How is the rail transport industry generally structured in your country?
The rail transport industry in Russia is divided into three groups:
- rail transport for public use, which is the rail infrastructure, rolling stock and other property serving the rail transport needs of individuals, legal entities and the state based on a public (standard form) contract, as well as for other related works (services) in connection with such transport;
- rail transport for non-public use, which is railways for non-public use, buildings, rolling stock (in certain cases) and other property serving the needs of individuals and legal entities for works or services in non-public places based on contracts or for their own purposes; and
- technological rail transport of organisations, which is the rail transport of organisations that transport goods within the territories of the organisations, and carry out initial and tail-end operations with railway rolling stock for the organisations’ purposes.
Non-public-use rail transport and technological rail transport are typically privately owned and operated by the owners.
The opposite is true of almost all rail infrastructure related to public-use rail transport, which is owned by Russian Railways Joint Stock Company (RZD). Rail operations over that infrastructure are typically performed by RZD and its subsidiaries, while the market share of other rail operators is relatively low.
Ownership and control
Does the government of your country have an ownership interest in any rail transport companies or another direct role in providing rail transport services?
The government owns 100 per cent of the shares of RZD. The company was established by the Government Regulation on the establishment of Russian Railways Joint Stock Company. RZD also has a number of affiliated companies in the different sections of the railway services market.
Are freight and passenger operations typically controlled by separate companies?
As mentioned in question 1, RZD controls a huge part of all rail operations. It has a strong monopoly on passenger operations on the public-use railways, while its market share of freight operations is quite similar to the market share of the private rail service providers. RZD has a small presence on the non-public-use railway freight market (the industrial rail transport enterprise section).
Which bodies regulate rail transport in your country, and under what basic laws?
The following government bodies regulate rail transport:
- Ministry of Transport: the federal executive body for transport, including rail transport. The Ministry of Transport defines and implements governmental policy and regulates rail transport.
- Federal Agency of Rail Transport: a federal executive body under the authority of the Ministry of Transport that renders state services and manages state property in the area of rail transport. Among other things, the Agency adopts decisions on commissioning of railway stations and public-use railways, and keeps track of rolling stock and containers by number.
- Federal Service for Supervision in the Sphere of Transport (FSSST): a federal executive body under the authority of the Ministry of Transport performing control and supervisory functions in the transport sector, including rail transport.
- RZD is given certain regulatory functions, for instance, issuance of technical conditions and approval of design documentation for the construction of new railways that connect with RZD railway infrastructure.
The key regulatory acts relating to rail transport are:
- the Federal Law on Rail Transport;
- the Federal Law Rail Transport Charter of the Russian Federation (the Rail Transport Charter); and
- by-laws, including government regulations.
Is regulatory approval necessary to enter the market as a rail transport provider? What is the procedure for obtaining approval?
The general requirements to start operations as a rail transport provider are stipulated in the Federal Law on railway transport and include the following:
- obtaining a licence, if the operations must be licensed;
- owning or being otherwise entitled to possess rolling stock;
- having qualified employees; and
- having an executed agreement for railway infrastructure use (if applicable).
The following operations must be licensed:
- passenger rail transport;
- hazardous materials and goods transport; and
- handling of hazardous materials and goods.
The rail transport provider must obtain the respective licence from the FSSST or its local offices. The list of documents required for the licences is stipulated by the Government Regulation on the licensing of certain operations on rail transport. The licence fee stipulated by the Tax Code is relatively low. Licences are issued for unlimited terms.
Is regulatory approval necessary to acquire control of an existing rail transport provider? What is the procedure for obtaining approval?
There is no specific regulatory approval necessary to acquire control of an existing rail transport provider. However, there are some general competition regulation requirements. If the circumstances listed below apply, the rail transport provider or buyer (accordingly) must submit an application for consent to the transaction or deliver a notification to the Federal Antimonopoly Service (FAS) in accordance with the FAS Order ‘on approval of the rules for the Federal Antimonopoly Service and its territorial bodies to examine applications and notifications submitted in accordance with the requirements of article 7 of the Federal Law on natural monopolies’.
