, the freight compensation proposal. Inconversations with the European Commission,Q672 Chairman:Youmentioned the whole question

of licensing drivers. Is your attitude towards where we have queried the benefit of this in theUnited Kingdom, their view is it could easily bedomestic drivers the same as your attitude towards

your own international drivers? withdrawn and may well be withdrawn if they couldsee that their overall policy objective was achieved inMr Smith: It should not be a significant diVerence,

providing that what we end up with is not over- diVerent ways. If performance improvement—be itin Germany or France or any mainland Europeanprescriptive and over-bureaucratic.state—was being brought about throughcompetition, or there was improved performanceQ673 Chairman: The point is it will be. One of thethrough an incentives regime, or improvedthings in the European suggestions was that nobodyperformance through investment by government,who left school at 16 could become a train driver.then you do not need the freight compensationWithout being working-classist, or whatever it is,package. It is ameans to an end; they are not weddedthat would wipe out something like 90% of the trainto it of itself.drivers that I know.

Mr Smith: Yes, it would certainly wipe out aconsiderable number of English,Welsh and Scottish Q677 Chairman: They are all fairly subjectiveRailway drivers. judgments, are they not?

Mr Smith: I think when you are dealing with thatnumber of Member States and very diVerentQ674 Chairman: It would be a very good job-

creation scheme for fast-track graduates looking for principles it will of necessity be subjective becausewhat you are trying to do is forecast the performancea change of pace!

Mr Smith: Yes. It certainly took my daughter nine of individual groups and managers and thepreferences of end customers in reaction tomonths to find a job after leaving university, but she

never aspired to be a train driver. diVerent stimuli.




Q678 Chairman: There would presumably be quite is planning to operate international freight services.There are private sector operators who can operatemarked diVerences between one Member State and

another. through the Channel Tunnel using the capacitythrough the tunnel. Whilst at present we, inMr Smith: There are marked diVerences, but given

that, for example, two-thirds of the traYc inHolland partnership with SNCF, are the only operatorsthrough the Channel Tunnel there is absolutelyand Belgium is international and 60% of the traYc

crossing through Germany is international then one nothing preventing anybody else entering themarket as well.can see that the European Commission has the view

that it cannot build rail freight solely on the back ofdomestic demand, it has to build it on the back of Q686 Mr Marsden: No, of course not. When youinternational demand because that is what road talk about expanding market share, then, on thehaulage is oVering as well. continent of Europe, how many jobs would you

project forward that would create in this country?Q679 Chairman: Let me put it this way round: were I, Mr Smith: EWS currently employs 5,600 people andas a German national, to be told by the European we move approximately 100 million tonnes a year. ICommission exactly what road surfaces, what road doubt if it is directly co-related that if we grew by 10widths and what diVerences between motorways and million tonnes we would be employing 600 moredomestic roads I shouldhave because ahighproportion people but, clearly, if there are more internationalof my traYc was international traYc I might resent it. trains operating from mainland Europe into theWhy should they do the same thing in rail? United Kingdom we would need more drivers, weMr Smith: You may resent it—again this is would need more maintenance staV and we wouldsubjective—but presumably in being a willing need more commercial staV. So I have not got anmember of the European Union— exact number but one can see there would be growth

opportunities.Q680 Chairman: I do not think you can carry itthat far. Q687 Mr Marsden: What proportion do youMr Smith: In Germany being a willing member of the anticipate would be British drivers and maintenanceEuropean Union, using the example you have selected, staV as compared to mainland continental Europe?they might say that if by having a common road Mr Smith: That is impossible to say.standard I was, for example, going to be able to attractmore traYc from major sources of production in the Q688MrMarsden:The point being that surely therefuture, such as the Czech Republic and Poland, now are marginal benefits?Members of the European Union, then it might be Mr Smith: No.economically sensible for Germany to do that.Chairman: A fairly interesting use of conditional Q689 Mr Marsden: It is good to see a Britishtenses in there. company doing well—do not get me wrong—and I

agree with the principle, but all I am saying is thatQ681 Mr Marsden: What is the proportion of your you are in a position where you would surely sayinternational rail freight business as compared with that, would you not?your total business? Mr Smith: Yes, of course I would, because we runMr Smith: Ten percent. international freight trains. It does not actually

make it wrong. Our international services, whichQ682 Mr Marsden:What is that worth? currently run through to Spain, Italy and Germany,Mr Smith: Round about just under £50 million a are resourced with English, Welsh and Scottishyear. Railway locomotives as far as Calais. Those

locomotives are maintained in Britain and they areQ683 Mr Marsden: In terms of the 10%? driven by EWS drivers into Calais and some FrenchMr Smith: Yes. drivers will come through to Folkestone. It could be,

if driver licensing comes to pass, that French driverscould operate to London, even throughLondon.WeQ684 Mr Marsden: Do you know what thewould like to have our drivers going through to Lilleproportion is for the whole of the rail freightor Antwerp or as far as they could get before theyindustry’s international business compared to theirneed a break and a nap and a bite to eat. If wetotal business?employ more drivers to go further in Europe, oneMr Smith: In the United Kingdom that is it becausewould have thought we would be employing morewe are the only operator going through thepeople. I cannot put a number on it but if EWS isChannel Tunnel.more active, ultimately, in Europe, either on its ownaccount or in partnership with others, it will increaseQ685 Mr Marsden: So how do you respond to theemployment.question, where you are obviously espousing the

great advantages of all this standardisation, whichsays “You would say that because you have got the Q690 Chairman: Could I ask you one or two sordid

questions about economics? How long do you thinkmonopoly on an expanding business”?Mr Smith: I would not say that we had a monopoly. the European Commission is going to go on wearing

the payment of your Channel Tunnel tolls from theYou will be aware, for example, that Eurotunnel hasacquired an operating licence to run in France and public purse?




MrSmith:The European Commission approved the of theagreementwasthatBritishRailway’sBoard,whichwill retain the obligation to pay Eurotunnel until 2052current agreement in 1997 as an acceptable state aid

in order to restore a competitive position through anyway, should continue to make that payment and notseek reimbursement from EWS.the Tunnel. In conversations with the Commission

they have informally indicated that an extension ofQ696 Chairman: So, the idea is that because thethat agreement would be acceptable, but they wouldtaxpayer has to pay the amount anyway, it does notbe looking for a long-term solution.matter that we do not ask it from you because youare doing it commercially.Q691 Chairman: Such as?Mr Smith: If you ask from us—Mr Smith: I think that long-term solution, perhaps,

has a number of facets. The first is that Eurotunnel’sQ697 Chairman: You are not going to play.own management will need to consider the level ofMr Smith: The traYc will cease.tolls for going through the Tunnel. The previous

management had proposed to reduce those tolls byQ698 Chairman: You will take your rolling stock75% under Project Galaxie. We do not know as yetand go home.whether the new management will continue withMr Smith: The traYc cannot bear £26 million ofthat proposal in whole or in part. There is anaccess charges through the tunnel.argument, which I believe is a strong one, that a

significant proportion of international rail freightQ699 Chairman: That does rather raise the questiontraYc brings environmental benefit to the Unitedof why in fact the European institutions think it isKingdomby going by rail rather than road and theresuch a good idea to put enormous emphasis on railis an existing government policy that saysfreight, does it not?environmental benefits can be reflected throughMrSmith: I think the point wasmade earlier that thesensitive lorry miles, and can be reflected in grantChannel Tunnel is quite an expensive piece ofpayments to the haulier. Then there is a thirdinfrastructure.element which is to say that the rail freight operator

must contribute an element itself. Now, our view isQ700 Chairman: I think we noticed that.that that element perhaps could be the equivalent ofMrSmith:And it is not necessarily that level of cost thatwhat we would pay if the equivalent volume waswould be applied in other parts of infrastructuremoving the equivalent distance on Network Rail.throughout Europe. So, I am sure the EuropeanCommission’s enthusiasm for rail freight is notQ692 Chairman:Wait a minute. That volume couldnecessarily built solelyon the cost of theChannel Tunnel.equal—tell me again.

MrSmith:Wewould argue that what EWSor any rail Q701 Chairman:No, but I repeat that, if you did notfreight operator should pay for going through the have a Channel Tunnel, you would not have anChannel Tunnel would be the equivalent amount to international business because driving trains acrossthat which it would pay Network Rail for the same on ferries did not prove altogether paying.volume moving the same distance on Network Rail’s Mr Smith: The Channel Tunnel is a much quickernetwork. That is the margin of wear and tear— way of getting into Europe than using the train ferry.Ian Lucas: So ignoring the fact it is through the That said, train ferries do have a role around theTunnel? world, for example, between the north and south

islands in New Zealand and, for example, in parts ofQ693 Chairman: And ignoring the fact that it is a North America. The Channel Tunnel is there, I dovery expensive tunnel. not think anybody is going to block it oV, so let usMr Smith: How can I put this? use it and build an international railway.

Q694 Chairman: With some delicacy, I think. You Q702 Chairman: So, you really believe that theare on slightly diYcult ground here; 26million quid’s benefits of intraoperability are from the economicsworth of delicate ground, I think. of scale alone.Mr Smith: I do not believe that the sunk cost and Mr Smith: Scale and eYciency of operation.capital within the Tunnel should be charged to railfreight operators because if it is there will be no rail Q703 Chairman: But really scale.freight through the Channel Tunnel. Mr Smith: As opposed to . . .?

Q704 Chairman:What you are really saying to us is,Q695 Chairman: Although you rely on the fact thatthere is a tunnel and, if you did not have a tunnel, it is there, it cost you a lot of money, we need it in

order to be able to run suYcient services to make ityou would not have an international market,nevertheless you do not think you should pay for it, viable and therefore you should not resent giving us

the cash for it.or do I represent your views unfairly?MrSmith: If I could put it in a slightly diVerentway!Our Mr Smith: Yes.

Chairman:Mr Smith, you have been very interestingview is that we entered into an agreement with the thenBritish Railways Board to purchase BR’s international as always and we very grateful to you. Thank you

very much for coming this afternoon.freightbusiness. It involved significant restructuring.Part



Written evidence

Memorandum by the Department for Transport (EU 01)

THE BALANCE OF COMPETENCES BETWEEN THE EUROPEAN UNION ANDMEMBER STATES

Introduction

I. The purpose of this memorandum is to advise on the balance of competences of the European Unionand individualmember states in transport, how those competences have been exercised in practice, andwhatprovision the EUmakes for evaluating the eVectiveness of its measures. It is written in response to the SelectCommittee’s request for advice of 14 July 2003 to the Department for Transport.

II. Thememorandum distinguishes between the legal competence to act at the EU level which is bestowedby the Treaty and the Courts, and how that competence is actually taken up and exercised in practicethrough the Council of Ministers, European Parliament and the European Commission.

III. It is also important to distinguish exclusiveCommunity competence and competence sharedwith themember states. Exclusive competence means that the Community alone can act. Where there is sharedcompetence either the Community or Member States or both can act.

IV. A further distinction can be made between the Community’s internal competence to act within theEU and external competence to enter into international obligations.

V. This memorandum is set out in the following sections:

— 1. The Treaty Basis for Community Competence in Transport

— 2. How the Community has Exercised its Competence in Practice

— 3. Community Competence in respect of External Agreements

— 4. The EU’s Evaluation of EVectiveness of Community Legislation

— 5. Future Developments

Section 1—Treaty Basis for Community Competence

Main provisions in the Treaty conferring competence in transport policy

1.1 The Treaty establishes an extensive basis for EU competence. The founding principles of theCommon Transport Policy were laid down in the 1957 Treaty of Rome. The current Treaty establishing theEuropean Community states:

. . . the activities of the Community shall include . . . a common policy in the sphere of transport . . .[Article 3]

The objectives of this Treaty shall, in matters governed by this title [ie Transport] be pursued byMember States within the framework of a common transport policy. [Article 70]

It prescribes that the Council of Ministers and the European Parliament working under codecision (as inArticle 251):

. . . shall . . . lay down:

(a) common rules applicable to international transport to or from the territory of a Member Stateor passing across the territory of one or more Member States;

(b) the conditions under which non-resident carriers may operate transport services within aMember State;

(c) measures to improve transport safety;

(d) any other appropriate provisions. [Article 71]

1.2 Article 80 specifies that the Common Transport Policy shall apply to transport by rail, road andinland waterways, and may apply to sea and air transport to an extent determined by the Council.

1.3 The Maastricht Treaty added a new provision for transport infrastructure:

. . . the Community shall contribute to the establishment and development of trans-Europeannetworks in the areas of transport, telecommunications and energy infrastructures . . . . . . promotingthe interconnection and interoperability of national networks as well as access to such networks . . .[Article 154]



Treaty provisions on state aid in transport

1.4 In principle, state aid for all transport sectors is subject to the general provisions in Articles 87 and89 of the Treaty. Road, rail and inland waterways (“inland transport”) are also covered by Article 73 whichallows for the granting of state aid which meets the needs of co-ordination in transport or public serviceobligations. Article 73 has not been extended to maritime or air transport. Articles 74–77 provide for theelimination of discrimination in charges and conditions in transport within the Community. There is awealth of secondary legislation and supporting guidelines which give eVect to the Treaty provisions onstate aid.

Transport measures in other policy fields

1.5 Other Treaty provisions have a bearing on EU transport policies—competition, environment, tax,social policy, employment and the internal market. Most transport proposals are considered in theTransport Council, even those which have more than one Treaty Title as a base. However, otherMinisterialCouncils adopt measures in their own policy fields which impact on the transport sector. Under theseprovisions there has been, for example, legislation on the working time of transport employees and manyenvironmental measures. Annex 1 gives examples. For the sake of a clear and manageable focus, thismemorandum is confined to measures adopted by Transport Ministers, in the Transport Council.

Subsidiarity

1.6 The Amsterdam Treaty made provision for the principle of subsidiarity: in policy areas wherecompetence is shared between Community and member states, the Community shall act “only if and in sofar as the objectives of the proposed action cannot be suYciently achieved by the Member States” (Article5 of the Treaty). Treaty requirements on subsidiarity and proportionality are a counter-balance to theexercise of competence. For each new proposal the Commission gives its own position with regard to theprinciples of subsidiarity and proportionality and member states may take up the principles in debate.

EU-wide legislation and national exemptions

1.7 Community legislation is generally made with uniform eVect across the EU as a whole. Permanentexceptions for particular member states are very rare because other member states and the main EUinstitutions normally do not wish to compromise the single market or other Community policies. However,there are examples in Directives on rail interoperability where the Commission may authorise derogationsfrom uniform European technical standards in certain circumstances,1 and where Northern Ireland, theRepublic of Ireland and Greece are exempted from certain provisions on grounds of their geographicalseparation.2 More often, there are “derogations” where implementation might be applied flexibly, perhapsto help some member states cope with transition. An example of this would be time-limited derogations forthe Greek islands and the Azores on aviation liberalisation measures.3

Qualified Majority Voting and codecision with the Parliament

1.8 The development of a common transport policy has taken place in the Council of Ministers throughQualified Majority Voting (QMV). QMV came into eVect in 1966 in respect of road, rail and inlandwaterways transport. In 1987, the entering into force of the Single European Act introduced QMV in theCouncil for aviation and maritime issues. In 1999 the Amsterdam Treaty extended “co-decision”, underwhich legislation can be adopted only if the Council and the Parliament agree. With some limitedexceptions,4 transport provisions under the Transport Chapter are subject to codecision.

Section 2—How the Community has Exercised its Competence in Transport in Practice

2.1 Although from the outset the Treaty has given the Community significant powers in respect oftransport, progress in developing the Common Transport Policy remained slow until the 1980s, apart fromthe adoption of some general transport measures. Member states were often reluctant to give up control oftheir transport markets—as a major state employer and beneficiary of significant state subsidies, transportwas, and remains, a sensitive sector. A change occurred in the 1980s because the European Parliament tookthe Council of Ministers to the European Court of Justice for “failing to introduce a common policy fortransport and in particular to lay down the framework of such a policy in a binding manner”. In May 1985, the

1 Directive 96/48/EC on the interoperability of the high-speed trans-European rail network Directive 2001/16/EC on theinteroperability of the conventional trans-European rail network.

2 Directive 2001/12/EC amending Council Directive 91/440/EEC on the development of the Community’s railways.3 Council Reg 2408/92 Art 14. Derogation set for six months with the possibility to extend to five years and then another fiveyears after that.

4 Articles 71(2) and 75 TEC.



ECJ found the Council in breach of the Treaty,5 eVectively forcing it to act. The counterpart to theCommunity exercising its competence has been the debate about the application of the principles ofsubsidiarity and proportionality which set boundaries to the exercise of EU competence.

Single Market Measures

2.2 Transport therefore formed an important element of the Commission’s proposals for the singlemarket which were published shortly afterwards. By 1992, the basic legislation underpinning the singlemarket in the aviation, maritime and road sectors was in place. Since then the single market in transportservices has continued to be the main driver for establishing the Common Transport Policy through the:

— Opening of transport markets to competition. There have been successive waves of liberalisationmeasures in respect of shipping, aviation, road haulage and rail. The Commission has proposedfurther measures for rail liberalisation and local transport services (ie revised Regulations onPublic Service Obligations). However, the opening of transport markets has not beenstraightforward: opening the rail freight market required lengthy negotiations about accessconditions before it could be agreed; and aviation liberalisation, which mainly came into eVect in1993, has been constrained by airport congestion and distorted by state aid to airlines.

— Creation of the TEN-Transport—Trans-European Networks (TENs) for transport,telecommunications and energy were given their own Title in the Maastricht Treaty with the aimof strengthening economic and social cohesion as enshrined inArticle 154 of the Treaty. In general,transport links had developed according to national priorities often without much thought givento cross-border traYc flows. TENS was an attempt to redress the balance by contributing to thedevelopment of infrastructure by supporting “the interconnection and interoperability of nationalnetworks as well as access to such networks” taking account of “the need to link island, landlockedand peripheral regions with the central regions of the Community”.

— Harmonisation of technical rules to promote interoperability (eg recognition of driver licences andhaulage certification, rail capacity allocation, technical specifications and safety management). Inthe rail sector, there has been widespread acceptance of the need for some harmonisation of thesector’s technical rules to reduce costs and make open access to diVerent national networks apractical and not just a theoretical possibility. There have been detailed negotiations to ensuresatisfactory safeguards against the imposition of disproportionate costs in some member states.In the aviation sector, there is the Single European Sky initiative in the field of air traYcmanagement to create a uniformoperating environment, encouraging the restructuring of airspacecontrol to reflect traYc flow rather than national borders, with the aims of reducing delays andreinforcing safety.

2.3 Single market legislation has to be backed up by Commission action to prevent unacceptable marketdistortion. Liberalisation and privatisation often involve company rationalisation and provisions, such assubsidies, to ensure that commercially provided services meet the public need. With progressive marketopening in transport services, therefore, the Commission has had to increase its activity to police competitionpolicy and state aid rules. It has recently proposed a tidying up and extension of the rules on transportstate aids.

2.4 Through the “Lisbon Agenda” for economic reform (established in Spring 2000), European Councilshave recently been seeking an increase in the pace of liberalisation across the Community, in the transportsector among others. The UK has supported this process.

Other policy themes

2.5 The Community has also exercised the transport powers in the Treaty to promote safety,environmental protection, consumer and employee interests, etc. This can be based either on a wish toprovide an EUwide standard for the benefit of all, or a wish to support the singlemarket by ruling out unfaircompetition based on lower standards. Measures can be promoted to serve more than one policy objective,sometimes under more than one Treaty Article.

2.6 In respect of safety, a number of maritime measures were adopted in the mid-1990s, following highprofile shipping disasters. For example, regulations on the safety management of roll-on/roll-oV passengerferries following the Estonia disaster in 1994. In aviation, there have been measures to harmonise technicalsafety standards, to establish principles governing the investigation of air accidents and occurrencereporting, and other measures. In rail, measures to harmonise safety regulation in the member states arecontained in a package currently under negotiation. There has been EU legislation on road safety as well,although the Commission and a number of member states have encouraged the raising of standards throughexchange of best practice; the latest initiative is a suggested non-binding action plan.

5 Case 13/83 Parliament v Commission [a985] ECR 1513.



2.7 Environmental protection is often pursued under the environmental Title of the Treaty. Thosemeasures are negotiated through the Environment Council, sometimes dealing with transport specifically,sometimes with more than one economic sector. In parallel, however, Transport Ministers on occasionadoptmeasures under theTransport Title. This has been evident in themaritime sectorwhere, recently, therehave been measures to protect the maritime environment following the Erika and Prestige disasters.

2.8 Another area of activity has been that of social or employment protection (eg the development of theEU rules on drivers’ hours for drivers of heavy goods vehicles and passenger vehicles, and more recently onworking time legislation in transport).

2.9 There have been consumer protectionmeasures, such as rules in the aviation sector on denied boardingcompensation, computer reservation systems, and airline liability.

2.10 There has recently been a limited extension of Community action into the field of transport security,primarily an area of member state responsibility. For example, as a reaction to the events of 11 September2001, the Community, prompted by the UK, chose to exercise its competence in respect of security in thecivil aviation sector. It adopted a new Regulation 6 to ensure that aviation security measures across the EUcomply with standards laid down by the European Civil Aviation Conference (an inter-governmentalorganisation).

European Commission’s powers and the “comitology” procedures

2.11 After legislation has been adopted, the practical negotiation of precisely what action should be takenat Community level is partly carried out through the “comitology” process, ie the committees constitutedby legislation to help the Commission exercise delegated regulatory and executive powers. Such committeesensure that member states remain involved in the exercise of those powers by the Commission, and thecomitology system allows for varying degrees of involvement in which themember states or the Commissionmight have the greater role. There are some 15 committees concerned with transport issues, engaged inadvisory, management or regulatory functions.

Section 3—Community Competence in respect of External Agreements

3.1 Where the Community has exclusive external competence, only it may negotiate or enter intointernational obligations with non-EU countries or other international bodies. There are two separatequestions, which easily become conflated:

— who shall negotiate international agreements? This concerns the role and influence of theCommission acting on behalf of the Community versus that of themember states. In itself this doesnot necessarily raise the subject of legal competence in external aVairs;

— who shall adopt agreements? This does raise the question of “competence”. TheCommunitymightreach an agreement in an area of EU competence, but any elements of that deal which remain inmember states’ sovereignty would be separately ratified by them. In practice the dividing line isoften not clear until the outcome of the negotiations is known.

3.2 Exclusive external Community competence is derived in three ways:

— by virtue of an express provision in the Treaty. External competence under the Treaty wasextended recently in the Nice Treaty, but not in transport. That Treaty, in force since February2003, widens the Common Commercial Policy (with its general rule of external competence) from“trade in goods” to “trade in services”. Some services, including transport services, were notincluded in the Common Commercial Policy;

— by virtue of the adoption of internal rules arising from the “AETRdoctrine”7, a EuropeanCourt ofJustice judgement on the European Agreement on Road Transport which held that member statescannot take on external commitments whichwould aVect the internal rules of the Community; and

— by virtue of the fact that external action is a necessary precondition of eVective internal action toachieve Treaty objectives. This arises from the “Rhine Navigation Doctrine”8.

3.3 Where the Community has exclusive external competence, member states may not negotiate withthird countries on their own account. However, in order to negotiate on behalf of the Community theCommission needs to obtain a mandate from the Council, and any subsequent agreement must be approvedand ratified by the Council.

3.4 In practice, particularly in maritime and aviation issues, the Commission may be mandated tonegotiate in areas which are within member states’ competence—usually this occurs when the negotiationsare expected to cover both areas that are subject to exclusive Community competence and some which arenot. In such situations the Council of Ministers may take a policy decision to mandate the Commission tonegotiate external agreements on behalf of the Community, on the basis that there would be added valuein negotiating at Community level compared with member states negotiating bilaterally.

7 Case 22/70, Commission v Council (Re: ERTA) (1971).8 Opinion 1/76 (1977) ECR 741 at 759.



3.5 An instructive example of this followed the ECJ ruling in November 2002 on so-called “Open Skies”aviation agreements between certain member states and the United States. The Court ruled that in certainrespects such agreements were illegal, and in certain respects subject to exclusive Community competence,but in other key respects remained a matter of national competence. The post-ECJ debate resulted in theCommission being granted amandate to negotiate with theUS on a Transatlantic OpenAviationArea, plusa limited mandate to negotiate with other third countries, whilst confirming that member states were freeto negotiate with third countries in other areas. This is an example of how the Community institutions andmember states can work together and reconcile conflicting interests when the division of competence iscomplex.

International Organisations

3.6 Special considerations apply to negotiations within international organisations such as theInternational Maritime Organisation (IMO) and the International Civil Aviation Organisation (ICAO).Matters discussed within these organisations are often subject either to exclusive Community competenceor to shared competence. In practice the picture is not always clear, and in such shipping matters as safety,pollution, training and crew competence, and security, and in such aviation matters as safety, air traYcmanagement, environmental standards, customs duties, and security, there is considerable scope fordiscussion of where competence lies. However in practice, since the Community is not a member of theseorganisations and (excepting the Intergovernmental Organisation for International Carriage by Rail—OTIF) has little prospect of becoming one, member states continue to speak on their own account, subjectwhere appropriate to a process of Community coordination.

3.7 There are also practical reasons for not promoting Community membership of these otherorganisations (eg the diYculties of changing their rules governing membership, the potential loss ofEuropean votes, and the likely impact on the organisations themselves), and EU policies and interests canbe eVectively promoted bymember states acting individually but within the framework of a common agreedapproach. For example, there has recently been eVective Community coordination in IMO at negotiationson maritime security, and at ICAO at the fifth Worldwide Air Transport Conference in 2003.

Section 4—EU Evaluation of Effectiveness of Legislation

4.1 There are no provisions in the Treaty which require regular evaluation or review of transportlegislative measures for their eVectiveness. Some transport directives however, do include a requirement fora periodic review of the implementingmeasures to assess their impact. The EuropeanCommission hasmadea number of Better Regulation commitments across the board.

Periodic Reviews

4.2 An example of a transport directive requiring a periodic review is that on Community guidelines forthe development of the trans-European transport network9. This requires the Commission to report everytwo years to the European Parliament, theCouncil, the Economic and Social Committee and the Committeeof the Regions on the implementation of the guidelines described in the Decision. It also requires theCommission to submit a report to the European Parliament and to the Council every five years indicatingwhether the guidelines need to be adapted to take account of economic and technological developments.

4.3 The agreement reached on the Second Rail Package10 in March 2003 includes a requirement on theEuropean Commission to report to the Council, the European Parliament and its Committees by 1 January2007 on progress with implementation and on its impact upon market development, modal shift, safety andworking conditions.

4.4 A third example is Article 51 of Regulation 1592/2002 on the EuropeanAviation Safety Agency. Thisincludes an “evaluation” process, requiring the Management Board to commission an “independentexternal evaluation of the implementation of the regulation” within three years of the Agency taking up itsresponsibilities and every five years thereafter. The results have to be forwarded to the Commission, whichmay forward them to the European Parliament and Council, and must be made public.

UK Assessments of Community Proposals

4.5 Although the Commission has not always issued comprehensive statements of the expected benefitsand costs, as the Committee will be aware, in the UK the Department for Transport normally includes anassessment of the anticipated policy impacts of proposals in each Explanatory Memorandum submitted tothe European Scrutiny Committee. It also develops, in consultation with stakeholders, a full Regulatory

9 Decision No 1692/96/EC of the European Parliament and of the Council of 23 July 1996 on Community Guidelines for theDevelopment of the Trans-European Network.

10 A draft Directive further amending 91/40/EC; a draft Directive aligning/extending the scope of 96/48/EC and 2001/16/EC; adraft Directive on safety regulation; a draft Regulation estabilshing a European Rail Agency; and a Decision mandating theEC per se to sign up to the International Convention on Transport by Rail (COTIF).



Impact Assessment, by the time implementing measures are adopted in the UK. This systematic practicehelps the Department to identify potential problems with Community proposals ahead of detailednegotiations in the Council, and also informs the Department’s advice to British MEPs on the EuropeanParliament’s Regional Policy, Transport and Tourism Committee.

Better Regulation Proposals

4.6 EU institutions and member states have recognised that Community measures could improve interms of clarity, brevity and simple language. The Commission has consequently issued Better Regulationproposals11 which will be implemented over the next two years. The Commission also announced itsintention to restrict legislative proposals to essential aspects only, and it invited the Parliament and theCouncil to commit themselves similarly in terms of proportionality and simplicity. The Commission has saidthat it intends to promote a “culture of dialogue and participation”, and to apply a “systematic approachto assessing the costs and benefits of its initiatives”.

4.7 The Commission has an action plan and timetable for simplifying and improving the regulatoryenvironment and for assessing policy proposals and subsequent evaluation. The Plan details 16 actions tobe put in place, either individually or jointly by the EU institutions, without the necessity of changes to theTreaty. The key elements of the Action Plan include:

— a programme of simplification aimed at reducing the volume of Community law;

— a two-stage impact assessment process covering the economic, social and environmental aspectsof policy proposals—to be implemented gradually from 2003 with full implementation by2004–05. The assessment is intended to make it easier to decide whether action should be taken atCommunity level, having regard to subsidiarity and proportionality;

— an internal better regulation network within the Commission, part of whose mandate it will be tomonitor compliance with the principles of subsidiarity and proportionality; and

— a review clause to be included in legislative acts, particularly those which are subject to rapidtechnological change, so that legislation can be updated and adjusted regularly.

Section 5—Future Developments

5.1 These developments on better regulation and evaluation of policy are among a number of futuredevelopments in the EUwhich the Select Committeemight feel have relevance to this enquiry. The followingparagraphs suggest some others.

Intergovernmental Conference 2003–04

5.2 On 4 October 2003, the member states of the European Union will launch an IntergovernmentalConference to draw up a new Treaty for the EU. The starting point of the negotiations will be the draftConstitutional Treaty drawn up by the Convention on the Future of Europe. For transport, theIntergovernmental Conference is primarily about ensuring the Treaty is accessible and suitable for an EUof 25member states. There are onlyminor revisions proposed to the Transport Title. Thus, the current draftof the new Treaty, if adopted, would not make a significant diVerence to EU transport policy provisions.

5.3 However, there are a number of general Treaty changes which, while not impacting on transportpolicy directly, will deal with the position in respect of the Community’s and member states’ competence.For example, the draft Treaty proposes a new approach to defining diVerent types of competence: wheremember states have chosen to confer exclusive competence on the Community; where the member statesshare competence with the Community; and where the Community can only take supporting action to helpmember states achieve their goals. The Government’s position on these and other proposals in the draftTreaty has been set out in its White Paper entitled “A Constitutional Treaty for the EU” of 9 September12.

EU Enlargement

5.4 On 1 May 2004, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland,Slovakia and Slovenia will join the EU. Already the new members have observer status and speaking rightsat Council meetings. The implications for the way in which competence is exercised in transport policy arenot yet clear. The UK will need to observe the new members’ positions on liberalisation, interoperability,subsidiarity and proportionality, and so on. In addition, it remains to be seen how far the emphasis in thenext few years will be on new legislative initiatives in the EU as a whole and how far on consolidation andimplementation in the new member states.

11 Commission Communications COM(2002) 275 final of 5.6.2002 “European Governance: Better Lawmaking” and COM(2002) 278 final of 5.6.2002 ‘Action plan “Simplifying and Improving the Regulatory Environment”’.

12 “A Constitutional Treaty for the EU—The British Approach to the European Union Intergovernmental Conference 2003”(Cm 5934).



New European Transport Agencies

5.5 A number of Community agencies are being set up, with diVering roles and powers. The EuropeanMaritime Safety Agency and the European Rail Agency are principally advisory, ensuring that theCommission has direct access to technical expertise but having no regulatory or enforcement powers of theirown. By contrast, the EuropeanAviation Safety Agency assists the Commission in carrying out its functionsbut also has a range of independent executive functions including the issuing, renewal and revocation ofcertain certificates and approvals. Annex 2 provides further details on the new agencies.

5.6 In setting up the European Aviation Safety Agency, member states wanted to establish an expertbody, as autonomous as possible, which could adopt aviation safety rules, certificate aeronautical products,and standardise implementation. They therefore negotiated a Regulation which exercised Communityagency powers as far as possible within the Treaty provisions. An issue in respect of subsidiarity, which isnow subject to discussion in the Council working groups, is the Commission’s proposal to widen the ambitof the European Maritime Safety Agency to include security.

UK Presidency 2005

5.7 The UK Presidency of the European Council in the latter half of 2005 will give the UK responsibilityfor setting the agenda and chairing negotiations within the Council. The UK will need to work with theCouncil agenda that it inherits, but will want to plan ahead so far as possible with the Commission and otherPresidencies to encourage the development of an appropriate agenda, and to emphasise the principles ofsubsidiarity and proportionality, of better regulation, and of assessment and evaluation of proposals. In thisspirit, in the Transport Council the UKhas already oVered to return to a programme, initiated by theGreekPresidency, for employment measures in shipping industries and which pursues its aims principally viavoluntary action.

September 2003

Annex 1

EXAMPLES OF IMPLEMENTINGMEASURES ADOPTED BY COUNCILS, OTHER THANTHE TRANSPORT COUNCIL, WHICH IMPACT ON THE TRANSPORT SECTOR

Directives Adopted by the Environment Council

Directive 93/59 of 28 June 1993 amending Directive 70/220 on measures to be taken against air pollutionby emissions from motor vehicles.

Directive 91/542 of 1 October 1991 amending Directive 88/77 on the measures to be taken against theemission of gaseous pollutants from diesel engines for use in vehicles.

Directive 2001/42 of 27 June 2001 on the assessment of the eVects of certain plans and programmes onthe environment (ie Strategic Environmental Assessment Directive).

Directive Adopted by the Energy Council

Directive 2003/30 of 8 May 2003 on the promotion of the use of biofuels or other renewable fuels fortransport.

Directive Adopted by the Industry Council

Directive 2001/85 of 20 November 2001 relating to special provisions for vehicles used for the carriage ofpassengers comprising more than eight seats in addition to the driver’s seat was adopted by the IndustryCouncil.

Directives Adopted by the Social Affairs Council

Directive 1999/63 of 21 June 1999 concerning the Agreement on the organisation of working time ofseafarers concluded by the European Community Shipowners’ Association (ECSA) and the Federation ofTransport Workers’ Unions in the European Union (FST)—Annex: European Agreement on theorganisation of working time of seafarers.

Directive 2000/34 of 22 June 2000 amendingDirective 93/104 concerning the organisation ofworking time

— This brought within the scope of EU working time legislation workers in road, air, sea, and railtransport and inland waterways [as well as sea fishermen, oV-shore workers and junior doctors].The Treaty base is Article 137(2).



Directive 89/391 of 12 June 1989 on the introduction of measures to encourage improvements in safetyand health of workers at work

— most of the “daughter directives” apply to means of transport.

Regulations Adopted by the Economic and Financial Affairs Council

Regulation 2236/95 of 18 September 1995 laying down general rules for the granting of Communityfinancial aid in the field of trans-European networks

— The vast majority of Trans-European Networks (TEN) funding goes to transport projects (somealso goes to energy and telecommunications TEN projects) but the Regulation and a subsequentamendment were adopted in Ecofin. The Treaty base is Article 129d (now Article 156).

Regulation Adopted by the Competition Council

Regulation 1/2003 of 16 December 2002 on the implementation of the rules of competition laid down inArticles 81 and 82 of the Treaty.

Annex 2

EUROPEAN UNION TRANSPORT AGENCIES

European Aviation Safety Agency

The setting up of EASA was prompted first by the practical shortcomings of the earlier CommunityRegulation, 3922/91, on the harmonisation of standards and then by the failure of the mandate onestablishing a European aviation safety authority as an international organisation. Regulation 1592/2002sets out a framework for aviation safety regulation (including basic principles and essential safetyrequirements) as well as establishing the agency. There are roles for the Commission and member states aswell as the agency. In practical terms, EASA will be restricted in the early days to making rules and issuingcertificates for aircraft and product designs. Member states’ aviation authorities, such as the UK CivilAviation Authority will continue to oversee the safety of their airlines’ fleets. In due course, the Agency willbecome involved in the rule-making for operations and licensing but national authorities will continue toissue certificates to, and oversee the safety of, operators and personnel. In order to ensure that nationalauthorities implement the standards uniformly, they will be subject to standardisation audits by EASA.

European Maritime Safety Agency

EMSA was established by Regulation EC 1406/2002 of 27 June 2002. Its main tasks are to assist theCommission and, where appropriate, the member states in (i) updating and developing Communitymaritime legislation, (ii) eVective implementation of existing legislation; (iii) the provision of technicalassistance and training; (iv) the enhancement of co-operation between the member states, in particular inrelation to ship monitoring and information systems.

The Agency is governed by an Administrative Board (currently chaired by the UK) comprising onerepresentative from each of the member states (with a vote), four from the Commission (each with a vote)and four from industry (appointed by the Commission) who do not have voting rights. Decisions areordinarily subject to a two thirdsmajority, so the Commission acting alone is unable to blockmost decisionsif the member states act collectively. Enlargement will further weaken the Commission’s position on theBoard.

European Rail Agency

In its role of supporting the Commission’s decision-making, the European Rail Agency will in particularbe responsible for co-ordinating development work on Technical Standards for Interoperability (TSIs), andthe harmonised safety certificate, Common Safety Targets ( CSTs) and Common Safety Methods (CSMs)introduced by the proposed Safety Directive. It will work with professional organisations from the sector,and will also have to consult interested parties, including the representatives of railway customers.

Further memorandum by the Department for Transport (EU 01A)

EU COMPETENCE IN THE TRANSPORT SECTOR: SOME CURRENT CASES

TheDepartment for Transport has submitted amemorandum to the Transport Select Committee to assistthem with their inquiry into EU Competence in the transport sector. In a letter of 14 July, the Clerk to theCommittee asked for additional briefing on proposals that are currently “live” issues in the parliamentaryscrutiny process.



What follows is a short summary of eight current EU proposals, based closely on the DfT’s explanatorymemoranda to the House of Commons European Scrutiny Committee or letters to the Committee. Thereare approximately 40 “live” EU proposals currently at various stages of the negotiation process. The eightselected below have been chosen because they fall into one of two categories:

— proposals that the European Scrutiny Committee has recommended for debate (Airport SlotAllocation and Trans-European Networks).

— proposals on which agreement was sought at the Transport Council on 9 October (Market Accessto Port Services,Unfair Pricing in theAviation Industry, InsuranceRequirements for AirCarriers,External Relations in the Aviation Sector, Safety Requirements in Road Tunnels and Ship andPort Facility Security).

10288/01: Proposal for a Regulation of the European Parliament and of the Council amending

Regulation (EEC) No 95/93 of 18 January 1993 on Common Rules for the Allocation of Slots at

Community Airports

The objective of this proposal is to ensure that scarce capacity at Europe’s congested airports is managedand used eYciently without radical change to the system of slot allocation, which is built around “grand-fathered” or “historical” slots. The Commission proposed a two-stage review, with technical revision now,to be followed by a study into more radical change, looking at the use of market-based mechanisms for theallocation of slots.

The legal basis for this proposal is in Article 80(2) of the EC Treaty. The Government recognises that theCommunity has already exercised competence in the field of slot allocation through Council Regulation(EEC) 95/93. The Government believes that common rules should be applied across the Community, butthat these should be flexible enough to take account of particular problems encountered at highly congestedairports such as Heathrow ie that a transparent secondary trading system should be allowed to operate atHeathrow, even if other Member States do not want secondary trading at their airports.

The Italian Presidency has reopened discussion of this proposal on the basis of a compromise text, whichtakes into account views expressed when the proposal was last considered in 2002. A Working Groupmeeting has been scheduled for late October.

Explanatory Memorandum (EM) 10288/01 was submitted on 20 July 2001 and was recommended fordebate in European Standing Committee A (report 35, session 2001/02). EM 14205/02 on the AmendedProposal was also recommended for debate in ESC(A) (report 5, session 2002/03).

