June 2013 – In mid-May 2013, the Serbian Parliament adopted the new Law on Railway, which came into force on 30 May 2013. The law represents the framework legislation for this area and replaces the old act on railway that was in force since 2005.
According to the Government, the Law on Railway is aimed at introducing the necessary reforms into the country’s railway system, opening competition into this sector, improving effectiveness of the country’s railway system and integrating it into the market of transportation services and EU railway system. Another general objective is to further harmonize the relevant domestic legal framework on railways with the EU rules, as well as certain domestic rules that were also recently reformed (e.g. the rules on railway safety).
Separation of railway infrastructure and operations
One of the main novelties introduced by the Law on Railway is the principle of separation of railway infrastructure from operations. The separation is supposed to be implemented in the form of the separate accounting and, to a certain extent, management of a commercial entity managing infrastructure from a commercial entity managing transport of passengers and goods. Although the Law on Railway does not explicitly prescribe that such separation has to be formally accomplished through the formation of separate legal entities (i.e. companies), it appears that this would be the most effective way to achieve the necessary separation objectives.
Despite the formal separation between railway infrastructure and operations, the railway infrastructure itself remains in the ownership of the Republic of Serbia and represents a so-called good in public use, while the management of the railway infrastructure is deemed to be an activity in the public interest. However, another important novelty is that an entity that manages railway infrastructure no longer needs to be organized in the form of a ”public enterprise”, a category of legal entities formed by the Serbian state, provinces or municipalities. This effectively opens the way for potential participation of private entities in the management of railway infrastructure. Such private entities would still need to be designated by the Serbian state as entities authorized to conduct an activity in the public interest.
Other novelties
The Law on Railway also expands the powers of the Directorate for Railways, the entity that was in charge of executing some specialized activities in the area of railway traffic such as issuance of certain licenses. Namely, the law vests the Directorate with the authority to regulate the railway market as well as to enact bylaws in the area of railway safety.
The so-called network statement is another novelty introduced by the Law on Railway. Entities that manage railway infrastructure will be obliged to issue such statements to provide railway operators with all the relevant information regarding the railway network in question.
The Law on Railway also provides for the preparation and adoption of a periodical National Program on Railway Infrastructure. Namely, the program should be prepared and proposed by the Serbian Government and, subsequently, adopted by the Serbian Parliament for a term of five years. According to the law, the program is the basis upon which each railway infrastructure operator (i.e. an entity managing railway infrastructure) should develop its own (mandatory) annual program on construction, reconstruction and maintenance of railway infrastructure, and organization and regulation of railway traffic.
A number of areas regulated by the old framework on railways were further developed by the Law on Railway. One of these is the area of public transport which now contains more detailed rules on the manner in which the public transport obligations are imposed on the relevant entities. The same is the case with the rules on awarding of railway routes to railway operators. Also, the law sets out more detailed general conditions and procedure for obtaining a licence to operate railway infrastructure, as well as other relevant licenses and certificates (transport licenses, etc.). However, certain implementing legislation will have to be adopted in due course in order to provide for the full set of rules on these issues.
A step towards true liberalization?
Overall, the Law on Railway appears to represent an important step in the direction of liberalization of the Serbian railway system. However, it is yet to be seen with what degree of efficiency and diligence the important novelties that the law contains will be implemented. Past experience teaches that a number of challenges may arise at the implementation stage. One of them is that the relevant implementing legislation is sometimes adopted with delay or lacks the necessary precision, which may stall the implementation of major parts of the relevant framework.
It also remains to be seen to what extent the relevant state-owned railway operator, which is currently undergoing corporate restructuring (aimed at, inter alia, the corporate separation of its railway management, passenger and freight units), will adjust to the new setting and whether such setting will bring effective liberalization to the market of railway services. According to some initial, informal reactions by the relevant public bodies to the Law, the entire railway network currently in existence should continue to be managed by the relevant state-owned railway operator, while possible new routes and/or existing routes that are potentially found in the future as being no longer viable for use by the state-owned railway operator could be possibly offered to private operators (e.g. new routes could be potentially constructed through a PPP/concession model). If so, the true liberalization of the Serbian railway market may still be some years away.
However, the Serbian Government is currently pressed to curb the budget deficit and there have been some calls for it to relinquish some of the state-owned and ran businesses (e.g. in the insurance sectors). Thus, one cannot entirely exclude the possibility that these pressures may provide an impetus for the quicker liberalization of the country’s railway sector.
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