- If the aggregate value of assets of the person (group of persons) or aggregate revenue from goods sales in the past calendar year exceeds a specific amount, then acquisition of the stocks (shares), rights or property of the rail transport provider (which meet the requirements stipulated by the Federal Law on Competition Protection) may be subject to preliminary approval by the FAS.
- If the rail transport provider is the subject of a natural monopoly, and:
- the sale as a result of which the buyer acquires the right to own, possess or use part of the fixed assets of the rail transport provider intended for the production (sale) of goods and the price of these assets exceeds 10 per cent of the provider’s equity capital; or
- if stocks (shares) of the provider valued at more than 10 per cent of the authorised capital are being acquired.
Is special approval required for rail transport companies to be owned or controlled by foreign entities?
The Federal Law on Procedures for Foreign Investments in Business Entities of Strategic Importance for Russian National Defence and State Security provides that rail services, which are treated as a natural monopoly, have strategic importance for national defence and state security. The law requires that prior authorisation be obtained from a special Government Commission on Monitoring Foreign Investment for foreign investors to acquire control over companies of strategic importance. Furthermore, any investor may be required by a decision of the chairman of the Commission to request preliminary approval for the transaction (even if it is not a strategic industry). Detailed grounds for the aforementioned decision other than ‘national defence and state security’ are not stated.
Transactions that result in a foreign investor obtaining control over rail transport companies, and that are made in violation of the above-mentioned Federal Law, are void.
Is regulatory approval necessary to construct a new rail line? What is the procedure for obtaining approval?
There are general and specific rules regarding new rail line construction.
The general rules are stipulated, inter alia, by the Town Planning Code and the Land Code. Such rules include obtaining title to the land, construction permits, etc.
Specific rules are stated in the Federal Law on Rail Transport. Non-public-use railway construction must be approved by the government of the Russian constituent entity in which the railway is located. A special commission handles commissioning of the non-public-use railway in accordance with the Federal Law on Rail Transport.
There are also different procedures for situations when and if the constructed railway connects with non-public-use railways or public-use railways. In the first case, construction must be approved by the owner of the existing railway (Order of the Ministry of Transport on approval of the procedure connecting non-public-use railways under construction with non-public-use railways). In the second case, construction must be approved by the Federal Agency of Rail Transport (Government Regulation on the rules for connecting new or renovated non-public and public-use railways to public-use railways).
The Ministry of Transport is authorised to regulate project design and construction of public-use railways; however, specific regulation does not exist.
Discontinuing a service
What laws govern a rail transport company’s ability to voluntarily discontinue service or to remove rail infrastructure over a particular route?
While there is no requirement to obtain special approval for non-public-use railways, there is a voluntary closure procedure for public-use railways stipulated by the Ministry of Transport Order on approval of the order for closure of public-use railways, including lines and plots of low intensity. This order sets forth quite a complicated procedure that includes Ministry of Transport approval that is based upon the Federal Agency of Rail Transport’s or its local office’s reports. The rail transport company must submit a set of documents, including a railway closure feasibility study and the offer from the respective constituent entity of Russia regarding the closure.
On what grounds, and what is the procedure, for the government or a third party to force a rail transport provider to discontinue service over a particular route or to withdraw a rail transport provider’s authorisation to operate? What measures are available for the authorisation holder to challenge the withdrawal of its authorisation to operate?
The general grounds for licence withdrawal are material breaches of the licence conditions. A licence can only be withdrawn by a court on the basis of an FSSST claim that the transport company failed to remedy material breaches after receiving a preliminary order from that body. Prior to withdrawal, the FSSST may suspend the licence on the same grounds or suspend the provider’s operations in accordance with the Code of Administrative Offences.