12817/02: Amended Proposal for a Decision of the European Parliament and of the Council

Amending Decision No 1692/96/EC on Community Guidelines for the Development of the Trans-European Transport Network

The development of the Transport trans-European network (TEN) aims to “enable citizens of theEuropeanUnion to derive full benefit from the setting up of an area without internal frontiers”. The original1996 guidelines to be amended by this Decision identified the main road, rail and inland waterway routesalong with ports and airports of common European interest. They set out the objectives and priorities forthis network until 2010, and identified 14 priority projects to which the European Council attributedparticular importance.

In 2001 the Commission proposed amendments to the guidelines that included changes to the prioritiesunder the existing guidelines—to give greater emphasis to rail and shipping—and more rigorous TENprojects. The Commission also suggested 6 new priority projects should be added to the 14 previously agreedby the European Council.

At the Transport Council on 9October 2003, theCommissioner presented further proposals for amendingthe guidelines. These would add another 16 projects to the priority list. They would also introducemechanisms for supporting motorways of the sea and provide for closer international co-operation and co-ordinated evaluation. An Explanatory Memorandum covering these proposals will be submitted by DfT inthe near future.

Article 155 of the Treaty gives the Community responsibility for the establishment of guidelines for thedevelopment of the TEN. The guidelines are formally addressed to the Member States who, in liaison withthe Commission, co-ordinate national policies towards the development of the TEN. Implementationremains the responsibility of Member States.

EM 12817/02 was submitted to Parliament on 24 October 2002 and was recommended for debate inEuropean Standing Committee A on 6 November 2002 (report 41, session 2001/02).



6375/01 and 6593/02: Proposal for a Directive of the European Parliament and of the Council on

Market Access to Port Services

The aim of the Directive is to establish clear rules governing access to port services. The Commissionbelieves that this framework should accompany and guide national measures which continue to furthereliminate existing restrictions in the port services market whilst ensuring, on the grounds of subsidiarity,that this process adequately respects local, regional and national port characteristics. The legal basis for theproposed Directive is Article 80(2) of the EC Treaty.

Whilst the principles underlying the proposal broadly concur with the UK’s position on marketliberalisation, the UK was concerned that the proposals should be realistic and proportionate, recognisingthe diversity of the industry and the competition that already exists. Furthermore, it was felt that theproposedDirective did not take account of the fact that themajority ofUKports are organised on a diVerentmodel to those in Europe.

Following intensive negotiations under the Spanish Presidency, political agreement was reached in June2002 and a Common Position was adopted in November. The UK secured a number of improvements tothe original text, resulting in a proposal that oVers the UK ports sector much greater flexibility. It no longerseeks to impose a prescriptive “one size fits all” solution across the EU, and acknowledges the particularcircumstances and eYciencies of the UK ports sector without prejudicing the basic thrust towards marketopening.

After discussion in Working Group, the majority of the Parliaments 36 proposed second readingamendments were rejected and the conciliation procedure was triggered. In discussions with the Parliament,the Presidency agreed to a compromise in September.

However, the vote on acceptance by the European Parliament was close. Somemembers have announcedthat they will attempt to orchestrate a vote against the Directive at Plenary in November. If they succeedthe Directive will fall. Otherwise, formal adoption by the Council should take place by the end of the year.

EM6375/01 & 6593/02 were cleared by theHouse of Commons European ScrutinyCommittee on 12 June2002 (report 12, session 2001–02). Further correspondence has been exchanged between the Minister andthe Committee Chairman since then to keep the Committee informed of subsequent developments.

7286/02: Proposal for a Regulation of the European Parliament and of the Council Concerning

Protection Against Subsidisation and Unfair Pricing Practices in the Supply of Airline Services

from Countries not Members of the European Community

The proposal would allow for duties to be imposed on products oVered by non-EU airlines found to beinvolved in unfair pricing practices based on government subsidies or other market distorting mechanismsdetrimental to EU carriers operating on the same routes, including state-controlled third-country airlinesenjoying subsidies in kind. The proposal was a response by the Commission to the considerable financialinvolvement of Swiss central and cantonal government bodies in the creation of a new national airline afterthe failure of Swissair, and to the substantial US package of financial aid to its airlines following the terroristattacks of 11 September.

Unfair pricing practices in aviation are not governed by the WTO rules. Procedures to deal with disputesover pricing are contained within most bilateral air service agreements between Member States and thirdcountries, but the Commission considered that not all of these would be able to deal with potential unfairpractices. The Commission’s explanatory memorandum, however, said that these bilateral agreementswould take precedence over the Regulation where they were deemed to be eVective.

Government lawyers considered the potential risk of the proposal extending the application ofCommunity competence on air regulation and precluding Member States from negotiating bilateralagreements with third-countries. They advised that the potential interplay between the proposal andbilateral external fare agreements was limited. Neither existing nor future bilateral agreements was likely toimpinge on the application of the proposal, or alter its scope; and neither was any specific aspect of theproposal likely to be prejudiced by an agreement. Consequently, lawyers concluded that the risk wasrelatively low, and would be lower still if any new bilateral agreement included within it a provision to theeVect that the agreement was without prejudice to the provisions of the proposal.

The UK also had doubts about the practicalities of the proposal and was concerned that the Regulationcould operate to reduce price competition from foreign carriers who may become wary of undercutting EUcarriers due to falling foul of its provisions.Nevertheless, theUK supported the PoliticalAgreement reachedon the Regulation at the October Transport Council because of our continuing concern about the verysubstantial government support given to US carriers which puts Community carriers (and notably UKcarriers) serving trans-Atlantic routes at an unfair competitive disadvantage.

The legal basis for the proposed Regulation is in Article 80(2). The House of Commons EuropeanScrutiny Committee cleared EM 7286/02 from scrutiny on 7 May 2002 (report 28, session 2001/02). Asubsequent EM on the Amended proposal (9340/03) was cleared from scrutiny on 7 July 2003 (report 28,session 2002–03).



12423/02: Proposal for a Regulation of the European Parliament and of the Council on Insurance

Requirements for Air Carriers and Aircraft Operators

The proposed Regulation introduces minimum levels of liability insurance for air carriers and aircraftoperators with regard to passengers, third parties, baggage, mail and cargo. It applies to most flights to andfromCommunity airports or the territory of aMember State and includes flights performed by state aircraft.

The Government considered that the proposed legislation was broadly compatible with the principle ofsubsidiarity. The UK initially questioned the inclusion of aircraft operators within the scope of theRegulation, as this category of (non-commercial) operation is not currently subject to regulation in termsof insurance because there is no evidence to demonstrate such a need. However, in the absence of supportfrom other Member States we negotiated five new weight categories below the original 25,000kg threshold.The minimum amounts of insurance proposed for each of these categories are broadly in line with existingcommercial practice, thereby minimising the impact on UK non-commercial aircraft operators. It will alsogo a long way to ensuring that visiting aircraft operators are properly insured.

On the basis of the 1944 International Air Services Transit Agreement concerning over-flying aircraft, theUK, along with other Member States, questioned the legality and practicality of including over-flightswithin the scope of the Regulation. FollowingWorkingGroup negotiations the recitals and substantive textwere amended to make enforcement of the Regulation optional in relation to over-flying aircraft, therebyremoving possible conflict with international law.

As a result of changes negotiated in Working Group, the UK was able to support Political Agreementreached at the October Transport Council. Again, the legal basis for the proposed Regulation is in Article80(2) of the EC Treaty.

The House of Commons European Scrutiny Committee cleared the EM from scrutiny on 18 December2002 (report 5, session 2002–03).

7047/03: Proposal for a Regulation of the Council and of the European Parliament on the

Negotiation and Implementation of Air Service Agreements between Member States and Third

Countries

Following the ECJ judgement in the “Open-Skies” cases against the UK and seven other Member States,the Commission proposed a Regulation which aims to ensure that bilateral negotiations are conducted insuch away as to produce results compatible withCommunity law. It also aims to ensure that there is a properinformation exchange within the Community, and that there is non-discriminatory treatment of EU airlinesby Member States, including all eligible EU airlines having an equal chance to apply for and take up thetraYc rights negotiated by Member States.

The proposal is made under Article 80(2) of the EC Treaty, and would provide a mechanism for thenegotiation or re-negotiation of bilateral air service agreements by Member States in accordance with EUlaw as clarified by the ECJ judgement. It therefore has the eVect of confirming the competence of MemberStates to act in this area, and the Government accepts that a degree of involvement by the EuropeanCommission in this area is acceptable in order to achieve this aim. The Regulation forms part of a balancedpackage deal between the Member States and the Commission for handling external aviation relations inthe light of the ECJ ruling.

The Transport Council reached Political Agreement at its meeting on 9 October.

EM 7053/03 and the subsequent Supplementary EM of the same number were cleared by the House ofCommons European Scrutiny Committee on 21 May 2003 (report 22, session 2002–03).

5207/03: Proposal for a Directive of the European Parliament and of the Council on Minimum

Safety Requirements for Tunnels in the Trans-European Road Network

The proposal aims to harmonise the organisation of tunnel safety at national level and to clarify thediVerent roles and responsibilities of the various organisations involved in managing, operating,maintaining and upgrading road tunnels. It applies to tunnels longer than 500m within the Trans EuropeanRoad Network.

The legal basis for Community action in this area is in Article 71(1) of the Treaty establishing theEuropean Communities. Harmonisation of minimum standards in tunnels on the Trans-European RoadNetwork is best achieved at Community level. However, the Government had some concern initially thatthe proposal for legislation did not conform to the principle of subsidiarity in relation to the design for traYcsigns, which is the responsibility of national governments. During negotiations, the annex relating to roadsigns was amended: Member States will be free to modify the signs and symbols in the directive, providedthis does not alter their essential intent.

The Transport Council reached a General Approach on the Directive at its meeting on 9 October.



EM 5207/03 was considered by the European Scrutiny Committee on 12 February 2003. The Committeefound the proposal to be of legal and political importance and did not clear it (report 12, session2002–03, 24187).

8566/03: Proposal for a Regulation of the European Parliament and of the Council on Enhancing

Ship and Port Facility Security

The primary purpose of the Regulation is to ensure consistent and timely implementation across the EUof the new maritime and port facility security regime agreed in the IMO in December 2002. In addition togiving direct legal eVect to the IMO regime, the proposed Regulation also seeks to extend the IMOrequirements to domestic ships and port facilities. The Government supported Community action in thisarea, provided that a number of concerns with the original proposal, including the scope of domesticapplication, were addressed satisfactorily.

Subject to the opinion of the European Parliament, a General Approach was reached at the OctoberTransport Council, based on the Presidency compromise text. In terms of domestic application, fullapplication of the IMO security regime will be required for Class A passenger ships on domestic voyages(primarily those that travel more than 20 nautical miles from the coast). For other domestic ships andassociated port facilities, the scope and extent of application will be for decision by each Member Statefollowing a mandatory security risk assessment of diVerent categories of ships. This text, which the UKsupported, strikes a balance between the need to ensure that the risk to all domestic traYc is considered andthe principle of subsidiarity.

This proposal was debated in European Standing Committee A on 10 September and the motion tosupport theGovernment’s continuing commitment to workingwith the EU to enhance ship and port facilitysecurity was carried unanimously.

Department for Transport

October 2003

Further memorandum by the Department for Transport (EU 01B)

EU COMPETENCE IN THE TRANSPORT SECTOR

Section A:

Draft Decision Authorising the Commission to Negotiate with the USA;Draft Decision Authorising the Commission to Negotiate with 3rd Countries on Ownership and

Control and Other Matters Falling Within Community Exclusive Competence;Proposal for aRegulation of theEuropean Parliament and of theCouncil on theNegotiation and

Implementation of Air Service Agreements with Third Countries.

Scope of the Proposal and Political Agreement

1. The Transport Council has agreed a balanced package of measures on aviation relations with thirdcountries in the light of the judgments of the European Court of Justice of 5 November 2002 in the so-called“Open Skies” cases.

2. The June 2003 Transport Council agreed two mandates for the Commission. One to negotiate acomprehensive Community-level aviation agreement with the United States; the other to negotiate withthird countries on amending the “nationality clause” in bilateral agreements, and on certain other issuesfalling within exclusive Community competence, eg provisions on computer reservation systems.Negotiations under the two mandates will be conducted by the Commission with the assistance of a SpecialCommittee of Member State representatives.

3. The Council also agreed a draft Regulation (which has its legal basis in Article 80(2) of the EC Treaty,on aviation provisions) creating the framework for Member States to continue to update and develop theirbilateral agreements with third countries, subject to compatibility with the aims of Community transportpolicy. The Regulation aims to ensure non-discriminatory treatment of EU airlines by Member States anda proper exchange of information within the Community. In addition, in implementing the results of anynegotiations, a Member State must ensure that all eligible EU airlines have an equal chance to apply foravailable traYc rights. Political Agreement was reached at the October Transport Council.

4. The UK Government supported the texts agreed on at Council, as they:

— aim for a comprehensive and genuinely liberal agreement with the US on a trans-Atlantic OpenAviation Area, with safeguards should the talks fail or the Commission return with aninadequate deal;

— allow Member States to negotiate in parallel with the Commission, using standard clauses whereappropriate, subject to a reasonable level of oversight by the Commission;

— allow Member States to continue managing and improving existing bilaterals;



— as far as possible prevent oneMember State benefiting from not acting properly, and ensure non-discriminatory treatment for all EU airlines;

— recognise that third countries will have legitimate safety concerns about Communitydesignation; and

— provide a suitable institutional framework and balance of powers for Member States and theCommission to co-operate in liberalising air transport services between Europe and the rest ofthe world.

5. The two negotiating mandates were not subject to scrutiny by the UK Parliament. On the proposedRegulation, the House of Commons European Scrutiny Committee considered the Department’sEM 7047/03 at their meeting on 9 April (report 18, session 2002–03, 24384), and found it to be of politicalimportance. They did not clear it from scrutiny, noting that the Government wanted the negotiatingmandate to be part of a package on a number of issues arising out of the ECJ judgement.

6. The Department submitted a Supplementary EM on 14 May 2003, which was considered by theCommittee at their meeting on 21 May 2003 (report 22, 2002–03), when they found it to be of politicalimportance but cleared it from scrutiny.

Reasons for Community action

7. During the 1990s the US succeeded in signing so-called “Open Skies” bilateral deals with several EUMember States. These agreements did not allow EU airlines access to traYc behind gateways in the US,which disadvantaged them compared to their US competitors, which could pick up or set down traYcelsewhere in Europe. The Commission argued that the US was picking oV EUMember States one by one,so that in the end US carriers would be able to operate across the EU whilst Community carriers would berestricted to their national corridors. The Commission considered that only it could remedy this situationby negotiating with the US on equal terms, and it pressed hard for a mandate to open Community-levelnegotiations.

8. Despite lengthy negotiations over a number of years, the Commission’s demand for a full negotiatingmandate failed to command a qualified majority in Council. In June 1996 Transport Ministers, against UKopposition, authorised the Commission to hold exploratory talks with theUS, limited to regulatorymatters,the so-called “soft rights” mandate. The Commission held two rounds of talks with the US, but it soonbecame clear that the US saw no point in further discussion in the absence of authority for the Commissionto discuss “hard rights” such as traYc rights, capacity and fares.

9. Unable to secure amandate by political means, the Commission turned to the Courts. In January 1999the Commission opened infraction proceedings against the UK and seven other Member States. TheCommission argued that Member States were not entitled to negotiate bilaterally, and that the agreementseach country had reached with the US were in breach of Community law.

10. In its judgement on 5 November 2002, the ECJ rejected the Commission’s most fundamental claimby ruling thatMember States are entitled to continue negotiating bilateral air service agreements with thirdcountries. But the Court held that there are certain issues on which Member States should not negotiatebecause they are subject to Community law. Most significantly, it ruled that bilateral agreements are illegalif they give advantages to national carriers compared to other Community carriers established in the homecountry. Since traditional bilateral agreements nearly all have clauses which treat home-owned carrierspreferentially, there are now a large number of bilateral agreements which need to be revised.

11. Member States realised that the Court’s ruling would prevent them withholding the Commission amandate to negotiate with the US. They maintained solidarity in insisting that a composite agreementshould be reached addressing a number of issues arising from the judgement, aVecting all bilaterals, not justthose with the US.

12. The UK Government worked closely with interested parties in developing a response to the Courtjudgements and the Commission proposals. Virtually all UK airlines, airports and consumer groupssupported the Government view that the Commission should take over negotiating with the US, subject tothis being part of the package deal outlined above. The only major stakeholder to express doubts was bmiBritish Midland, which felt that its ambitions to enter the UK-US market might be best achieved if the UKretained control of the negotiations.

13. The House of Lords Select Committee on the European Union recently produced its Report “OpenSkies’ or Open Markets? The EVect of the European Court of Justice Judgments on Aviation Relationsbetween the European Union and the United States of America”: The Committee was supportive of theGovernment’s reasons for deciding that the time had come for the Commission to be given a mandate tonegotiate with the US.



Extent of Community Competence

14. The ECJ found that theCommunity had obtained exclusive competence over certain areas of aviationnormally covered in bilateral air services agreements. These were areas now subject to Community law, suchas intra-EU tariVs and computer reservation systems. In addition, the Court found that bilateral air servicesagreements which favoured national carriers were incompatible with Article 43 of the Treaty, whichguarantees Community undertakings established in a Member State the right to operate on the same basisas national undertakings.

15. The Court did not find that the Community had exclusive competence to negotiate air servicesagreements on behalf ofMember States, who are therefore free to continue to negotiate bilaterally, providedany agreements are compatible with Community law.

16. Nonetheless, Member States recognised that the Court judgement had made it diYcult, if notimpossible, for them to continue to negotiate with the US bilaterally. All air services agreements betweenthe US and individual Member States include the illegal nationality clause, and no single Member Statecould hope to negotiate Community designation with the US on its own.

17. An eventual agreement between the EU and the US would be subject to ratification in Council.

Subsidiarity and proportionality

18. The package of measures agreed at Council empowers the Commission to negotiate on behalf ofMember States where it can addmost value, whileMember States remain free to work on their own accounton issues best dealt with at national State level. The Government believes this deal provides a suitableinstitutional framework, and balance of responsibilities, for Member States and the Commission to co-operate in liberalising air transport services between Europe and the rest of the world.

Section B

Proposal for aDirective of theEuropeanParliament and of theCouncil, AmendingDirective 1999/62/EC on the Charging of Heavy Goods Vehicles for the Use of Certain Infrastructure. (The

“Eurovignette” Proposal)


1. This proposal, which is based on Article 71(1) of the EC Treaty (the transport article), would amendDirective 1999/62/EC (the so-called “Eurovignette” Directive) setting out rules governing the imposition oftolls, user charges and vehicle excise duties on heavy goods vehicles. Neither the existing Directive nor theproposal requires Member States to introduce charging.

2. The Commission states that the objective of the proposal is to develop further the degree ofharmonisation of lorry charging that has been achieved through the existing Eurovignette Directive. Therationale for this objective is that: fair mechanisms are required to charge hauliers for the costs they imposeon the infrastructure, in order to ensure sustainable transport in the Community; and to improvecompetitiveness and eliminate distortions of competition between transport undertakings inMember Statesand ensure the proper functioning of the internal market.

3. The Council Working Group has met on three occasions to consider the proposal. On 5 December2003 Transport Ministers held a policy debate in the Council guided by three questions from the ItalianPresidency. More Working Group meetings are expected when Ireland assumes the Presidency of the EUin January 2004. The Irish Presidency is planning a work programme with the aim of the Transport Councilreaching agreement on the proposal in March 2004, although this might not be achievable.

4. HM Treasury and the Department for Transport jointly submitted an Explanatory Memorandum(11944/03) on 19 September 2003. The proposal has yet to clear scrutiny and the House of CommonsEuropean Scrutiny Committee has asked to see the results of a consultation exercise on the proposal (report33 of 15 October 2003).

5. The ExplanatoryMemorandum describes the UKGovernment’s key policy objective, which is for theUK is to ensure that the directive facilitates rather than hinders the introduction of our planned LorryRoad-User Charging (LRUC) scheme. To this end the Government is seeking to ensure that:

— Member States would be able to levy tolls on all lorries with a maximum permissible gross ladenweight of more than 3.5 tonnes;

— Member States would be able to levy tolls on all roads;

— we would be able to compensate those who pay lorry road-user charges through fuel dutyreductions (as permitted in the Energy Products directive);

— any rate structure in the Directive is not too prescriptive and does not impose unwarrantedlimitations on a Member State’s ability to charge appropriately;



— any rules governing how any charge may be varied according to factors such as environmentalimpact and congestion are flexible enough to allow us to meet our policy objectives; and

— there is no requirement to hypothecate toll receipts.

6. The Government is also seeking to ensure that any provisions in the Directive are in accordance withTreaty principles such as proportionality and non-discrimination and that the UK haulage industryoperating in other Member States are not disadvantaged in any way.

Why Community action now?

7. In June 1999 the European Parliament and the Council adopted the “Eurovignette” Directive whichset maximum levels of time-based user charges, minimum levels of vehicle taxes, and some general principlesrelating to distance based tolls. The key provisions on tolls were that, where levied, they should apply onmotorways and should be related to the costs of constructing, operating and developing the infrastructurenetwork concerned.

8. The Commission believes it is necessary to amend the existing Directive to take account ofdevelopments in road charging since 1999, especially as a number of Member States are working towardsimplementation of nationwide distance-based charges (as opposed to concession-based tollingarrangements such as those in France and Italy).

9. In its 2001 White Paper “European transport policy for 2010: time to decide” (COM (2001) 370) theCommission made clear its intention to come forward with a proposal. The conclusions said thatCommunity action should be gradually taken to replace existing transport taxes with more eVectiveinstruments, including charges; and that external costs (for example the costs of accidents) should beintegrated into infrastructure pricing.

10. There appears to be a consensus among Member States that changes are needed to the existingDirective. There are substantial diVerences of opinion however about what those changes should be.Broadly speaking, peripheral countries look for rules that exercise restraint on the level of charges, whiletransit countries are interested in greater independence.

11. DfT is currently consulting the UK road haulage industry and other key stakeholders on thisproposal, and expects to receive responses by mid-February 2004.

Extent of Community Competence

12. Article 71(1) of the Treaty provides for the Community to lay down “common rules applicable tointernational transport to or from the territory of a Member State or passing across the territory of one ormore Member States” and “any other appropriate provisions.” The Community has already exercised itscompetence in this area by adopting the existing ‘Eurovignette’ Directive under a joint legal base of Article71(1) and Article 93. Depending on the ultimate scope of the directive, the tolls it covers may have tax-likecharacteristics when levied by Governments. The UKGovernment therefore has doubts at this stage aboutthese measures being adopted under qualified majority voting (QMV) and without at least a joint tax legalbase. This applies in particular to the provisions relating to how revenues from tolls should be used.

13. To date, the Community has only exercised competence in respect of lorries with a maximumpermissible gross laden weight of not less than 12 tonnes. The current proposal would extend the scope tolorries weighing over 3.5 tonnes in a way which would help our plans for LRUC by explicitly permitting thecharging of smaller lorries (there is room for doubt whether this would be permitted by the existingEurovignette Directive).

14. The Community has an interest in safeguarding the internal transport market. In agreeing to theexisting Directive, the Government accepted that it is appropriate for the Community to adopt commonrules on charging for lorries, to ensure the proper functioning of that market. The new proposal recognisesthat common rules are not needed for charging in relation to roads which are not part of the trans-EuropeanRoad Network and do not compete with it. The proposal therefore respects the subsidiarity principle.

15. The Government has questioned the extent to which the Commission’s proposals respect theproportionality principle, in particular the need for prescriptive rules on the setting of tolls. TheGovernmentis not persuaded that there is any need to establish an infrastructure supervision authority to monitor thesystem of tolls or charges to ensure transparency and non-discrimination and to verify that the revenue fromtolls and user charges are used for projects in the transport sector.

Costs and Benefits

16. The Commission’s Explanatory Memorandum accompanying the draft directive gives no indicationof the costs of implementing the proposals, though it should be pointed out that the question of costs onlyapplies where Member States choose to introduce tolling. In terms of the benefits of charging, theMemorandum highlights:



— Amore eYcient market. The Commission argues that a Community framework for road chargeswill result in fairer prices for users and help establish fair conditions of competition betweenoperators in the EuropeanUnion. It will also enhance integration of the internalmarket and hencethe competitiveness of the European economy, by avoiding fragmentation of Communityterritory.

— More rational use of infrastructure. The Commission suggests diVerentiated tariVs will encourageuse of less congested networks and cleaner, safer modes. This will reduce the overall costsassociated with transport and will boost the competitiveness of the European economy andimprove the quality of life.

— A gain for the European economy. The Commission says charging will generate savings of severaltens of billions of Euros yearly, owing to a reduction in time lost on congested roads, a drop in thenumber of accidents and improved environmental quality. It will also help reduce the overalldistance travelled by encouraging the transport operators to optimise their loads and theforwarders to adapt their logistical chain.

— Support for financing new infrastructure. The Commission highlights the huge costs associatedwith the completion of the trans-European network and the problem of funding the work fromCommunity and national budgets. It suggests charging will generate new revenue which could beused to finance new investments in transport and hence increase the capacity of the network.

— Amore transparent, less discriminatory system.TheCommission believes reformof the conditionsgoverning tolls and user charges will introduce greater transparency in setting the price chargedto the user.With access to information on tariVs, users will be able to optimise journeys and choosebetween the least costly itineraries or modes.

Section C

Proposal for aDirective of theEuropean Parliament and of the Council on Ship-source Pollution

and on the Introduction of Sanctions, including Criminal Sanctions, for Pollution Offences


1. In December 2002 the Transport Council indicated that it would welcome a Commission proposalapplying sanctions to those responsible, through grossly negligent behaviour, for causing or contributing topollution of the environment by shipping.

2. On 5 March 2003, the Commission issued a draft Directive on ship-source pollution and on theintroduction of sanctions, including criminal sanctions, for pollution oVences. The Directive expressly seeksto apply the requirements of the International Convention for the Prevention of Pollution from Ships1973–78 (commonly known as MARPOL) in a harmonised way. However, as drafted, the Directive alsoseeks to go further than MARPOL, by making unlawful some actions that would be lawful underMARPOL.

3. As matters relating to criminal law, including imposition of criminal sanctions, are the responsibilityof Member States, the Commission subsequently produced a proposal for a Framework Decision,complementary to the draft Directive, to strengthen the criminal law framework for the enforcement of thelaw against ship-source pollution. This is a Third Pillar measure which seeks to provide the criminalsanctions for the oVences detailed in Article 6(1) of the draft Directive. The Home OYce is the lead UKDepartment for negotiation of the Framework Decision.

4. The proposed Directive has its legal basis in Article 80(2) of the EC Treaty (which provides for seatransport provisions) and is subject to Qualified Majority Voting in the Council of Ministers.

5. The UKGovernment recognises the importance of having legislation, including criminal sanctions, inplace under which those responsible for pollution from ships can be prosecuted. The UK has had suchlegislation in place for an appreciable time.

6. In correspondence with theHouse of CommonsEuropean ScrutinyCommittee and in the ExplanatoryMemorada, the Government identified key concerns in respect of the Directive as drafted by theCommission.

7. The Directive should be entirely consistent with MARPOL, and must not make unlawful actions thatare lawful in MARPOL. This issue was addressed in the policy debate at the October 2003 TransportCouncil at which Member States were deeply divided about whether the Directive should impose a morestringent regime than MARPOL.

8. The UK believes that all matters relating to criminal law, including imposition of criminal sanctions,fall to Member States, not the Community. At the October 2003 Transport Council 14 Member Statesunited to oppose the inclusion of criminal law matters in the Directive.

9. In the transport Working Group the UK expressed concern that this Directive would have the eVectof extending exclusive Community Competence (see section “Extent of Community Competence” below).However, few other Member States appeared to share our concerns.



10. The Transport Council has not yet reached agreement on a text of the Directive. The ItalianPresidency organised a policy debate at Transport Council in October 2003. The outcome of the policydebate was as follows:

— Member States agreed on the need to integrate international requirements into Europeanlegislation, and that measures should be dissuasive;

— there were objections to the inclusion of criminal law matters in the Directive, with nearly allMember States seeking to have criminal sanctions covered by a Framework Decision under theThird Pillar of the EU Treaty;

— Member States were divided on the question of whether the Directive should impose a morestringent regime than MARPOL. However, there was agreement that it should be possible toadopt measures covering ships flying third country flags;

— someMember States preferred to ban insurance against fines as a deterrent, but others noted thatinsurable fines were more likely to be paid and culpability ensured.

11. At Transport Council in December 2003, the Italian Presidency presented a progress report on theproposal for a Directive. The report recorded that consensus had been reached notably on the objective, thescope and the definition of main concepts of the Directive. The main issues outstanding concerned thereference to criminal sanctions and other concepts related to criminal law in a First Pillar instrument, andthe appropriateness of considering certain discharges resulting from damage to the ship, which are exceptedunder MARPOL, as oVences.

12. Accordingly, further work will need to be done under the Irish Presidency in 2004 before theTransport Council can achieve agreement on the Directive.

13. Explanatory Memorandum 7312/03 was submitted by the Department for Transport on 27 May2003. The House of Commons European Scrutiny Committee considered the EM, along with EM 9008/03on the Framework Decision submitted by the Home OYce, at their meeting on 18 June 2003. They foundif to be of both legal and political importance and did not clear it from scrutiny. The Committee agreed withthe Government that it is “not appropriate for a measure proposed under the EC Treaty to impose criminalpenalties” and noted “with concern that the Commission has attempted to do so on a number of recentoccasions.” The Committee asked Ministers to consider closely the extent to which the proposals wereconsistent with the UK’s obligation under the 1982 United Nations Convention on the Law of the Sea(UNCLOS), notably in relation to the right of innocent passage, and with the provisions of MARPOL.

14. On 15 October 2003, the Committee considered the proposal again, in the light of a letter fromDavidJamieson dated 22 July. The Committee were unconvinced of the value of the measures and agreed with theGovernment that “the subjectmatter is better dealt with by the InternationalMaritime Organisation.” Theywere “concerned that the principle substantive eVect of the measures, and quite possibly their true purpose,is to confer exclusive external competence on the Community in relation to IMO matters”.

15. On 10 November 2003, Mr Jamieson wrote a further letter to the Chairman of the Committeeinforming the Committee of developments, particularly in respect of the policy debate at the October 2003Transport Council.

Why Community action now?

16. TheCommission’s position is thatmajor ship-source pollution incidents in recent years, most notablythe sinking of the oil tanker Prestige inNovember 2002 and of the Erika inDecember 1999, have highlightedthe need for further legislation. The Commission expresses the view that ships of dubious quality loadedwith polluting cargoes continue to sail in EUMember States’ waters and to cause massive pollution withoutbeing adequately penalised for it.

17. The urgency of bringing forward measures to combat ship-source pollution oVences was stressed atthe highest political level within the EU. At the European Council summit in December 2002, the Heads ofState/Government of all EU Member States expressed grave concerns with respect to the Prestige accidentand specifically referred to the need for further specific measures relating to liability. The December 2002Transport Council “welcomed the intention of the Commission to present a proposal to ensure that anyperson who has caused or contributed to a pollution incident through grossly negligent behaviour shouldbe subject to appropriate sanctions”.

18. The Commission expresses the view that deliberate discharges of waste and cargo residues from shipsat sea are unacceptably common. For the most part they are also illegal, being in contravention of theinternational rules on ships’ discharges laid down in MARPOL, but only a fraction of the perpetrators arebrought to justice. The Commission notes thatMARPOL lays downdetailed standards and strict conditionsfor discharge of waste and residues at sea. Given the strictness and wide acceptance of these standards, theproblem with the frequent occurrence of illegal discharges is largely due to lack of implementation andenforcement of the applicable rules. The Commission feels that an element within the regulatory frameworkis missing, as the actual oVence (the violation of applicable pollution standards) is not covered by



Community law. Therefore the Commission believes that a specific Directive on ship-source dischargeswould have the dual benefit of completing and clarifying the Community’s regulation in this area and ofachieving a harmonisation of the enforcement of the rules.

19. The proposal for a Directive arises from the Council Conclusions of the December 2002 TransportCouncil. Consequently, no EU Member State opposes the introduction of a Directive on this subject.

20. The shipping industry has registered concern about the Directive, primarily on the grounds that allEU Member States have already incorporated the provisions of MARPOL into national law and that EUMember States have a treaty obligation to apply measures and sanctions in accordance with the provisionsof MARPOL and UNCLOS. In particular, the shipping industry has pointed out that—where vesselsflagged with non-EU states are involved—it would create a conflict with MARPOL to categorise certaindischarges resulting from damage to the ship, which are excepted under MARPOL, as oVences.

Extent of Community competence

21. The Community already has competence in the field of shipping by virtue of Article 80 (2). Wherethe Community exercises that competence in practice by creating internal rules, by implication it acquirescompetence in external, international negotiations in so far as those negotiations would result in theMember State assuming obligationswhichmight aVect those rules or alter their scope. So, it will no longer beopen toMember States to act in such a way as to aVect those rules outside the framework of the Communityinstitutions.

Subsidiarity and Proportionality

22. The Commission has indicated that ensuring the safety of maritime transport and protectingCommunity waters from ship-source pollution is an objective of the European Community. This objectiveis to be pursued by Community policy according to Title V or the Treaty, in particular Article 80(2) thereof.The Commission has also asserted that the Community has the power to regulate behaviour in order toachieve aCommunity objective and has the competence to legislate that the regulated behaviour (or the non-compliance with the regulated behaviour) be sanctioned at national level.

23. The Commission accepts that there is no explicit substantive Community competence in relation tocriminal matters per se. However, the Commission takes the view that, to the extent where this is necessary,the Community can oblige Member States to provide for criminal sanctions. Moreover, even whereCommunity law does not provide expressly for sanctions,Member States can be obliged to take appropriatesteps to enforce Community law. Where criminal law is the only means to guarantee that Community lawis enforced eVectively, Member States can be obliged to provide for criminal sanctions. The relevantquestions when determining whether a proposed measure falls within the competence of the Communitytherefore relate to the nature and the object of the intended action. Therefore the Commission concludesthat as far as the measure in question is designed to improve maritime safety or to protect the marineenvironment, the Community is competent to deal with it.

Costs and Benefits

24. The Commission has expressed the view that the financial impact of theDirective is limited. Only shipowners and other players in the maritime world who act in violation, intentionally or by means of grossnegligence, of rules which are applicable since many years would feel any direct financial implications. TheCommission has expressed the view that a more detailed financial statement would be redundant, as theydo not foresee any financial impact at Community level.

Supplementary memorandum by the Department for Transport (EU 01C)

EU COMPETENCE IN TRANSPORT

The Secretary of State for Transport gave evidence before the Transport Select Committee on 26 May.During the course of his evidence he undertook to write to the Committee with further information on sixissues. The following note from the Department for Transport provides this information.

Q412–416: Delays in approving new air routes from Manchester Airport due to Community procedures

Mr Stringer asked whether EU procedures for the approval of bilateral agreements had caused delays inthe agreement of new air services rights for Pakistan International Airlines from Manchester Airport.

The UK has negotiated a number of new and amended bilateral air services agreements since the newarrangements for Community notification and incorporation of standard clauses (now incorporated inRegulation 847/2004) were first agreed. The application of these new arrangements has meant that someagreements have had to be implemented provisionally pending approval by the Commission. But they have



not prevented bilateral agreements being reached; and in only one case, the negotiations with Hong Kong,has there been a delay in implementing an agreement. In that case, as mentioned in the oral evidence, thedelay was as a result of concerns expressed by the other party, which bothwe and the Commission have beenworking to resolve.

As regards possible new air services from Pakistan using Manchester Airport, negotiations have yet totake place on this issue. The new arrangements embodied in Regulation 847/2004 have not therefore comeinto play, nor have they had any bearing on decisions about the timing of possible negotiations.

Q434: Commission Impact Assessments

In its Better Regulation Action Plan, adopted in June 2002, the Commission committed itself to thefollowing key measures:

— The introduction of a two stage impact assessment process, covering the economic, social andenvironmental impacts of policy proposals—to be implemented gradually from the start of 2003,with a view to being fully operational in 2004–05. Impact assessment will be applied to allproposals listed in the Annual Policy Strategy or Work Programme. All proposals will be subjectto a preliminary assessment, with some proposals being selected for extended assessment.In its Work Programme for 2003, the Commission did not produce preliminary assessments, but,as a pilot, identified 43 proposals that were to be subject to extended impact assessment, six ofwhich were in the field of transport.

— A commitment to establishing and adhering to minimum standards for consultation to improve theopenness and transparency of the policy-making process from the start of 2003. Although the UKfeels that there is still room for improvement in the quality of pre-legislative consultationundertaken by the Commission, the situation is being monitored by Departments and the UKPermanent Representation in Brussels, who encourage the Commission to adhere to thecommitments they made in the 2003 Action Plan.

All Directorates-General within the Commission are signed up to the Action Plan. However, it will taketime to become embedded in the Commission’s working practices. Commission delivery on this agenda isa priority for the UK, and UK policy oYcials have therefore been encouraging the Commission to carryout impact assessments for all proposals adopted before the new initiative comes fully into force.

Two recently published transport proposals were identified as significant in theAnnualWork Programmefor 2003:

— Proposal for a Directive on the development of the Community’s railways to gradually open up themarket for international passenger services by rail (at annex A).

— Communication from the Commission on information and communications technologies for safe andintelligent vehicles (at annex B).

These were both accompanied by an extended impact assessment when they were published. I attachcopies of both extended impact assessments for your information.

The UK Government also produces its own domestic regulatory impact assessment in connection withevery new proposal for European legislation, and these are all submitted to a Minister for consideration.

Q478: Implementation of AAIB recommendations in report on Manchester Airport crash (August 1985)

Graham Stringer asked about suggestions made in evidence that the recommendations made by the AirAccident Investigation Branch in their report on the 1985 Manchester air disaster have not beenimplemented, by and large, and that the reason is that we are waiting for everybody to get to the same levelof safety.

The majority of the AAIB’s recommendations have in fact been implemented. Of the 31recommendations, the Civil Aviation Authority accepted 22, either partially or fully, and has ensured thataction has been taken, either nationally or internationally, to implement them. A further eightrecommendations were accepted and subjected to further review, following which no further action wastaken either because the current requirements were considered to be adequate, or further action wasconsidered not justified following a safety-benefit analysis.

This leaves just one recommendation where regulatory action has not been taken pending internationalagreement. That recommendation covers three subjects—cabin crew view, access through bulkheads andaccess to overwing exits. Although there has been no regulatory action, progress has been made in all threeareas. On cabin crew view, improved design standards have been applied on all recent aircraft typecertification programmes through the use of updated guidance. On the access through bulkheads and accessto overwing exits, the results of CAA research and safety-benefit studies were used as the basis for twoproposed amendments to Joint Aviation Authorities (JAA) for European design requirements. However,the JAA was unable to progress them. Since 28 September 2003 the European Aviation Safety Agency(EASA) assumed responsibility for setting the design standards of most aircraft manufactured and operatedwithin the EuropeanUnion. This includes responsibility for cabin interiors and emergency access standards.



Both of these proposed amendments to European design requirements are included on the EASA forwardrulemaking programme for 2005 onwards.With the advent of the EASA there is now a good process in placefor taking these recommendations forward and ensuring that agreed changes are implemented.

Q488: DfT StaV seconded to the European Commission and Agencies

The Secretary of state was asked how many DfT staV are seconded to the Commision. Currently thereare six, in the areas shown in the following table.

Grade Directorate General of Field of Workthe Commission

1 G7 Competition Antitrust enforcement and merger control in the railwaysector, looking into potentially anti-competitive behaviourwhich impacts on inter-State trade. Also dealing with thecompetition aspects of inland transport state aid cases suchas Railtrack/Network Rail, the Channel Tunnel Rail Linkand the London Underground PPP.

