On 9 September 2021, the Court of Justice handed down its judgment in Case C-144/20, AS ‘LatRailNet’ and VAS ‘Latvijas dzelzceļš’ v Valsts dzelzceļa administrācija, on the interpretation of Articles 32(1) and 56(2) of Directive 2012/34/EU. The request has been made in proceedings between, on the one hand, AS ‘LatRailNet’ (“LatRailNet”) and VAS ‘Latvijas dzelzceļš’ (“LD”) and, on the other hand, Valsts dzelzceļa administrācija (National Latvian Railway Authority), concerning the challenge of two acts adopted by the latter.

On 27 June 2018, the National Railway Authority, in its functions as regulatory body, had adopted a decision requiring LatRailNet, as the entity entrusted with performing the essential functions of the railway infrastructure manager, to modify the charging system applicable to passenger transport services under a public service contract. Furthermore, by its decision of 7 November 2018, the Authority had dismissed the appeal brought by LD, as infrastructure manager, against the changes imposed by the Authority to the charging system. Against the decisions, both LatRailNet and LD had lodged an appeal to the Administratīvā rajona tiesa (District Administrative Court, Latvia; the “referring court”), seeking annulment on the grounds of misuse of powers and lack of competence of the regulatory body in modifying the charging system. The referring court, in light of the need to interpret the relevant European legislation, decided to stay the proceedings and to refer three questions to the Court of Justice for a preliminary ruling.

By the first question, the referring court asked whether Article 56 of Directive 2012/34 must be interpreted as conferring on the regulatory body the power to adopt, on its own initiative, a decision requiring the undertaking performing the essential functions of the railway infrastructure manager, referred to in Article 7(1) of that directive, to make certain changes to the infrastructure charging scheme, even where that decision does not entail discrimination against applicants.

According to the Court, under Article 56(9) of Directive 2012/34 and, in particular, paragraph 1(d) of that article, the regulatory body is competent to assess and monitor, on its own initiative, the compliance of the charges set by the infrastructure manager with the provisions of that directive, without limiting the monitoring to an assessment of the discriminatory nature of those charges.

By the second question, the referring court asked whether Article 56 of Directive 2012/34 must be interpreted as meaning that a regulatory body, when requiring an undertaking performing the essential functions of railway infrastructure manager to make changes, may lay down conditions which those changes must include and, specifically, whether it may impose an obligation to exclude from the criteria for determining infrastructure charges expenditure previously planned to be covered by the State budget or the budgets of local authorities which railway undertakings for the transport of passengers cannot cover out of their transport revenue.

According to the Court, the regulatory body may impose conditions on such an operator, which must, however, be justified by the infringement of Directive 2012/34 and limited to addressing situations of incompatibility, and may not involve assessments of appropriateness, which undermine the manager’s margin of flexibility.

By the third question, the referring court asked whether Article 32(1) of Directive 2012/34 must be interpreted as meaning that it applies, as wells as regards the criterion of optimal competitiveness of segments of the rail market, to segments of the rail market in which there is no competition, in particular where they are operated by a public service operator which has been granted, under a public service contract, an exclusive right within the meaning of Article 2(f) of Regulation No 1370/2007.

According to the Court, since the concept of competitiveness does not refer to competition between railway undertakings but to the competitiveness of the railway sector in relation to other transport modes, Article 32(1) of Directive 2012/34 also applies to market segments where there is no competition, even where the segment concerned is operated by a public service operator which has been granted an exclusive right.