The FSSST and the courts consider a breach to be material when it (i) results in the death of or injury to a person, (ii) results in harm to animals, the environment or cultural heritage sites, or (iii) poses a risk of (i) and (ii). The following are considered breaches:
- violation of rules of passenger transport, rules of freight transport and the respective technical conditions;
- not having the required number of employees with the appropriate qualifications and experience; and
- the required equipment (containers, rolling stock, etc) being of poor quality.
Are there sector-specific rules that govern the insolvency of rail transport providers, or do general insolvency rules apply? Must a rail transport provider continue providing service during insolvency?
The general rules of the Federal Law on Insolvency (Bankruptcy) apply to the insolvency of rail transport providers. In general, legal entities must continue operations during insolvency. Whether services can be provided during insolvency depends on the insolvency phase and amount of assets needed to pay debts. A rail transport provider must stop operations if a court decides that it must be liquidated.
Do general and sector-specific competition rules apply to rail transport?
The general legislative acts relating to competition are the Federal Law on Protection of Competition and the Federal Law on Natural Monopolies. In addition to these two laws, rail transport is regulated by specific by-laws relating to fees and charges, among other things. The FAS is the government body authorised to regulate competition.
Regulator competition responsibilities
Does the sector-specific regulator have any responsibility for enforcing competition law?
Despite the fact that the Ministry of Transport is authorised to take measures to develop competition in relevant spheres, including special-purpose government programmes, it does not have the power of direct competition law enforcement.
What are the main standards for assessing the competitive effect of a transaction involving rail transport companies?
To the extent that public-use rail transport services are part of a natural monopoly they have specific features in competition regulation. For example, there are two main methods for regulating natural monopolies:
- price regulation (fixing prices or the maximum price level); and
- stating a list of consumers who must be provided with services or the minimal level of service provision.
The following competition standards, which may indicate a violation of competition rules, apply to other railway services (which are not part of a natural monopoly):
- reduction of the number of players in the relevant market;
- price manipulation;
- restricting certain market players from acting independently;
- determination of joint conditions for the circulation of goods; and
- other circumstances allowing some of the market players to influence the conditions for the circulation of goods.
Types of regulation
Are the prices charged by rail carriers for freight transport regulated? How?
Prices for freight services on public-use rail transport are regulated by the government in accordance with the Federal Law on Natural Monopolies, because they are considered natural monopolies. The main piece of legislation is the Government Regulation on state regulation of charges, fees and payments relating to works (services) of natural monopolies in rail transport.
Previously, prices (tariffs) were regulated by the Federal Tariff Service (FTS), but this right was subsequently transferred to the FAS. For example, the limits within which service providers are entitled to determine prices are stipulated by the FTS Order on the approval of the method for rail transport companies to state price limits (maximum and minimum levels) for freight transport. In addition to the FAS, executive government bodies of the constituent entities of Russia regulate prices, including setting tariffs for carriage on local transport services.
Prices for non-natural monopoly services emerge on a free basis, but they must comply with competition rules.
International transport service prices are regulated by international treaties.
Are the prices charged by rail carriers for passenger transport regulated? How?
Price regulation of passenger rail transport services is relatively similar to that of freight services, if they are natural monopolies. The Government Regulation on state regulation of charges, fees and payment for works (services) of natural monopolies in rail transport also applies to passenger transport tariffs.
An important feature of tariff regulation is that service providers must meet break-even criteria.
Is there a procedure for freight shippers or passengers to challenge price levels? Who adjudicates those challenges, and what rules apply?
The general rule is that freight shippers or passengers are entitled to challenge acts that set prices with the FAS, if these acts violate the competition rules. The resulting FAS decisions may be challenged in the state courts.
Furthermore, there are specific ways to reduce prices for freight shippers or passengers within the limits stated by the FAS or FTS. For example, the procedure for reducing prices for freight shippers on the RZD rail infrastructure is stipulated by RZD Order No. 2314p dated 15 November 2016.