2 HEO Transport & Energy Communication Unit, produces press releases, pressmemos, videos, publications, and arranges conferences.

3 SEO Enterprise Mechanical engineer working in the Automotive IndustryUnit connected to DTI work as well as DfT—legislationon vehicle safety.

4 SPTO Enterprise Automotive Unit electronic diagnostic systems.5 G7 Transport & Energy Environmental impact of aviation.6 SEO Transport & Energy Responsible for Satellite Navigation Systems (GALILEO)

and Intelligent Transport Systems and service. Managingpart of the 2001–06 financial programme for thedeployment of ITS on the Trans-European road network.

The Department actively seeks secondments to the Commission, encouraging staV to apply whenopportunities arise, and looking for relevant opportunities. Each member of staV on secondment has aDepartmental “sponsor”, in a related area of work, to keep the Secondee in touch with DfT. We hold anannual seminar for secondees in Brussels, and the Department helps staV find suitable and relevant postson return.

Q497: exercise of the principle of subsidiarity

Mr Stevenson asked for an example of an issue that has been the subject of a subsidiarity debate since thesigning of the Maastricht Treaty in 1992.

The principle of subsidiarity sets boundaries to the exercise of Community competence. There is a relatedprinciple of proportionality, both found in Article 5 of the Treaty establishing the European Community.This says that in policy areas where competence is shared with member states:

“the Community shall act “only if and in so far as the objectives of the proposed action cannot be suYcientlyachieved by the Member States”

“Any action by the Community shall not go beyond what is necessary to achieve the objectives ofthis Treaty.”

With each new proposal published the Commission should give its own position with regard to theprinciples of subsidiarity and proportionality. The Department’s experience is that the Commissiongenerally does this. The judgements reached about subsidiarity and proportionality are, of course, often thesubject of debate in negotiations.

There are many cases in which the UK has sought to ensure an appropriate balance between Communityand national measures. Road safety provides a useful example.

The European Community has competence to act in the field of road safety under Article 71 of the ECTreaty. Nevertheless, the UK maintains that road safety is primarily an area for national legislation andthat the public would not understand Community legislation overriding domestic road safety policy.However, there are equally times when the UK has accepted that Community action is appropriate; forexample, in a single market for goods and services, and in a continent of integrated road networks, driversexpect a degree of harmonisation of rules and standards.

This can be illustrated using the following three examples of proposed Community action in the area ofroad safety:



The UK supported Community action in relation to rules on fitting seat belts in vehicles. Constructionstandards for vehicles have been progressively harmonised across Europe over a number of years. Thisallows freedom of trade of vehicles between Member States, whilst ensuring that essential safety andenvironmental standards are maintained. Against this background, the UK has supported commonstandards for seat belt fitting.

The UK accepted the introduction of rules on the use of seat belts in 1991, as we have long advocated thebenefits of seat belt wearing. While the arguments about subsidiarity and proportionality were less clear-cut here, there were no road safety grounds for opposition. Much of the 2003 Directive was concerned withimproving the safety of children in vehicles and the UK accepted rules on seat belt use as part of a widernegotiating aim to ensure that the Directive was sensible and enforceable.

The UK and others successfully resisted proposals on the harmonisation of blood alcohol limits. TheCommission has long sought harmonisation of levels of 50mg of alcohol per 100ml of blood (theUK currentlevel is 80mg to 100ml). The Commission argued that people who drive between Member States shouldexpect approximately the same laws in each. The UK argued that a number of diVerent approaches can leadto similarly successful results, as shown by the UK’s success in tackling drink-driving at a national levelthrough the use of very severe penalties and eVective enforcement. The Commission accepted that the UKtrack record in this area demonstrated that that approaches other than lowering of the blood alcohol limitcould have equally successful results in tackling drink-driving, and replaced its proposal for aDirective witha non-binding Commission Recommendation.

Furthermore, the UK and many other Member States argued that the main thrust of road safety policyin the EU should be a matter for action at national level and for co-operation between member states. Thishas been accepted, at least for now, as demonstrated by the recognition in the Recommendation onenforcement in the field of road safety, that the “harmonisation of rules does not appear to be the panaceafor reducing death rates” and that success appears to lie in the appropriate enforcement of existingrelevant rules.

Memorandum by T-Systems (EU 02)

EUROPEAN UNION COMPETENCE AND TRANSPORT

Introduction

T-Systems, a division of the Deutsche Telekom group, is pleased to have the opportunity to submitevidence to the Transport Committee’s inquiry into European Union Competence and Transport.

T-Systems is one of Europe’s leading service providers for Information Technology andTelecommunications.

We have a particular interest in the development of road toll systems across Europe. Deutsche Telekomis one of the members of the consortium of Toll Collect, the company responsible for installing andoperating the lorry toll collection system in Germany. We played a major role in the development andoperation of the system which is currently being piloted.

European Union Competence

Standardisation

Interoperable toll systems are a major factor in pan-European integration of road transportation.Interoperability is best achieved through On Board Units (OBUs) which conform to minimum standards.They will allow cross-border operations and thereby provide the necessary basis for future pan-Europeanservices (toll and value-added telematics). To achieve the necessary degree of interoperability, the EuropeanUnion should set minimum standards and monitor their implementation. If OBUs are not interoperable,vehicles that operate in diVerent toll regions will need to be equipped with multiple on-board devices.

Not only is standardisation important in relation to interoperability but it will also broaden theequipment market, create competition and lead to innovation and price reductions for the users and webelieve that the European Commission is right to propose a deadline of 1 January 2008 for all new systemsbrought in as part of the European electronic toll service to only use satellite and mobile communicationtechnologies. This deadline will provide clear guidance for users, toll operators, manufactures, telematicsservice providers and consumers.

Standardisation should be confined, however, to necessary functions and interfaces. In order not to stifleinnovation, it should not be extended to detailed technical solutions.



Technologies

To provide a platform for new intelligent services, the on-board device will need to be equipped witheYcient data processing and data storage capability, flexible communications means and position location.

The EU Directive requires the application of three technologies: global navigation satellite system(GNSS), mobile communications (GSM/GPRS) and microwave technology (DSRC 5.8 GHz). To enablefull interoperability in Europe (including enforcement), we believe that infrared communications shouldalso be a required feature in future OBUs.

European Toll Service

The European Union’s proposed European toll service which envisages one OBU and one contract pervehicle is both desirable and feasible. It would:

— contribute to a better flow of traYc through diVerent toll regions;

— reduce the incidence of accidents;

— reduce environmental pollution;

— reduce the bureaucratic onus onHGVdrivers for example who frequently cross diVerent toll areasby enabling them to receive one itemised bill containing all records generated by diVerent tolloperators; and

— help to decrease the administrative overheads of transport companies.

Interoperability and roaming capability are necessary features to fully develop an information society inroad transport. They would enable the introduction of cross-border, pan-European services and thus thecreation of the critical mass which is essential tomake such services commercially successful. However, theirdevelopment and implementation will require close co-operation between toll operators to define, developand implement common toll features and operator-to-operator processes to handle all necessaryadministrative and support functions including:

— common service functions (for example, registration of toll customers, collection of tolls,enforcement and customer support);

— processes between toll operators (for example, exchange of data, payment flows, clearing andhandling of irregular cases);

— technical standards for OBU interoperability and communications;

— a framework to cover business and legal aspects; and

— a test plan to demonstrate toll roaming.

Indeed, there are promising standardisation and demonstration initiatives underway, for example, theCommission’s project, under Framework Programme 6, which is due to begin next year that will, we believe,prove the feasibility and demonstrate the advantages of the European electronic toll service.

In Short

— It is desirable for On Board Units (OBUs) which are essential components of future vehicleelectronic systems to be interoperable across the whole of the European Union. If they are not,vehicles that travel across the EU will need to be equipped with multiple on-board devices whichwill result in unnecessary costs and complexity for vehicle owners and operators.

— To achieve interoperability, the EU should be responsible for setting minimum standards. Thisstandardisation will broaden the market and thereby increase competition which will result ininnovation and price reduction for users.

— However, it is important that standardisation does not cover detailed technical solutions in orderthat innovation in this area is not stifled.

— A European toll service, as proposed by the European Commission in its recent draft directive isboth desirable and achievable. It will contribute to improved traYc flow through diVerent tollregions and reduce the administrative overheads of transport companies.

— We believe that the electronic toll system, implemented along the lines proposed by theCommission will:

— speed up toll collection;

— increase infrastructure capacity;

— reduce bureaucracy;

— reduce accidents;

— have a beneficial impact of the environment.



— The implementation of an electronic system can be the key to the development of an informationsociety in road transport. This will require advanceOBU technology that is both interoperable andhas a roaming capability.

— To achieve an information society in road transport will require more sophisticated equipmentthan the vehicle devices required for microwave (DSRC) tolling systems. Future OBUs need tobe equipped with GNSS, suYcient data processing/storage capacity and flexible communicationsmeans (GSM, DSRC and Infrared). Such an OBU will enable interoperability and toll roamingand provide a basis for the implementation of future telematics services.

— The European Commission is right to propose that from 1 January 2008 all new systems broughtin as part of a European electronic toll service should use satellite and mobile communicationstechnologies.

December 2003

Memorandum by Transport for London (EU 03)


1. Introduction

Transport for London (TfL) was formed in July 2000 and is a functional body of the Greater LondonAuthority. Its role is to implement the Mayor’s Transport Strategy and manage public transport servicesand facilities across Greater London.

TfL’s responsibilities include London’s buses, London Underground, Docklands Light Railway,Croydon Tramlink, London River Services and Victoria Coach Station. As well as running the centralLondon congestion charge scheme, TfL manages a 580 km of London’s main roads, 4,600 traYc lights andregulates taxis and the private hire trade.

TfL is committed to listening and responding to the transport needs of Londoners and welcomes theopportunity to submit written evidence on this important issue.

Even though public transport is inherently a domestic matter, and TfL is not involved in European orinternational trade, EU aVairs have profound implications for the organisation. In recognition of this in1992 the former London Transport created a European AVairs unit (which has continued under TfL) withthe objective of monitoring EU policies and legislation aVecting public transport and of seeking to influencethese where necessary.

2. Commission Initiatives with Major Implications for TfL

It is easiest to appreciate the ways in which EU initiatives have aVected TfL and its predecessor byconsidering specific cases in which the costs and/or quality of transport in London have been aVected byEU initiatives. An analysis of such initiatives is given below.

We concentrate on those issues which have a specific impact on urban transport.We have tried to identifyspecifically where the law-making processes, or some malfunctioning of these, are themselves in question.

2.1 EU Policies

In general, EU policy is favourable to urban public transport, particularly on environmental and socialgrounds. This helps to create a congenial climate for decision-making. We welcome for example EUcampaigns on global warming, and its advocacy of infrastructure charging.

2.2 EU Legislation

The real impact of EU initiatives on public transport, however, is determined by the eVects of thelegislation it generates. This is illustrated in the following paragraphs, addressing first the question of theEurovignette directive raised by the Committee and the related road toll “interoperability” directive,followed by a summary of our experience of a number of other EU directives and regulations.

2.3 The examples of the Infrastructure Charging directives on the “Eurovignette” and the Interoperability ofelectronic toll collection systems

These directives, proposed by the Commission in July and April 2003, are of crucial importance for thefuture of road pricing, including congestion charging. Although London had already implemented (inFebruary 2003) one of the most ambitious road charging schemes ever considered, TfL were at no stageconsulted prior to the adoption of the proposed Directives.



2.3.1 The “Eurovignette” Directive

The proposed Directive (COM(2003)448) sets out the general principles for the “charging of heavy goodsvehicles for the use of certain infrastructures”.

Nominally, the directive applies only to hgvs using the Trans-European Road Network. So long as it isrestricted in this way, the directive is unlikely to have any significant impact upon congestion, environmentaldamage or economic savings. We are concerned that the same principles are likely in practice to form thebasis of the Commission’s policies for the charging of all vehicles on the wider road network. This appliesparticularly where the roads in question run parallel to TERN roads (eg certain roads parallel to the M25in the London area).

There are two issues which are of particular concern to TfL:

(a) The restriction on the use of road charging as an eVective demand management tool

While the proposal allows charging as a function of the level of congestion, this would be restrictedto amaximum100% above the toll charged in the cheapest period of the day (amended para 10(b)).Such a restriction would not be compatible with London’s congestion charging system,particularly given that the price outside charging hours is zero. To be eVective in tacklingcongestion, the charge has to be set at whatever level is necessary to ensure free movement. Set atthis level, there will bemajor gains to the economy and to the individual in terms of savings in time.

Freer movement will also bring reductions in fuel consumption and in emissions. Because (asLondon experience has shown) of the tangible time savings it brings to road users, such a policyis also likely to be politicallymuch easier to accept. It is therefore essential that the authorities havethe requisite freedom in their road charging policies. This includes the need to be able to managethe traYc diverted to parallel routes by the introduction of charging on the TERN.

(b) Restrictions on the use of toll income to fund investment in alternative modes

The proposed amendments provide for charging to protect particular sensitive (eg mountain)areas, with revenues reinvested in funding alternative modes of transport. Urban areas are farmore sensitive than mountainous regions, because the number of people exposed to the nuisancesof heavy traYc is far larger, their proximity to heavy traYc is greater, the levels of emissions muchhigher—while it is often physically impossible to increase the volume of road space. In urban areasit is essential then to be able to invest the proceeds of road pricing measures in alternative modes.

2.3.2 Interoperability of electronic toll collection systems

The Commission proposal (COM 2003(132)) for this Directive would require the adoption of satellitebased communications as the basis for a future interoperable system of electronic road charging across theEU. No one can gainsay the advantages of interoperability in this field. The proposal did not however givedue weight to the fact that the great majority of existing ERP systems are based on microwavecommunications. Nor did it allow for the diYculties encountered with satellite communications because ofthe “Canyon eVect” in city streets which makes it diYcult to establish the position of a vehicle with suYcientprecision—eg to satisfy a court of law where the imposition of a road charge is contested by a user. InLondon conditions the use of microwave communications therefore provides the most promising futuretechnical solution for automating charging without prepayment.

2.3.3 The approval process

In the case of the Eurovignette directive it is a matter of concern that the Commission should have issueda proposal with shortcomings as serious as those indicated. These might however have been avoided if therehad been more extensive consultation of stakeholders in preparing the proposal. As a result the essentialissues are still under intense debate in the EP and Council. It is to be hoped that both the key points raisedabove will be satisfactorily addressed.

In the case of the Interoperability directive, it appears that continued availability of microwavecommunications will in any event be endorsed by the EP and Council. A number of more detailedamendments for which TfL/GLA lobbied with MEPs—eg against an obligation for tolling authorities topay for on board equipment—have not however been carried.

Again, it was regrettable that there was no consultation with TfL by the Commission in preparing theproposal.

2.4 Other EU Legislation aVecting urban transport

By way of illustration this table lists both cases with actual adverse results and those with potentiallyadverse consequences which were averted successfully through appropriate lobbying action—and co-operation of the relevant institutions—



Key:

UITP: International Association of Public Transport, whose EU Committee (in which TfL plays aprominent part) represents transport undertakings across the EU.

CPT: Confederation of Passenger Transport (representing UK public transport operators).

IMPACTS OF EU INITIATIVES ON TRANSPORT IN LONDON

EU initiative Issue/consequences Comments on the approvalprocess. How could a betteroutcome be achieved?

Regulatory framework for public transport

Regulation on public As originally proposed in July 2000, could Both Commission and EP haveservice requirements in have forced tendering of the operation of proved attentive to our objectionspassenger transport the Underground, would prevent retention so far, and the most recent

of small in-house bus operator to contest proposal (Feb 2002) addresseslocal private monopolies, and could have many of our concerns. Theforced unravelling of eg the Croydon relevant amendments mayTramlink concession at heavy cost however be lost or weakened in

subsequent processes in Council.

Bus legislation

Bus construction In its earlier form this would have made it Intensive lobbying through UITPdirective impossible for industry to continue and CPT of the Commission &

producing a viable double-decker bus. It EP over several years managed towould also have seriously reduced urban secure necessary changes.bus seated capacity.

Driving hours As adopted by Commission, this would In the event vigorous lobbyingregulation inter alia have introduced a requirement for led by CPT and UITP secured

a 45-minute break after 4° hours’ driving exemption for urban transportworking day. This would have increased and taxis.operating costs and the length of time busdrivers would be away from home andmade taxi operation extremely diYcult

Bus/coach/hgv/driver This directive would require six weeks to be The Commission introduced itstraining added to the training of all drivers to train original proposal no prior

them in issues such as bus economics, basic consultation of the transportmechanics etc, risking adding substantially profession. Subsequent intensiveboth to training costs and to the loss of lobbying by UITP in EP achievedmore recruits during training, all for very a reduction in training durationlittle tangible benefit as far as bus services and the option of an exam to aare concerned. Although the CPT has found given duration of training—buta way of minimising the impact on costs only to be exercised by eachthrough incorporation in NVQs, there will member state.still be significant additional costs.

Rail legislation

Interoperability— If the related national rail routes become Issue raised with DfT, but theconventional rail interoperable, then signalling and other implications for through running

standards would be inconsistent between are still uncertain. As in otherLUL and main-line railways. The only cases the focus on the European,solution would be to segregate LUL and long distance dimension may bemain-line services. damaging to local services.

Licensing of drivers Directive awaited. It appears that the TfL have lobbied through UITP,Commission wishes to draw definition of and will continue to lobby, for“rail drivers” as widely as possible. This is exclusion of metros and light rail.likely to add to admin and trainingexpenditure, for training which would inpart be irrelevant.

3. EU Legislation: Conclusions

The principal way in which the EU can intervene in urban public transport operations is through its rolein the development of the single market, and much of its legislation—not only in the area of liberalisation,but in eg the harmonisation of working hours, training requirements, vehicle standards—is driven by thisfactor. Such legislation ismost often addressed at long distance and cross-border transport. These initiatives



tend inevitably to draw in the corresponding (rail and road) urban transport modes. There is littlerecognition that urban transport is a diVerent case, which may draw little benefit from eg harmonised raildriver qualifications, and which may have to support quite gratuitous additional costs. In some cases wewould regard the legislation itself as misconceived—for example the compulsory use of green fuels, whichcould increase our costs for so little environmental return that the net eVect will be negative, as the additionalcosts will deter passengers from using PT.

Against this, the potential benefits of the single market will take the form of the lower prices and higherquality which should result from EU-wide competition, but will be dispersed in practice across businessat large.

The end-result of EU initiatives has too often been to increase the costs of local transport operationwithout oVsetting benefits.

*4. Could Greater Powers for the EU Benefit or Damage TfL?

It is evident from the above that the existing powers of the EU have given opportunities to introducelegislation which sometimes poses serious problems for TfL and other urban transport undertakings. It ishowever diYcult to see any reduction in prospect. To judge by the past legislative record, any increase inlegal powers is likely to extend the opportunities for introducing new legislation, generating (ifinadvertently) new problems and challenges for transport in London, and would not be welcomed.

It is diYcult to challenge the legal competence of EU in the areas it has addressed. We would howeverdirect attention to the processes by which decisions are made within those competences.

5. How Conducive have the EU’s Processes and Powers been Conducive to Good Lawmaking in the

Public Transport Sector?

Our experience has highlighted the following practical diYculties:

(a) It is the usual practice of the Commission (with some honourable exceptions) not to consultrelevant stakeholders before producing a proposal—from which it is then diYcult for theCommission to diverge in the light of expert evidence.

(b) There is frequently a lack of coherence and balance in the proposals emerging from theCommission. Most proposals, despite inter-service consultation and subsequent approval by theCollege of Commissioners bear the clear stamp of one or other of the Commission’s DGs. Thistendency is a reflection of the lack of any body within the Commission charged with taking acomprehensive view on the overall merits and shortcomings of proposed legislation and to ensurejoined-up decision-making. (The Commission’s General Secretariat has nevertheless sometimestaken on this role.)

(c) One of the problems is rooted in the basic design and rules of the EU. It is striking that much EUlegislation is drawn up not in specific response to problems, but in order to fulfil the requirementsof the Treaty. That Treaty is itself an “active” rather than a passive document. It does not justprotect rights and set out processes, but it requires active intervention by the EU in order inparticular to continue development of the single market. Add to this the fact that the Commissionhas the right to propose legislation, and we have a structure which encourages law-making.

(d) To those who are having constantly to face challenging practical diYculties in keeping a businessgoing or in ensuring the provision of an eYcient and high quality public service these interventionsoften appear gratuitous. And all too frequently such interventions tend both to increase theadministrative burden and to adversely aVect the costs or the quality of service which can beoVered.

That said, our experience has shown that:

(e) by and large, theCommission is remarkably open inmany respects, andwe have usually been givena courteous and attentive reception when we have approached Commission oYcials.

(f) MEPs too have proved fairly approachable and willing to listen—and that, particularly at theCommittee stage, the EP oVers opportunities for influence.

(g) We have enjoyed very good communications with DfT on European issues.

(h) The Council ofMinisters, however, is far more impenetrable, not only because of the diYculties oftrying to influence 15 (now becoming 25) member states’ delegations, but also because its decision-making is performed in secret.

(i) Taken in aggregate, European structures, processes and practices have allowed our voice to beheard in influencing new legislation.



6. Suggestions for Improved Functioning

(a) The first target must be to reduce the volume of legislation. This however would be diYcult toachieve without radical changes—in the right of the Commission to propose legislation, in the“activism” inherent in the Treaty itself.

(b) The preparation of all legislation should include a wide-ranging consultation process beforeadoption by the Commission;

(c) The proceedings of the Council of Ministers should be made public;

(d) At UK national level, closer contacts between the Select Committee and bodies like ourselvescould prove useful in informing the Council;

(e) There is need for more balanced impact assessments, and the Commission’s own organisationneeds to ensure that legislative proposals reflect the goals of the whole Commission;

(f) Every legislative proposal should come complete with an audit trail, accessible to the public,showing how it was produced and in particular identify all those consulted.

(g) Legislation should be systematically reviewed by a 3rd party say three to five years afterimplementation in order to assess eVectiveness, need for change.

Memorandum by the States of Guernsey Board of Administration (EU 04)


The States of Guernsey’s Board of Administration noted with interest the press notice from the House ofCommons’ Transport Committee with regard to the Committee’s intention to undertake an inquiry intoEuropean Union competence and transport, with particular reference to the principles of proportionalityand subsidiarity. The Board of Administration notes that the Committee intends to structure its inquiry bymaking particular reference to a number of matters, including the draft directive and draft frameworkdecision on the enforcement of the law against ship pollution.

The Board of Administration has a diverse and wide-ranging mandate. It is responsible for provision andadministration of port facilities in respect of Guernsey’s airport and harbours together with Alderney’sairport and Breakwater and for the insurance and management of risks to States’ assets and activities. TheBoard also has functions in respect to property management, waste disposal and receivership of wreck.

The Board of Administration wishes to comment on the above-mentioned draft directive and draftframework decision on the enforcement of the law against ship pollution.

The Board’s understanding of the issue is that there is a concern that some EU Member States are notenforcing the MARPOL Regulations and failing to prosecute ships illegally discharging pollutants into thesea. The Maritime and Coastguard Agency is active in this area and the proposed directive is to bring intoforce EU Law to encourage all EU Coastal States to tighten up on ship pollution.

The Board would wish to support any move to strengthen the enforcement of law against ship sourcepollution, as clearly it would have significant environmental benefits for the Channel Islands.

22 December 2003

Memorandum by the Railway Forum (EU 05)


The Railway Forum

The Railway Forum is an industry-wide body sponsored by and paid for by most of train operatingcompanies, the rolling stock leasing companies, the Passenger Transport Executives, NetworkRail, LondonUnderground andmanymanufacturing and infrastructure companies, as well as other businesses connectedwith the railways. In all we have some 70 members. Our key role is to act as a think tank, informationexchange and point of contact for those committed to and interested in the rail industry.

Introduction

1. The Railway Forum has a keen interest in any legislation or proposals that aVect the UK railwayindustry. In this respect the European Commission in particular (and the Parliament) is increasingly a keyplayer in shaping the future of European railways. Legislation on a wide range of issues has beenimplemented in recent years and more is planned. Fundamentally European proposals will have far-reaching impacts upon the way in which the UK’s railways are managed and operated. In light of this it isimportant for both the Commission and Parliament ensure that the principles of proportionality andsubsidiarity remain integral to emerging legislation.



Railways and the Single European Market

2. The European Commission has powers to develop a common European transport policy (subject toEuropean Parliament and Council of Ministers co-decision making)13 and the most recent White Paper14

identified an integrated, deregulated transport network as vital to the eVective functioning of the SingleEuropeanMarket (SEM). However, more importantly, the development of a successful common transportpolicy has been severely limited by the inability of the Commission to take forward the proposals onintermodal pricing15. It is clear that, on this issue, there is a rationale for the EU to act to ensure a Europe-wide solution to intermodal pricing both in terms of the levels of charges and the technological means oftheir collection. National solutions in this scenario will not be successful. However it is clear that theCommission has, to date, failed to produce a convincing case acceptable to all member states. There is thusa huge hole at the centre of Commission transport policy that no amount of activity on secondary issuescan disguise.

3. The lack of progress on intermodal pricing thus has clear implications for the success of railway policy.Without the framework provided by an agreed set of infrastructure charges, policy in relation to rail (andother modes) exists in something of a vacuum. Infrastructure charging will have significant and far-reachingeVects on the relative mix of modes and patterns of travel. In this sense, investment decisions taken in thecontext of intermodal pricing are significantly diVerent to those that would occur under the presentcircumstances (where there is little or no market correction).

4. Nevertheless, despite the slow progress on pricing, the Commission has pursued three key strategieswith respect to the railways:

— development (and completion where possible) of the Trans-European Transport Network(TEN-T)16;

— implementation of measures aimed at opening up the rail sector to competition; and

— establishment of an internal market in rail based on common standards (via the interoperabilitydirectives17).

In addition, the White Paper also identified other areas where the Commission should act to bringrailways in line with other regulated transport industries across Europe. In this regard it has introducedlegislation regulating:

— noise and atmospheric emissions from rail vehicles; and

— safety management on the railways.

EU Competence and the Railways

5. Overall the success of these strategies has been patchy. There have been notable reforms, particularlywith regard to the development of an interoperable European rail system and the further opening of the railsector to competition. Reform in these areas is generally progressing well. However other areas have eitherseen limited improvement and/or will require further consideration. In particular:

— development of the TEN-T has been problematic in particular as several projects have beendelayed due to funding and/or management diYculties;

— legislation to open up European railway monopolies has resulted in unintended outcomes;

— legislation regulating atmospheric emissions has caused significant diYculties due to the distinctivenature of rail operations in the UK; and

— legislation to reform safety management on the railways.

The first three areas are the most problematic and in many respects suVer from the inconsistentapplication of the principles of proportionality and subsidiarity whilst the fourth (the reform safetymanagement) is welcome but will require careful application within the UK. These are discussed furtherbelow.

13 First provided for in the Treaty of Rome and subsequently reinforced by the Treaty of Maastricht.14 European Transport for 2010: Time to Decide, COM (2001) 370.15 Fair Payment for Infrastructure Use: A phased approach to a common transport infrastructure charging framework in the EU,COM (1998) 466.

16 For further information see:www.europa.eu.int/comm/transport/themes/network/english/ten-t-en.html

17 For further information see:www.europa.eu.int/comm/transport/rail/interoperability/index—en.htm



The Trans-European Transport Network (TEN-T)

6. The TEN-T comprises a large number of “priority projects”, the majority of which are rail solutions.The UK projects include the West Coast Main Line upgrade and the Channel Tunnel Rail Link. Howeverby 2002, only 20% of the initial list of priority projects had been completed. There is currently much workbeing undertaken at the European level to ensure that the TEN-T process is accelerated as a result.Nonetheless establishment of such a network has not developed well:

— too many projects are included more on the basis of ensuring fair shares rather than transportneed;

— in turn this has produced a huge bill. The completion of the TEN-T is estimated to require someƒ600 billion between now and 2020, funds are just not available on this scale; and

— the imbalance of costs and benefits accruing to countries involved, particularly in cross-borderprojects.

7. Overall The Railway Forum supports the establishment of the TEN-T as it will ultimately benefit both“UKplc” andUK railways, through improved links (particularly rail) to the continent. However, we remainconcerned that the TEN-T process does not adequately reflect the need for further development of railinfrastructure in the UK in order to better link with continental Europe. In particular, of the most recentlist of 22 new priority projects, only one UK project was included. It is clear that the UK interest in this areamust be better coordinated to ensure that the UK has the best possible chance of securing priority projectsand related funding.

8. In addition there are clearly issues of subsidiarity and proportionality with regard to the developmentof the TEN-T and themethodology for project selection. In particular there are a number of priority projectsthat do not appear to have any significant pan-European benefit18. Whilst the recent High Level Group19

has clarified the methodology for the selection of priority projects we are not convinced that a number ofsuch schemes require concerted action at EU level. In any event the Commission will always find itselfconstrained when it comes to project delivery. It would be helpful if there were more recognition of this.

Opening up European Railways to Competition

9. A large proportion of Commission activity is aimed at increasing competition, particularly amongstthe “traditional” European monopolies (eg France, Germany etc). Whilst this is to be welcomed—as it isan area where the Commission can and should act—the outcome in many cases is further bureaucracy,particularly for those railway systems that have progressed farthest in terms of competition. A recentexample is the attempt to introduce a common method of train driver licensing across Europe. Whilstinitially intended to ensure greater competition by allowing the free movement of drivers across Europeanrailways, it is seemingly developing into a bureaucratic solution and particularly so for the UK whichcurrently has a simple and flexible process. This is however an ongoing debate in which the UK isstrenuously making the case for simple and straightforward procedures.

10. Clearly, the Commission’s eVorts to improve competition between and within European railwaysmust take better account of the conditions prevalent in individualmember states, the proportionality of theiractions and the likely consequences. Any policy that results in outcomes sub-optimal to those that existedpreviously needs to be reconsidered.

Environmental Regulation

11. In terms of environmental measures the Commission has recently enacted legislation aimed atlimiting atmospheric emissions from the railways. More specifically the Commission recently proposed anextension of the existing 97/68/EC directive20 to cover emissions from new rail vehicles. The proposalsincorporated demanding new limits on the exhaust gas emissions. The impact of the proposals on the UKwould have been significant due to the very high proportion of diesel operation in the UK compared withthe rest of the EU. Recent lobbying by The Railway Forum and others has succeeded in reaching acompromise on this issue however it is clear that the manner in which the legislation was proposed hashighlighted some key problems:

— the measures were disproportionate to the desired outcome; the UK is the largest diesel operatorin the EU by some margin and the original proposals would have incurred significant cost to theindustry; and

— the use of separate legislative tools to regulate emissions is confusing; rail emissions are alreadybeing addressed within the Technical Specifications for Interoperability (TSI) framework21.

18 For example plans to make the Iberian high-speed rail network interoperable.19 See: www.europa.eu.int/comm/ten/transport/revision/hlg—en.htm20 on the regulation of atmospheric emissions from Non-Road Mobile Machinery (NRMM).21 Directive 97/68/EC is overseen by DG Environment within the Commission whilst interoperability (and hence the TSIprocess) is overseen by DG Transport and Energy.



Again, European legislation in this area, whilst justifiable, needs to be proportionate given the operatingmix in each member state. Similarly, the Commission (and Parliament) has not demonstrated a joined-upapproach to emissions reduction. The use of two separate legislative measures to achieve the same goal is areflection of this.

Safety Management

12. In light of the drive towards interoperability, the move towards a harmonised safety regime for therailways is a logical step. The Railway Safety Directive and Regulation establishing a European RailwayAgency22 are a reflection of the need to ensure that an interoperable railway systemworks to common safetyand technical objectives. In light of this it is crucial that the UK application of this legislation does not leadto a situation where several layers of safety regulation exist (eg a national approach overlaying the agreedEU policy). The present divergence between our current national approach to railway safety and theemerging EU interoperability model must not be underestimated. Nevertheless the HSC/HSE, workingclosely with the industry, must plan for the adoption of new safety management techniques in the mosteVective manner.

13. Similarly, with the establishment of a European Rail Agency (ERA) there is a danger that EUstrategies promulgated by the ERA do not mesh with those of the Strategic Rail Authority (SRA) in theUK. As with the HSC/HSE on safety, the SRAmust begin to engage in the process of establishing the ERAand ensure that UK rail strategies broadly fit within the overall EU framework.

19 December 2003

Memorandum by British Airways Plc (EU 06)


1. Introduction

1.1 British Airways welcomes the opportunity to submit evidence to the Transport Select Committee onthe subject of European Union Competence and Transport.

1.2 The inquiry is timely given the evolving role of the EuropeanUnion (EU) in many aspects of aviationregulation. In line with the terms of reference of the inquiry, this submission focuses mainly on the mandategiven to the European Commission to negotiate aviation agreements with the United States (US) on behalfof EU Member States. However, we would also like to take this opportunity to comment briefly on othertopical areas of EU aviation regulation such as the new European Aviation Safety Agency (EASA) and theSingle European Sky.

1.3 For clarity, we also highlight our main points in an Executive Summary.

2. Executive Summary

2.1 In British Airways’ view:

— The negotiating mandate given to the European Commission should be supported as this gives thebest chance of achieving greater liberalisation of the global aviation industry.

— Any agreement on an Open Aviation Area (OAA) should encompass the full range of measuresnecessary for true liberalisation. The EUmust resist an early harvest which would hinder progresstowards real liberalisation.

— There should be full participation of representatives of individual states and the aviation industryin the negotiation process with the United States (US). More specifically, the UK Governmentshould work to protect the interests of UK aviation.

— In the interim period, the process of individual states negotiating Air Services Agreements withthird countries should be allowed to continue.

— EASA should bring high safety standards to all EU based aircraft and airlines, thereby improvingsafety for passengers on foreign as well as UK airlines while creating a more level playing field forUK airlines.

— We hope the single European sky will deliver improvements in air space eYciency and airnavigation service provider performance but we are concerned about the compromises that havebeen made to secure political approval.

22 COM (2002) 21 and COM (2002) 23 respectively.



3. The Evolving Powers of the European Commission

3.1 In the post war era, the commercial development of global aviation has been governed by a systemof Air Services Agreements (ASAs) negotiated and agreed largely on a bilateral basis between thegovernments of the respective states. A feature of many of these ASAs is the nationality clause. This clauseplaces limits on the level of foreign ownership and control of the carriers designated in the agreements. Thissystem has resulted in an intricate “spider’s web” of bilateral international agreements between countriesand has prevented the natural path of consolidation within the aviation industry as has occurred in mostother international industries. In the absence of such normalisation, airlines that wish to extend theirnetworks on a global basis have had no choice but to develop alliances and code share arrangements withother carriers.

3.2 Despite this, some progress has been made in liberalisation of these agreements. The US hasnegotiated so called “Open Skies” agreements with many countries including eleven EUMember States andthe EU has a completely open internal aviation market which is blind to nationality among EU airlines.However, compared with the EU open aviation area, US liberalisation can be seen as incomplete—not leastbecause the so called Open Skies agreements are merely conventional bilateral agreements but withliberalised route rights.

3.3 On 5 November 2002, the European Court of Justice (ECJ) ruled that eight EU Member States,including the United Kingdom, had breached the European Community Treaty by including nationalityclauses in their bilateral agreements with the US. The judgement stated that this was “a case ofdiscrimination, excluding air carriers of other Member States from the benefit of national treatment in thehost Member State, which is forbidden by the Community rules on right of establishment”. In addition theECJ identified three specific areas of Community exclusive competence—slots, CRSs and intra Communityfares and rates.

3.4 The Commission issued a subsequent “Communication” stating that the judgements of the ECJestablish the application of the “AETR” principle by which theUnion acquires an external competence. TheCommunication also highlighted additional areas of competence such as safety, customs duties, taxes anduser charges, Denied Boarding Compensation (DBC) and air carrier liability.

3.5 Following the ECJ ruling, the Transport Council agreed on the 5 June 2003 to a package of measuresthat formalised the now mixed nature of responsibilities in the negotiation of Air Transport Agreements,including:

— a framework for the passing of responsibility for the negotiation of air transport agreements fromthe governments of the Members States to the European Commission;

— a mandate for the Commission to begin negotiations with the US on an Open Aviation Area;

— an agreement on Member states continuing bilateral negotiations with third countries subject toa degree of Community control; and

— a horizontal mandate which would allow the Commission to negotiate Community Clauses withthird countries (ie “bring the agreements into line”) in the absence of a full mandate to negotiatea full EU level agreement with that country.

3.6 In short, this means that the power to negotiate aviation agreements is now shared inextricablybetween the individual member states of the EU and the European Commission. The Commission has sincecommenced negotiations with the US on an OAA and plans to follow this with third country negotiationsunder the horizontal mandate. It recently held inconclusive talks with Australia, New Zealand, andSingapore under the horizontal mandate, and is, we understand, considering whether to ask the Council fora full mandate to negotiate an OAA with those countries, either together or separately.

3.7 In the meantime, Member States can continue to conduct bilateral talks with other countries.However, it is the view of the Commission that no changes to an existing agreement should be made unlessa Community Clause is included. The purpose of a Community Clause is to replace the existing nationalityprovisions with a similar provision which would extend this access to carriers of all EU nationalities. A“model” Community Clause and other necessary amendments on pricing, CRS etc. have been agreedbetween theMember States and the Commission, and are available for use by either in bringing agreementsinto line.

3.8 In practice theMember States do agree revisions to existing bilateral agreements and implement themon the basis that business must be allowed to continue. These revisions are subject to scrutiny by a SpecialCommittee which is set up for this purpose and comprises Member States and Commission representatives.Its duty with regard to the Community Clause is satisfied provided it makes a serious eVort to persuade theother party to agree to it.



4. Implications of the Transfer of Power for the Structure of the Industry and Individual States

4.1 British Airways welcomes the judgement of the European Court of Justice and the subsequentnegotiating mandates given to the European Commission. Whilst this means that the exclusive power ofindividual countries to independently negotiate ASAs with third countries has been modified, this isoutweighed by the advantages that can be gained through the EU’s increased power to facilitate thenecessary changes in the regulation and structure of the aviation industry.

4.2 The removal of restrictions on routings and limits of ownership and control will open up EUmarketsto foreign competition andwill enable the much needed consolidation process within the European aviationindustry to begin. Agreement between the EU and US on an OAA is then the most likely route to furtherliberalisation of the global aviation industry, improving its structure and maximising competition.

4.3 An OAA would grant access to all EU-US routes to all EU carriers. This will enable UK carriers tooperate US routes from anywhere within the EU and grant the same opportunities for EU carriers in theUK-US market. The result will be increased benefits for EU consumers as carriers are able to compete ona global basis.

4.4 The open aviation areas developed within the US and EU in the 1980’s and 90’s have alreadydemonstrated the benefits that single markets can create. Passengers have benefited from increased services,lower fares, strong competition and new enterprise—most visible in the rise of the no-frills carriers and thecompetitive response of the full service network carriers.

5. The Appropriate Extent of European Commission’s Powers

5.1 British Airways gives its full support to accelerating the liberalisation of the global industry startingwith an Open Aviation Area agreement between the EU and the USA.

5.2 In our view, the mandate given to the European Commission increases the chances of acomprehensive liberal agreement with the US being negotiated. In the past, UK attempts to secureagreement on these issues with the US have been unsuccessful as both sides have been unable or unwillingtomake all the changes required. Since the Community hasmore power as a negotiating bloc than individualstates, and has the competence to propose changes to some of the existing restrictive European Regulations,an EU-led US negotiation is more likely to achieve the whole package than member states negotiatingindividually.

5.3 However, whilst it creates a greater chance of success, the negotiating mandate given to the EU alsonecessitates a certain level of trust on the part of individual member states.

5.4 In British Airways’ view, it is vital that the European Union does not settle for anything less than afull liberalisation package with the US. Any agreement should encompass the entire range of measuresnecessary for true liberalisation. In order to secure the benefits of an Open Aviation Area as outlined above,the package needs to encompass the removal of restrictions across the spectrum such as: the limits inownership and control, access to the US domestic market, routing rights, the US Fly America and CivilReserve Air Fleet (CRAF) policies, cargo and wet-leasing arrangements.

5.5 It is a key concern that, given the complexity of the deal that needs to be negotiated, the temptationmay exist to agree to trade oVs to secure an “early win”. This might take the form of an agreement to accept49% ownership and control rules in the place of the 100% required by a true Open Aviation Area. A 49%limit would not permit necessary industry restructuring. The airline industry has not developed into a“normal” business precisely because national control rules prevent cross-border mergers. Such partialliberalisation would inevitably favour theUS in the short tomedium termwhowould then see no advantagein pursuing a full liberalisation agenda. Only a full package of measures, including access to theUS domesticmarket for EU carriers would bring about the necessary restructuring of the aviation industry and thedesired economic and consumer benefits.

5.6 The European Commission has been granted the power to negotiate on behalf of 15 individualmember states and British Airways urges the Commission to use that leverage to its fullest potential.

6. Other Concerns Regarding the Extent of EU Power

6.1 In addition to the key concern outlined above, British Airways would like to note the following issueswith regard to the appropriate extent of Community competence.

6.2 Continued participation of the industry and representatives of individual states in negotiations withthe US: it is vital that the UK government and UK aviation industry representatives play a full and activerole in the ongoing negotiations with the US. When conducted at a national level, the aviation industry hasthe opportunity to lend its technical and commercial knowledge to bilateral talks. This existing expertiseneeds to be utilised by the Commission, preferably to the extent that representatives from the industry arepermitted to participate in future negotiations.

6.3 EU can add value to some but not all bilateral negotiations. Examples of where the Commission canadd value at European level are:



(i) negotiations on specific common issues of immediate concern. Examples are the current EUinitiative to free EU airlines from Russian overflight payments and other restrictions; issues withthe USA concerning passenger information and data security;

(ii) negotiations with states whose general policy towards bilateral partners has been restrictive/protective, eg Japan, where the oVer of access to the EU as a whole may be persuasive; and

(iii) negotiations with neighbouring states, eg Turkey which would lead to an enlargement of thecontiguous open operating area centred in the EU.

Examples of where the EU is unlikely to add value are:

(i) countries whose policies are already liberal vis a vis the Member States of the EU, eg Australia,New Zealand;

(ii) countries where the overall market is small eg many states in Latin America, Africa; and

(iii) countries where demand is limited to one or two gateways in the EU, eg Congo, Gabon.

6.4 A phased approach : the EU should plan a phased approach to third country negotiations andcarefully choose those countries where progress is both likely and desirable. It is important to note that, evenwith recent increases in its establishment, the Commission has limited resources, so the added value conceptis far from theoretical. The Commission also needs to gain experience in this field. Priority should be givento completing the EU/US agreement as amodel of liberalisation and agreeing with theMember States wherethe next priorities should be. These are likely to be where liberalisation is diYcult and needed eg India.

7. Recent Negotiations

7.1 Two rounds of negotiations between the EU Commission and the US have now been held. ThediVerent approaches from the two sides can be characterized as the EU trying to create a liberal umbrellaagreement versus the US building incrementally from their existing Open Skies agreements.

7.2 Of the two, the EU’s aspirations are those that deserve support from the UK and its industry. TheUS position is that their so called Open Skies template is the ideal model and that this model has already(in the case of several Asia/Pacific countries) been adapted to create a multilateral agreement.

7.3 In fact the Open Skies model does not meet the need for change and consolidation in the industry asit does not touch the issue of ownership and control which is essential to bring about the consolidation ofthe industry. Nor does it touch various matters of US protectionism such as the Fly America policy, a one-way street in wet-leasing etc. The EU model does challenge the US to tackle these issues and begin theprocess of creating a global aviation market.

7.4 Thus far, the EU should be congratulated for not acceding to the US position but this will be a longprocess and it will be important that the Commission holds its line though forthcoming changes of personnelat many levels.

8. Other Aviation Regulation Issues

8.1 Although not mentioned in the Committee’s terms of reference, developments in the non-commercialareas such as the International Civil Aviation Organisation (ICAO), the new European Aviation SafetyAgency (EASA) and the Single European Sky have also seen competence being passed from national toEuropean level. As such, we would like to oVer a few brief comments on these issues.

8.2 The Chicago convention of 1944 provided the world-wide regulatory framework for aviation andestablished ICAO, both of which have been especially important in the development of non-commercialaspects of aviation regulation such as safety, security and environmental protection. As the EuropeanUnionhas now been given competence in these areas the Commission is seeking direct membership of ICAO inplace of Member States. The UK and other member states oppose this on the basis that there would be asignificant loss of Europe’s voting power.

8.3 EASA is, in BritishAirways’ view, an important step forward in aviation safety that should lead to thedevelopment and application of consistently high safety standards across the EU. The previous approach,whereby national regulators cooperated under the Joint Aviation Authority (JAA) resulted in an unevenapplication of standards. Due to a consensus requirement it proved diYcult to reach agreements and centralresources were inadequate. The JAA itself had no real status and was unequal in influence to theUS FederalAviation Authority. National regulators either lacked the resources to operate eVectively under thisapproach or they became very expensive. The principle of subsidiarity is met because the national approachwas not working.

8.4 EASA’s approach should result in amore eYcient approach with less duplication of eVort and amoreconsistent application of common standards. The standards themselves should be developed on the basis ofhigh quality and objective safety analysis with consultation, regulatory impact assessment and appeals built-in to the decision making process. The framework has been designed to ensure that proportionate decisionsare taken as much as possible.



8.5 There are implications for the Civil Aviation Authority which, although retaining its responsibilitiesfor oversight of UKmanufacturers and airlines, has started to lose its remit for developing safety standards.Initially, responsibility will pass to EASA in the areas of airworthiness and maintenance but in the futurethis will extend to operations and licensing and longer term, there is scope to extend EASA’s remit toaerodrome and air traYc safety as well.

8.6 British Airways has also supported the development of a Single European Sky because this shouldresult in a much greater eYciency of airspace coordination and allow for significant productivityimprovements and safety benefits. However, following a diYcult conciliation process between the EuropeanParliament and Council, the regulations that were agreed recently resulted in a number of compromises tothe original objectives. Despite this, an important principle was established that the provision of air traYcservices should be separated from regulatory functions and that independent safety and performanceregulation is needed to avoid conflicts of interest by Member States. During 2004, the revised regulationsshould be adopted and implementing arrangements worked through. British Airways will seek, through ourindustry association, to ensure that this project delivers real improvements in the areas of performance (costeYciency and management of air traYc delays) and safety.

9. Conclusion

British Airways supports the negotiating mandates given to the European Union as this oVers the bestchance of achieving greater liberalisation of the global aviation industry. We believe the Commission hasacted appropriately thus far in its negotiations with the US regarding an Open Aviation Area but that asatisfactory final outcome is dependant on a full package of liberalising measures being agreed with especialregard to the issue of ownership and control which is essential to bring about consolidation of the industry.

During this period of change, individual Member States should be allowed to continue to conductbilateral talks with other countries. It should also be recognised that whilst the EU can add value to somenegotiations there are areas where this is less likely and British Airways believes the Commission shouldadopt a phased approach to future negotiations.

As demonstrated in Section 8, EU regulation in non-commercial areas of aviation can bring benefits ofconsistency and eYciency. However, it is British Airways’ view that these benefits are most apparent in theevent that such EU regulation does not duplicate UK regulation, create additional cost or be more onerouson EU Member States and airlines.

Memorandum by the Freight Transport Association (EU 07)

Freight Transport Association

Freight Transport Association represents the freight transport interests of UK industry. Its membershipincludes large blue chip multinationals, major third party logistics providers, own account operators whichcarry their own goods and small hauliers. FTA has in excess of 10,000 members which operate over half ofthe 430,000 hgv fleet in the UK. In addition members consign 90% of all rail freight in the UK and areresponsible for 60% of the nation’s visible trade.

The Contribution of Logistics to the European Union

The free movement of goods is a founding principle of the Treaty of Rome. It also matters a great dealto businesses that produce and carry them. The costs of storing, distributing and transporting goods areimportant factors in the competitive balance of the European Union. The EU spends about 12% of itseconomic output on logistics. This compares with about 10% in the USA and 13% in Asia.23

The European Commission has a crucial role to play in ensuring common safety and environmentalstandards, the removal of market distortions and the development and maintenance of harmonised tradingconditions across the single market. The Commission has traditionally seen itself as the regulator oftransport and much of its work on freight transport issues has been related to the establishment of aharmonised legislative framework for the construction and operation of goods vehicles, mainly during the1980s. More recently, and in the wake of the 1992 Transport White Paper, the Commission has broughtabout the liberalisation of the transport market. This work has helped establish a pan-European roadhaulage market which has supported the development of the single market over the last 10 years.

In the future, the Commission should become the custodian of the eYcient operation and unhindered useof Europe’s transport infrastructure, the regulator of open and competitive transport markets and thechampion of the contribution logistics makes to the competitiveness of the European trading bloc.

23 9th Annual State of Logistics Report—CASS—1998.



The Common Transport Policy

However, that goal is far from being realised. FTA is dismayed and concerned at the paralysis that hasgripped EU transport policy development in the past five years. The European Union is about to increaseits membership by 10 new member states. This will increase the size of its population by 75 million and itseconomic output by 30%. The realisation of this economic growthwill depend on eYcient goodsmovementsto and from these newmember states and on keeping infrastructure in the existing member states operating.

Yet the common transport policy, as expressed in the Commission’s 2001 White Paper, seems obliviousto these challenges. Instead it is obsessed with actions to correct what is seen as the excessive growth of roadtransport, the need to rebalance modal share, the internalising of transport’s external costs and theimposition of new social costs and controls. FTA does not believe this a responsible approach to Europe’sgrowing transport problems and that rather than stifle transport growth the Commission should be actingto ensure that the EU’s transport capabilities match the demand for services that will follow from theexpansion of the EU and the expected economic growth within its existing members.

Not only is there an apparent absence of long-term planning but many of the recent legislative actionsinitiated by the Commission have been stalled or reversed during the co-decision process. Some of theseexpose wider issues that the Commission needs to confront in its future role in developing a commontransport policy.

Digital Tachographs: the Challenge of Staying Ahead of Technology

The replacement of analogue tachographs by an electronic model to record drivers’ hours has been aCommission project since the end of the 1980s. The specification for the so-called ‘Type 1B’ tachograph wasfinally published in the OYcial Journal on 5 August 2002. The accompanying regulation requires that allnew vehicles over 3.5 tonnes gvw first registered after 5 August 2004 be fitted with an approved Type 1Btachograph and that the operator and driver use this equipment to record and monitor compliance with thedrivers’ hours rules.

The regulation also specified dates by when prospective suppliers of these tachographs needed to submitprototypemodels for testing and type approval. Although this deadline passed inAugust last year nomodelshave even been submitted. However, the regulatory deadline for the fitting of tachographs in new vehiclesis still extant—the Commission resolutely refuses to issue a revised deadline fearing that far wideramendments will be sought by the Council and the Parliament during the passage of the amendingregulation through the co-decision procedure. Thus vehicle operators face the prospect in August 2004 ofbreaching an EU regulation requiring the use of equipment that almost certainly will not exist in anapproved form. Many UK operators have said they will defer the purchase of new vehicles in the summerrather than operate them in an uncertain legal environment.

FTA is astounded at the fiasco of the non existent digital tachographs and there are serious issues thatthe Committee should note. Clearly the digital tachograph will not be the last piece of statutory electronicequipment that will need to be specified for fitment in the cabs of goods vehicles. The next such item will bea road user charging unit.Whilst the development of a commonEU standard for such equipment is essentialthe Commission needs to establish a quicker way of specifying this equipment with a greater range ofsanctions available where equipment suppliers choose not, or are unable, to meet statutory deadlines.

A further issue is that the basic design of the tachograph is based on technology extant in the mid 1990s.It is unlikely that approved digital tachographs will be able to interact with other, more recent electronicequipment fitted to the goods vehicle.

The Committee should conclude that the Commission needs urgently to find a shorter, more flexible means forthe development and approval of statutory electronic devices for fitment in goods vehicles that allows forincorporation of new technological developments.

Amendments to the Drivers’ Hours Regulation: the Results of Exposing the Fine Detail to

Amendment

TheEU regulation on drivers’ hours and rest periodswas adopted in 1985 and is one of the principal piecesof safety legislation in the road freight industry. Although complex, the regulations incorporate vitalflexibility that allows drivers to optimise their rest and break periods whilst preserving protection againstunsafe periods at thewheel. In 2001 theCommission proposed a revision to a number of the provisions of theregulation, ostensibly to harmonise interpretation and allegedly to make it easier to programme the digitaltachograph. Once published the list of changes quickly escalated and became virtually unmanageablefollowing amendments made by the European Parliament. These were of great consequence to logisticsoperations and were made without consultation with industry representatives. As a result of these changes,the amending regulation is now stalled in the Transport Council awaiting the initiative of a futurePresidency.

In the UK technical amendments of this detail would be made through statutory instruments and subjectto detailed consultation and review with industry and other stakeholders. A comparable system is requiredat European level so as to avoid future delays and frustrations in the revision of detailed technical legislation.



The Committee should conclude that the Commission needs to institute revised procedures for the amendmentof detailed technical legislation giving access to industry and other stakeholders to inform and influence theamendments at an early stage.

Harmonisation of Weekend Bans: the Need for 24/7 Transport Infrastructure

The prohibition of heavy goods vehicles in many EU countries at weekends and on public holidays is along-standing irritant to theUK international haulier. It causes unnecessary peaks in journeys and is at oddswith economies that operate on a 24 hours a day/seven days a week basis. Following an attempt to extendan existing ban discriminatorily to foreign vehicles by the French Government in 1998 the EuropeanCommission proposed a directive harmonising the criteria by which future bans could be set and requiringtheir pre-notification. Member states with existing bans in place proved reluctant to accept this and thedirective has stalled in the Transport Council. Making the best use of the existing infrastructure will becomea more pressing policy approach as road congestion grows in the future. A key role for the Commissionshould be to monitor congestion at an EU level and discourage restrictions on the main European routes(E routes).

The Commission should highlight the need for continuous access to the road network as part of itspromotion of the importance of logistics to European economic growth.

The Committee should conclude that access to the main European road network should be available at all timesto maximise the use of existing infrastructure and should encourage the Commission to attempt again aharmonisation and curtailment of weekend bans on heavy goods vehicle movements.

Action in the Event of Blockades: Keeping International Trade Arteries Open

Disruption to the free movement of road vehicles, trains, ferries and aircraft is a common tactic employedby dissatisfied groups, particularly in France. The extensive and lengthy blockades of parts of the Frenchroad and rail network by striking hauliers in 1998 caused particular hardship for British drivers and washighly disruptive for many British businesses. Despite repeated requests for the Commission to enforce therights for the free movement of goods in another member state the Commission proved reluctant to actdecisively. At the time FTA called on the Commission to designate the network of E routes as immune fromthis form of disruption, given the high proportion of international traYc that use them and their importanceto provision of eYcient logistics in the European Union.

The Committee should conclude that the Commission should defend robustly this founding principle of theEuropean Treaty and take rapid and decisive action against member states who fail to keep vital infrastructureopen for international traYc.

Harmonisation of Fuel Duties: Ensuring a Consistent and Even-Handed Approach to Taxation

The existence of wide disparities in the level of diesel duty taxation across the EU has created an unstableUK logistics market in whichUK-based road transport operatorsmust compete with foreign operators whohave a significantly lower cost base by virtue of the lower fuel duty they pay. The annual cost of fuel for a40 tonne articulated vehicle in the UK in October 2003 was £28,221. This compares to £18,758 in theNetherlands, £18,716 in France and £17,000 in Spain. The high price of diesel in the UK is the main factorcontributing to overall vehicle operating costs which are 20% higher than in France and 4% higher than inthe Netherlands, according to the most recent FTA survey of EU operating costs.

The Commission’s 2002 proposals for a gradual harmonisation of diesel duty rates for commercialvehicles recognised the competitive distortions created by member states such as the UK setting diesel dutyrates in isolation from levels applied elsewhere in the EU. The rejection of these proposals was a major setback for the UK freight transport industry and leaves businesses exposed to predatory pricing from lowercost foreign operators.

The introduction of lorry road user charging in the UK and the development of a charging frameworkby the Commission oVers the possibility of a new way to tackle the competitive distortion of high fuel dutyfaced by UK hauliers. However, a more equitable tax regime will be achieved only if UK diesel duty isreduced to levels paid by operators elsewhere in the EU.

Even if the Government can meet its 2006 target date, lorry road user charging could be up to three yearsaway. In the meantime the UK logistics industry continues to steadily lose market share on its domestic andinternational routes. In the last three years there has been a fourfold increase in the number of foreign lorriesundertaking domestic work in the UK and the market share of foreign lorries on UK accompaniedinternational work has risen from 65% to 73%.24

24 Department for Transport, Roads Goods Vehicles Travelling to Mainland Europe: Q3 2003.



The Committee should conclude that the Commission should set a framework for road freight taxation whichensures a consistent approach to setting duty rates and charge throughout the EU in which levels of taxes andcharges converge over time.

Future Planning

The European Commission has a unique role of the as initiator of legislation and collator of memberstates’ actions. FTA believes that there are five areas where the European Commission can, and should,exercise its powers of law making and enforcement and information gathering to assist the development ofeYcient logistics services in an expanded European market.

Identifying the trends in manufacturing location and future origins and destinations of goods

Over the next 10 years, trends should be identified in manufacturing location and future origins anddestinations of goods so as to inform long term planning and investment decisions by industry, logisticsproviders, rail freight undertakings and infrastructure owners. Demand for freight transport services is adirect result of the need to transport goods from origin to consumer. The Commission is uniquely placedto collate this information and develop a high quality planning resource for use by all parties involved.

Assessing the costs and impact of congested infrastructure and journey time on the eYciency of the singlemarket and identifying investment priorities

The cost of congestion will become more significant in the next 10 years. The Commission can uniquelyidentify and target resources towards tackling chronic bottlenecks, particularly in transit countries.

The Commission must be the champion of sustaining modal choice for freight operators and consignors.However, this need not be at the expense of supply chain eYciency. After two years of lacklustre growth in2002 and 2003, the Euro area economy is expected to grow at an average annual rate of 2.7% between 2004and 2010, with trade increasing at 6% per year.25 Industry will need to make best use of all transport modesif it is to eVectively service this growth in activity. The logistics sector will naturally gravitate towards aspread of modal use which achieves the best blend of cost and journey time reliability. To do this it must beable to assess the performance of eachmode using common standards and be able tomove freight seamlesslybetween modes to achieve the optimal supply chain configuration.

Removing barriers to the movement of labour into transport jobs

Transport generally is suVering a chronic shortage of skilled labour and productivity of many employeeswill be dramatically reduced by the introduction of working time controls to all modes of transport. TheCommission needs to ensure that licensing legislation does not unduly inhibit the movement of labour intotransport, provided safety standards are observed.

Liberalising restrictive markets and residual cartelised practices

The Commission needs to complete the work of creating a single market for goods transport in all modes.The railways, deep sea container shipping and air cargo continue to suVer from residual protectionistmeasures which inhibit their eYciency. In nearly all cases work is already under-way but the task ofcompletion is urgent and must maintain a high priority in the Competition Directorate’s work programme.

Timely and eVective use of technology to improve safety and environmental performance and operatingeYciency

As demonstrated by the digital tachograph, and possibly by the development of common road usercharging technology, the Commission urgently needs to establish a process for the timely adoption of newtechnologies in transport. It is crucial that where possible the Commission avoids technical prescription inits regulation and concentrates its eVort on producing objective-focused legislation in the form offrameworks and targets that allow industry to decide how best to meet the requirements.

Where highly detailed specifications are required, the Commission needs to protect this from arbitraryscrutiny and amendment whilst protecting transparency and accountability.

25 National Institute Economic Review, October 2003.



Conclusion

The role of the European Commission in developing beneficial and economically eYcient transportpolicies is central to the success of the Europeanmarket. The slow progress recently made and the challengesahead, in particular from rising congestion in all modes, demand a new and revitalised approach. TheCommission should accept and understand the vital contribution that logistics makes to the functioning ofthe single market and direct its eVorts towards maximising operational and economic eYciency withinharmonised standards for safety and environmental performance.

January 2004

Memorandum by BAA plc (EU 08)

1. BAA plc is the owner, operator and developer of seven airports in the UK (Heathrow, Gatwick,Stansted, Glasgow, Edinburgh, Aberdeen and Southampton) and we also operate and have an investmentstake in Naples airport. BAA’s business is increasingly aVected by policy and legislation arising under theauspices of the European Union rather than the United Kingdom. For this reason, we welcome theTransport Committee’s inquiry.

2. BAA’s submission is in two parts. Firstly, we comment on the European Union’s competence withrespect to aviation matters. Secondly, we set out our views on the specific issue of the negotiations betweenthe European Union and the United States of America on air services between the world’s two largestaviation markets.

European Union Competence in Respect to Air Transport Matters

3. Aviation is a global transport industry, which by its international nature requires agreements,standards and processes which transcend national boundaries and national competence. However, it is alsoan industry which has highly-localised impacts and requirements, so in many areas of policy it is entirelyappropriate for national or sub-national competence to apply.

4. In areas where standards, agreements and processes transcend national boundaries, it is oftenappropriate for the European Union to take responsibility for initiating policy and legislation covering airtransport. BAA recognises andwelcomes the competence of the EuropeanUnion in relation to internationalnegotiations on aircraft noise and emissions standards, for instance, and on EU-wide noise and emissionspolicies. BAA looks to Europe to provide a mechanism for bringing intra-EU aviation into the EuropeanEmissions Trading Scheme, so that air transport can make its contribution to delivering the emissionstargets set out in the Kyoto Protocol on climate change. BAA particularly welcomes the UKGovernment’sclear commitment to use its Presidency of the European Union in 2005 to bring intra-EU aviation withinthe European Emissions Trading Scheme.

5. BAA also welcomes policies designed to liberalise intra-EU civil aviation, which has delivered majorbenefits to consumers and to the industry as awhole. Furthermore, the current pan-Europeanwork to createa “single European sky” should deliver benefits in the medium and long term, and BAA recognises theimportant role of the European Union in delivering this.

6. BAAwouldwant tomention threemajor areas of national competencewhichwe believe should remainwithin the jurisdiction of national Governments. First and most obviously, national Governments shouldcontinue to take responsibility for major decisions relating to the extent and location of expanding airportcapacity in the national interest. Second, national and sub-national Government should remain responsiblefor implementing local solutions to the local social and environmental impacts from air transport, includingissues such as compensation, noisemitigation, surface transport access, planning, flight paths and other suchissues. Third, there should be a continuing role, at least for the moment, for national Governments in theagreement and allocation of traYc rights in the bilateral air service agreements between their nations andnon-EU countries.

7. While BAA recognises the legitimacy of the European Union to formulate policy on air transport, weare concerned that the tone of recent European air transport policy reflects a presumption against airtransport and that the practice of European legislators is increasingly to apply policies to air transport whichthey do not seek to apply to other forms of public transport.

European air transport policy

8. BAA concurs with the views expressed by ACI Europe, the association representing the continent’sairports, which has commented as follows:

“The European airport industry fundamentally objects to the overall goal of the EuropeanCommission’s White Paper to redistribute the proportion of usage amongst the transport modes,notably shifting traYc away from air transport towards rail transport. We consider that a policyaimed solely at changing the modal split is inappropriate and undesirable”.



BAA believes that this presumption against air transport is unjustified and is not supported by clearevidence that it is desirable.

9. ACI Europe noted the European Commission’s intention to open a debate on the future of airports.This initiativemay prove to be a usefulmeans of devising ways to enhance the use of existing airport capacityand to identify what and where new airport infrastructure is required. However, it is important to respectthe principle of subsidiarity, so that the EUMember States are fully involved in developing an appropriatepolicy for their own airport capacity needs. At present, the Commission’s position on airport capacityappears to be unclear. The White Paper reads: “Today the stated priority is thus to limit the constructionof new airports . . .”, while clearly emphasising on the previous page that: “ . . .Europe will not be able tocope without new airport infrastructure . . .”

10. Despite those concerns, ACI Europe was able to support the majority of the policy initiatives for airtransport outlined in the White Paper, and BAA concurs with ACI Europe’s views.

The Practice of European Legislators

11. Legislation in the European Union is a product of a process involving the Council of Ministers, theEuropean Parliament and the European Commission. Each of these parts, and particularly the latter two,is able to initiate proposals or draft amendments to European legislation. In practice, there are instanceswhere legislation has been initiated or amended without a full understanding of the issues and implications.

12. BAA would draw the Committee’s attention to three issues associated with European legislation onair transport matters:

— First, there is a temptation to over-legislate or to “tinker” with existing legislation. An example ofthis is the European Commission’s current work on a revision to the Ground Handling Directive.The costs incurred by the industry in reviewing the existing regulation and discussing a newregulation are likely to outweigh the potential benefits. The European Commission’s eVorts mightbe better directed towards ensuring rapid adoption of and compliance with existing EU legislationacross the whole Community.

— Second, “one-size-fits-all” legislation sometimes cannot successfully address issues at the largestand/or most congested airports. This is illustrated by the diYculties in revising the regulationcovering slot allocation, where the need to allow flexibility through secondary trading at airportssuch as Heathrow was almost prohibited through the stance taken by countries without majorcongestion problems.

— Finally, it is important that the European Commission is staVed by oYcials of a high calibre whotake time to understand the issues through close dialogue with the aviation industry and otherstakeholders. There have been occasions when oYcials have held onto entrenched views despiteevidence to the contrary, such as elements of legislation suggested in relation to air travel forpassengers with reduced mobility.

EU-US Negotiations on Air Services

13. BAA continues to support the general principle of liberalising international air services. Theliberalisation of air services expands consumer choice and creates more competitive markets for air travel.It is clear thatUKconsumers andmanyUK industries would benefit from further liberalisation of air serviceagreements. In addition, BAA’s long term prospects are inextricably linked to the future success of UKairlines globally. The civil aviation industry needs liberalisation.

14. The UK has, by a considerable margin, the highest volume of passengers of any European countrytravelling to and from the US. The period since the last major changes were made to the Bermuda IIagreement has seenUK airlines continue to grow their share of the UK-USmarket. BAAhas both benefitedfrom, and contributed to, the success of the UK air transport industry.

15. We are therefore pleased that European Governments gave a mandate to the European Commissionto negotiate with the United States of America. This appears the most likely route towards a fully liberalair service agreement. We believe that an EU-US agreement on the right terms would lead to improved airservices and a wider choice for travellers.

16. The “right terms” include going beyond the United States’ “Open Skies” model which, in particular,retains limits on ownership and control of airlines. It also prevents non-US airlines from operating“cabotage” services in the US. However, this restriction might be overcome by tackling the ownership andcontrol issue. Such changes will require amendments to US legislation and, even if achievable, this will taketime. The only successful route to full liberalisation appears to be a carefully-planned phased approach, butwith dates set for each phase at the start of the process.

17. BAA would like to bring to the Committee’s attention the challenges for the operation of Heathrowand Gatwick of a more liberal air service agreement. The Committee will be familiar with the capacitypressures that already exist at both Heathrow and Gatwick, and the extent of the unmet demand in busyperiods at both airports. Experience has shown that the process of liberalisation typically stimulates



additional demand. Although BAAwould look forward to meeting these challenges, the practical obstaclesthat will need to be overcome to implement any further liberalisation of air services, prior to a fifth terminalat Heathrow, must be fully considered and reflected in any agreement.

BAA plc

January 2004

Supplementary memorandum by BAA plc (EU 08A)

In May 2002, BAA Scotland announced the establishment of a £60 million, five-year route developmentfund, providing financial incentives from BAA to airlines considering launching new direct internationalservices to and from BAA Scotland’s Aberdeen, Edinburgh and Glasgow Airports.

This long-term funding programme was devised in line with BAA Scotland’s commitment to share thecommercial risks, and significant costs, faced by airlines launching new international services.

While we continue to support important services between the Highlands and Islands and the central belt,BAA Scotland is reluctant to provide financial support to airlines wishing to serve the commercially-competitive and busy Scotland-London market. While this stance may frustrate some airlines who wouldlike additional finance, it does reflect Scotland’s aspirations to develop strong, direct internationalconnections, thereby reducing travellers’ reliance on the London airports.

In March 2004, BAA Scotland announced an extension of the scheme, with a further £35 millioncommitted to the existing fund. The company now spends around £14 million a year developing new routesto Scotland’s main airports. This investment, like BAA’s capital spend, costs the taxpayer nothing.

The BAA Scotland route development fund is distributed to airlines in the form of discounted airportcharges and marketing support, both financial and in-kind, for example through the provision of keyadvertising sites at airports.

Individual deals are commercially sensitive, although discounts of 75% in year one through to 20% in yearthree indicate the extent to which BAA will support new routes. Marketing support varies, though this issignificant.

It is important to recognise that only airlines can make the final decision on which airports they fly toand from, although BAA Scotland is committed, through this extensive package of funding, to creating theconditions in which airlines can operate commercially-successful air services from Scotland.

To date, BAA’s route development fund has supported some 30 new routes. However, inMay 2004, DuoAirways, which had benefited from BAA’s support, went into administration and six international serviceswere lost. BAA is currently examining the opportunities to replace the Duo services.

Scottish Executive Air Route Development Fund

In November 2002, First Minister Jack McConnell MSP announced details of a £6.8 million ScottishExecutive air route development fund, to support new routes generating economic benefit for Scotland.

BAAScotland’s understanding is that this fund has supported around 13 routes from Scotland’s airports,including those not in BAA’s ownership and those operated by Duo.

The air route development fund is administered by Scottish Enterprise on behalf of the Scottish Executive.The principal contact is Mary McLaughlin, director of transport, on 0141 248 2700 ormary.mclaughlinwscotent.co.uk.

May 2004

Memorandum by Liverpool John Lennon Airport (EU 09)

European Union Competence and Transport

Liverpool John Lennon Airport presently serves 3 million passengers per annum and is considered to beone of Europe’s fastest-growing airports.

We are in a market whereby many of our primary customers, the airlines, have already purchased orleased their aircraft assets for many years to come. They then have the flexibility to place these assets at awide variety of European airports and they take into account several factors in making those decisions.

Thanks to the liberalisation eVorts of the EuropeanCommission and themember states, (and in particularwith the so-called “Third Package”), the airlines now view Europe much more as a single market. We havemoved on from the days when the only agenda was the protection of the national flag carrier by individualmember states. Nowadays, themarket is internationallymobile betweenmember states and competition hasled to the emergence and continuous development of the low cost sector.



Whilst the Committee has structured its inquiry by making particular reference to negotiations with theUS on aviation issues, it is not this issue that will be the most important issue for many of the Europeanregions. Most European regions are seeking to compete for the fastest-growing market, namely point-to-point intra-European traYc and not for the transatlantic business.

In order to eVectively compete for the intra-EU business with our European airport and regionalcounterparts, it is crucial that we at Liverpool John Lennon Airport have a level playing field on which todo so. As the operators increasingly strive for the lowest possible cost base in reaching their decisions onwhere to base aircraft, the ability of an airport to oVer a competitive business proposals has become moreimportant and for these airline decisions, all other factors across the market should be neutral, whereverpossible. When it is not neutral, there is in eVect a distortion of the market.

When an airport or a region competes for a single-based aircraft from an airline, it is eVectively competingon two levels. First there is the business for the airport, in terms of aeronautical income and non-aeronautical per passenger income, and second there is the strategic economic benefit the aircraft generatesfor the region of that airport, which equates to about 40 million euros contribution to the GDP per aircraft.

It is essential to both John Lennon Airport and the region for which we serve, that we develop a fair andequitable status alongside our European airport competitors. This is not the case at present.

Specifically we would like to see:

(a) Slot-ring-fencing provided in the UK in a similar way to that has been adopted within other EUmember states. For example at Paris Orly, some 30% of slots are ring-fenced for domestic servicesinto Paris for both point-to-point and connecting services. If Liverpool is to be linked as a city toother cities of the world, the preference is that we be connected over Heathrow and not over aEuropean hub. We do not need to wait for additional runway capacity at Heathrow to achievethis. As and when slots become available at Heathrow, they should be ring-fenced for regional airaccess. For too long our city and the region of Merseyside has been ignored by our airlines whoalways have something better to do commercially. If we are to prioritise the needs of the region,slots into Heathrow for connecting flights should be prioritised. No other south-east airports oVerthese connections.

(b) Public Services Obligations—We welcome the views expressed in the White Paper on PSOs andwould seek that these be applied for economic reasons as well as for reasons of social exclusion.Objective One regions have been identified as areas targeted for economic regeneration and PSOscould be very eVective to help achieve this objective. Some routes in France for example, aresupported by PSOs even when they are used by over 300,000 passengers per annum. Again acommon application of PSO rules would assist in developing the level playing field we strive for.

(c) Taxation—The Air Passenger Duty generates approximately £800 million of income to the UKbut no one has quantified the cost of this in terms of loss of business. We know at Liverpool, theloss of one particular operator which had earmarked two-based aircraft would have generatedapproximately 80million euros to our region’sGDP, yet we only account for £7million of the £800million generated by the APD. In relation to the question put by the Committee, what is requiredonce again, is the level playing field across the European ensuring there is no such marketdistortion in the future. This principle equally applies to any other taxation proposals.

As for as the question of US negotiations is concerned, all we are concerned with is that any customerswishing to book into Liverpool cannot at present through any widely used Computer Reservation Systems.CRS systems are the tool agents used in identifying the most suitable flights, and without direct access,Liverpool is not as accessible as it would wish to be. The American Airlines CRS system for example,identifies a connection over Dublin and the Isle of Man as the preferred routing, entailing a stopover in theIsle ofMan. BritishAirways identify a transatlantic flight toHeathrow followed by a bus operation to Lutonthen a flight to the Isle of Man before connecting to Liverpool.

Invariably however, any search for flights to Liverpool simply generate the response that “no flights areavailable”. This result is commonplace not only in the US, and it would be naıve to think that thegeographical knowledge of users outside of the UK extends to the understanding that they should thinkManchester when wanting to purchase Liverpool. After all we in the UK do not think to fly to Dusseldorfwhenwewant to fly toCologne, yet it is a closer city pairing thanManchester andLiverpool.More bookingsare made to Frankfurt with connecting flights to Cologne than people booking Dusseldorf and then usingsurface transport to Cologne.

Liverpool will be an increasingly attractive city brand thanks to the Capital of Culture nomination andwhen an operator does wish to oVer direct connections, then it should be allowed to do so, and so long asthis is not jeopardised by any EU:US agreement, then we would not have a concern with that specific issue.However, the need for indirect connections is a much more important issue at this time for Liverpool andthe Merseyside region.

I thank you for enabling us to be consulted on these important issues.

31 December 2003



Memorandum by Railfuture (EU 10)

We do not propose to submit a full response to this inquiry. Our view is primarily that the influence ofthe European Union on transport policy in the UK has generally been a positive one, although there areareas where the EU has not got it right, or where more should be done to assist the role of the railways inimproving transport provision across the European Union.

The Committee’s Press Notice, however, refers to three subjects to which they intend making particularreference. We would like to submit observations on two of these.

1. The “Euro-vignette” Proposals for Road User Charging

Wewelcome these plans in principle. Anymove to charging for road use on an as-you-go rather than flat-rate basis, has to be a move in the right direction. We support the distance-based option, and recognise theneed to make compensating changes in other aspects of taxation of goods vehicles. We would hope that indue course this system can provide a pilot for a charging system for all road vehicles.

We are aware of a recent Dept for Transport consultation on a Commission Directive on (inter alia)Interoperability of Electronic Road Charging systems. Whilst there are clearly long-term advantages ofEurope-wide interoperability, we trust that pursuit of this aim will not be allowed to delay introduction ofsuch systems in member countries. In particular there seems no reason to delay introduction of paper-basedschemes on themodel of the London congestion charge in the interim, whilst allowing the possibility of theirreplacement with more sophisticated technology in due course. In this connection, the Commission’sreported stipulation that environmental and congestion costs cannot be charged is unacceptable andcontrary to their policy of fully internalising social and environmental costs. These costs must be charged.

Two further aspects of the proposals (as recently revealed) give us cause for concern. First, it is reportedthat the Commission envisages charges applying only on Trans-European Network roads. This would bedisastrous, and we understand HMG are objecting—rightly so. Not only would this be far more diYcult toarrange, requiring separate technology instead of a simple add-on to the tachograph, but more seriously, itwill inevitably result in an unwelcome diversion of heavy vehicles onto unsuitable secondary roads. Thisobjection will apply equally if charging were applied to motorways or any other specific category. The newM6-toll may well demonstrate this. Any charging system must be area-wide.

The second area of concern is the reported stipulation that the funds raised be earmarked for roadimprovement. In our view such hypothecation should not be to roads alone, but to transport in general.Otherwise it risks distorting policy choices betweenmodes simply because of the availability of hypothecatedfunds. It is right that the money should be ploughed back into transport improvements—indeed this maybe essential for public acceptability, but the priorities of individual states—or regions should be allowed forin deciding how and on which modes to spend the funds raised. To do otherwise would seem to go againstthe EU’s own environmental and sustainable transport policies post Kyoto, and also the principles ofsubsidiarity.

We would remind EU member states of their stated support for the Kyoto Agreement and theircommitment to reductions in pollution levels by 2010. It would be more sustainable if such funds were usedprimarily for railway infrastructure and other surface public transport improvements.

2. Aviation Agreements

The Press Notice refers specifically to negotiations with the US. In our view, high on the agenda of anyEU-US aviation negotiations ought to be the need to end the present overgenerous taxation regime enjoyedby the aviation industry, especially in relation to fuel tax. This would of course require a common EUposition to be agreed in advance of any Transatlantic negotiations.

The Select Committee conducted a full inquiry into Aviation in the UK in 2002, to which we submitteda copy of our earlier submission to the Department on the same subject. Sadly we found the Report on thatinquiry extremely disappointing. Nor does the White Paper on Aviation (just out) give suYcient weight tothe need to rein in the headlong growth of air travel through taxation or other means.

First, the Committee took as given that “demand (for aviation) must be met”.We disagree. It is not clearhow this diVers from “predict and provide”, which their report rejects. Second, the proposal to break upthe “BAA monopoly” and allow London’s airports to compete, suggests that none of the lessons of earliertransport legislation (Bus deregulation 1985–86, Rail fragmentation 1993–94) have been learnt, and thesame mistakes are about to be made in aviation. Any hope of a rational, planned solution would be totallylost. Equally appalling is the suggestion of reinstating the Heathrow-Gatwick helicopter link. This wasaccepted specifically as a stopgap measure pending the opening of the M25, and its reinstatement wouldcause uproar across Surrey. The option of a direct rail link (eg via Olympia) was not even considered.

Evenmore perversely, it appears that European regulations permit the protection of slots for feeder flightsto/from regional centres which could perfectly well be served by rail alternatives (as other member statesdo), but not for oVshore locations such as the Isle of Man or Channel Isles which cannot be so served, but



which happen to be outside the EU. If we have understood this correctly, then this last point is one whichHMGneeds to raise in Brussels, as it is self-evidently the reverse of a logical situation! This at least is relevantto the present inquiry.