Must rail transport companies charge similar prices to all shippers and passengers who are requesting similar service?
Rail transport providers are required to charge similar prices for similar services if they provide public-use rail transport services in accordance with article 789 of the Civil Code, the Rail Transport Charter, the Federal Law on Rail Transport and other by-laws. However, this obligation does not apply to non-public-use railway services.
Sharing access with other companies
Must entities controlling rail infrastructure grant network access to other rail transport companies? Are there exceptions or restrictions?
A public-use railway owner is not allowed to deny network access to such railways and other public-use rail infrastructure in accordance with the Government Regulation on approval of the rules for rail transport of public-use infrastructure usage services.
The only reason for denying network access is when it is not possible to execute an agreement granting network access. This would need to be assessed case by case.
Are the prices for granting of network access regulated? How?
Prices for granting network access to public-use railways and other public-use rail infrastructure services also relate to the natural monopoly sphere and are regulated as described in questions 15 and 16.
In addition to the price for granting network access, the regulator is entitled to establish additional special-purpose costs related to prescribed financing needs (eg, rail transport infrastructure major repairs).
Is there a declared policy on allowing new market entrants network access or increasing competition in rail transport? What is it?
Russia has announced the process of rail transport market demonopolisation. The main objective is to switch from regulating all natural monopolies in all rail transport services to regulating public-use transport services only.
There are plans to move away from price regulation of passenger transport and reduce the cross-subsidisation of passenger transport through freight. These plans are outlined in the Ministry of Transport Order on approval of Russia’s Transport Strategy for the period until 2020. The Rail Transport Improvement Strategy for the period until 2030 (approved by a government regulation) also aims to deregulate competitive sections of the rail transport market.
Must rail transport providers serve all customers who request service? Are there exceptions or restrictions?
As mentioned in question 18, service providers are required to serve anyone who requests service on public-use transport in accordance with article 789 of the Civil Code, the Rail Transport Charter, the Federal law on Rail Transport and other by-laws. However, a service provider is entitled to deny service if it does not have the capacity to provide it.
This rule does not apply to non-public-use transport services.
Regarding restrictions, there are a number of items that are not allowed on rail transport, including those that are flammable, poisonous, explosive or otherwise dangerous.
Are there legal or regulatory service standards that rail transport companies are required to meet?
General regulation for service standards is stipulated by the Rail Transport Charter, which states, for instance, that railway stations and other buildings must comply with construction and sanitary regulations. Passengers must be provided with free use of waiting areas and toilets, special equipment must be provided for people with disabilities, etc.
The Government Regulation ‘on the provision of rail transport services for carriage of passengers and cargo, baggage and freight baggage for personal, family, household and other needs not connected with the approval of commercial operation rules’ is the specific act regulating service standards, which are primarily established for passenger transport services and for private freight.
Is there a procedure for freight shippers or passengers to challenge the quality of service they receive? Who adjudicates those challenges, and what rules apply?
Freight shippers who are individuals and passengers (consumers) are entitled to challenge the quality of service under the Federal Law on the protection of consumer rights.
If shortcomings are discovered in service received, consumers have the right, inter alia, to demand:
- to remedy the shortcomings in the service at no charge;
- a commensurate reduction in the price of the service; or
- reimbursement of the consumer’s or a third party’s costs to remedy the shortcomings in the service.
The Rail Transport Charter establishes specific liability for rail transport providers (primarily in the form of fines), including the following:
- damage to or the loss of cargo or baggage;
- delay of freight or passenger transport; and
- use of a freight shipper’s equipment without approval.
Freight shippers (companies and individuals) and passengers may challenge service quality on the grounds listed above without taking legal action. However, they can also challenge service quality in court, pursuant to the general rules stipulated by Russian civil and procedural legislation.
Types of regulation
How is rail safety regulated?
There is a wide range of transport safety regulations in Russia, including technical, criminal and fire safety regulations.