If further evidence were needed of the need to rein in the demands of the aviation industry, it was providedby recent statements from BA and others to the eVect that expansion of Stansted would not satisfy theirrequirements anyway. Only demolishing yet another swathe of West London to accommodate a furtherrunway at Heathrow (a horrifying prospect) will do, it seems. Regrettably the White Paper has not ruledthis out, although it does give some encouragement to the need to shift emphasis away from the South Easttowards the regions. How much better it would have been to give more encouragement to developing high-speed rail as an alternative to domestic air routes—for example by redressing the imbalance between highrail fares and low air fares. We believe that the scope for high-speed railways to reduce demand for short-haul flights has been overlooked in the UK, while elsewhere in mainland Europe these new railways are atleast keeping down demand for more air transport provision and reducing it on short journeys. We urge arethink in the UK.

19 December 2003

Memorandum by the European and External Relations Committee of the Scottish Parliament (EU 11)

European Union Competence and Transport

1. Thank you for your invitation to submit evidence to the above-mentioned inquiry being conducted byyour committee. We welcome this inquiry as we believe that tackling transport issues will form one of thegreatest challenges over the coming decades. We recognise also the potential role of the EU and of nationalauthorities, both in legislative and non-legislative terms, in tackling these challenges.

2. We recognise under the Scotland Act 1998 and associated concordats that there is a role both for theUKParliament and the Scottish Parliament in relation to the negotiation, transposition and implementationof Community legislation, including that in the transport field.

3. Your committee’s inquiry is far-reaching and we will read with interest its findings, which we hope willbe disseminated widely. At this stage, however, wewish to bring two issues to the attention of yourMembersthat we feel are intrinsic to any consideration of EU competences in the transport field. These areparticularly relevant to your expressed desire to consider the inter-relationship between transport mattersand the single Europeanmarket, which as a creation should be designed to both result in a level playing fieldacross the EU whilst also recognising, with appropriate safeguards, the diVerences in transportinfrastructure, population density and geographic conditions across the EU.

Euro Vignette

4. At a recent meeting of the Scottish Parliament’s European and External Relations Committee, wediscussed a document issued in the EU (EC Reference 12198/03). This referred to transit arrangements forHeavy Goods Vehicles (HGV) in Austria. One of ourMembers, JohnHomeRobertsonMSP (Labour, EastLothian), commented on his personal experience of continental truck journeys, which included having topay for transit across Austria.

5. He reported that Scottish road hauliers have strong feelings about the increasing number of trucksfrom other EUmember states carrying goods on UK roads without contributing to road costs through UKfuel taxation, because they use diesel purchased at mainland European ferry ports. He highlighted the“vignette” system, which enables Austria to charge such transit traYc for the use of Austrian roads, and inhis view, there must be a powerful case for a similar arrangement to address the same problem in the UK.

6. I understand that this matter has been considered in passing by the UKGovernment who reported tothe then House of Commons Select Committee on Environment, Transport and Regional AVairs in March20001 that, “An attempt was made to ensure that foreign vehicles made a contribution more or lessequivalent to the VED [Vehicle Excise Duty] contribution which British-based vehicles would have tomake”, but that, “there are restrictions on what you can do under European law because there are vignettesacross Europe and there is a maximum figure. The maximum figure is £760 a year. If you work that out thatis nowhere near the top of the range VED”. During these discussions, Mr DonohoeMP suggested that thisproposal would at least be a start.

7. At this stage, this Committee would support the calls by Scottish road hauliers, the Road HaulageAssociation and others for the UK Government to reconsider the principle of a “Brit disc” vignette typeproposal, provided it helped to level the playing field between UK and European hauliers and could be setup in a way which was consistent with Community law and cost-eVective to administer.



Public Service Obligations and Remote, Lifeline Air Services

8. The second issue that we wish to bring to your attention is that of Public Service Obligations (PSOs)and lifeline Scottish air routes. A study by the Highlands and Islands Strategic Transport Partnership(HITRANS) in May 2002 concluded that there is a compelling case on social and economic grounds forintroducing Public Service Obligations to protect lifeline Scottish air routes.

9. This study showed that PSOs are used widely and eVectively in many European countries; that theyresult in cheaper travel for remote communities; and that it is perfectly legal for the UK Government toapprove PSOs, both to assist island and rural mainland communities and to secure slots at congested hubair centres, such as the major London airports.

10. The study found clear evidence to suggest that other EU countries have a stronger commitment toair services for remote and island communities than exists within Scotland. It identified a number of routesin Scotland—linking mainland population centres with island communities—which, if the criteria adoptedbyGovernments in other countries were applied, would clearly be eligible for PSO status and public subsidy.

11. France is an example where political pressure applied by regional authorities to establish and sustainair services, has resulted in widespread adoption of the PSO mechanism by the French Government.Portugal, Ireland and Norway are also more active than the UK in obliging carriers to maintain very highminimum levels of frequency; use fast pressurised aircraft; and set aVordable maximum fares.

12. The Governments in France, Italy and Germany reserve slots at their capacity constrained capitalcity airports for internal air services to their remote regions. Paris Orly, Frankfurt, Berlin, Rome andMilanall have reserved slots. The study suggests that the case is equally strong on socio-economic grounds forreserving slots at Gatwick for the Inverness service, and is entirely in accordance with Article 9 of the EU’sregulations.

13. The study also shows that fares are higher on Scottish routes than on comparable routes in other EUcountries. For example, Aberdeen to Sumburgh; Glasgow to Benbecula; Inverness to Stornoway; Invernessto Kirkwall; and Edinburgh to Wick have higher fares than comparable Norwegian, Irish French andSpanish routes, where PSOs are in place.

14. As a Committee, we would urge you to support our view that there needs to be a reconsideration ofeVorts to secure a greater use, over longer periods, of PSOs in Scotland to secure and protect lifeline Scottishair routes.

9 January 2003

Memorandum by The Royal Society for the Protection of Birds (EU 12)


1. Executive Summary

1.1 In this Memorandum, the RSPB sets out the historical background which establishes the current EUcompetence on transport, from the Treaty of Rome through to the publication of theWhite Paper Europeantransport policy for 2010: time to decide. We also briefly set out the responsibilities of the European Union(EU) in relation to the integration of environmental issues into transport policy.

1.2 We have discussed in further detail three specific areas of EU transport policy, namely, trans-European Transport Networks (TEN-T), the Eurovignette directive and aviation.

1.3 We are concerned about a number of issues in relation to the proposed revision of the TEN-TGuidelines. One of our key concerns is the possible damage caused by the TEN-T, and the priority projectsin particular, to sites proposed or designated as Natura 2000 sites under the EU Birds and HabitatsDirectives. We also believe that, in developing this area of transport policy, there appears to have been littleconsideration to other competences, such as those set out on Article 130r (Environment) of the EC Treaty.

1.4 In relation to the proposed amendment to the Eurovignette directive, we believe that there are aspectsof the proposal that may contradict the principle of subsidiarity. We also believe that the proposal couldsubsidise and exacerbate the problems associated with road haulage, by reserving revenue raised fromcharges for additional development of the road sector.

1.5 With regards to aviation, we believe the EU should take action to curb aviation emissions. In theimmediate future, the EU should introduce an emissions charge and in the medium-term, we believe the EUshould consider including aviation emissions in the EU Emissions Trading Scheme from 2008.



2. Introduction

2.1 The RSPB considers that human-induced climate change poses the biggest long-term threat to globalbiodiversity. We therefore support policies and measures that reduce the anthropogenic greenhouse gasemissions that cause climate change. The transport sector currently accounts for over 20% of greenhousegas emissions in the United Kingdom and in the European Union (EU).

2.2 Transport can have a number of other direct eVects on birds, biodiversity, and the environment,including direct land take, habitat fragmentation, noise, motion and light disturbance, bird and animalstrike and local air pollution. Each of these eVects is important. Together, they mean that sustainabletransport policy is of great significance for birds, biodiversity and the wider environment, as well as fordelivering social and economic benefits.

3. Background to EU Transport Policy

3.1 The task of the EC is set out in Article 2 of the EC Treaty, including promoting throughout theCommunity a harmonious, balanced and sustainable development of economic activities and a high levelof protection and improvement of the quality of the environment. The tasks of the EC represent broad fieldsof competence. In order to fulfil these tasks, the activities of the EC, as set out in Article 3, include commonpolicies in the spheres of transport and the environment.

3.2 The EC Treaty contains a number of further articles defining specific policy areas, includingtransport. These articles define the scope of EC competence in policymaking.

3.3 The transport chapter (Title IV and referred to as the Common Transport Policy) remains essentiallyunchanged since 1957, and can be summarised as follows:

(i) The Community is to have common rules governing international transport, and conditions areto be agreed under which non-resident carriers can operate in all Member States.

(ii) Measures are to be taken to improve transport safety.

(iii) State aids are allowed for the purposes of “coordination of transport” or to fulfil public serviceobligations.

(iv) Discriminatory charges or other conditions (in eVect against foreign carriers) are generallyforbidden.

3.4 The exercise of the various powers by the EC is governed by a number of operating principles. Mostimportant amongst these are the subsidiarity and proportionality principles.

3.5 The principle of subsidiarity means that EU decisions must be taken as closely as possible to thecitizen. In other words, the EU does not take action unless EU action is more eVective than action taken atnational, regional or local level. For example, setting minimum standards for products to be sold in thesingle market requires community action, but setting parking standards for housing probably does not,because diVerent standards in diVerent countries do not cause obvious problems in the latter case, and canbetter reflect local circumstances.

3.6 The principle of proportionality principle dictates that EC action should be proportionate to the issueat hand. Framework legislation, minimum standards and mutual recognition of national standards shouldalso be preferred where possible above more detailed EC rules.

3.7 With regards to environmental protection, the ECdid not acquire explicit Treaty responsibilities untilthe Single European Act took eVect in 1987. These responsibilities and powers have subsequently beenextended under the Maastricht and Amsterdam Treaties. In particular, these treaties have established therequirement for environmental considerations to be integrated into all other areas of EC policymaking,including transport.

3.8 At the European Council meeting in Gothenburg in 2001, the need for a sustainable developmentstrategy was discussed. Four main areas for action were highlighted, these were, climate change, transport,public health and natural resources. In relation to transport, a “significant decoupling” of transport growthand Gross Domestic Product (GDP) growth was called for.

3.9 In September 2001, the European Commission published theWhite Paper European transport policyfor 2010: time to decide. The overall aim of the White Paper is to strike a balance between economicdevelopment and the quality and safety demands made by society in order to develop a modern, sustainabletransport system. It tackles a number of transport related issues including rebalancing the diVerent modesof transport, tackling congestion problems and promotion of alternative fuels.

3.10 Therefore, there are general guides setting out of the limits of Community competence in transport,but these are not clear-cut, and so diVerences in interpretation can easily arise. These diVerences should bedealt with at a very early stage of the legislative cycle. A systematic approach, where objectives, trends andthe need for legislation are set out in Green andWhite Papers, then translated into legislative programmes,with built-in consultation of Member States and stakeholders is key to this process. Such a systematic and



transparent approach has in fact been set out under the Better Regulation initiative. However, there havebeen a number of examples in recent years that suggest that the Commission has attached insuYcientimportance to such matters.

4. Issues Relating to Specific EU Transport Policies

4.1 Trans-European Transport Network (TEN-T)

Article 129b of the EC Treaty requires the Community to “contribute to the establishment anddevelopment of trans-European networks (TENs) in the areas of transport, telecommunications and energyinfrastructures”. Community action is to “aim at promoting the interconnection and inter-operability ofnational networks as well as access to such networks” and shall take account of “the need to link island,landlocked and peripheral regions with the central regions of the Community”.

4.2 Decision No. 1692/96/EC established the guidelines for the development of the TENs for transport(TEN-T). A proposal is currently being considered which will amend this decision. This proposal includesa list of 29 priority projects. An Extended Impact Assessment was undertaken as part of the process ofdrafting the latest revision proposal.

4.3 The RSPB and the BirdLife partners are concerned about a number of issues in relation to the TEN-T revision proposal. In brief, our concerns are:

(i) The Extended Impact Assessment did not adequately consider environmental issues.

(ii) The assumption is made that in the future transport volumes will grow, thus investments areneeded to solve problems of congestion, bottlenecks and to provide better connections forperipheral areas. Demand management measures do not feature in any of the proposedamendments.

(iii) In the present European transport system, there are trade-oVs between the quantity and the qualityof the transport networks, which favour quantity. The proposal for revision had lost sight ofoverall needs and the possible alternatives to building, and focused on the increase of individualcapacities, through an extended list of 29 priority projects.

(iv) The process of choosing the priority projects was subject to political and economic influences,assuming a direct relationship between new investments and economic growth. The environmentalimpact of the priority projects, alone or in combination with others, have not been taken intoconsideration. One of our key concerns is the possible damage caused by the TEN-T, and thepriority projects in particular, to sites proposed or designated as Natura 2000 sites under the EUBirds and Habitats Directives. There is no clear mechanism to remove projects from this list if itis found that they have undesired and irreversible environmental impact.

(v) The Commission has developed some guidelines for Cost-Benefit Analysis, however, we believethese should be developed further, so that they include social and environmental costs and benefits,including an economic valuation of the ecosystem functions.

(vi) We believe the amount of money needed to invest in the new TEN-T priority projects could bemore usefully employed in other areas of EU’s economy, with a greater impact on the well beingof its citizens, and the proposed earmarking of Structural and Cohesion funds for priority projectsis not likely to bring such a result.

4.4 We are further concerned that the process for amending the TEN-TGuidelines has been particularlyconvoluted and lacking in transparency. In developing this area of transport policy, there appears to havebeen little consideration to other competences, such as those set out on Article 130r (Environment) of theEC Treaty.

4.5 The Eurovignette Directive

Certain aspects of road user charging are commonly agreed at the EU level for a number of reasons. Thisis because it is necessary to ensure that each Member State does not discriminate against foreign hauliersthrough road user charges or tolls, or excessively advantage their own hauliers through other taxation.

4.6 The objective of Directive 1999/62/EC (on the charging of heavy goods vehicles for the use of certaininfrastructures and known as the Eurovignette directive) is to harmonise levy systems—vehicle taxes, tollsand charges relating to the use of road infrastructure—and introduce fair mechanisms for charginginfrastructure costs to hauliers. TheDirective covers vehicle taxes, tolls and user charges imposed on vehiclesintended for the carriage of goods by road and having a maximum permissible gross laden weight of notless than 12 tonnes.

4.7 However, many Member States have been contemplating the introduction of some form of morecomprehensive road user charging, such that, a more sophisticated and flexible framework was required atthe European level. For example, the UK would like to introduce a charging scheme that would apply toall commercial vehicles over 3.5 tonnes using the entire national road network, and for these charges to coverenvironmental costs, as well as the costs of the infrastructure.



4.8 In July 2003, the European Commission adopted a proposal on charging heavy goods vehicles to useEurope’s principal roads. This proposal will amend Directive 1999/62/EC.

4.9 There are three aspects of the proposed amendments that are of concern to us, these are:

(i) User charges and tolls may be limited to roads that form part of the TEN-T. Charges on roads indirect competition with the TEN-T can only be made with the specific permission of theCommission.

(ii) The external costs of accidents may be included, but environmental and congestion costs cannotbe charged for.

(iii) Revenues from user charges must be earmarked for the transport sector.

4.10 The Eurovignette proposal allows road tolls and user charges to be applied in principle only to roadsforming part of the TEN-T (chargesmay be permitted to non-TEN-T roads but this is not clear at this stage).If this is the case, we believe that it could well encourage heavy goods traYc onto non-TEN-T roads wherethey can do greater damage. The Commission’s wish to be the arbiter on which non-TEN-T roads mayqualify for user charges may be in contradiction to the principle of subsidiarity. At the European Councilmeeting in Gothenburg in 2001, the need for the full internalisation of social and environmental costs wasreinforced. We feel that the failure of the Eurovignette proposal to provide for charging for environmentaland congestion costs contradicts the principles set out at Gothenburg.

4.11 The explanatory memorandum that accompanies the Eurovignette proposal makes it clear thatmoney from charges should generally be used for the sector from which the charge was raised. If this meansthat money from charges should be used to support non-road transport modes, and public transport inparticular, this would be sensible. Perversely, however, it could be interpreted that any revenue raised mustbe reserved for the road sector rather than the transport sector as a whole. If this is the case, we believe thatit is eVectively using external cost pricing to contribute to the development of the cause of the externalityand, thus, subsidising and exacerbating the problems associated with road haulage.

4.12 Aviation—Open Skies

Deregulation of the civil aviation sector is also a central plank of EC transport policy, under the generalheading of “Open Skies”. The Commission has been eVective in laying down common rules and gettinglegislation passed in this area, taking advantage of the potentially broad range of Community competencein this area. However, a number of Member States including the UK have guarded their right to negotiatebilateral agreements with third parties such as the US. By this means, they consider themselves to gainpreferential terms but, as a result of these arrangements, US carriers now enjoy far better access to theEuropean aviation market than vice versa.

4.13 However, a European Court of Justice ruling on 5 November 2002 (against the UK and seven otherMember States) confirmed the Commission’s argument that these arrangements were illegal, and that theCommunity did indeed have some implicit competence in this area, in the fields of airport landing slots,reservation systems, and intra-Community fares and rates, for the reasons outlined above. The Court alsoruled that such agreements were illegal, because they discriminated against carriers in other EU MemberStates. The Commission argues that other areas of competence, including safety and taxes and charges, havealso become Community competences by the same line of argument, and so a much stronger Commissioninvolvement in international negotiations can now be anticipated, with the US and elsewhere.

4.14 Aviation—Constraining demand

As the fastest growing source of greenhouse gas emissions, the EU has long recognised that aviationemissions need to be constrained and has repeatedly said so in the international negotiations on the ClimateChange Convention and the Kyoto Protocol. However, mainly due to pressure from successive USAdministrations, aviation emissions were excluded from the international treaties on climate change andincluded in the remit of the International Civil Aviation Organisation (ICAO). Whilst ICAO’s Committeeon Aviation Environmental Protection (CAEP) has proposed an “open” international emissions tradingscheme, it would take a decade or more, if ever, for such a scheme to come into operation.

4.15 In the interim, in line with policy statements by EU (including UK) ministers, we believe the EUshould take action to curb aviation emissions. In the immediate future, the EU should introduce anemissions charge which, unlike some other measures, would not breach the conditions of the ChicagoConvention which established ICAO or a host of Bilateral Air Service Agreements that, for example, bantaxation on fuel used for international aviation. In the medium term, the EU should consider includingaviation emissions in the EU Emissions Trading Scheme from 2008.



5. Conclusions

5.1 European competence on transport is defined in the ECTreaty although these are only general guidessetting out of the limits of Community competence and are not clear-cut. DiVerences in interpretation ofCommunity competence should be dealt with at a very early stage of the legislative cycle but this is notalways the case.

5.2 The RSPB believes that the proposed revision to the Eurovignette directive may be in contradictionto the principle of subsidiarity and may prove too restrictive for Member States that may wish to chargeheavy goods vehicles for using the entire road network, and for the environmental consequences of that use.

5.3 The TEN-T Guidelines revision proposals demonstrate that the current emphasis of EU TransportPolicy is still uponmodal shift and removal of bottlenecks. The RSPB believes that without eVective policieson demand management, there is a real possibility that this approach will lead to continuing growth intraYc, and continuing damage to the environment, both at a very high cost. This approach alsodemonstrates that the EU is still failing to fully integrate environmental policy into transport policy as setout in the Single European Act and the Maastricht and Amsterdam Treaties.

January 2004

Memorandum by Virgin Atlantic Airways Limited (EU 13)


Introduction

1. Virgin Atlantic welcomes the Committee’s decision to launch an inquiry into this important subject.The inquiry is timely as, in the aviation sector in particular, the European Commission is seeking to extendboth its powers and its influence. It is inevitable that the Commission will play a major role in the regulationof European air transport. However,Member States should ensure that the Commission’s involvement addsvalue to what is already in place. There is nothing to be gained, and much to be lost, from unnecessaryCommission intervention.

2. The Commission is likely to add most value in two areas. First, where it is taking action to promotecompetition by removing obstacles to the free movement of goods, services, persons and capital. In this wayit is most likely to contribute to the competitiveness of the European economy and to promoting social andeconomic welfare within Europe. Consumers, through the exercise of choice, are the most eVectiveregulators. Commission action should aim to help empower consumers to exercise those choices. Second,where there are issues or problems aVecting more than one member state, that do not respect nationalborders and that can only be eVectively dealt with by concerted action at a supra-national level or EU level.Many environmental issues would fall into this category. The area where the accretion of powers orresponsibilities should be most vigorously resisted is where the extension of competence becomes an end initself, not the achievement of some policy objectives of benefit to EU citizens.

3. The evidence in this Memorandum is confined to the air transport sector. It focuses in particular onEU/US air services negotiations, but also encompasses moves by the Commission to obtain mandates forair services negotiations with other countries and further intervention by the Commission in the areas ofconsumer rights, airport slots, air traYc services, safety and security. Each of these complex issues is coveredonly briefly. Virgin Atlantic would be pleased to provide more detailed briefing should the Committeerequire it.

4. It is essential, as the Commission increases its powers in the aviation sector, that the UKGovernmentremains alert to ensure that UK interests are protected. OtherMember States are certainly actively involvedin protecting the interests of their own stakeholders. There have been occasions when the UK industry hasfelt that the Department for Transport has been unnecessarily heavy-handed in the way it has chosen toimplement new EU legislation, in contrast to the attitude of some other Member States. The Departmentcould do even more to keep the industry informed about developments in Brussels.

Europe and Air Services Negotiations

EU/US Air Services Negotiations

5. The Committee will be aware that the EuropeanCommission received amandate to negotiate an OpenAviation Area with the United States in June 2003, as part of the broader political settlement with MemberStates on the conduct of air services negotiations with third countries. This followed the European Courtof Justice Decision of November 2002. Since June there have been two rounds of negotiations between theUS and the EU, the most recent of which took place in December in Brussels. Another round is scheduledto take place in Washington DC in mid-February.

6. Virgin Atlantic has been a long-standing supporter of the Commission being granted such a mandate.There are good practical reasons for this. The EU and US markets are of equivalent size. This makes for amore even-handed negotiation. Moreover certain items critical to the achievement of an OAA, such aschanges to the ownership and control rules, already require legislative action at an EU level. We very much



welcomed, therefore, the June settlement. It remains our view that only by acting together canEurope expectto persuade the United States to alter its protectionist policies on air services and to move away from theself-serving so-called “Open Skies” agreements, which the Committee itself has criticised. However, it is alsoVirgin Atlantic’s view that the Commission’s mandate for the negotiations with the United States is tootightly drawn in that it covers only air services between and within the European Union and the UnitedStates, and therefore excludes fifth and seventh freedom rights. This is not a tenable position for thenegotiation of a fully liberal agreement. The US will wish to include fifths and sevenths. Moreover, if theUS is to be persuaded to move away from its traditional protectionist position, Europe will similarly haveto widen its negotiating mandate.

7. The inclusion of fifths is of particular importance to ensuring that the benefits of liberalisation arespread equitably through the regions of the EU. As the Committee has in the past recognised, such rightswould make direct transatlantic flights from regional points more viable.

8. The conclusion of a fully liberal Open Aviation Area between the United States and the EuropeanUnion could well lead to a new world order for air services and move the industry away from bilateralismand protectionism. It is likely that a number of other, liberally-minded countries will seek to join a new EU/US agreement, ensuring that the OAA covers a very large proportion of worldwide aviation. Theimplications of this for the future structure of the global airline industry are considerable, if unpredictable.Certainly, at long last aviation could become just another mature industry, instead of being restricted byunnecessary and damaging government regulations. This is why the EU/US negotiations are so important.It is diYcult to exaggerate what is at stake. If the negotiations are eventually successful, there is no reasonto doubt that UK airlines will be well placed—because of their earlier exposure to a more competitive multi-airline environment—to take advantage of the new regulatory environment, as they did so successfully whenthe internal EU aviation market was liberalised.

9. The Virgin Group was among the first to take advantage of the more liberal regulatory environmentin Europe with the establishment of Virgin Express. The same was true in Australia with the creation of thehighly successful Virgin Blue following the removal of the ownership and control restrictions for domesticairlines. We are confident that we will be able to exploit whatever new opportunities are created by an EU/US Open Aviation Area.

10. The negotiating mandate granted to the Commission contains most of the elements of a fully liberaldeal that Virgin Atlantic would expect to see, including the removal of all capacity and designationrestrictions, the opening up of domestic markets, and the ending of the controversial “Fly America” schemeoperated by the United States Government and its various agencies. The negotiating process is thereforecomplex and will inevitably take some time, although probably not as long as some UK airlines haveforecast. Since it is likely that legislative action will be necessary to implement a fully liberal agreement, suchan agreement may well have to be implemented in stages. Virgin Atlantic hopes that the Commission willpursue all elements with equal vigour and will resist US attempts to limit a final agreement to those elementsbenefiting its own airlines. This means that not only should the ultimate package be balanced, but also eachphase, to ensure that the US has a strong incentive to complete the negotiations. It will also be imperativeto ensure that the Commission does not trade the most valuable UK rights—such as access to Heathrow—to achieve less valuable concessions on behalf of other EU member states.

11. Traditionally airlines, as well as other stakeholders, have participated directly in bilateral air servicesnegotiations. The stakeholder consultation process is still evolving and so far is far from perfect. If theCommission is to obtain deals that best meet the needs of European consumers and industry it must showa greater willingness to involve all the key stakeholders.

12. We are hopeful that despite inevitable delays because of the US Presidential Election and EUCommissioner changes this year, an EU/US agreement will be reached within a reasonable period. Therereally is no alternative. The old bilateral approach has failed, and particularly since the ECJ Decision, thereis no going back for European airlines.

Air Services Negotiations with Third Countries

In many respects this is a more problematic matter. Despite the political settlement of last June, thereremains a great deal of uncertainty surrounding negotiations with third countries. The current situation isdamaging for both the industry and consumers and cannot be allowed to persist for much longer.

14. The political settlement was intended to remove the legal uncertainty and enable Member States tocontinue to negotiate bilateral air services agreements. They undertook that during such negotiations theywould seek agreement that any EU airline could be designated under the provisions of the bilateral. WhereCommunity designation is acceptable to the other country, the new bilateral arrangements can be concludedand implemented immediately. However, where the third country is not willing to accept Communitydesignation, which is likely inmost cases because this would reduce that country’s ability to achieve its future



negotiating objectives, a deal can only be implemented on a provisional basis pending approval by eitheran EU Advisory Committee or Regulatory Committee.26 The role of such a Committee would be to ensurethat any bilateral agreement is consistent with EU policy.

15. Since the legislation to create the Advisory/Regulatory Committee has not yet been approved, theCommittee has not met. The criteria that might be used to decide whether or not any new arrangements areacceptable (and, if not, what action Member States would then have to take) is therefore unclear. This iscausing some confusion, especially amongst bilateral partners who are often reluctant to commit to newdeals without knowing the views of the Commission. As a result some bilateral relationships are stagnatingand failing to respond to market needs. Inevitably, of course, certainMember States are taking more noticeof the Commission and the political settlement than others. The Commission itself at times appears to bemore interested in expanding its powers than in meeting in timely fashion the evolving needs of airlines andthe travelling public. A more pragmatic approach is required.

Horizontal Mandate

16. The third element of the June political settlement was the granting of a mandate to the Commissionto conduct negotiations with certain third countries to bring their bilaterals into line with the ECJ Decisionon air services. This involves, inter alia, reaching an EU-wide agreement with these countries on newdesignation provisions. The process is commonly known as the “Horizontal Mandate”. It is largely downto the Commission to propose with which countries it should enter into horizontal discussions, but its listhas to be endorsed by the Council of Ministers.

17. Horizontal negotiations have already taken place with Australia, Singapore and New Zealand,though without a positive outcome largely because these countries wanted to discuss a much broader deal.The Commission was restricted by the Council to its tightly-defined mandate.

18. There is concern that the Horizontal Mandate creates an unnecessary level of complication. If theCommission is engaged in, or is planning to enter into, horizontal negotiationswith a third country,MemberStates should not raise the standard designation clauses with that country. It is also Virgin Atlantic’sunderstanding that the Commission is asking Member States not to do anything in their own negotiationswith the third country that could jeopardise its ability to reach agreement on horizontal matters.

19. The principal diYculty for the Commission on the Horizontal Mandate is that it is often in a veryweak bargaining position. It is seeking changes to existing bilaterals without being able to oVer anything inreturn to a third country. The concern of many in Europe is that the Commission will very quickly use thisas a reason to seek additional full mandates. There remains opposition among many Member States to thegranting of suchmandates unless theCommission is able to show that it can add value to the current bilateralapproach. There is a distinct possibility of a stand-oV, which could further restrict the ability of airlines toreact to market demands. This was not what the political settlement of last June was meant to achieve.

Additional Mandates

20. Consistent with its position on negotiations with the US, Virgin Atlantic is not opposed in principleto the Commission being given additional mandates. However, as a practical matter it should prioritise itsactivities, rather than spread itself too thinly at the outset. The Commission would be better advisedto concentrate its eVorts initially on securing an Open Aviation Area with the United States, rather thanseek additional full air services negotiating mandates from the Council. It could then turn its attention toother countries. The only exception to this should be potential accession States to the European Union andother geographically close States in Eastern Europe or around the Mediterranean basin. The Commissionalready has experience of such negotiations, and has achieved some success.

Consumer Issues

21. The Commission and the European Parliament have brought forward a number of newmeasures andconsultations connected with consumer rights. Whilst Virgin Atlantic welcomes measures which supportconsumer interests and accessibility, some Commission activities in this area show a lack of understandingof the industry and the external impacts upon it.

22. Examples of where the Commission and the European Parliament can and have been eVective are inintroducing the voluntary “Air Passenger Service Commitment” code of conduct which establishesindustry-wide best practice. Commission eVorts to promote best practice through voluntary action placesconsumers in a stronger position in the market. Virgin Atlantic also welcomes the Commission’s draftRegulations on assistance for passengers with reducedmobility, which will ensure a level playing field across

26 The draft Regulation concerning third country negotiations originally proposed an Advisory Committee, but Virgin Atlanticunderstands that some Member States and some elements within the European Parliament favour a Regulatory Committee.There is an important distinction here. The former is a committee consisting of Member States which merely advises theCommission, with the Commission making the final decision. In the latter case it is the Committee which would itself endorseany air services deal, working on the basis of Qualified Majority Voting.



Europe. Virgin Atlantic already provides free of charge assistance to passengers with reduced mobility,whilst some others charge for assistance, either in full or in part. The proposed EU Regulation will preventcarriers and airports for charging for such assistance and we are happy to work with the Commission toensure that the eventual Regulation is workable for the industry and provides the best possible service forcustomers.

23. However, not all initiatives are well timed or thought through. An example of this is the proposedRegulation on Denied Boarding Compensation. Developed by the Commission at a time when the industrywas deep in crisis in the immediate aftermath of the tragic events of 11 September 2001, it stems from amisunderstanding on the part of some in the Commission about the way that airlines operate and whatpassengers really want. The draft Regulation, which is nearing its final stages, was poorly drafted from theoutset, resulting in a large proportion of the legislative process being taken up with trying to clarify anddefine key elements. In its current form it is still unclear and is, in some respects, probably unworkable. Itwill lead to large increases in compensation payments for passengers who are either denied boarding or whoare subject to delays, even where the airline is not responsible or at fault. The result will almost certainly bean increase in fares and reduced flexibility for passengers. Neither of these outcomes will serve theconsumer’s interests

Single European Sky

24. Virgin believes that the Commission can add value in this area. Adopting a united and unified airtraYc control regime for Europe will produce significant savings for airlines, reduce complexity and benefitthe environment. Despite recent agreement in Brussels, there is still a long way to go and the politicalobstacles should not be underestimated. Whilst this is a pan-Europe initiative, Virgin Atlantic believes thatthis should be done with the full support and input of national governments and we are pleased to see thattheUKGovernment andNational Air TraYc Services are playing a full role in this important development.

Slots

25. The Commission has for some time been conducting a review of the current Slot Regulation. This hasbeen a very slow process. Rather than aiming for a more radical review of the current Regulation, as VirginAtlantic would prefer, the Commission has instead opted for relatively minor adjustments, leaving moresubstantive revisions to a later date. However, even reaching agreement on the more minor changes hasproved very diYcult, with the Commission proposing at one time to ban all forms of secondary trading inslots, something that would have created serious problems at an airport such as Heathrow. This shows alack of understanding on the part of the Commission of the way the aviation industry operates. Theseproposals have now been overturned, thanks in particular to active lobbying by the UK Government andairlines. The Commission should now consider how the promotion of a permissive market in slots couldimprove consumer welfare on a pan-European basis, rather than attempt to impose inappropriatesupranational solutions. Where capacity is restricted, slots act as a barrier to entry. Trading is an obvious,initial solution, although longer term a more radical approach might be more appropriate.

Safety and Security

26. The Commission is now responsible for setting minimum levels of security at European aviationinstallations. Detailed proposals are likely to be published soon, although they are not expected to requiresignificant changes in the UK.

27. On safety, the new European Air Safety Authority (EASA) has been established to oversee safetyregulation in Europe. In principle, this is a development to be welcomed, although it remains to be seen howEASA will perform in practice. A system of single European safety values could promote the operation ofthe single market whilst guaranteeing high safety standards across the EU.

28. However, Virgin Atlantic, along with other UK airlines, remains concerned at the role of the SafetyRegulation Group of the UK Civil Aviation Authority in relation to EASA. There is an urgent need toreview SRG’s activities relative to EASA’s new powers. Safety standards must be maintained, but inaddition duplication should be avoided and costs on the industry, which eventually have to be passed on tothe travelling public, should be kept as low as possible. It is not obvious to Virgin Atlantic that SRG hasyet developed an acceptable business strategy to reflect the new environment in which it now has to operate.The Commission is intending to propose progressive amendments to the aviation safety regulation to widenthe responsibilities of EASA; it is essential that SRG reviews its responsibilities in advance of the adoptionof these amendments.

29. The Commission has also recently reached agreement with the US on transatlantic air passenger dataexchanges. The protracted nature of these negotiations demonstrate many of the diYculties that lie aheadfor the Commission. However, on many aspects of safety and security, the Commission could achieve moreon a pan-European basis than member states could alone. The Commission should ensure that it makes fulluse of the expertise available in the aviation industry and other member states.



Conclusion

30. The Commission can add value in a number of areas through the promotion of competitiveness andchoice across Europe and the facilitation of the operation of the internal market. However, the UKGovernment should remain alert to Commission initiatives, and ensure that UK interests are fully protectedin the framing of legislation and that domestic legislation keeps track with developments elsewhere.

31. The Commission in turn should focus on the areas where it can add most value. At the moment, itseVort should be directed towards the securing of anOpen AviationArea with theUnited States. This shouldbe done in full consultation with industry and Member States to guarantee that the Commission is makingbest use of the extensive expertise available.

January 2004

Memorandum by Singapore Airlines Limited (EU 14)


Introduction

1. Singapore Airlines (SIA) welcomes this inquiry into EuropeanUnion Competence and Transport andis grateful for the opportunity to comment in relation to aviation matters.

2. SIA is a major international airline currently operating nearly 600 scheduled return passenger servicesa week to 82 destinations in 35 countries, including code-shared services with its partners. Our interest inthis inquiry is as an international carrier that operates to most major cities in the European Union. We alsooperate transatlantic services to New York via Amsterdam and Frankfurt.

3. We are interested in having the issue of European Union competence in the aviation arena clarified.There is still some uncertainty over the relationship between the Commission and Member States innegotiations with third countries such as Singapore.

Air Service Agreements

European Court of Justice Decision

4. The European Court of Justice ruling of 5 November 2002 found that the “nationality clause” in theUK—US Bermuda 2 ASA, which allows the US to refuse to accept the UK’s designation of any airline inwhich substantial ownership and eVective control is not vested in UK nationals, was in breach of Article 43of the EC Treaty. Article 43 allows nationals of a Member State to operate a business in another MemberState under the same conditions as its own nationals. The “nationality clause” was considered contrary tothe single market provisions of the Treaty and the Court ruled that all EU carriers should benefit equallyfrom air service agreements.

European Commission Competence

5. The European Commission was subsequently given a limited mandate to negotiate a new agreementwith the US, on behalf of all Member States, under which all community carriers would be granted equaltraYc rights. Talks with the United States are proceeding on this basis.

6. The Commission has also presented a draft Regulation on the negotiation and implementation of airservice agreements between Member States and third countries. The regulation is currently awaiting asecond reading in the European Parliament and this is not expected until March 2004. Meanwhile, the June2003 Transport Council reached political agreement on a text whichwould allowMember States to continueto negotiate bilaterally with third countries, provided they attempt to bring any subsequent agreementwithin EU law and adhere to certain procedural and notification requirements, designed to ensure that anysuch agreements do not breach the ECJ ruling.

The Problem For Third Countries

7. The policy of shared responsibilities, or dual mandate, creates uncertainty for third countries in theirnegotiations with Member States.

8. Singapore has formany years followed a liberal policy in respect of the grant of traYc rights. Singaporewelcomes all airlines that wish to operate there, and encourages other States to adopt equally liberal policies.

9. In the view of Singapore Airlines, the adoption by all States of such a liberal policy is the only way tobring the aviation sector into line with other global industries. Singapore Airlines is therefore in favour ofany policy or decision that promises and delivers more liberalisation overall, to the benefit of not onlyairlines but also consumers.



10. Unlike Singapore, however, the UK has been noticeably inconsistent in its liberalisation. We refer tothe recent air service negotiations between the UK andHongKong. This agreement has now been amendedto allow UK-designated airlines to operate with fifth freedom rights beyond Hong Kong to Australia. Suchrights have long been granted beyond Singapore to UK-designated airlines.

11. In exchange for these rights from Hong Kong, the UK has now granted Hong Kong-designatedairlines the right to operate with fifth freedom rights on transatlantic routes from London Heathrow tothe US.

12. Yet these rights have been routinely refused to Singapore Airlines, in a number of negotiations overthe last fourteen years. Each time that Singapore Airlines has sought the approval, the UKGovernment hasgiven some condition or other that must first be met.

13. During the two most recent rounds of negotiations between the UK and Singapore, SingaporeAirlines was told that it could not operate on transatlantic routes from Heathrow, until such time as bmibritish midland could operate between the UK and US. We note that this condition was not a bar to thegranting of rights to Hong Kong.

14. Singapore Airlines is therefore anxious to see clarity and consistency in the handling of air servicenegotiations between Member States and third countries. If bilateral negotiations are to continue, then theUK should immediately grant fifth freedom rights fromLondonHeathrow to SingaporeAirlines, consistentwith the rights recently granted to Hong Kong carriers.

15. If on the other hand the Commission is to take over all third country negotiations, then SingaporeAirlines calls for it to be given an early and full mandate by the UK. The Commission should be explicitlyencouraged to negotiate as liberal an agreement as is possible with third countries, opening up newopportunities for UK, EU and third country carriers, bringing the benefits of new routes and services toconsumers.

16. As we have earlier stated, Singapore has a most liberal aviation policy, and Singapore Airlines wouldbe fully supportive of its Government reaching an open skies agreement with the Commission on behalf ofall Member States.

17. Such a positive outcome for the industry and for consumers is possible, if a strong recommendationis made by this Committee to grant the Commission the fullest possible mandate at the earliest opportunity.

18. The involvement of the Commission has confused the issue of competence in bilateral ASAnegotiations. It is essential that the situation be clarified.

January 2004

Memorandum by the Civil Aviation Authority (EU 15)


Introduction and Overview

1. The Committee sought views on EuropeanUnion competence and transport, with particular referenceto the current and future powers of the Commission and the relationship between transport matters and thesingle European market.

2. The CAA has identified five air transport related areas, including EU-US negotiations on aviationagreements, in which it believes the Committee may have a particular interest. This memorandum has beenstructured to address the key points of the Committee’s terms of reference for each of the following areas:

— negotiations on air service agreements;

— access to the groundhandling market;

— regulation of aircraft slots at co-ordinated airports;

— the Single European Sky programme; and

— the European Aviation Safety Agency.

3. In each of these cases, the CAA provides specialist advice to the Department for Transport and, inmany cases, participates in international fora with the Department to represent the interests of UK industryand consumers.

4. The increasing involvement of the European Union in these aspects of air transport has the potentialto deliver important benefits, eg,

— further development of a single liberalised market in aviation and related services, both withinEurope and between Europe and other major aviation markets, particularly the United States;

— reducing flight delays and other ineYciencies which stem from each nation regulating its ownairspace, from limited co-ordination of cross-border traYc flows, and from diVerences in ATCsystems and concepts;



— raising aviation safety standards across Europe, and the creation of a more level playing-fieldthrough the establishment and uniform application of common rules for aviation safety.

5. The CAA welcomes these various new EU initiatives, and will do all it can to help them succeed, asthe potential benefits are very significant. However, experience of other EU initiatives, both in aviation andother fields, underlines the need for considerable eVort, skill and vigilance to be applied to ensure that thepotential benefits are realised and undesirable side eVects avoided. Also, it is important to be realistic aboutthe length of time it will take for the benefits to be realised, given the diYculty of progressing with so manycountries involved.

6. In many of these areas, the principle of subsidiarity will be very important. Many of the objectives inthe areas discussed below can be achieved only with EU involvement. However, given that the resultsobtained will also often depend significantly on local operation/implementation, there must be eVectiveconsultation to ensure the correct distribution of roles and responsibilities between the Commission andMember States. Full account should be taken of national interests. It is essential, therefore, that the role ofthe EU is limited to those functions which are best performed at EU level.

Extending Commission Competence in Bilateral and Multilateral Negotiations

Actual and appropriate extent of Community competence—EU-US

7. In June 2003, the European Council granted a mandate for the EU to carry out negotiations with theUS government on a new EU-US air services agreement to replace the current bilateral agreements betweeneach Member State and the US. These talks are now in progress, with the European Commission fieldinga negotiating team that is working through a number of issues with the US negotiators, led in their case bythe State Department. The mandate to negotiate with the US is designed to achieve a comprehensiveliberalising deal, and Member States cannot now negotiate on a bilateral basis with the US.

8. From the CAA perspective, the Commission taking this on represents the best chance of achieving themuch needed liberalisation of the aviation market between the two most important markets in globalaviation, and if successful, could be the first step in achieving global liberalisation.

Actual and appropriate extent of Community competence—other countries

9. The June mandate also extends to allowing the Commission to open up discussions with othercountries, or blocs of countries, with a view to amending existing restrictive bilateral agreements andreplacing them with a multilateral agreement covering all EUMember States and the relevant third countryor countries. This is known as the “horizontal mandate”. Whilst considerations about how best to handlethese issues in the future are continuing, the dividing line between Community competence and nationalcompetence in this area is currently somewhat unclear.

10. In brief, the system is supposed to allowMember States in the interim to continue to conduct bilateralnegotiations, as long as they try to broker deals based on EU airlines being given rights to fly, rather thannational airlines (the so-called “community carrier” provision) and do not pursue policies that are contraryto EU transport policy. TheMember State would also need to formally ratify any bilateral agreements withthe Commission.

11. If the Commission is itself in negotiation with a third country, or bloc of countries as part of itshorizontal mandate, then the scope of any bilateral with a Member State would be much restricted.

What powers the Commission needs or wants for the future

12. The European Court of Justice ruling that declared it was illegal to discriminate in air servicesagreements between EU airlines on the grounds of the nationality of their ownership, points, in the longterm, to a future where bilateral agreements betweenMember States and third countries should be replacedby multilateral agreements between the European Union and those third countries.

13. For negotiations with the US, this is already happening, as described above. The horizontal mandateprovides opportunities for this same approach to be applied in relation to other countries on an ad hoc basisbut there is a limit to how far this can be taken forward. The sheer number of existing bilateral agreementsbetween Member States and other countries makes it impractical for the Commission to take on a greaterrole in actively renegotiating them at the moment. This is why the Member States continue to operatenational competence in relation to bilaterals, but not with complete freedom of manoeuvre. The diYcultywith this “mixed competence” situation is that in a bilateral situation, neither theMember State nor the thirdcountry can be sure that the Commission might not overrule any bilateral agreement reached, particularlyif the third country is unwilling to agree to the Community carrier provision and yet still wishes to makeamendments to the existing air services agreement. The current position is unstable, and it is likely that therewill need to be some resolution in the near future—including the possibility of the Commission seeking solecompetence in air services negotiations at some point in time.



14. Given that the European Court of Justice ruling has confirmed that traYc rights between an EUcountry and a third country should be available for anyEU carrier, not just national carriers, then the logicalposition for the long term future would probably be for the Commission to take responsibility at the EUlevel for negotiations with all third countries. These negotiations would then cover all matters, includingtraYc rights. But for now at least, this would simply be impractical, and lack of resources in the Commissioncould lead to an unhelpful stasis where sensible bilateral amendments would not be able to be taken forward.Consequently, there would seem to be some merit in allowing Member States in the interim to preserve theability to amend their own bilateral agreements, unless the Commission is itself taking forward negotiationswith the relevant bilateral partner, which could be compromised by a singleMember State amending its ownagreements.

Key issues from the UK perspective

15. The two key issues for the UK in this area relate to the potential opening up of the UK-US marketthat could be achieved by a broader EU-US deal, and the possible restrictive impact that the Commission’sstance on relations with third countries could have on the UK’s ability to conclude beneficial amendmentsto existing bilateral agreements with those countries.

16. The UK’s existing Bermuda II agreement with the US is more restrictive than the “Open Skies”agreements that are in place between other EUMember States and theUS. In particular, access toHeathrowis restricted to just four airlines (two US and two UK) and a limited number of US cities. Consequently, theintroduction of an Open Aviation Area would create new opportunities for carriers to operate services tothe US from Heathrow, and would bring benefits to UK consumers as well. Removing US restrictions onforeign ownership as part of such a deal would also open up new opportunities for UK carriers who maywish to start up an airline in the US.

17. For negotiations with third countries, it will be important that the interim arrangements are clarifiedand that they are framed in terms that allow some flexibility for Member States. The UK ought to be ableto continue to pursue sensible, liberalising, amendments to the network of air services agreements with itstrading partners, as long as this did not reduce the likelihood of the Commission being able to conclude abroader agreement on behalf of the EU as a whole. If the Commission seeks to adopt too restrictive aposition on this matter, then resource constraints could lead to a long period of stasis (with air servicesagreements frozen in their current form), which would not be beneficial to airlines or the travelling public.

Access to the Groundhandling Market at Community Airports

Scope of the EC directive on groundhandling

18. The directive (Council directive 96/67/EC) was designed to open up access to the market for thesupply of groundhandling services within the EU, with the aim of reducing the operating costs of airlinesand improving the quality of service for airport users. It was given eVect in UK law by the AirportsGroundhandling Regulations 1997 and should now be fully implemented across the EU.

19. Under the directive, airports (above a certain size) cannot restrict either self handling (airlines thathandle themselves) or third party handling (companies that handle airlines or airlines that handle otherairlines) without a determination from the Member State. Details of the thresholds and determinationspossible are shown in the table below.

Self handling Third party handling

Landside None (any airports) None (any airports)

Airside (baggage, ramp, fuel Not less than 2 handlers Not less than 2 handlersand oil, and freight and mail (airports with more than (airports with more thanhandling). 1 mppa or 50,000 tonnes of 2 mppa or 75,000 tonnes of

freight). freight).

20. Any restrictions beyond these have to be agreed by the European Commission and are time limited.

21. Additional features:

— third party handlers (whether airport, airline or other company) must separate the accounts oftheir groundhandling activities from their other activities;

— airports need to establish an airport users’ committee comprising representatives of airport usersor organisations representing airport users;

— Member Statesmay reserve for themanaging body of the airport or another body themanagementof centralised infrastructures used for groundhandling services;

— Member States must ensure that handlers (including self handlers) have access to installations tothe extent necessary for them to carry out their activities and that any conditions upon access andany fees must be according to relevant, objective, transparent and non-discriminatory criteria.



Key issues from the UK perspective

22. The eVects of the directive on UK airports have not been great, partly because the UKgroundhandling market was already quite diverse in terms of oVering a choice of service providers. Prior tothe directive, at Heathrow there were eight airlines which had rights to handle themselves and other airlines(although the rights did not necessarily cover all four terminals), at Gatwick the number of handlers hadvaried between three and four. BAA did not handle at any of its London airports. At Manchester, asubsidiary of the airport operator (RingwayHandling) had held amonopoly of baggage and ramp handling.However, this had been found to act against the public interest by theMonopolies andMergers Commissionand by the time the directive came into force there was a choice of five handlers. At the next tier of airports(eg Birmingham and Glasgow), the airport operators were looking for opportunities to rid themselves ofineYcient in-house handling units and to introduce competition. A number of them ceased their ownhandling activities at this time.

23. Since the directive has come into force, the situation has changed to some extent, so that morespecialist groundhandling agents now operate at UK airports. However, the greater eVect has been seenelsewhere in Europe where groundhandling was often previously either amonopoly or duopoly between theairport and the national airline. The directive has led to an increase in competition and provided greaterchoice and flexibility for UK airlines. Charter airlines were particularly strong supporters of the directive.

Relevance to the single market

24. The directive has led to greater opportunities for groundhandling companies to operate throughoutthe Community.

Actual and appropriate extent of Community competence

25. The directive allows Member States to limit the opening up of markets to some extent but theCommission’s oversight has preventedMember States from retaining all the previous barriers to entry. Thedirective has not had a great eVect within the UK, although some airports have commented that they feelit has given them less control over service quality at their airports and has led to more handlers operatingthan they would otherwise have allowed. From a CAA perspective, the requirement for separation ofaccounts seems to impose an unnecessary burden, although it is unclear how widely this provision has beenimplemented across the Community.

Whether the Commission wants or needs more power

26. Amendments to the directive are currently being considered. We are not aware of any which wouldincrease the Commission’s powers.

EC Regulation of Slots at Co-Ordinated Airports

Scope of the regulation

27. The regulation on slots (Council Regulation (EEC) No 95/93) requires that Member States have anadministrative procedure for dealing with slot allocation and that they set up a co-ordination committee todeal with slot issues at co-ordinated (in eVect, this means congested) airports.

28. The regulation allows for grandfather rights to continue, but sets out rules governing the allocationof new slots (broadly seeking to favour new entrants) and the usage of slots (broadly providing that slotsthat are not at least 80% used must be returned to the pool and reallocated). Exchange of slots betweenairlines, with or without monetary compensation, operates under a “grey market”.

29. Where public service obligations have been imposed on a domestic route according to Article 4 ofCouncil Regulation (EEC) No 2408/92, a Member State may reserve at a co-ordinated airport the slotsrequired for the envisaged operations on that route. If the reserved slots on the route concerned are not used,these slots shall be made available to any other air carrier interested in operating the route according to thepublic service obligations.

What powers the Commission wants or needs for the future

30. The Commission has shown some desire to increase their regulatory control of slots, for examplemaking proposals to outlaw the limited secondary trading in slots that exists under the so-called greymarket. However, the UK and other like-minded States have been successful in resisting this change, andthere seems to be some acceptance within the Commission that, in the longer term, a move to a more opensystem of trading in slots would be desirable. However, the current position is unclear; the Commission has



asked a consultancy to carry out a study into the benefits of slot markets, the results of which have not yetbeen released. This is likely to be an area of discussion in the future. The CAA considers it important thatthe Commission takes a deregulatory approach.

The key issues from a UK perspective

31. The slot question is a particularly important one for the UK, as the problem of congested airports ismore acute in the south east of England than anywhere else in Europe. The key issues from aUKperspectivefall into two main areas. Firstly, the economic value of slots and the need for flexibility of use of what is ascarce resource, particularly for the main London airports, suggests that a transparent secondary tradingmarket in slots ought to be encouraged. This is the UK policy stance, and was the conclusion of a recentCAA study (”Implementation of Secondary Slot Trading” published in December 2001).

32. Second, there is the question of how best to allocate new slots at airports, and to what extent auctionscould be used to create an eYcient initial slot allocation.Morework is needed in considering these issues, butas it stands, the EC regulation could operate to constrain how theUKmaywish to allocate slots at extremelycongested airports such as Heathrow.

33. On the first question, the CAA believes that there should be greater flexibility to allow transparentsecondary trading and that the Commission could therefore helpfully reduce regulation of this area. On thesecond question, there could be a need in the future to see the Commission’s regulation evolve so that itfacilitates economically eYcient methods of allocating new resources that could apply in Member States asrequired.

Single European Sky (SES)

34. Air traYc delays in Europe increased steadily during the last decade as the European air traYcmanagement system struggled to cope with increases in traYc. European airspace is still organised in muchthe same way as it was in the 1960s, with each country regulating its own airspace with only limited co-ordination, primarily to deal with cross border traYc flows. The resulting fragmentation is unlikely to bethe most eVective way to provide air traYcmanagement services for Europe. It was against this backgroundthat the European Commission’s proposals for a Single European Sky (SES) were formulated.

What powers the Commission has/stage reached in implementation

35. In December 2003, four regulations relating to the implementation of the Single European Sky werefinalised for adoption into Community law. This is expected to occur in Feb 2004, following three years ofsensitive political debate. These regulations will extend Community competence to administrativearrangements, airspace, service provision and all aspects of interoperability. The proposals are designed toovercome fragmentation in Europe’s ATM system by using the EU’s regulatory framework to overcomethe lack of legislative or enforcement powers, inherent with Eurocontrol’s intergovernmental status. As theEU is now a Member of Eurocontrol, the Community’s regulatory framework, together with its evolvingSES initiative, will provide for a more integrated airspace solution which enhances safety, increaseseYciency and reduces delays. The CAA supports the aims of the SES programme and is committed toensuring that existing high national safety standards are maintained, whilst at the same time recognising ourother international obligations.

36. The ramifications of the Single European Sky initiative cannot be fully understood at this early stagein its development, but it is clear that the future structure of air traYc management services in Europe maybe very diVerent to the one that exists today. This will have a number of consequences, including on theeconomic regulation of those services and the extent to which national competence in this area may need tobe ceded to a central European body of some kind.


37. The EC has indicated that is seeks to:

— Become a Member of ICAO;

— Extend the remit of the SES to cover the lower airspace as well as the upper airspace;

— Tackle congestion at Europe’s airports;

— Introduce diVerential en-route air navigation charges to take account of the environmental impactof aircraft;

— Extend the powers of the EuropeanAviation SafetyAgency to theATMsector. TheGovernment’sWhite Paper makes clear the importance of ensuring the separation of regulation from serviceprovision that the European Aviation Safety Agency will require;



— Coincident with the emergence of SES, the Commission intends to submit legislative proposals tothe European Parliament and Council for the introduction of a common licensing scheme for airtraYc controllers.

What powers/duties should be reserved to individual countries

38. Since the organisation and use of airspace may impact on military authorities, Member States aremost likely to retain ATM mechanisms which are proportionate to their defence and security needs.

39. Any reconfiguration of airspace into Functional Airspace Blockswill require specific arrangements toensure that national interests are not compromised, particularly with regard to the military. Operationallybased proposals must be driven by users and service providers, although some encouragement by States,who may be informed by EC data, may facilitate the process.

40. Decisions relating to the provision of airport capacity are likely to remain a national responsibility,given the sensitivity of local communities to such developments and the diVering ownership of airports.

What are the key issues from a UK point of view

41. Ensuring full participation by military authorities in the regulation and management of all SESactivities through national arrangements. The Transport Act 2000 and Directions to the CAA provide forthis in the UK.

42. Issues including sovereignty, certification, uniform enforcement (cross border) of standards and airtraYc services system provision will have to be considered to ensure both a level playing field and noreduction in safety standards across Europe. As part of the certification process, the EC has also suggestedthat all air navigation service providers should be subject to a large number of “common requirements”.Whilst most of these requirements would not present any diYculties forNATS, their common application tosmaller service providers at all airports (includingmany small airports) would be unnecessary, cumbersome,disproportionate to the service provided and could reduce competition. The UK has argued to theCommission that a flexible approach is needed, and although their formal response has not yet beendelivered, they have indicated that they have sympathy with these arguments. However, whatever emergesas “common requirements” may include some new areas of economic oversight which the CAAwould haveto implement. Going forward, it will be important to ensure that development of the market is not hamperedby excessive regulation.

43. Capitalising on the opportunities provided by the creation of Functional Blocks of Airspace to thebenefit of the UK.

44. Ensuring that the CAAmakes preparations for the discharge of its function as a national supervisorybody and, if necessary, as a qualified entity.

How do these matters relate to the Single European Market

45. The SES initiative allows for limited liberalisation of the ATMsector. The first set of Single EuropeanSky regulations includes a requirement for each air navigation service provider to be certified by the relevantnational supervisory authority (the CAA, in the case of the UK). The objective behind this certificationprocess is to enhance service provider mobility across Europe and to facilitate future cross-border serviceprovision, objectives which would help to complete the single market and provide for more eYcientoperation of air traYc control, objectives which the CAA supports. TheCAAalso supports the introductionof a common European Air TraYc Controller Licence with full mutual recognition attributes. Within theconstraints of the licence validation process, there will be some potential to facilitate the free movement ofair traYc control staV between EU Member States. Following sector specific training, this would increasethe resource pool available to air traYc service providers.

46. Air traYc control has some elements of natural monopoly, and there is likely to be a need for someeconomic regulation under whatever structure for provision of air traYc control services emerges underSingle European Sky.

47. The thinking on this issue is at an embryonic stage, and it is unlikely that radical change will occurover the next few years. However, if future provision of air traYc management services moves away froma system based on national boundaries (a change which would enhance eYciency and result in a majorbenefit of the Single European Sky concept), then a national system of economic regulation, such as theCAA applies to NATS, may no longer be fit for purpose. In such a scenario, there would be a range ofoptions available, but it is likely that some form of centralised body, either within the EC or as anindependent regulatory agency set up by the EC, may be needed to carry out economic regulation of airnavigation service providers that were operating on a multi-national basis.



The actual and appropriate extent of Community competence

48. The most important benefit of the SES initiative is that the role of the State is reserved, largely, to thethree functions of safety, equal access to scarce resources for all categories of user and the economicoversight of monopolistic providers. The view of the CAA is that the EU should restrict its activities to thehigh level regulation of the three functions and encourage autonomous service providers to takeresponsibility and accountability for ATM service provision rather than this being carried out in the samebody that is handling regulation. Similarly, it would be far preferable for Eurocontrol to be restricted tocarrying out its core functions of network co-ordination (which can only be done by a trans-national body)rather than being involved in pure service provision or regulatory activity. In this manner, a focused ATMsector can respond more eVectively to market signals relating to the cost eVective provision of capacity.

The level of detail needed in European regulation

49. Three levels are foreseen in the SES initiative:

— Essential requirements—mandatory

— Implementation rules—mandatory

— European standards—voluntary.

50. The CAA believes that it is essential that the industry determines the means of compliance tomandatory rules and associated certification criteria. Therefore, all regulation should be objective based,protect the autonomy and innovation capabilities of industry and facilitate competition in the developmentof products and services. However, the nature and extent of the common requirements and implementationrules is not clear.

Conclusion

51. The CAA welcomes the EC’s involvement in the ATM sector, although it recognises that there aremany constraints and diYculties which lie ahead if concepts such as cross-border service provision are tomature. If Member States or Eurocontrol could solve Europe’s ATM performance diYculties, there wouldbe no requirement for the Community to acquire or to exercise competence. Consequently, the challengefor the future is to ensure that Community Regulations focus on achieving key objectives such as safety,eYciency and equal access to scarce resources, and that the level of detail contained in the Regulations isappropriate to this aim. To achieve these objectives, further institutional changes will be necessary such thatthe ATM sector can operate in a regulated commercial environment within the constraints set by Europeancompetition law (Articles 81, 82 and 83). This is unlikely to happen in the near future.

European Aviation Safety Agency (EASA)

52. Air transport in the Community has been progressively liberalised since 1988 and the market hasevolved from one based on bilateral agreements, with virtually no competition, towards a genuine openmarket based on Treaty principles. Hence, air transport is governed by common rules for licensing, marketaccess, pricing and competition. However, it became clear that a genuine air transport single market alsorequired the establishment and uniform application of common rules for aviation safety and environmentalprotection. In order to address the shortcomings in the JAA system, a European Aviation Safety Agency(EASA) was formed.

53. Regulation (EC) No 1592/2002 established the European Aviation Safety Agency (EASA), whichstarted functioning on 28 September 2003 and which put in place the framework to replace the existing JointAviation Authorities (JAA) non-binding arrangements. EASA’s establishment is regarded as an importantelement of the European Union’s strategy to maintain and improve the level of aviation safety in Europe.Unlike the JAA, the Agency has a firm legal basis on which to ensure the application and enforcement ofcommon aviation requirements across the Member States. The CAA is supportive of the formation ofEASA and recognises the potential benefits of common standards across Europe. The CAA has providedongoing specialist safety regulatory advice and support to the DfT and the Commission during theestablishment of EASA, and is closely monitoring the Agency’s development, with the aim of seeking toensure that:

— UK CAA is able to continue to fulfil its safety regulatory obligations;

— the current high safety standards established by the UK and JAA Full Member States are noteroded as EASA assumes legal competency for aviation regulation;

— the UK civil aviation community and industry are not adversely aVected; and

— safety regulations are developed transparently and, in future, are applied uniformly across all EUMember States.

54. The CAA continues to adapt its procedures in transition to the EASA regulatory system, with theaim of achieving these objectives.



What Powers the Commission has

55. Regulation (EC) No 1592/2002 of the European Parliament and of the Council of 15 July 2002 setout common rules in the field of civil aviation and established EASA. The Regulation applies to the design,production, maintenance and operation of aeronautical products, parts and appliances, to the personneland organisations involved in these activities and to those involved in the operation of aircraft. TheRegulation does not generally apply to very small aircraft, those of historic relevance or when aircraft areengaged in military, customs, police or similar services.

The stage reached in implementation

56. On 28 September 2003, EASA became responsible for the airworthiness standards for the majorityof the civil aircraft registered in the Member States of the EU.

57. As a first step, Commission Regulations have been established which pave the way for Communityaction in respect of:

— the airworthiness and environmental certification of aeronautical products (generally aircraft,engines and propellers) and related parts and appliances (generally installed equipment); and

— the approval of organisations and personnel engaged in the maintenance of these products, partsand appliances.

58. It is still early days for the Agency and there is currently a lack of resources and technical expertise.As a consequence, tasks required under the EASA Regulation have initially been allocated to Central JAAand to National Aviation Authorities (NAAs). Such allocations are in the form of interim arrangementspending the signing of more formal contracts.


59. The EC, assisted by EASA, will propose the necessary legislation to extend its scope to embrace thefollowing domains:

— operations and licensing—the date for transfer of responsibility from JAA to EASA for these hasnot been decided, but is expected to be before 2007; and

— the safety oversight of airports and air traYc services operators (Air Navigation Facilities). TheCommission has indicated that Air Navigation Facilities will not be considered until a later stageof EASA development, which is unlikely to take place before the end of the decade.

What powers/duties should be reserved to individual countries

60. The principle of subsidiarity and proportionality has been applied to the development of theairworthiness regulatory framework and the CAA’s view is that a similar pragmatic approach should beadopted for the development of essential requirements andCommunityRegulations in respect of operationsand licensing.

61. One area recognised as being appropriate for EASA to act centrally is in respect of major certificationactivity, specifically the initial certification of products and the certification of significant changes to theseproducts when in service. However, to provide the flexibility necessary to ensure operations are notadversely aVected, the certification of other changes by competent NAAs should continue.

62. The work of EASA should be clearly limited to those activities where it has full and eVective accessto the information necessary for it to discharge its responsibility. A major consideration in achieving theCommission’s strategy to maintain and improve the level of safety in Europe is the management of thecontinuing airworthiness of community aircraft. This relies on significant eVort at local level, which isessential to achieve eVective oversight.

What are the key issues from a UK point of view

63. The concept of “common regulation” across Europe is not new and, in the area of aircraftcertification, has existed since the 1970s in the form of the JAA. The new and challenging concept is commonstandards of compliance. There are significant issues related to ensuring common compliance in the 15 EUMember States, which could not be satisfactorily addressed by the JAA, and this problem will beexacerbated with the arrival of the 10 Accession States.

64. The UK has one of the most rigorous aviation safety regimes in the world, and the CAA considersthat it is essential that we avoid any degradation in the UK’s achieved and measured safety performance asa result of the introduction of common rules and standards under EASA, particularly in the context of theenlarged Community. We must also ensure that we continue to meet the UK’s ICAO obligations in respectof activities now to be undertaken by EASA.



65. EASA has started with a sound basis in using the JAA system but the Implementing Rules necessitatesome changes to the CAA’s regulatory processes. With regard to compliance finding against commonstandards, UK safety regulatory policy must be consistent with that of EASA, while at the same timeencouraging use of “Best Practice” aviation regulation along the lines of the UK model.

66. The Commission’s stated objectives to maintain and improve safety will be tested by its need toestablish a common airworthiness system that meets the demands and expectations of all EU MemberStates. Significant change in the approach adopted by some NAA’s will need to be made in order to achievecommon standards across the 15 EUMember States. The CAA has been a leading example in maintainingand where practicable, improving safety. It will be possible for NAA’s to take unilateral action in the short-termwhere they consider safety standards are not beingmet. However, there is a risk of potential for conflictwhere such action places an aircraft on one State’s register at a commercial disadvantage compared withthose operated on the registers of other States.

67. Over the first three and a half years of transition to EASA, the Agency will assume responsibility forcertain airworthiness certification activities and rule-making. After transition, there will be a significantnumber of activities in these areas that the CAA will continue to carry out, either as an NAA or on behalfof EASA.During the transition period, EASAwill also require the CAA to undertake activities on its behalfunder contract. Consequently, it will be necessary to ensure that the CAA takes the necessary steps to enablea smooth transition to the EASA system and that there is clarity concerning the division of responsibilitiesbetween EASA and the CAA, both during and after the transition period.

68. The development of EASA has implications for the staYng and funding of the CAA, especially in thearea of certification of products. Although, pending clearer definition of the role and manpower plan of theAgency, this eVect cannot be quantified with any confidence, it is likely that the evolution of EASAwill giverise to issues concerning the funding of the CAA. The CAA is unique in Europe in that it is funded entirelyby the industry it regulates, whereas other regulators are funded wholly or partly by their taxpayers. Againstthis background, the CAA considers important that it maintains the appropriate level of expertise necessaryto support its national safety regulatory obligations, the DfT, and the interests of the UK civil aviationcommunity and industry.

How do these matters relate to the Single European Market

69. The goal of a single European market puts pressure on EASA to achieve common and equalacceptance of national activities. The current responsibilities are focused initially on the certification ofproducts, parts and appliances. The ability to carry out this work varies significantly across EU MemberStates and EASA must ensure there is consistency of compliance finding, through the development of welldefined standards for required expertise, and eVective procedures. These must be tested bymeans of a robuststandardisation system (audit). This will be essential if the current high airworthiness standards presentlyachieved in the UK are to be maintained.

The actual and appropriate extent of Community competence

70. At its start in September, EASA had few staV, none of whom had any appreciable experience of thecivil aviation regulatory environment. Recruitment at Director level is now almost complete and furtherrecruitment of some ProjectManagers and Technical Assistants is underway. There is as yet no informationon how the lower levels of the Agency will be structured, or when the posts will be filled.

71. In respect of technical expertise, it is also unclear how this will be accommodated within the EASAstructure. In the interim, the appointment of a Panel of Technical Experts has been proposed, withmemberssought from appropriate bodies outside the Agency. The size and terms of reference of this panel, and thequalifications of its expert members, have yet to be defined.

72. Consequently, the CAA has been asked to continue with the majority of airworthiness certificationactivities that it currently undertakes, and in the year ahead, EASA will continue to rely substantially onthe resources of all the NAAs.

The level of detail needed in European regulation

73. The existing standard of airworthiness achieved in Europe has benefited from a system of detailedcertification procedures and guidance material, harmonised with the FAA, through the work of the JAA.This has provided consistent interpretation and application of requirements. Issues have arisen during theearly experience of EASA resulting from the limited detail of the Regulations and the minimal guidanceprovided directly by the Agency, primarily due to its temporary lack of suitably experienced staV.

74. Initial experience has shown that there is an inherent reluctance to amend regulation, even where suchchanges may provide the most eVective and eYcient means to resolve issues and prevent unnecessaryburdens on the Agency, NAAs and industry. The CAA supports an approach that minimises the level ofdetail in Regulations, with such instruction and guidance being left to other documentation that can bemanaged with greater flexibility.



75. The level of detail in European regulation should, therefore, be such that it ensures that the majorprinciples to be followed are well defined and that there is proper foundation for the generation of thesupport documentation required to achieve consistency of approach within EASA, as well as by the NAAs.

Overall Conclusions

76. The CAA welcomes the involvement of the European Union in the aspects of aviation describedabove, and considers that they have the potential to deliver very significant benefits. Our key concerns atthis time are:

(i) that the Commission should continue to make progress on liberalisation of air services,particularly with the US, whilst permitting Member States to take forward sensible amendmentsto bilateral agreements that are consistent with overarching EU aviation policy;

(ii) the Commission moves to allow a more open system of trading in airport slots to operate inMember States as necessary;

(iii) ensuring that the Commission’s emerging secondary legislation for the Single European Skyremains proportionate to the objective and that the development of the market is not hamperedby excessive regulation;

(iv) ensuring full participation by military authorities in the regulation and management of all SingleEuropean Sky activities, through national arrangements;

(v) ensuring common standards of compliance with common safety rules established by EASA; and

(vi) ensuring that UK safety standards and safety performance are maintained under the newEASA regime.

January 2004

Supplementary memorandum by the Civil Aviation Authority (EU 15A)

European Council’s Ground Handling Directive: Evidence of Enhanced Competition

During the CAA’s recent appearance before the Committee on 5 May, we promised to write in responseto the Chair’s request for examples of where the European Council’s Ground Handling Directive has hada positive eVect in opening up the Europeanmarket for the provision of airport services. I hope the followinginformation meets the Committee’s needs. I have set out some of the background in the attachment.

One of the main purposes of the Directive was to open up access to the ground handling market to helpreduce the operating costs of airlines and to improve the quality of service they receive. Evidence of theextent to which it has been eVective in achieving these aims can be found in the study conducted by SimatHelliessen & Eichner (SH&E) International Air Transport Consultancy, on behalf of the EuropeanCommission. The study, published in October 2002, involved site visits to the top 33 European airports byturnover and a postal survey covering a further 48.

The report illustrated that the eVect of the Directive has not been very marked in the UK, largely becausethe market was already quite diverse before the Directive, with a wide choice of service providers availableat the larger airports. For example, Heathrow had exactly the same number of self- and third-party handlersafter the introduction of the Directive (18 and 12 respectively—the highest levels in Europe) as it did before.

In contrast, at the time of the phased introduction of the Directive between 1996 and 2001, Europeanairports were characterised by monopolistic or heavily restricted ground handling service provision. Theconsequent eVect of the Directive’s introduction at airports in the rest of Europe has been quite marked, asthe table below shows:

NUMBER OF THIRD PARTY HANDLERS AT EUROPEAN AIRPORTS

Passenger Handling Baggage Handling Ramp Handling

Before After Before After Before AfterNumber of handlers Directive Directive Directive Directive Directive Directive

1 8 1 15 4 14 02 9 3 13 15 11 183 7 4 3 5 4 64! 7 25 2 9 4 9

Source: SH&E International Air Transport Consultancy (2002)

These statistics tend to suggest that theDirective has had a significant positive impact in terms of wideningthe choice of handler at airports across the EU, with the number of monopoly handlers for the three groundhandling services featured dropping from 37 to 5, although it is always diYcult to establish quite howmuchthis is a direct eVect of the new regulation and how much is down to “natural” market developments. Asthe SH&E report states “It is generally viewed that it is not just the Directive which has brought about



changes to the ground handling market. Changes in the industry and the market itself, such as continuouscost cutting of airlines and consolidation among handlers, have also had a significant impact on quality andprice. Indeed, a number of parties believe it is not possible to diVerentiate between the causes of theimprovement.” (p 50, SH&E (2002))

Examples of enhanced competition in ground handling at EU airports include an increase from either oneor two third-party handling companies to eight at each of Vienna, Barcelona, Lisbon and Paris Charles deGaulle—to the benefit of UK airlines operating to those destinations.

So far as the eVect on airline costs and service quality are concerned the SH&E study does not reach anyhard and fast conclusions although it found some evidence that prices to airlines for handling have fallen,in particular at those airports which previously enjoyed a handling monopoly. As far as service quality isconcerned there was also some evidence of improvements, a view supported by our discussions with theindustry on this issue.

We are also aware of instances where the Directive has been used by the Commission andMember Statesto enable them to challenge the handling restrictions at a number of airports, for example in Germany,France and Portugal The Directive has therefore in some cases been a useful mechanism for allowing adetailed review of those airports that wish to continue restricting the ground handlingmarket. Nevertheless,there remain a few stubborn exceptions such as Greece, which has been slow in removing Olympic Airways’stranglehold over ground handling services. The Commission’s priority should be to concentrate on such“stragglers” to ensure that consumers benefit from greater competition across Europe.

The CAA stands ready to provide further assistance where and when it can be of help.

ATTACHMENT

The Ground Handling Directive

The introduction of Council Directive (96/67/EC) of 15 October 1996 was phased in over a number ofyears. By January 2001, at which point all provisions were in force, the Directive required a minimum levelof competition for the following services:

— Baggage handling.

— Ramp handling.

— Fuel and oil handling.

— Freight and mail handling.

Competition was encouraged by setting in place two key principles of access to ground handling services:Freedom of self-handling (article 7), applied to all airports, regardless of size or volume of traYc.At airports with more than 1million passenger movements or 25,000 tonnes of freight per annum,where complexity of self handling may lead to operational diYculties, no fewer than two airportusers should be allowed to self-handle, with those chosen on the basis of relevant, objective,transparent and non-discriminatory criteria. Exemptions to the general rule are also allowedwherespecific constraints make it impossible to open up the market.Freedom of third-party handling (article 6), for all ground handling services at airports with morethan 2 million passengers or 50,000 tonnes of freight per annum. Member States may limit thenumber of suppliers to no fewer than two for each category of service, but at least one of theseservice providers in each category must be independent of the airport managing body or anyairport user with more than 25% of passenger or freight share.

Exemptions from these general principles can be made, but notification must be made to the Commissionand published in the OYcial Journal, so that interested parties can submit comments. The Commission mayapprove or disapprove the application on the basis of the available evidence and justification for action.

Memorandum by Manchester Airports Group PLC (EU 16)


1. Introduction

1.1 This is the response of The Manchester Airports Group Plc (MAG) to the House of CommonsTransport Committee’s inquiry on EU Competence and Transport, announced in the press notice of 10November 2003.

1.2 MAG owns and operates four airports: Manchester, East Midlands, Bournemouth and Humbersideand is jointly owned by the 10 Local Authorities of Greater Manchester. MAG is the UK’s second largestairport operator and in 2003 its airports handled some 24 million passengers, 80% of whom travelled viaManchester itself.

1.3 MAGwelcomes the opportunity to participate in the Committee’s inquiry, since it addresses an areaof EU activity that is currently having a potentially detrimental eVect on its ability to develop its business.



1.4 The remainder of this document is structured as follows. Section 2 deals briefly with the extent of theEuropean Commission’s overall competence in relation to aviation at present and sets outMAG’s views onhow this should develop in the future. Section 3 examines the specific issue of EU-US aviation negotiations,while Section 4 covers the EU’s position with regard to aviation relations betweenMember States and thirdcountries. It is in this area that MAG has serious concerns about the Commission’s recent actions and itsintentions with regard to gaining competence for air services negotiations in the future. Finally, Section 5contains a brief outline of MAG’s views on EU competence as it relates to emissions trading and aviation.

2. EU Competence in the Field of Aviaiton

2.1 As theCommittee is aware, the EUalready has wide-ranging powers in relation to transport generallyand aviation in particular. MAG believes that, with few exceptions, the legislation brought forward by theCommission in the field of aviation has been enormously beneficial to both consumers and the industryalike. For example, the three “packages” of measures that liberalised air transport in the EU just over 10years ago have been very successful, and the Directive on the liberalisation of ground handling services hasalso brought significant benefits.

2.2 Nevertheless, the Commission has shown a tendency to be over zealous in its attempts to introduceadditional legislation and there is a risk that the regulatory burden on the industry, far from being reduced,is becoming greater. There are many examples where the Commission has introduced (or intends tointroduce) new legislation or revise existing rules, where MAG believes the functioning of the market issuYcient to ensure the optimum outcome for consumers. One example is the recent increase in the amountsof denied boarding compensation that airlines must pay to passengers when delayed; the levels have beenset so high that they often exceed the fares for the flights covered by the rules, which is clearly illogical.MAGwould make the general observation that, whilst revisions to legislation to take account of major changesin an industry are to be welcomed, the constant tinkering with legislation that the Commission undertakesis unhelpful and can impose unnecessary costs on the industry and its consumers.

2.3 EU competence is, however, crucial in order to enable the consistent application of rules across theEuropean Union in a number of key areas that transcend national boundaries. In addition to implementingthose Directives and Regulations that relate to the functioning of the single market for aviation, EU-widepolicies and legislation that deal with environmental issues including aircraft emissions and noise areextremely important to ensure that businesses in all Member States are on an equal footing. The Committeerequested views on the level of detail such legislation requires and MAG would comment that, where suchlegislation is concerned, it is desirable to set out detailed rules, so the EU Regulations are the mostappropriate mechanism to employ. However, for most market-related legislation, MAG would prefer theCommission to take a less detailed approach, using Directives to set out principles governing such areas.

2.4 MAG does not, therefore, advocate any reduction in the Commission’s powers in this area (whichwould in any case be unrealistic). However, with the exception of emissions trading it is reluctant to see EUcompetence being extended significantly beyond its current limits, particularly in respect of the negotiationof air services agreements. This is covered in detail in the following two Sections.

3. EU Competence and EU-US Aviation Negotiations

3.1 The Committee sought views on the situation vis-a-vis the negotiation of the EU-US Open AviationArea (OAA), which is currently underway. MAG considers that, whilst this presents the EuropeanCommission with a major challenge—particularly in terms of balancing the interests of all 15 (soon to be25) Member States—it is entirely appropriate for Europe to negotiate with the US as a bloc.

3.2 The can be no doubt that liberalisation of air services between Europe and the US will be of greatbenefit both to the UK aviation industry and to the wider British economy. It follows that world-wideliberalisation of aviation must be the ultimate objective of UK air services policy, though whether it isappropriate for the EU to gain competence for this process is open to question. This is examined in detailin Section 4.

4. EU Competence and Aviation Relations with Third Countries

4.1 This Section addresses Member States’ aviation arrangements with countries outside the EU, otherthan the US. This is a matter of great concern to the Manchester Airports Group, since the Commission’srecent intervention in negotiations between the UK and certain of its bilateral partners has resulted in thefailure of air services talks and—in one case—failure to implement a revised air services agreement (ASA)even where an agreement to increase capacity was reached.

4.2 Before examining detailed examples, however, it is important to first look at the prevailing legislativesituation. Following the judgments of the European Court of Justice on 5 November 2002, a key finding ofwhich was that the “nationality” provisions of ASAs infringe the EC Treaty, the Commission published adraft Regulation covering Member States’ negotiation and implementation of ASAs with third countries.



This laid down a procedure that aimed to enable Member States to continue to update air servicesagreements, and implicitly recognised that the Commission had neither the resources nor the mandate tonegotiate “hard” rights (such as traYc rights) with countries other than the US.