One of the general acts for transport safety is the Federal Law on Transport Safety. It prescribes different types of safety requirements:
- transport safety requirements;
- transport safety requirements regarding transport infrastructure safety during project design;
- transport safety requirements regarding non-transport infrastructure facilities that are located near transport infrastructure; and
- requirements for the transport safety of individuals.
The Government Regulation on federal transport supervision regulates rail transport supervision, including safety supervision. The Regulation sets forth a timetable for planned inspections of providers: depending on the risk category of the facility, an inspection takes place every year, or every three, five or 10 years.
The Federal Law on Fire Safety and the Federal Law on Technical Regulation also apply to transport safety.
For convenience of researching transport safety regulation, the most important acts on rail transport regulation can be found in the FSSST Order ‘on approval of the FSSST list of legal acts that contain obligatory requirements for commercial operations based on a notification procedure’.
What body has responsibility for regulating rail safety?
The Ministry of Transport regulates the safety of transport and maintenance of rail infrastructure and prepares the state transport safety policy.
As mentioned in question 4, the FSSST performs control and supervisory functions in the transport sector, including rail transport.
What safety regulations apply to the manufacture of rail equipment?
Primarily, the manufacture of rail equipment must comply with provisions of the Technical Regulation on the Safety of Rail Equipment (approved by a decision of the Customs Union Commission). It includes, inter alia, requirements for mechanical, chemical, biological and radiation safety.
A safety compliance assessment may be in the form of certification or in the form of declaration of conformity. The Technical Regulation contains lists that state the form of assessment for particular equipment.
What rules regulate the maintenance of track and other rail infrastructure?
The general rules of the Town Planning Code apply to the operation, construction and commissioning of buildings that are part of rail infrastructure. As already mentioned, rail transport and other rail infrastructure are also regulated by the Federal Law on Rail Transport and other specific by-laws. This includes the Technical Regulation on the Safety of Rail Infrastructure (see question 27).
Rules for the maintenance of track and other rail infrastructure are stipulated by the Ministry of Transport Order on the approval of railway technical maintenance rules, which regulates, inter alia, the following:
- rail transport employees’ obligations regarding transport safety;
- the maintenance of buildings and track equipment;
- the maintenance of electrical equipment; and
- train traffic management.
What specific rules regulate the maintenance of rail equipment?
The Ministry of Transport Order on the approval of railway technical maintenance rules also regulates the maintenance of rail equipment. It prescribes requirements for planned repairs. An access permit can be obtained following equipment repair provided the relevant notes were made in the technical passport, which each locomotive, carriage or other part of the rolling stock must have.
The rules also require certain signs and titles to be made on rolling stock (eg, owner’s name, dates of repair, identification numbers).
Moreover, the rules contain separate regulation for the maintenance of rail infrastructure, including rolling stock, on tracks where high-speed trains (140 to 250 km/h) are operated.
What systems and procedures are in place for the investigation of rail accidents?
The procedure for the investigation of rail accidents is prescribed by the Ministry of Transport Order on the approval of provisions for classification, investigation and recording of rail accidents and other events related to violations of rail safety regulation procedure.
This procedure requires the rail infrastructure owner to inform a range of government bodies (including the FSSST and the relevant public prosecutor’s office) about accidents such as train crashes, accidents involving hazardous cargo spills, etc.
A commission of FSSST representatives must be formed to investigate these accidents. The commission’s decisions are binding on the rail infrastructure owner.
The RZD Order ‘on the approval of provisions for the classification, investigation and recording of rail accidents and other events related to violations of rail safety regulation procedure on RZD infrastructure’ corresponds to the above-mentioned Ministry of Transport order.
Investigation of accidents involving a transport company owner’s employees is regulated by the Labour Code, which also requires the employer to immediately report accidents to the relevant government bodies. In this case the investigation is conducted by a commission formed by the employer. The commission must include a state labour inspector if the accident caused death or injury.