4.3 In doing so, most observers believed that the Commission had freed Member States to conclude newor revised air services agreements with their bilateral partners, provided they made a proper attempt topersuade the country concerned to accept the designation of all community carriers, not just those from theMember State concerned. In theory this would avoid the situation referred to in MAG’s oral evidence tothe Committee on 19 March 2003, where it stated: “What we are concerned about is the paralysis that mayset in, in negotiating Air Services Agreements . . .” It went on to give two examples—China and SouthAfrica—where the EU nationality clause was proposed and rejected, resulting in failure to agree a newASA.

4.4 Unfortunately, MAG’s recent discussions with the parties directly involved with the negotiation ofBritain’s ASAs, including oYcials at the Department for Transport, indicate that the draft Regulation hasfailed to deal with this problem, to the detriment of the UK and the UK regions in particular. One examplewhere this has potentially adverse eVects for Manchester Airport is the UK—Hong Kong ASA. This wasrenegotiated during 2003 to permit a rise in frequency between the two territories that would enable CathayPacific Airways to increase services to the UK (including adding flights to Manchester) but, while a signedagreement exists, it cannot be implemented because the Commission has not approved it.28 The problemappears to stem from the fact that the Commission has so far failed to set up the machinery necessary toenable the approval of new or revised ASAs negotiated byMember States, ie a committee with the authorityto review and approve them. This is ostensibly because the Regulation is only a “draft” Regulation andtherefore cannot be implemented. Nevertheless, the Transport Committee may be interested to note that itis MAG’s understanding from discussions with the UK DfT that the Commission has cited the draftRegulation in forcing Austria to renegotiate it’s recently concluded ASA with Australia. Suchinconsistencies in the Commission’s approach do nothing to reassureMAG that EU competence in this areais desirable.

4.5 There are several forthcoming air services negotiations where Manchester, and possibly otherairports in the UK including Birmingham and the Scottish airports (as well as those in London) could loseout on newopportunities to developmore direct international services unless this situation is resolved. Theseinclude talks with India (scheduled for January 2004) where the UK will oVer to liberalise access to the UKregions, and China (in February 2004),29 where an increase in capacity and the range of cities that can beserved will be on the table.

4.6 Given the continuing problems described here, and given that the European Commission has neithersuYcient resources nor the expertise to undertake air services negotiations with third countries on behalfof 25 Member States, MAG believes that accepting EU competence for negotiations with third (non-EU)countries other than the largest aviation powers such as the US is inappropriate.

5. EU Competence and Emissions Trading

5.1 As stated in Section 2, MAG considers that it is correct that the EU should have competence forenvironmental legislation, especially where this deals with matters that cannot be eVectively dealt with at anational level. This is the case where gaseous emissions from aircraft implicated in climate change areconcerned.

5.2 The European Emissions Trading Scheme already in operation provides an appropriate vehicle forthe introduction of emissions trading for aviation as a means for reducing carbon dioxide emissions inEurope. MAG believes that the UK government should be supported in its commitment, set out in therecently published Aviation White Paper, to bring intra-EU aviation into this scheme as soon aspractically possible.

6. Conclusions

6.1 MAGbelieves that EU competence for the negotiation of ASAs as a bloc withmajor aviation powersis appropriate. Once an agreement has been reached with the US, and on the assumption that the outcomeis acceptable to the UK, the extension of EU competence to other large countries should be considered. Inthis regard, MAG supports the recommendation contained in the report published by the House of LordsSelect Committee on the European Union on 8 April 2003, which notes that extending full liberalisation tothe US, Japan and Russia would eVectively open up 80% of the world aviation market.

28 The Committee will no doubt wish to seek more detailed evidence from those in Government who are directly involved in thenegotiation of air services agreements.

29 The Committee may be interested to note that four European countries—Germany, France, Finland and the Netherlands—have recently implemented newASAswith China, without including the EC’s nationality clause. However, as far as theUK—Hong Kong ASA is concerned, the Commission took a close interest in the negotiations and intervened directly by writingto the Government of Hong Kong to state that any agreement would be unlawful unless approved by the Commission. Asthe Committee is aware, this approval has not been forthcoming for the reasons described earlier.



6.2 MAG does not, however, support the widening of EU competence to coverMember States’ bilateralaviation relations with other third countries, since the Commission simply does not have—and is unlikelyever to secure—the necessary resources to deal with separate bilaterals for each of the (from mid-2004) 25Member States. A more practical solution would be to permit Member States to undertake their own airservices negotiations within the framework provided by the draft Regulation on the negotiation andimplementation of air service agreements betweenMember States and third countries. The draft regulationneeds to be implemented and the necessary machinery to enable it to function as intended must be put inplace as soon as possible, in order to resolve the problems outlined in Section 4, which are harming theinterests of UK aviation and the ability UK regional airports to develop new international services inparticular.

6.3 Finally, MAG believes that EU competence for all other aviation matters which go beyond nationalboundaries should be retained and, where appropriate—such as in bringing aviation into the EuropeanEmissions Trading Scheme—extended, in line with UK Government policy.

19 January 2004

Further memorandum by Manchester Airports Group PLC (EU 16A)


We promised to come back to you with some practical examples of the diYculties arising from the EUCommission’s mandate to negotiate air service agreements with third countries. I have enclosed a short noteproviding details of these and hope this is useful for your committee’s forthcoming inquiry.

We also discussed the Government’s policy on route development and some of the questions this raisesaround the use of public funds. As mentioned, we strongly believe that Regional Development Agenciesshould have the flexibility to use the funds to market the English regions to international businesses andvisitors. RDAs are experienced in this area; which we believe would promote the long-term viability ofroutes rather than simply providing a short-term incentive for airlines.

Finally, we take your point on the need for more public involvement in the transport debate, particularlyin the run up tomajor elections. As discussed, we are playing amajor role in a campaign being set up to lobbyfor rail investment in the NorthWest; working with major stakeholders such as GMPTE,Merseytravel andthe Rail Passengers’ Council. We will naturally keep you posted on developments in this area.

BRIEFING NOTE⁄EVIDENCE OF THE IMPACT OF THE ECJ DECISION ON THE UK’SBILATERAL AIR SERVICES NEGOTIATIONS

Introduction

Following the judgment of the EuropeanCourt of Justice on 5November 2002, a key finding ofwhichwasthat the “nationality” provisions of Air ServiceAgreements (ASAs) infringe the ECTreaty, the Commissionpublished a draft Regulation covering Member States’ negotiation and implementation of ASAs with thirdcountries. This laid down a procedure that aimed to enable Member States to continue to ‘update airservices’ agreements; and in implicitly recognised that the Commission had neither the resources nor themandate to negotiate “hard” rights (such as traYc rights) with countries other than the US.

In doing so, most observers believed that the Commission had freed Member States to conclude new orrevised air services agreements with their bilateral partners, provided they made a proper attempt topersuade the country concerned to accept the designation of all community carriers, not just those from theMember State concerned. In theory this would avoid the situation where paralysis might set in during thenegotiation of Air Services Agreements.

The failure of the draft Regulation

Unfortunately, Manchester Airport Group’s (MAG) recent discussions with the parties directly involvedwith the negotiation of Britain’s ASAs, including oYcials at the Department for Transport, indicate thatthe draft Regulation has failed to deal with this problem, to the detriment of the UK and the UK regionsin particular. This is a matter of great concern to the Manchester Airports Group.

The problem appears to stem from the fact that the Commission has so far failed to ‘set up the machinerynecessary to enable the approval of new or revised ASAs negotiated byMember States, ie a committee withthe authority to review and approve them. This is ostensibly because the Regulation is only a “draft”Regulation and therefore cannot be implemented. It is unlikely that the regulation will be confirmed untilthe new Commission is in place that will be in Autumn 2004.



Nevertheless, it is MAG’s understanding from discussions with the UK DfT that the Commission hascited the draft Regulation in forcing Austria to renegotiate it’s recently concludedASAwithAustralia. Suchinconsistencies in the Commission’s approach do nothing to reassureMAG that EU competence in this areais desirable.

EVects of EC intervention on Manchester

TheCommission’s recent intervention in negotiations between theUK and certain of its bilateral partnershas resulted in the failure of air services talks and in one case, that of Hong Kong, failure to implement arevised air services agreement (ASA) even where an agreement to increase capacity was reached. Thisparticular example has potentially adverse eVects forManchester Airport The ASAwas renegotiated during2003 to permit a rise in frequency between the two territories that would enable Cathay Pacific Airways toincrease services to the UK (including adding flights to Manchester) but, while a signed agreement exists,it cannot be implemented because the Commission has not approved it.

Another bilateral where potential EU intervention is adversely aVecting Manchester is the UK—Chinaagreement. Talks to revise the ASA to include additional frequencies and’ access to Manchester took placein early 2003 and at that time, the only sticking point was the EU requirement for community airlinedesignation which China wished to examine in more detail. Further talks were delayed by the impact ofSARS and a new agreement was finally signed in February 2004. Meanwhile, Manchester Airport has beenin negotiation with Air China to provide a direct service to Beijing and whilst this is now possible under therevised bilateral, there is uncertainty whether the EU will wish to intervene. Whilst this uncertainty lasts,the airline is unable to firm up its plans and the opportunity may be lost if it decides to allocate the aircraftto another route outside the UK where bilateral rights are already available.

Another recent agreement where EU paralysis could aVect Manchester is the deal recently agreed withRussia. Following the revision to the ASA in January 2004, Transaero have now applied to operateManchester- Moscow weekly from autumn 2004. (It is also hoping to operate Edinburgh—Moscow in thesummer). The view of the Commission has yet to be clarified.

bmi BritishMidland’s Chief Executive OYcer, AustinReid recently announced that bmi were consideringadding Indian and South African destinations fromManchester. In order to achieve this, there will need tobe bilateral discussions on additional capacity and this is likely to prove diYcult given previous negotiations:Discussions-with both countries are pencilled, in for Summer 2004, but even if agreement is reached, therewill remain uncertainty over the validity of the revised ASA until the EU regulation is confirmed and theCommission has suYcient resources to administer it.

A new Australian airline, Backpacker’s Express, is planning to operate toManchester in the autumn andis likely to be looking for 5th freedom rights via India in order to make the service viable. BangladeshAirlines have been contemplating a service through Manchester which is likely to involve a negotiation on5th freedom rights whilst Pakistan is currently involved in a debate with the UK DfT over additional fifthfreedom rights on their expanded Manchester programme. Assuming all these issues are resolved on abilateral basis (and past experience shows that this can take some time), the airline and the airport will thenface a further delay while they wait to see if and how the European Commission wish to be involved.

Conclusion

Whilst this short paper outlines the current practical diYculties being experienced at Manchester, theAirport continues to talk to a wide range of airlines looking to start new services or increase frequency onexisting routes. In some cases a bilateral negotiation will be’ required which can already be time consumingand oV-putting to the airline. The addition of a further layer of red tape to address EU matters does notassist in rapid decision-making.

In the meantime, the airlines cannot make definitive plans and may allocate the aircraft elsewhere whilstUK regional customers are denied access to new long haul services and are forced to travel via inconvenientUK and European hubs.

It is therefore imperative that a clear and speedy procedure is put in place to ensure that Air ServicesAgreements can be updated in a timely fashion and with the minimum involvement of the Commission.

MAG

16 April 2004



Memorandum by the Airport Operators Association (EU 17)


Introduction

1. This submission is made by the Airport Operators Association (AOA). AOA is the trade body thatspeaks and acts for British airports and counts among its members all of the nation’s international hub andmajor regional airports together with a large number of airports engaged in business, community andleisure aviation.

A listing of AOA member airports is attached at Appendix 1.

2. AOA would wish to submit evidence in three specific areas:

(a) general EU competence in respect of air transport matters;

(b) emissions trading; and

(c) competence in air service negotiations.

General EU Competence in Air Transport Matters

3. Aviation is a global industry and as such requires international regulations, standards, processes andprocedures. It should also be recognised that aviation has local/national requirements which needconsideration at the appropriate national or regional level and as such it is essential that the ability to addressthese matters is retained at this appropriate level.

4. In areas where regulations, standards, processes and procedures extend beyond national boundariesit is appropriate for the European Union to assume a leading role for the Member States. This process hasbeen seen to produce benefits in a number of areas including the packages that liberalised air transportwithin the EU, and the development of aircraft noise and emissions standards.

5. AOA also believes that the benefits that have come from EU involvement in air transport issues canbe extended further with particular emphasis on key initiatives such as the development of the SingleEuropean Sky, and integration of intra—EU air transport in the European Emissions Trading Scheme.

6. However, AOA also believes that the UK must retain certain areas of competence exclusive fromintervention at the EU level. Specifically we strongly support the continuation of theUK to determinemajordecisions on the provision and delivery of additional airport capacity. We also strongly support the overallconcept of “local solutions to local problems” in the areas of addressing the environmental and socialimpacts of aviation and, following on from the recent publication of “The Future of AviationWhite Paper”,the development of appropriate national, regional and local initiatives on matters including noisemitigation, local air quality improvement, airport and infrastructure planning, and local compensationissues addressing those most severely aVected by the impact of aviation.

7. AOA believes that it is essential that appropriate competence in addressing specific national, regionaland local aviation issues is retained at these levels. These matters should not be subsumed within an EUstructure.

8. Indeed, we believe that there have been a number of issues where the EU has assumed competencewithout a comprehensive consideration of the impact of its actions. Perhaps the best recent example of thisissue is given by reference to the introduction of denied boarding compensation that airlines must pay topassengers when flights are delayed and which in many cases grossly exceed the fares paid for the flight inquestion. Despite the well intentioned objective behind this initiative its delivery has not addressed thelegitimate concerns of the airlines that are providing low cost travel to an increasing number of travellers,nor appear to have considered the unintended impact that it might have on those travellers.

9. AOA would also submit the following general concerns.

9.1 The trend towards reviewing and “tinkering” with regulations and Directives by the Commission. Agood example of this is given by the current review of the Ground Handling Directive where there will becosts incurred by industry in participating with the review and with no certainty that any benefit will bedelivered to consumers.

9.2 A broad “one size fits all” approach to legislation. This is inappropriate in many cases—see ourcomments on denied boarding compensation at paragraph 8 above.

9.3 The tendency for legislation to be highly detailed rather than creating an enabling framework whichallows the development of specific national or sub-national responses addressing impacts of the particularissue being legislated upon at the appropriate level.



Emissions Trading

10. AOA advocates the inclusion of intra-EU aviation into the European Emissions Trading Scheme asa precursor to the development of a global scheme through ICAO.

11. AOA firmly believes that emissions trading represents a viable approach that will incentivisemanufacturers to develop new technologies in aircraft and engine design that will, over time, reduce theimpact that aircraft make on higher atmosphere emissions.

12. AOA fully supports the UK government’s position as stated in the recent White Paper and it’sintention to “ . . .press for the inclusion of intra-EU air services in the forthcoming EU emissions tradingscheme, and to make this a priority for the UKPresidency of the EU in 2005, with a view to aviation joiningthe scheme from 2008, or as soon as possible thereafter.”

13. The development of this initiative is an area where the EU must take a leading position in thedevelopment of a sustainable future for aviation.

Competence in Air Services Negotiations

14. AOA fully supports the principle of liberalising international air services and has been consistent inpressing for a comprehensive “open skies” approach to these matters. We believe that the liberalisation ofsuch services would significantly enhance consumer choice and create more dynamic and competitivemarkets in air transport.

15. AOAalso fully supports the views of othermajorUKairport operators in that therewill be significantbenefits to UK consumers, UK industry andUK plc in the liberalisation of air services between Europe andthe USA. It therefore follows that AOA welcomes the mandate given to the Commission to negotiate withthe USA as this appears the most likely vehicle to achieving a fully liberalised air service agreement betweenthe world’s most significant economies.

16. The issue relating to EU competence in negotiating air service agreements with third countries otherthan the USA must also be considered. The Commission has produced a draft regulation that eVectivelyenabledMember States to continue to negotiate such services with the recognition that it (the Commission)did not have either the resource or mandate to negotiate with other third countries, other than the USA.

17. In the event, however, Commission oYcials have cited the continuing draft status of this regulationas reason for not establishing the body that is therein tasked with endorsing any agreements which may benegotiated by individualMember States in accordance with it. Nor have they permitted any such agreementsto be ratified in the absence of this body. A current specific example is the impasse reached in finalisationof a much-desired extension to the UK/Hong Kong air services agreement. There appear to be no earlyindications of the regulation being formally adopted or the ensuing diYculties resolved.

18 AOA believes that there are questions around whether the Commission should assume competencein negotiating air service agreements with third countries other than the USA and that until these areresolved theUK government should continue to take a leading role in the allocation of traYc rights betweentheUKand non-EUStates.More specifically, AOAasserts that draft regulation should not in themeantimebe used by the Commission as an apparent blocking mechanism for preventing the eVective exercise ofindividual Member State’s agreed competence in this regard.

19. AOA would be pleased to submit oral evidence to the Committee if required.

January 2004

APPENDIX 1

AOAMember Airports

BAA PlcAberdeen AirportEdinburgh AirportGlasgow International AirportHeathrow London AirportLondon Gatwick AirportLondon Stansted AirportSouthampton Airport

Belfast City AirportBirmingham International AirportBlackbushe AirportBlackpool AirportBristol Filton AirfieldBristol International Airport



Cambridge AirportCarlisle AirportChester Hawarden AirportChichester Goodwood AerodromeCity of Derry AirportCoventry Airport

Denham AirportDundee Airport

Elstree AerodromeExeter International Airport

Fairoaks AirportFarnborough Airport

Glasgow Prestwick International AirportGloucestershire AirportGuernsey Airport

Highlands & Islands AirportsBarra AirportBenbecula AirportCampbeltown AirportKirkwall AirportInverness AirportIslay AirportStornaway AirportSumburgh AirportTiree AirportWick Airport

Isle of Man Airport

Jersey Airport

Leeds Bradford International AirportLondon Battersea HeliportLondon City AirportLondon Manston AirportLydd Airport

Manchester Airport GroupBournemouth International AirportEast Midlands AirportHumberside International AirportManchester Airport

Newcastle AirportNorwich International Airport

Oxford Airport

Peel Airports LimitedLiverpool John Lennon AirportManchester Barton AerodromeSheYeld City AirportTeesside International Airport

Redhill AerodromeRegional Airports LimitedLondon Biggin Hill AirportLondon Southend Airport

Shoreham AirportSwansea AirportSywell Aerodrome

TBI PlcBelfast International AirportCardiV International AirportLondon Luton Airport

Thruxton Airport

Warton AerodromeWolverhampton AirportWycombe Air Park



Memorandum by ICS/ECSA/OCIMF/INTERTANKO (EU 18)


Commission Proposal for a Directive on Ship-Source Pollution and on the

Introduction of Sanctions, Including Criminal Sanctions, for Polluting Offences

General Comments

ICS, ECSA, OCIMF and INTERTANKO30, hereafter Industry, welcome the opportunity to commenton the Commission proposal for a Directive on ship-source pollution and on the introduction of sanctions,including criminal sanctions, for polluting oVences.

Industry supports the general principle that persons responsible for illegal discharges should be subjectto appropriate sanctions, including criminal sanctions. However, shipping being an international industryby nature, ship-source pollution should be dealt with on an international basis rather than on a regionallevel.

Industry draws attention to the fact that ship-source pollution is already covered by internationalConventions, notably by the MARPOL 73/78 Convention and the UN Convention on the Law of the Sea(UNCLOS). Industry welcomes the fact that the European Commission underpins in the ExplanatoryMemorandum to the Directive the importance of the international standards and rules for ship-sourcepollution laid down in the MARPOL 73/78 and UNCLOS Conventions. Industry supports that theinternational level is the preferable one to ensure a uniform application and enforcement of these standardsand rules.

Though the general objective of the Directive is supported, industry questions its value added, for thefollowing reasons:

— All EU Member States have ratified the MARPOL 73/78 Convention as well as the UNCLOSConvention and have, as a consequence, already incorporated in their national law theinternational rules and standards for ship-source pollution laid down in both conventions, asenvisaged in Article 1 of the Directive.

— Being contracting parties to the MARPOL 73/78 and UNCLOS Conventions, Member Stateshave a treaty obligation to applymeasures and sanctions in accordance with the provisions of theseinternational Conventions, as envisaged in Article 7 of the Directive.

— An analysis of the applicable legislation for ship-source pollution inMember States illustrates thatalmost all Member States have already provided in their national law for specific sanctions,including criminal sanctions, for illegal ship-source pollution.

Industry, however, presupposes that the main aim of the Directive is to compel Member States to applymore stringent sanctions in case of ship-source pollution.

Nonetheless, industry wants to caution that adoption of theDirective would create legal uncertainty sincethe Directive will establish an additional regional legislative layer on top of the applicable international andnational legislation with respect to ship-source pollution.

Moreover, some provisions of the Directive are in direct conflict with theMARPOL 73/78 andUNCLOSConventions and enforcement of such provisions would be in violation of these Conventions.

Additionally, adoption of the Directive will also entail legal diYculties in relation to the law of MemberStates, eg the obligation to penalise illegal discharges of polluting substances committed by gross negligence.In common law countries, like the UK for example, the term “gross negligence” in criminal law is only usedwithin the context of homicide for certain manslaughter cases.

Since the Directive deals with criminal legislation, it is of key importance that the provisions of theDirective are clear and transparent and fully comply with existing applicable legislation. It also needs to befully in line with the fundamental principles of Human Rights law.

Serious concern has been voiced as to whether criminalisation of ships’ crews and oYcers represents afruitful approach towards increased safety and environment protection. There is undoubtedly a potentialdilemma between pursuing the line of criminalisation and that of fostering a culture of transparency and oflearning frommistakes and nearmisses, etc. It is a sad state of aVairs when oYcials in some parts of theworldare met by ship oYcers and crew members who will only communicate through lawyers in the aftermath ofa maritime incident because they otherwise may jeopardise their rights and risk criminal sanctions.

In addition, Industry notes that the Commission recognises that operational (deliberate) ship-sourcepollution is still occurring due to a lack of adequate waste reception facilities in EUports. However, Industryis of the opinion that it would be inappropriate to penalise operational discharges from ships, while EU

30 The International Chamber of Shipping (ICS) and the European Community Shipowners’ Associations (ECSA) representmore than 50% of the world’s merchant tonnage. The Oil Companies International Marine Forum (OCIMF) represents alltheworld’smajor oil companies onmarine safety and technicalmatters. The InternationalAssociation of Independent TankerOwners (INTERTANKO) represents some 70% of the world’s independently owned tankers.



Member States themselves fail to provide for the availability and the use of waste reception facilities in EUports, in accordance with Directive 2000/59 on Port Reception Facilities. Industry supports theCommission’s endeavours to enforce Directive 2000/59 and correct this situation.

Finally, Industry notes that the Commission’s competence to mandate the imposition of criminalsanctions has been questioned, where the Commission recognizes that there is “no explicit substantiveCommunity competence in relation to criminal matters per se”.

Major Concerns

1. Article 2.3 of the Directive provides that illegal discharges shall also include discharges resulting fromdamage to the ship or its equipment (ie accidental discharges).

This provision is in conflict with the MARPOL 73/78 Convention, which explicitly exempts accidentaldischarges as criminal oVences. According to their treaty obligation,Member States could not apply in theirnational legislation criminal sanctions to accidental discharges in accordance with the MARPOL 73/78Convention if the discharge is connected with a ship flying a flag of a third country being party to thatConvention.

It is noted that this Directive sets out to ensure uniform application and enforcement of MARPOL,however, the Directive includes provisions which are, in fact, contradictory to MARPOL.

An obligation to penalise accidental discharges in accordance with the Directive would imply that theMARPOL 73/78 Convention is only a minimum convention and consists of minimum requirements whichneed to be complemented by additional measures. If Member States would be obliged to penalise accidentaldischarges, they would be in breach of their existing treaty obligations to respect the MARPOL 73/78provisions. Such a breach could only be avoided by denouncing that Convention. However, such adenouncement would be in conflict with Article 7 of the Directive itself which provides that Member Stateshave to apply measures and sanctions in accordance with the applicable international Conventions and itwould appear to run contrary to the aim of supporting and strengthening MARPOL compliance.

Industry firmly believes that the MARPOL 73/78 Convention is a maximum convention providing forspecific requirements which do not need an additional regulation. Industry is of the opinion that the factthat MARPOL explicitly exempts accidental discharges as criminal oVences, indicates that this is a specificrequirement.

Furthermore it is at least questionable whether a European Union Member State could and shouldestablish a criminal jurisdiction with regard to oVences committed on the high seas if no damage is causedin the territorial sea or the EEZ of aMember State. In those cases the jurisdiction is and should be primarilywith the flag state.

2. Article 6.2 of theDirective does not provide that an obligation to hold any person liable for ship-sourcepollution should be in accordance with Member States’ legislation. In most Member States (eg Denmark)objective conditions, like causation and proximity, need to be fulfilled in addition to subjective requirementsin order to incur criminal liability. In some Member States (eg Germany) therefore it will be very diYcultto prove the liability of a person for ship-source pollution, especially if he has only a remote connection withthe operation of the vessel (eg a charterer or class).

Moreover, the lack of a direct reference to public entities among the possible subjects of penal sanctionsis puzzling, particularly in view of the prominent place public decision makers have had in the causationchain leading to pollution incidents over the last decades.

3. Article 6.3 stipulates that (criminal) sanctions for ship-source pollution should be eVective,proportionate and dissuasive. The Directive does not provide for a definition of these notions, nor gives itany indication that it is already enforced in Member States. Nor does the Directive provide that a criminalsanction should be proportionate to the nature of the criminal oVence committed, which is a fundamentalprinciple of Human Rights law. However, Industry takes note that meanwhile the “proposal for a CouncilFramework Decision to strengthen the criminal law framework for the enforcement of the law against ship-source pollution” has developed detailed rules for applying penalties in respect of ship-source pollution.Industry will analyse this additional proposal and comment on it as appropriate.

4. The principle of proportionality of criminal sanctions also relates to the rights of the accused. TheDirective does not refer to such rights. However the rights of the accused are particularly at stake in thecase of seafarers. Seafarers, being the only persons connected with the ship who are physically present in thejurisdiction concerned, are increasingly victims of prompt actions following a pollution incident. Recentcases have demonstrated that eg the shipmaster may be put, and unduly held, in jail as an immediateresponse to an incident even before a proper investigation has taken place by the competent authorities. Thefact that the public opinion is pushing for immediate action places an additional pressure on thefundamental rights of seafarers. The fact that a Directive on criminal sanctions is introduced without at thesame time ensuring that appropriate due process safeguards for seafarers are in place causes great concernin industry.



5. Industry considers the range of sanctions proposed by the Directive extreme and excessive. Attentionis also drawn to the fact that the notion “appropriate cases”, mentioned in Article 6.5, is unclear andconfusing.

6. Article 6.6 provides that fines for illegal ship-source pollution shall not be insurable. If an oVencecausing damage is done intentionally there is no insurance available anyway. In case of an accidentaldischarge, for example as a consequence of a collision happening unintentionally, all financial consequencesare and should be insured including possible fines. It is to be noted that shipowners through the CLC andHNSC mandatory insurance requirements are compelled to carry insurance for such illegal discharges.

In conclusion, Industry supports the general objective to penalise illegal ship-source pollution, meaningdischarges that are in violation of the MARPOL and UNCLOS Conventions. However, such regulation ofillegal discharges should continue to be at the international level. Industry is of the opinion that theDirectivedoes not produce any immediate value added and consists of some unclear provisions and provisions whichconflict with the applicable international Conventions for ship-source pollution. Industry also underlinesthat the Directive will create legal diYculties with Member States’ legislation, which provide already forsanctions, including criminal sanctions, for ship-source pollution. As a consequence, Industry fears that anadoption of the Directive will create legal uncertainty, whereas it is of key importance that criminallegislation is clear and transparent and fully complies with existing applicable legislation, including HumanRights law. Industry therefore prefers that the applicable international Conventions and relevant national(criminal) sanctions should continue to be the relevant legislation/sanctions for ship-source pollution.

Memorandum by Institute for European Environmental Policy (IEEP) (EU 19)

EUROPEAN UNION COMPETENCE IN TRANSPORT POLICY

Introduction

1. IEEP is an independent institute specialising in European environmental policy and the environmentaland sustainability dimensions of sectoral policies. Transport is amongst our specialist areas. As such ourevidence relates in part to general considerations of EU competence in transport, with particular referenceto the matters highlighted by the Committee, and to environment and sustainability considerations.

The EU Powers and Treaties

The EU Treaties

2. An obvious starting point for any discussion of EU31 competence is the original Treaty of Rome of1957 and its various amendments, commonly referred to as the Treaty of the EuropeanCommunities (TEC),which define the scope, powers and institutions of the Community. Although intergovernmental in nature,the TEC also provides for the operation of powerful community institutions other than the Council ofMinisters—most obviously the Commission and Parliament. In these respects the EU is unique and doesnot bear comparison (flattering or otherwise) with any other international entity. That is, it is far more thana free trade area, but far less than a federal superstate.

3. Community powers are those which are conferred on the Community in specific areas by these treaties.There are three types of powers, as follows:

— Explicit powers, which are clearly defined in the Treaties.

— Where the Community has explicit powers in a particular area (eg transport), it also has implicitpowers in the same field with regard to external relations (eg negotiation of internationalagreements).

— Also, where the Community has no explicit or implicit powers to achieve a Treaty objectiveconcerning the single market, Article 308 allows the Council, acting unanimously, to take themeasures it considers necessary.

4. The tasks of the EU are not narrowly delineated in the Treaties, but represent broad fields ofcompetence. The overarching goal of the EC is set out in Article 2 of the EC Treaty, including promotingthroughout the Community a harmonious, balanced and sustainable development of economic activitiesetc. In order to fulfil this task, the activities of the Community (Article 3) include a common policy in thesphere of transport, which is defined later. In this way the Treaty does not confer on the Community generalpowers to take all measures, but lays down in each chapter the extent of the Community’s powers to act.This ensures that the surrender ofMember State powers is more controllable. That said, the scope of powersis in many cases theoretically very far-reaching, as discussed below for the case of transport.

31 Note that in what follows we follow where possible the commonly accepted practice in referring to the “European Union”,but when discussing treaties and laws, the most relevant provisions are still mainly specific to the “European Community”,which is one of the “pillars” of the EU.



5. Note that the proposed “Constitution for Europe”, which is under negotiation at the time of writing,will probably make little diVerence to the current situation on EU competence with respect to transport,except on points noted below. Also, although it proposes some important changes in other areas, it will notbe radically diVerent in nature from its predecessors and is therefore no more or less of a “Constitution”than the earlier treaties.

The Common Transport Policy

6. The TEC contains a group of articles defining the scope of Community competence in transport. Thetransport chapter remains essentially unchanged since 1957, and the new Constitution does not envisageany changes either. As such, perhaps not surprisingly, the text reflects the preoccupations of half a dozengovernments nearly half a century ago, and has nowhere near the scope of what one might expect of amodern transport policy—at least not in its specific provisions.

7. In the 1950s, mass international travel was in its infancy, and even road haulage on the Continent wasessentially a national enterprise, with cross-border traYc subject to strict and very limited quotas. Clearlyif the Common Market was to become a reality, this would have to change. Consequently the substantiveprovisions of the transport chapter can be summarised briefly and simply as follows:

— The Community is to have common rules governing international transport, and conditions areto be agreed under which non-resident carriers can operate in all Member States.

— Measures are to be taken to improve transport safety.

— State aids are allowed for the purposes of “coordination of transport” or to fulfil public serviceobligations.

— Discriminatory charges or other conditions (in eVect against foreign carriers) are generallyforbidden.

8. These requirements apply only to road, rail and inland waterways. “Other appropriate measures” mayalso be taken; but since no specific objectives are stated for the Common Transport Policy, it is diYcult tosay what should be judged “appropriate”. “Appropriate measures” may also be taken for air and seatransport, but again with no indication of what thesemight be. Thus the transport title in the Treaty is rathera paradox: in specifics it is rather narrow, but its catch-all clauses are extremely broad. More recently, aseparate policy on Trans-European Networks was added. The transport dimension of this is discussedbelow.

Environment and Sustainable Development in the EU

9. In contrast to the CTP, the Community did not acquire explicit Treaty responsibilities forenvironmental protection until the Single European Act took eVect in 1987: responsibilities and powerswhich have since been extended under the Maastricht and Amsterdam Treaties. In particular these treatieshave created, and subsequently strengthened, the requirement for environmental considerations to beintegrated into all other areas of EC policy making, including transport. These are high level treatyobligations, and as such, the Community institutions are under a legal obligation to respect them.

10. Since that time EC policy has developed across a wide range of issues, and with mixed results in termsof the environment. Certainly some developments (such as tighter vehicle emissions standards) can beclassed as a success for environment policy; while others, such as the EC’s role in road construction and thepromotion of trade, have led to further damage to the environment.

Relevant principles inherent in the Treaties

11. The exercise of the various powers by the EC is governed by a number of operating principles. Mostrelevant amongst.

12. Subsidiarity dictates that action should only be taken if there is a need for Community rules andcommon action, in that action cannot as easily be taken at the level of the Member States. Clearly, forexample, settingminimum standards for products to be sold in the singlemarket requires community action,but setting parking standards for housing probably does not, because diVerent standards in diVerentcountries do not cause obvious problems in the latter case, and can better reflect local circumstances.

13. The proportionality principle also dictates that the form of action should be proportionate to the issueat hand. In other words, the Commission should not opt for a “sledgehammer to crack a nut” in proposingnew legislation. Framework legislation, minimum standards and mutual recognition of national standardsshould also where possible be preferred to more detailed Community rules.

14. These rules are very clear and rational in principle, but it is very diYcult (or even impossible) to applyeither subsidiarity or proportionality definitively in a given case. For example, it is generally recognized that,for safety reasons, it is a good idea to have a common set of road traYc signs across Europe, but how far



should this go? Do we need a common style for direction signs, for example, and should all Europe’s cyclelanes be painted the same colour? For this reason it is diYcult in practice to challenge a Commissionproposal on these grounds.

From principles into practice

15. Thus various general guides are set out of the limits of Community competence in transport aselsewhere, but these are not clear cut or foolproof, and so diVerences of opinion or interpretation can easilyarise. Ideally, these would be dealt with at a very early stage of the legislative cycle, with the processproceeding in a systematic way, in which objectives, trends and the need for legislation were set out in GreenandWhite Papers, then translated into legislative programmes, with built-in consultation ofMember Statesand stakeholders, etc. Such a systematic and transparent approach has in fact been set out under the BetterRegulation initiative, which in turn arose from Commissioner Prodi’s European Governance White Paper.These principles are as yet rather new, but both the Commissioner and the Director-General in charge oftransport policy have been conspicuously slow to take them up. This might change with the newCommission later this year, however.

The Nature of EU Legislation

16. In addressing the powers of the Community, it is important to bear in mind the implications of thecomplex EU legislative process, as there is a tendency in some quarters to regard the Commission and theCommunity as synonymous. In reality the Commission, uniquely, has the power to propose legislation, butin almost all cases it is others (ie, theCouncil and inmost cases the Parliament) who have the power to amendthe proposal and adopt or block it.

17. Currently the Commission has quite limited powers to pass legislation on its own authority alone.These relate typically to highly technical issues, such as adapting a monitoring or measurement processrelating to a product standard to reflect advances in the technology available. However, the draftConstitution envisages a change to the current structure of EU legislation, whereby the Council andParliament would be involved as now in the passing of framework legislation, but the Commission alonewould have a much freer hand to draw up implementing legislation within these frameworks. It is not yetclear how this would work in practice, or what limits might be placed on such a power, but if agreed, it mightopen the way for a substantial increase in the power of the Commission.

Sensitive areas for EU policymaking

18. There are a number of areas relevant to transport policy in which EU competence is heavilycircumscribed. For example, theMember States must agree unanimously on Community measures for landuse planning within their territories, although arguably Structural Fund plans and the Interreg programmesimpinge slightly in this field. Unanimity is also required for decisions relating primarily to energy policychoices and taxation measures. Since this gives everyMember State (of which there are soon to be 25) a vetoover every aspect of relevant legislation, the result is that measures can only be passed either if there is verystrong support for them, and/or they have little or no adverse consequence for any Member State. This hasseverely delayed and weakened attempts to harmonise even minimum rates of fuel duty across theCommunity, as described below.

Discussion of Relevant Policy Areas

Vehicle and fuel standards

19. The Community has been rather successful in setting quality standards for vehicles and fuels—mostobviously for road fuels and cars. Although these are measures of environmental importance, it should bestressed that they too have their origin in the single market.

Liberalisation in haulage and public transport

20. Also of considerable importance to the Common Transport Policy is the liberalisation andderegulation of transport operators (including road hauliers), which will allow hauliers from within theCommunity to ply for trade without restriction in any Member State.

TEN-T and infrastructure funding

21. The trans-European Transport Networks is the subject of a specific Title (Title XII) originating in theMaastricht Treaty, which lays down three elements for Community policy, as follows:

— the establishment of guidelines for objectives, priorities and broad outlines of measures envisaged,identifying projects of common interest;



— the implementation of measures to ensure the inter-operability of networks, particularly technicalstandardisation; and

— financial support for projects of common interest.

22. There is a rationale for the establishment of such networks, in that communications links havehistorically developed to cater for largely national trade and travel. As such, cross-border links are oftenless strong, and trans-European routes may be fragmented or lacking. These weaknesses can themselves beseen as impediments to the free movement of people and goods between Member States.

23. The Commission has since developed guidelines for the TEN-T, but these have not really establishedclear criteria for what would constitute value-added elements in a network, relying instead on the vague andundefined terms such as “bottlenecks” in the Treaty. Community Structural Funds, and even more so theCohesion Funds, have been used to fund major transport infrastructure projects, including thoseincorporated in the TEN-T.

Fuel and vehicle taxes

24. In order to facilitate the proper functioning of the internal market, it is considered important to havea degree of harmonisation of taxation within the EU in limited circumstances. After much wrangling, theenergy products Directive was finally agreed last year. Again, the requirement for unanimity has meant thatthe amended rates reflect the lowest common denominator and although increases will be required in someMember States to meet the new minimum rates, these are not much more than probably would havehappened anyway, through inflation or othermeans.However, the impact on the newMember States, whichwill join the EU in May, may be more significant.

25. Some fiscal experts consider that ever-closer monetary union itself creates long term pressures for taxrate convergence between Union members. In simple terms, the argument is that ever-greater mobility ofmoney between states will force tax rates and structures to be harmonised to avoid an increase in damagingtax competition.However, this in itself suggests that ratesmay converge towards the low end of the spectrum(known as a “race to the bottom”) unless action is taken to establish a minimum below which they cannotfall. This is particularly important in eVorts to internalise the external costs of transport, as the fuel crisisof autumn 2000 highlighted the competitive pressures of varying duty rates between countries. This may inthe long run create a stronger impetus towards harmonisationmeasures, but recent experience demonstratesthat particular national interests combined with the unanimity requirement can still present a very powerfulblock to progress on any particular measure.

Road charges

26. Certain aspects of road user charging are commonly agreed at the EU level for a number of reasons.First, it is necessary to ensure that eachMember State does not discriminate against foreign hauliers throughroad user charges or tolls. Hence, the so-called “Eurovignette” Directive set up an EU framework for roaduser charging. However, particularly as many Member States including the UK have been contemplatingthe introduction of some form of more comprehensive road user charging, a more sophisticated and flexibleframework is now required at the European level. After much deliberation, the European Commissionfinally published its proposal to amend the Eurovignette Directive in 2003, which addresses some of theneeds of Member States, but notably fails to address others as it heavily reflects DG Tren’s own agenda.

27. The second, increasingly important, requirement, is that hauliers in particular can use the chargingsystems of other countries, without having to acquire a separate “black box” for each city or country thatthey visit, or receive a separate bill from each. This is known as the “one box, one bill” principle, and so EUlegislation is being developed to ensure that the various systems are interoperable.