Are there any special rules about the liability of rail transport companies for rail accidents, or does the ordinary liability regime apply?
The Rail Transport Charter states that a transport company is liable for the death of and injury to passengers or for damage to baggage in accordance with international treaties or Russian civil law. The Charter or the respective transport contract may set a higher amount of compensation than is determined by civil law.
According to the Rail Transport Charter, the compensation for a passenger’s death is 2 million roubles and for injury up to 2 million roubles.
Liability for safety rule breaches is also regulated by the Criminal Code (liability of individuals) and Code of Administrative Offences.
Does the government or government-controlled entities provide direct or indirect financial support to rail transport companies? What is the nature of such support (eg, loans, direct financial subsidies, or other forms of support)?
Government financial support to rail transport companies and especially to RZD as the exclusive public-use rail infrastructure owner is primarily provided in the form of reimbursement of expenses.
Generally, loss of income of rail infrastructure owners and service providers resulting from government tariffs or consumer benefits below an economically feasible level must be subsidised by the state budget.
Are there sector-specific rules governing financial support to rail transport companies and is there a formal process to request such support or to challenge a grant of financial support?
The government’s obligation to reimburse expenses (see question 32) is stipulated by the Federal Law on Rail Transport. The government issues specific procedures for this reimbursement depending on the particular tariffs or grounds for the consumer benefits. As a general rule, the transport company has to deliver a loss of income report to the Federal Agency of Rail Transport on a monthly basis to request reimbursement.
Applicable labour and employment laws
Are there specialised labour or employment laws that apply to workers in the rail transport industry, or do standard labour and employment laws apply?
In addition to the Labour Code, employment of workers in the rail transport industry is regulated by the Federal Law on Rail Transport. In accordance with this law, a large part of the specific regulation in this field falls under the authority of the Ministry of Transport. For example, the Ministry of Transport governs special aspects of working conditions, and rail workers’ work and rest.
Moreover, there are special requirements for workplace discipline in rail transport stipulated by the Government Regulation on the approval of the discipline regulation for rail transport workers. In addition to the disciplinary liability stipulated by the Labour Code, this regulation, inter alia, prescribes rail transport workers’ disqualification from driving trains or other rail vehicles and dismissal of rail transport workers on special grounds.
Applicable environmental laws
Are there specialised environmental laws that apply to rail transport companies, or do standard environmental laws apply?
There is no specific environmental regulation for rail transport, therefore the Federal Law on Environmental Protection applies.
Update and trends
Update and trends
Are there any emerging trends or hot topics in your jurisdiction?
One of the hottest topics in business is investment in transport infrastructure (including rail transport) on the basis of public-private partnerships (PPPs). There are a number of large rail infrastructure PPP projects in Russia, including the following:
- Moscow-Kazan high-speed railway. The entire high-speed railway project includes construction of a railway connecting Moscow to Yekaterinburg. The first phase consists of the construction of the Moscow-Kazan railway (770km) that will cross several regions in Russia, including Moscow Oblast, Tatarstan and Udmurtia, and will pass through the cities of Vladimir and Nizhny Novgorod.
- Development of the Tobolsk-Surgut-Korotchaevo railway (reconstruction of train stations and construction of 27,000km of track).
- Belkomur railway line (1,161km from Arkhangelsk to Perm). The project was valued at approximately 176 billion roubles.
Infrastructure development is one of the main targets in current state policy. For instance, some of the Russian President’s May 2018 instructions to the government are related to infrastructure upgrades. Moreover, an infrastructure mortgage roadmap was adopted by the government on 12 March 2018. The roadmap defines infrastructure mortgage as a set of measures to improve the system of managing the creation and upgrading of Russia’s infrastructure and Russian legislation to make PPP tools, including concessions, more attractive and effective. These measures involve not only developing new financing models for infrastructure construction and reconstruction, but also improving existing mechanisms.