Railways

28. The Commission has a similar liberalisation and market-opening agenda with rail as with road,seeking to promote measures to allow rail operators free and fair access to track in other Member States,for example. However, national interests have led to resistance and a relatively slow pace of change in thisarea. The Commission’s recent transportWhite Paper laid great emphasis on promoting and revitalising railas a means to redress the modal shift towards road. In particular this envisages measures to promote boththe interoperability of Europe’s various railway systems, and facilities to encourage transhipment of goods,for example between road container trucks and trains.

Aviation

29. Deregulation of the civil aviation sector is also a central plank of EC transport policy, under thegeneral heading of “Open Skies”. This has encouraged a progressive breakup of the old system of “nationalcarriers” in Europe and the entry of new operators into the market, leading to much freer competition andhence lower prices and a steep increase in air travel. The Commission has been eVective in this area, taking



advantage of the potentially broad Community competence noted above. Hitherto, however, a number ofMember States including the UK have jealously guarded their right to negotiate bilateral agreements withthird parties such as the US. By this means they consider themselves to gain preferential terms, although theoverall result is suboptimal, in that as a result of these arrangements, US carriers now enjoy far better accessto the European aviation market than vice versa.

30. However, a European Court of Justice ruling on 5 November 2002 (against the UK and seven otherMember States) confirmed the Commission’s argument that these arrangements were illegal, and that theCommunity did indeed have some implicit competence in this area, in the fields of airport landing slots,reservation systems, and intra-Community fares and rates, for the reasons outlined above. The Court alsoruled that such agreements were illegal, because they discriminated against carriers in other EU MemberStates. The Commission now argues that other areas of competence, including safety and taxes and charges,have also become Community competences by the same line of argument, and so a much strongerCommission involvement in international negotiations can now be anticipated, with the US and elsewhere.Some Member States may resist this, but arguably it will lend the EU a stronger bargaining position inrelation to the US in the medium-term.

Emissions from ships and inland waterway vessels

31. Polluting emissions from ships and vessels used on inland waterways have been treated in a relativelyad hoc manner to date compared to emissions from on-road vehicles. This is partially to do with theinternational nature of marine travel, in particular, but also relates to the comparatively lower totalemissions from the sector. However, in 2001, the Commission produced a strategy on reducing suchemissions, which signalled a more strategic approach. Legislation to date on emissions from the sector hasfocused on fuel quality and some engine emission standards.

32. Council Conclusions of 22 December 2003 both recognised the need for Community measures in thissphere, but also called on theMember States to ensure that parallel measures were taken in the internationalsphere through IMO. This is a good example of the possibility of Community competence increasingEuropean states’ combined leverage in the international arena.

The Commission’s forthcoming Urban Thematic Strategy

33. The Thematic Strategy (TS) on the Urban Environment is one of several strategies being prepared asa result of the EU’s Sixth Environment Action Programme. Four priority themes for the urban TS wereidentified and independent working groups have been taking forward the work on a number of themes,including “sustainable urban transport”. It is expected that the resulting TS will focus on establishing aframework that encourages towns and cities to better manage their urban environments, rather thanproposing concrete detailed measures of EU law. This is if anything a retreat from an earlier Green Paperin the area, which had suggested a more dirigiste approach, and reflects the very limited Communitycompetence in this area.

Conclusions

34. In summary, there is a clear rationale for Community competence in some areas of Europeantransport policy, andmuch less so in others. Inevitably there are also “grey areas”, in which the Commissionwill continue to press the case for further Community involvement, and a number of Member States,sometimes including the UK, will resist.

Memorandum by the Chamber of Shipping (EU 20)


Background

Shipping is both by its nature and development a truly global industry. Maritime trade accounts for thevast majority of all transport movements, with over 90% of all trade travelling by sea at some stage. It is thekey driver in the engine of world trade, providing themeans to deliver goods at low cost throughout a rapidlychanging and expanding global market place. International shipping is versatile, eYcient and largely freefrom barriers to trade and the maritime sector in the UK, in particular, is completely liberalised.

There is an unique and historic concentration of shipping and associated business activity in theUK. Thisactivity has grown in recent years, following a decline in the previous three decades, with the introductionin 2000 of the UK Tonnage Tax. This, combined with other elements, has led to a more than 100% increasein the fleet owned and operated by companies established in the UK and a 250% increase in the UK-registered fleet.



It is important to note also the importance of the UK as a base for shipping activity. The earnings ofBritish shipping also include a substantial international contribution which comes from carryings by UK-based companies engaged in maritime cross trading—ie tonnage employed overseas, trading betweencountries outside the UK and EU.

The UK’s approach on shipping has therefore long been based on an open-trading philosophy. While itshares this with many other European countries (particularly in Northern Europe), it is quite diVerent incharacter from the approach of some of its other EU partners. Not surprisingly, the EU institutions havehad to try to reconcile the two.While they have taken account of the economic contribution of internationalshipping and the importance of EU-based shipping companies being able to operated on a level playing fieldwith their competitors, there has been a tendency for them also to politicise the issue by focussing insteadon interventionist activity which is of questionable value or practicality.

The global shipping industry has an established legal regime. The international community—through theUnited Nations—empowered the International Maritime Organisation as summarised by Article1(a) of theIMO Convention (1958) “to provide machinery for the cooperation among Governments in the field ofgovernmental regulation and practices relating to technical matters of all kinds aVecting shipping engagedin international trade; to encourage and facilitate the general adoption of the highest practicable standardsin matters concerning maritime safety, eYciency of navigation and prevention and control of marinepollution”. The supremacy of the IMO in regulating shipping is clear and is unquestioned by its 163contracting governments.

Shipping is also subject to international regulation by other similar bodies within or related to the UnitedNations family. Themost evident of these is the International LabourOrganisation, which has adopted over60 specifically maritime instruments dealing with labour matters.

European Maritime Policy

Maritime regulation has therefore long been essentially international in character but the more recentdiYculty in the European context has been to find a proper and appropriate function for advancing themaritime elements of the Common Transport Policy of the European Union. The EU has implemented thispolicy and sought to promote the regional maritime interests of the community in a wide range of importantareas aVecting shipping, including trade harmonisation, competition policy, state aids, maritime safety,environmental protection, port and maritime infrastructure, and the promotion of short sea and inlandwaterway transport modes.

Most recently, this policy evolved from the 1993 communication “ACommon Policy on Safe Seas” whichoutlined a framework based on four pillars:

— securing the convergent implementation of international safety standards in European waters;

— strengthening the role of port states in inspecting ships of all flags;

— fostering an adequate and technologically advanced maritime safety structure; and

— supporting international organisations in their primary role in international standard-setting.

This was in turn endorsed and built on in the so-called Kinnock strategy paper entitled “Towards amaritime strategy”, adopted in 1996, and resulted in a programme of 10 diVerent proposals of which themain directives aimed to ensure the implementation of international safety rules, social conditions for crewsand better protection of the European coast. In reality much of the legal output of the EU has beenimplementing legislation for IMO requirements.

The Chamber supported the general approach of the European Commission at that time. However, whilewe continue to do so, we have seen over recent years a greater tendency to shift and reinforce the EU’s roleto one of increasingly seeking to be “the driving force for global international rule-making”. It is in the detailof many directives that the Commission seeks to advance this. A careful study of successive directives showsa trend not only to reflect IMO rules but also to add rules that are tighter or more advanced than those setinternationally.

The Commission also outlined and developed a bolder policy approach in its White Paper in 2001 stating“plans to reinforce the position of the community in international organisations, in particular theInternational Maritime Organisation”. In a moment of self analysis the report acknowledged: “it isparadoxical that the EU which is the world’s leading commercial power carries so little weight in theadoption of the international rules which govern much of transport . . . This situation needs to be remediedwithout delay by having the Community accede to the intergovernmental organisations.”

Arguably, it is largely the ambition of the Commission to influence the supra-national bodies and gofurther and quicker that lies behind recent diYculties.

This aspiration has led to a proposal, currently before the Council of Ministers, that the EU as a bodyshould formally become a member of IMO. But this in turn raises several serious questions which straddlethe line between increasing the EU’s influence and weakening it. There is the obvious question as to whetherindividual member states will be willing to give up their competence in IMO and to rely on the Commissionor Council representatives as their sole interlocutors. But beyond that lie questions of the weight carried by



one large institution (even if representing 25 countries) compared with that of 25 governments speaking inconcert. This is an issue that could run and run, but it is with us now. There are precedents, particularly forexample in trade policy generally and in the WTO, but are they desirable here? And will the growing roleof the European Maritime Safety Agency have an impact on this debate as it develops?

EU Measures Exceeding International Requirements

The IMOconventions (onLoadLines,Marine Pollution, Safety of Life at Sea (including the InternationalShipManagement Code), and Standards of Training, Certification andWatchkeeping) lay down a completeframework of rules which competent authorities such as the Department for Transport and the Maritime& Coastguard Agency can implement into UK law. It is widely known that some countries do not applyIMO rules as consistently as the UK and other quality administrations. This does not mean that there is aneed for more regulation globally or regionally. Instead it illustrates the need for better enforcement ofexisting regulations. The Chamber strongly supports the use of existing institutions and devices such as portstate control inspections, and where appropriate help to flag states, as the appropriate instruments to ensurethat errant ship operators and poorer quality flag states raise their standards. In addition there are otherinternational conventions and standards organisations in other fields, all of which—taken together—provide a practical framework to underpin the carriage of international trade.

While the Chamber accepts that specific regional action may be required in a limited number of definedcases, in general, unilateral action outside IMO—whether at regional or national level—can only encouragedual standards, cause confusion, and hinder trade. Regrettably, there has to date been a trend for the EUnot only to copy IMO rules into directives and regulations but also to set rules which are tighter or moreextensive than those set internationally.

In the Chamber’s view, the accumulation over time of unnecessary gold-plating of internationalrequirements can only be counterproductive to the objectives of liberalising world trade, raising standardsworld-wide, and enhancing European competitiveness.

A number of practical examples are set out in the Annex.

Measures going Beyond EU Competence

Even more damaging to international law-making and good order in the global trading environment areattempts by the Commission to extend EU law into new areas beyond accepted boundaries of EUcompetence. The Select Committee has specifically identified the draft directive and draft frameworkdecision on the enforcement of the law against ship source pollution as a subject for inquiry.

The directive was proposed by the Commission in March 2003. The principles contained in it were theresult of high-level political reaction in the aftermath of the Prestige incident in November 2002. Thepurpose of the directive is to incorporate applicable international rules on ship-source pollution intoCommunity law and to provide detailed enforcement provisions.

There is no dispute about punishing illegal discharges. However, the international nature of shippingdemands internationally agreed provisions.

The mechanism already exists through the IMO, which has well-developed pollution preventionprovisions. The International Convention for the Prevention of Pollution from Ships 1973 and its Protocolof 1978 (MARPOL 73/78) is the primary instrument for prevention of pollution of the marine environmentby ships. It has been accepted by some 127 states representing 97% of world tonnage. It has been ratifiedby all EU member and accession states and is incorporated into UK domestic law through the MerchantShipping Acts.

MARPOL sets out provisions for strictly controlled operational discharges and the situation in the eventof accidental discharges. Violations ofMARPOLmay be an oVence. Accidental discharges do not normallygive rise to the commission of an oVence. Where an oVence has been committed, Article 230 of the UnitedNationsConvention on the Lawof the Sea (UNCLOS) provides thatmonetary penalties are the appropriatesanction for foreign vessels other than in the case of a “wilful and serious act of pollution in theterritorial sea”.

The Commission’s proposals would duplicate the principles of MARPOL but are less than a mirrorimage. For example, they broaden the definition of “illegal discharges” to include accidental spills of oil andother noxious liquid substances and although this has been rejected by the European Parliament, howeverthey did add “confiscation of the ship” as a sanction. There are also diYculties with terminology, such as a“gross negligence” test which is inconsistent with the common law approach.

The Commission does not have competence in relation to criminal matters so a directive cannot specifydetailed “sanctions”. For this reason, an accompanying Council framework decision is being developed,which will set out detailed rules and criminal provisions for implementation by individual member states toapply in response to illegal discharges, as laid down in the Directive.

However, and contrary to the principles in UNCLOS, the proposed penalties in the framework decisioninclude imprisonment where “death or serious injury” is caused (although it is questionable whether, in such



circumstances, states’ domestic health and safety legislation would be a more appropriate means of action),or where the oVence results in “substantial damage” to water quality. Other penalties, to be set on amonetary basis, would relate fines to a percentage of turnover and it remains to be seen whether confiscationwill be added. In any event such sanctions represent a disproportionate response.

Implementation of the directive and framework decision will create uncertainty as between MARPOL/UNCLOS and EU provisions and lead to potential conflicts in states’ treaty law obligations. At the sametime, unilateral action by the EU is likely to encourage similar action by individual states (as with recentlegislation in France) or regional groupings in other parts of the world which can only erode the uniformitycreated by agreement at IMO. The value of the internationally agreed provisions will thus be undermined.

Adequate provisions already exist under MARPOL for regulating and punishing illegal discharges. Newregulations are therefore unnecessary and, as demonstrated, are inappropriate and potentially divisive.

Conclusion

Generally, the Chamber of Shipping has a concern that the Commission has a policy approach which hastended recently to be driven by political opportunism, to be sometimes interventionist in style, and often toadd to the burdens on shipping business, which is already heavily regulated.

The EU appears to be seeking a role which actively drives or contributes to the continuing improvementof international standards.While this is an admirable and potentially valuable objective, the EUmust strikea balance which does not undermine the well-established and respected legislative machinery which hasevolved for the development and enforcement of standards on a world-wide basis. There can only be oneprincipal international regulator setting standards for shipping, namely theUN through its agency the IMO,supported by other similar organisations in specific legal and operational areas (eg the ILO in social policy).The main role of the EU should focus on ensuring full adherence by member states to generally acceptedinternational requirements and framing the regional implementing legislation for them, where that isrequired.

It is important that the EU should join with the wider international eVort to establish and enforce a rangeof eVective minimum international standards in shipping—through strong flag and port state commitment.To the extent that it is seen by others as promoting the use of regional or unilateral solutions, in conflict withor going beyond what is agreed internationally, that runs the risk of damaging—rather than helpingachieve—the common objective.

May 2004

Annex

PRACTICAL EXAMPLES OF INTERNATIONAL REQUIREMENTS EXCEEDED

Ferry Safety

It is widely acknowledged that North Western Europe sets some of the highest safety standards in theworld. In this respect, the Chamber supported the introduction of the StockholmAgreement in 1994, whichset stability and other standards for roll-on/roll-oV ferries in North West Europe at a considerably higherlevel than for the rest of the world. However the Chamber does not accept that the Stockholm Agreementset a precedent for or highlighted the need for more regional regulation as a matter of principle.

Prevention of Air Pollution from Ships

Annex VI to the International Convention for the Prevention of Pollution from Ships (MARPOL) setslimits on the emission of combustion products such as sulphur and nitrous oxides from ships’ exhausts, buthas yet to come into force. While many agree that the Annex VI worldwide sulphur “cap” of 4.5% is toohigh, many EU members have still not ratified the Annex itself. They should have done so, thereby helpingto bring theAnnex into forcemuch earlier. The EU is now developing a regulation to setmuch lower sulphuremission limits in European waters and especially in ports. The purpose of this is not understood. Sulphuris a naturally occurring element in crude oil. As the level of sulphur is reduced in automotive fuels, the levelwill naturally increase at the bottom end of the refining fraction from which marine fuels are distilled.

The right course would be for EU policy to encourage member states to ratify the existing MARPOLProtocol AnnexVI and then, through IMO, to seek to have the limits tightened globally. The EU has chosento pursue a regional regime that is both unnecessary and fails to take account of practical problems in bothship and port operations.



Greenhouse Gases

The EU has set target dates for the withdrawal or elimination of certain greenhouse gases in advance ofthe UN Environment Programme’s Montreal Protocol deadlines. As an example, the Protocol has stoppedthe production of Halon but permitted its use in fire-fighting systems on a worldwide basis until stocks areexhausted. The EU has forced the complete withdrawal of Halon from systems (except for essential userswhere there is no suitable and safe alternative) and required the destruction of Halon stocks by burning(which thereby produces greenhouse gases).

The terms of the Montreal Protocol are continually being revised as new and more benign gases aredeveloped, and the EU should work to the same deadlines. There is no convincing reason for Europecontinually to move further ahead at considerable cost to European operators with a policy that also hassome negative eVects on the environment.

European Intermodal Loading Unit (EILU)

The International Standards Organisation shipping container has evolved over the last 30 years to carrythe vast majority of the world’s trade in manufactured goods, as well as a range of specialised containers tocarry other cargoes. In parallel within Europe, a “swap body” system is used for domestic traYc. It has beendeveloped to carry intermodal cargoes also using demountable loading units whose footprint is notconstrained by the cell guide limitations of practically all deep-sea container ships. This makes the floor areaof a swap body more pallet or unit-load friendly than an ISO container, though where necessary, specialdesigns of ISO container are available which are as pallet friendly as swap bodies.

Against this background the EU has proposed a directive to authorise the development of an EILUwhichis designed to be pallet-friendly, but which will be of no practical use within the EU or beyond given theexisting range of equipment in service. Despite almost universal industry opposition to the proposal, the EUcontinues with the development of the EILU.

Oil Pollution Liability

In the aftermath of the Erika incident in 1999, the European Commission brought forward proposals foran additional compensation scheme for oil pollution occurring in Europeanwaters. This would provide top-up payments where resources under the internationally agreed IMO Civil Liability Convention (CLC) andInternational Oil Pollution Convention Fund (Fund Convention) were insuYcient to meet claims. The UKand other EU member states, together with industry, were unenthusiastic since a European top-up systemwould quickly lead to a world-wide proliferation of bolt-on, regional or even independent solutions. Thiscould undermine the internationalism of IMO arrangements. It was welcome that the EuropeanCommission subsequently delayed its proposals while discussions continued about an internationalsolution.

While treaty law limitations meant that it was not simply a case of increasing the IMO compensationlimits, it was proposed that an optional Supplementary Fund of payments should be made available toprovide compensation in states requiring higher limits. A new instrument was adopted last year withmaximum compensation set at an increased figure of SDR 750 million (US$ 1.09 billion), a figure close tothe Euro 1 billion previously advocated by the European Commission. This was seen by the Commissionas a vindication of its policy objective.

The wider issue of the shares of liability to be borne by the shipping companies and by oil companiescontinues to be the subject of debate, particularly following the Prestige incident in 2002.

Memorandum by the British International Freight Association (EU 21)

EUROPEAN COMMUNITY COMPETENCE AND TRANSPORT

I read with interest the report of a recent Transport Committee meeting at which the EuropeanCommunity Transport Competence enquiry was the subject of evidence from a number of transport relatedtrade associations. My colleagues from the Road Haulage Association, the Freight Transport Associationand the Chamber of Shipping were present and gave evidence.

I am taking this opportunity to input our own views in writing in the belief that they will add some valuein your own deliberations and perhaps act as a prompt for future contacts.

With regard to your enquiry it was not possible for me to identify all of the issues that you are interestedin, but I hope the following is helpful.



General

There is a tendency for the EU to try and impose a “one size fits all” approach to regulation. In a verydiverse European Community, more so since the arrival of 10 new countries, conditions vary enormouslyso the eVect of regulation is often the reverse of what was expected or indeed intended. This is partly downto interpretation and partly due to diVerences in national law, working practices and even culturalexpectations. The structure of the transport sector is as you know extremely complex. This is not generallyunderstood by those who write rules and the result is that the law of unintended consequence comes in toplay. BIFA is a member of a European trade association (CLECAT) representing the freight forwardingsector in all the member states. Reaching consensus in this environment is very diYcult and to achieve thisrequires a great deal of flexibility. Regulations from the EU tend not to oVer the degree of flexibility that isessential and this coupled with unequal enforcement often results in a muddle. BIFA supports an open andfree trading environment that eliminates protectionism but it takes more than a set of rules to make thishappen.

Road Transport

The majority of BIFA members do not run their own vehicles into mainland Europe. Nevertheless wesuVer the consequences of a lack of harmonisation in tax and fuel duties and we support the introductionof road user charging that must be evenly applied across the Union.

Rail Transport

Few BIFA members use rail transport internationally as it is not competitive either on price or service.We fully support the development of better rail utilisation. Unless the Commission enforces its ownregulations rail will remain an under utilised resource and the channel tunnel will not realise its potential.The Intermodal loading units proposal is an example of an inappropriate attempt to force change withoutunderstanding the consequences.

Maritime Transport

Maritime transport is the subject of much international regulation. The Commission’s role here is tocreate an environment within Europe that encourages rather than discourage development. Portliberalisation was resisted in many quarters and is perhaps an example where there was a genuine attemptto liberalise the market. There is a temptation, however, to legislate too heavily and this may be the reasonwhy in this case the Commission appears to have found this diYcult to progress.

Air Transport

The situation here is much the same as for maritime transport with international regulation andenforcement critical for eVective utilisation of this mode of transport. The Commission’s influence isrestricted to establishing rules for Europe that can be eVectively imposed on foreign carriers from the USAfor example. Protection of state carriers is also a barrier.

Multimodal Issues

The Working Time Directive is an example of legislation that takes no account of cultural diVerences. Itinterferes with the way in which people choose to live their lives. It quite rightly needs to deal withexploitation but it is too inflexible, unenforceable and not appropriate in its current form.

Logistics standards are under discussion by the CEN (European Standards Agency) with theencouragement of the Commission. It is an example of a body (CEN) attempting to justify its existence.Logistics is a very complex sector and hardly understood. Standardising terminology and processes soundssensible but is fraught with danger and likely to confuse the customer rather than assist him.

Conclusions

There are three things that need to happen. The commission must improve its understanding of thetransport sector. Theymust consult more widely and theymust ensure that what is put in place is reasonablyenforceable. BIFA has one other example that has failed at the consultation stage and will do doubt fail inthe other areas as well. New regulations to mediate the selling of insurance is a Treasury issue but one thatimpacts on transport. It is clear from the origins of theDirective what types of insurance selling was intendedto be covered but because of a lack of understanding and sloppy drafting followed by poor consultation,BIFA members who provide aVordable insurance for goods movement to importers and exporters mustcomply with legislation that is entirely inappropriate for them and will deprive international traders in theUK of access to this type of cover for their goods. Further more the UK has implemented it and no otherMember State has so far.

May 2004



Memorandum by Freightliner Group (EU 22)


1. Introduction

This evidence is submitted by the Freightliner Group, which consists of two licensed rail freight operatingcompanies, Freightliner Ltd and Freightliner Heavy Haul Ltd.

Freightliner Ltd is the UK’s largest intermodal rail operator, and moves some 600,000 intercontinentalcontainers a year between the major container ports (particularly Felixstowe, Southampton, Tilbury andThamesport) and 13 inland destinations.

Freightliner Heavy Haul Ltd has been working in the rail bulk market for four years, and now operatesmore than 1,000 trains a week carrying coal, rail infrastructure materials, cement, cars and vans, domesticwaste, aggregates and petroleum products throughout Britain.

2. Subjects of Evidence

This evidence considers three of the items from the European Commission’s (EC) proposed ThirdRailway Package which seem likely to have an eVect on freight; the proposals for driver licensing, qualityrequirements in contracts and technical interoperability. We believe that the first two are on balance likelyto be harmful to our interests; the third could, if properly implemented, be beneficial.

3. Train Driver Licensing

The problem which the EC’s proposal seeks to address is that of the non-discriminatory recognition oftrain driving qualifications across the borders of the member states. We recognise from our contacts withindependent freight operators in mainland Europe (we are members of the European Rail FreightAssociation, the representative body for “new” operators) that there is a problem for drivers engaged incross border operations and a strong likelihood that incumbent state-owned entities will make it diYcult fornew entrants to operate across international borders. We therefore support the introduction of aninternational driving licence for those drivers engaged in international traYc.

However, we do not accept that it is then necessary to introduce a standard and complex requirement fortrain driver licensing for the vast majority of drivers (at least 95%, we estimate) whose duties will never callfor them to cross international boundaries between member states. At present drivers in the UK areauthorised to drive by the operating company which employs them by reference to the industry standardsset by theRail Safety and Standards Board and approved byHerMajesty’s Railway Inspectorate. This basiccompetency is transferable between licensed operators in Britain, although operators are also required tosatisfy themselves that any newly-recruited qualified drivers are competent for the new employer’s work.

There is no evidence to suggest that this system does not work satisfactorily for all parties; the creationof an external administrative licensing authority is not only likely to be administratively burdensome, it willalso run a considerable risk of diluting the employer’s direct responsibility for the safe behaviour of itsemployees. It will, in essence, become possible to say “Someone else told me he/she was safe”.

In addition the EC proposal introduces new requirements as under which we consider onerous orimpracticable.

3.1 The psychological examination of drivers

Whilst it is a requirement for drivers to undergo psychometric testing in Britain, it is not at all clear thatthere is any need for psychological examination or that psychologists have any skills which are of significantvalue in assessing the fitness of individuals to drive trains.

3.2 Professional experience

The proposal includes a requirement for drivers to progress through certain categories of trains beforebeing allowed to drive long distance passenger and freight trains. It is not possible for freight operatingcompanies to arrange progression through local passenger train driving, nor is it an essential qualificationfor the driving of freight trains. Equally, British express passenger companies will not be able to arrangeprogression through local freight or passenger train driving.



3.3 Frequency of re-examination

There is no evidence to suggest that competencies need to be reviewed at the frequencies proposed by thecommission.

3.4 Educational qualifications

The required term of secondary education proposed by the commission would preclude UK residentsleaving school at age 16 from ever becoming train drivers. There is no evidence to support the introductionof such a restriction.

4. Quality Requirements

In an attempt to address the deplorable quality of service currently oVered to freight customers by someof the incumbent nationalised operators in mainland member states, the EC proposes to mandate theinclusion of compulsory penalty clauses in the contracts between freight operators and their customers tocover service failures and delays. The problem being addressed simply does not exist in Britain, where thereis a mature competitive market in the provision of rail freight services and most customers will expressthemselves to be reasonably satisfied with the service they receivemost of the time—customer representativebodies such as the Freight Transport Association and the Rail Freight Group will endorse this.

Our objections to the introduction of compulsory penalty clauses are made for the following reasons:

4.1 Commercial contracts, including penalty clauses if required, should be freely negotiated betweenthe parties to reflect their precise requirements and the understanding of commercial situationswhich can only be fully appreciated by those directly involved in an agreement.

4.2 There is no objective evidence that the introduction of compulsory performance penalty clauseswould make any positive contribution to the performance quality problems experienced by manyEuropean railways.

4.3 Where railway undertakings are state owned financial losses will be passed through to taxpayers.

4.4 Where railway undertakings are properly commercial, the risk profile of the operating companiesmay require them to raise their prices to cover potential adverse eVects, thus reducing theattractiveness of rail (other modes not having similar risks to carry) and diminishing the volumecarried by rail.

4.5 By far the largest part (typically four times the amount) of the delay experienced by our trains isattributable to Network Rail, our infrastructure provider; we must be able to pass all their delayliability through to them if we are not to go bankrupt.

4.6 The risk of substantial compulsory penalties will stifle initiative in the development of rail servicesto meet customer needs.

4.7 The existence of an inappropriate compulsory penalty regime will deter new entrants to thebusiness and the growth of rail service in markets which established operators find it diYcult toaddress.

5. Technical Interoperability

Because of a multiplicity of signalling, track gauge and traction current systems across Europe—sometimes as a result of divergent technical development, sometimes as a result of conscious historicdecisions to impede hostile international troop movements—it can be very diYcult for locomotives androlling stock to be operated in neighbouring member states. Provided that it is implemented with theminimum of bureaucracy and over reasonable timescales, we welcome the harmonisation of standardswhich should enable rolling stock to be built and approved to common standards. In particular, we approvethe change to a systemwhich will say that if the vehicle is built to an approved standard that will be suYcientfor it to be operated universally rather than being dependent on variable approval processes in each country;in the case of the UK, the present process requires an applicant to address risks from the use of the vehiclerather thanmeet standards for its construction, and this can lead to uncertainty, delay and expense (withoutan appropriate safety gain). The introduction of technical interoperability, if properly done, should reducebureaucratic complexity and help in the reduction of manufacturing costs.

4 June 2004



Memorandum by English Welsh and Scottish Railway (EU 23)


Introduction

The European Union has a crucial role to play in ensuring that rail is able to retain and grow its share ofthe European freight market.

The key to this is the liberalisation of the rail freight market so that operators can access it and competefor business in all sectors. This allows on-rail competition to flourish and so ensure that operators respondto the needs of customers by oVering eYcient, flexible cost-eVective services. These qualities then help railto retain existing business and win new customers by oVering an attractive and viable alternative to roadhaulage which is increasingly vulnerable to road congestion.

The extent of the Commission’s success in achieving this has a direct impact (i) on the prosperity of EUindustry and commerce and thus on the economies of Member states—and (ii) on the environmental eVectsof road congestion on the population of the Community as a whole.

Since the Transport Act 1993 the UK has been in the forefront of the liberalisation process. EWS cameinto being as a result of this legislation and is the UK’s leading rail freight operator. Since 1993, othercompanies have entered the UK freight market to ensure that today there is active on-rail competition.Collectively, EWS and the other freight operating companies (FOCs) have brought over £1 billion ofprivate-sector investment to the UK rail freight industry and this process is continuing as more newlocomotives, wagons and other equipment are purchased.

This commitment to the future and the eYciency generated by on-rail competition have been instrumentalin reversing decades of decline and making rail grow its market share. Since 1993–94, the volume of freightmoved by rail has grown by over 50% and rail’s share of the UK surface freight market (ie road ! rail) isnow close to 11%—the best performance for 20 years. EWS has identified further substantial opportunitiesfor growth in both existing core market sectors and also in parts of the market where rail has modestpresence.

EWS operates international services between the UK and continental Europe. As such and with ourexperience of a decade of operating in a liberalised rail freight market, EWS is well-placed to respond to theCommittee’s Inquiry into the European Union’s role in shaping transport policy.

The Role of the European Union in the Broader Principles of Railway Liberalisation

By issuing Directives under what are now termed the First and Second Railway Packages, the EU hasencouraged new entrant operators to join existing incumbents in competing for business.

In theUK, the first of theDirectives concerned—91/440—formed the basis of theRailwaysAct 1993. ThisAct included measures that privatised Britain’s railways, introduced open access, separated ownership andcontrol of infrastructure from train operations and established an independent regulator and a fair andtransparent method for allocating capacity and charging for its use. These measures form the legislativebasis for rail’s subsequent success in the UK freight market, helped also by substantial investment from theprivate sector. Since 1993, there have been adjustments to the way in which the UK’s railways are run butthe basic structure has remained the same.

From a purely domestic viewpoint, EUDirective 91/440 and its whole-hearted implementation by theUKGovernment have been broadly suYcient to create the favourable conditions needed to encourage thesubstantial private-sector investment. This investment and the supportive legislation have allowed rail tohandle roundly 50% more freight per annum today than was moved prior to 1993. In this respect, EWSbelieves that the European Commission has acted competently and appropriately.

The Commission has consistently registered its concerns that international rail freight operations areunnecessarily hampered by border controls and the operating practices of neighbouring administrations.A number of Directives has been introduced to address the issue and thus encourage the development ofinternational rail freight, including 91/440 (covering intermodal services), 95/19 (rail freight freeways orRFFs), and 2001–12 (use of the Trans European Freight Network). Following the 2001 CommissionWhitePaper on European Transport Policy for 2010, a further set of measures was proposed in the “SecondPackage” which was adopted in January 2003. InMarch 2004 a “Third Package” of measures was adopted,aimed at revitalising European railways.

EWS believes that the Commission’s work outlined above is essential if international freight trainoperations—such as those operated byEWS through theChannel Tunnel—to be competitive with road thusbe able to expand. Just as with the liberalisation of domestic rail freight, this process would not be takingplace today without the active intervention of the Commission. The Commission has broadly actedcompetently and EWS supports it in this respect.



Issues of Concern Arising from the Commission’s Measures

EWS is broadly supportive of the Commission’s measures but we must register our concern that there aresome which may be counter-productive to the aim shared by us all of a liberalised, competitive andexpanding rail freight industry. We give three examples below:

Mandatory Performance regimes

As part of its “Third Railway Package” of measures adopted in March 2004, the EU has issued itsproposed Directive on Quality Measures in Rail Freight. This Directive seeks to establish compulsoryclauses in each contract between rail freight operator and customer relating to minimum service levels.

EWS fully accepts that service quality is a key factor in determiningmodal choice on the part of end-users.Poor quality of service deters customers and drives business onto the roads and the EU is fully justified inits concern over the inadequate quality of service oVered by some rail freight operators. However EWSbelieves that the introduction of compulsory arrangements will be counter-productive and is not particularlyhelpful in developing rail freight traYc.

The significant growth in the amount of rail freight traYc within the UK is the result of competitivemarket forces under which each customer is freely able to negotiate its own conditions with the rail freightoperator of its choice. These contracts may cover a range of issues including price, journey time and value-adding services—to name but a few—andmay ormay not include a performance regime as such.When thesequality of service conditions are included, they are constructed to meet the precise requirements of thecustomer concerned, are almost always confidential and will vary from one contract to another.

Bymaking such a requirement mandatory, the EUwould damage rail freight’s competitive position since:

— those customers that chose not to include performance regimes in their contracts will be penalisedsince rail freight operators must then protect themselves against potential payments for poorperformance and face little alternative but to increase their prices. This will work against theoverall EU objective of increasing freight traYc moved by rail;

— it is unclear whether an imposed performance regime will be flexible enough to match precisely theconditions of those contracts that have been negotiated freely between customer and rail freightoperator; and

— to distort the cost-base of one part of the transport market is discriminatory: there is no similarrequirement placed on the road haulage industry.

From our experience of trading in an open-access railway, EWS believes that more eVective measuresshould be taken by speeding up the process of liberalisation, particularly in countries where there is onedominant state-controlled operator.

Interoperability

Measures to improve barriers to open access by encouraging interoperability have formed part of theEU’s Second Railway Package. These involve the creation of new European Technical Standards forInteroperability (TSIs) and a uniform approval process. Throughout the Community these standards wouldreplace existing national standards on the lines selected by Member states to form part of the TransEuropean network.

EWS accepts that the intention here is well founded: greater standardisation and uniform approvalprocesses should result in lower costs of production of equipment such as locomotives, wagons, trackcomponents and signalling systems for the industry.

Through our participation so far in the establishment of TSIs, it has become clear to EWS that thestandards may be set unrealistically high and that this may oblige the use of equipment that is costly topurchase. Unless careful analysis of the relative costs and benefits of each TSI is undertaken with the fulland active participation of those who must purchase the equipment—ie the train operators—there is a riskthat in seeking these standard arrangements, costs may be unnecessarily increased. If the cost base for railfreight operators is raised without full justification then rail will be less price-competitive with road haulageand business will be lost from rail rather than attracted to it.

This issue is particularly important to those member states such as the UK where geography means thatthrough international freight will always and inevitably remain a small proportion of the total amounthandled.



Driver Licensing

The EU regards the lack of harmonised standards for driver management as a barrier to opening the railmarket to competition and seeks to address this through measures in the Third Railway Package.

EWS accepts that at present it is seldom possible for drivers to operate a through freight train from onerailway administration across a border to another and that this enforces a change of driver which causes adelay and can prevent the eYcient utilisation of staV. Such circumstances do little to permit the benefits ofthrough operation of locomotives to be realised or for other measures such as reductions in borderbureaucracy to be felt. It is also diYcult for drivers to move their employment from one administration toanother without the need for sometimes lengthy and expensive retraining.

However, the EUnowproposes to extend a common set of driver competency standards to all such staV—including those employed purely on domestic duties. Given that standards inevitably vary betweenadministrations, such an extension of new requirements will result in an extensive and expensive programmeof training. It is not at all clear to EWS that these costs are—or ever would be—outweighed by the benefitsthat the EU feels would be obtained. Furthermore, EWS has undertaken its own study of the safety benefitsthat would be obtained if all its drivers had to be trained to meet a set of competence standards forinternational freight trains. This study failed to find any significant benefit.

Channel Tunnel

Unlike the majority of UK rail operators EWS is involved in hauling international services. EWS’sinternational freight business operates traYc to and from the United Kingdom and mainland Europe viathe Channel Tunnel. This business is conducted in partnership with the other European railways althoughthe transit through the Channel Tunnel is just in partnership with the French Railways (SNCF).

EWS believes that the European rail freight market represents a significant growth opportunity,encouraged by the European Union’s pro rail freight policy and the opening of all European networks toopen access operation in 2007. In the medium to long term there may be opportunities for EWS to operateon mainland Europe in its own right or in partnership with one or more of the public or private Europeanrail hauliers. A further option would be to form an alliance with a mainland European customer.

The enlargement of the European Union reinforces the attractiveness of the market given the marketshare enjoyed by rail freight in the accession states.

However, these aspirations will be thwarted if an agreement is not reached on the future level of ChannelTunnel tolls paid by international rail freight.

The charges for the UK portion of international rail freight are paid by the residuary British RailwaysBoard (BRB)—an obligation created when the Channel Tunnel opened. These charges comprise threeelements:

— Variable tolls relating to the volume and type of freight traYc conveyed.

— A contribution to Eurotunnel’s operating costs.

— A top-up fee known as the Minimum Usage Charge (MUC).

Together these elements amount to around £26million a year and last until 30November 2006. Thereafterthe MUC element falls away, leaving an annual charge of around £17 million a year should traYc remainat the current levels.

At present, the BRB (in practice the Strategic Rail Authority (SRA)) is not seeking reimbursement ofthese charges from EWS, an arrangement approved by the European Commission at the time that EWSacquired BritishRail’s international business. This arrangement ceases on 30April 2005 and if no agreementis reached EWS will have to pay £26 million a year to access the tunnel.

Unfortunately international rail freight cannot bear this level of charges, in part because traYc levels havenot reached expected levels as a result of theAsylum Seekers problem of recent years. Therefore EWSwouldhave to cease international freight services if it was obliged to pay Channel Tunnel tolls.

EWS is in active discussion with the SRA and Department for Transport to extend the existingarrangement on tolls. Should we reach agreement we would need to gain approval from the EuropeanCommission—further evidence of the importance of the European Union to the development ofinternational rail freight.

June 2004



Memorandum by the Road Haulage Association Ltd (EU 24)


When Roger King and I appeared before the Select Committee in connection with the above inquiry, Iagreed to come back to the committee on a couple of issues. I apologise for the delay in responding.

Flagging Out

A member of the Committee asked whether the practise of hauliers “flagging out” (ie registering theirbusinesses in the Republic of Ireland) remained common. The RHA believes that since Vehicle Excise Duty(VED) rates in the UK have reduced, flagging out has become less of an attractive option and we are notaware of hauliers opting for this in any significant numbers.

However, we believe that this situation may change radically if the Government’s plans for Lorry RoadUser Charging are implemented as planned in Northern Ireland.

Cross-Border Fuelling/Smuggling

Legitimate cross-border fuelling remains extremely common. Indeed, no haulier located within about 50miles of the border would even consider filling up in Northern Ireland such is the diVerence in prices.Naturally this helps Northern Ireland based hauliers to be able to compete with operators based in theRepublic. Unfortunately it places those operators in NI (and indeed in Scotland and in the North ofEngland) without access to the cheap fuel at a distinct disadvantage. The RHA believes that the only wayto address this problem is to bring the eVective rates of fuel duty in the UK into line with the rest of Europe.

Similarly smuggling remains a very big problem, despite the best eVorts of HMCE enforcement oYcers.Only by removing the incentive (ie the diVerence in fuel prices) can this problem be addressed eVectively.

I hope this information is useful.

12 July 2004

Printed in the United Kingdom by The Stationery OYce Limited4/2005 993936 19585

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