National railway infrastructure - possibilities of lease for private investors
The Romanian railway infrastructure seems to start the alignment to the European standards by long term rehabilitation plans and projects. In this context more and more investors are interested in the possibility to connect or to use the national railway infrastructure for their business. The dynamics of rehabilitation projects in this sector and the orientation of the competent public authorities to the real needs of the market, brought a first major change in the approach of the legal possibilities in this field.
Although the procedure for allotment or lease of railway capacities is regulated in Romania since 2004 by the Government Ordinance no. 27, it has not been really applied until now. In the context of the above described legal regulation and considering the growing interest of private investors in leasing certain railway segments, mainly for their industrial use, the Ministry of Transports expressed recently its intention to lease a quite large segment of non interoperable railway to private contractors. Although probably most of the railway segments to be leased need rehabilitation, most of those envisaged by the Ministry of Transports do have either touristy or industrial potential. Moreover, most of the non interoperable railway segments are connected to the interoperable railway infrastructure, in such a way as to enable them to fulfil the requirements of an industrial use.
The aforementioned ordinance distinguishes between interoperable railway infrastructure and non interoperable, whereas both categories are subject to private or public property of the Romanian State. Ordinance no. 27/2004 stipulates that only non interoperable railways, meaning those designed for local transportation, can be leased by companies. The competent authority for implementation of the aforementioned ordinance is the Romanian Railway Company (hereinafter referred to as “CFR”).
The lease of railway infrastructure to private companies must be carried out by ways of public tender, whereas only Romanian legal entities authorised to carry out railway traffic services can apply for this. Moreover it has to be observed that after award of the lease contract to a Romanian legal entity, the respective company must obtain from the Romanian Railway Authority (hereinafter referred to as “AFER”) a licence for operating on the awarded non interoperable railway.
The segments of railway that can be leased are determined by CFR, whereas a complete list of the non interoperable railway segments is being communicated to each County Council.
The procedure for award of contracts relies on the tender documentation that sets out the requirements to the interested companies. Among other things the tender documentation also stipulates the operating conditions on the respective railway for the whole lease period, the rehabilitation and maintenance works that have to be carried out by the companies operating on the respective segment and the technical operating parameters. Depending on the volume of rehabilitation works to be undertaken and on their period for amortisation, the Ordinance no. 27/2004 admits a lease period of 5 to 10 years.
The lease agreement to be concluded with CFR contains specific conditions for operation on the respective railway segment, whereas at this stage it is of high importance for the company that was awarded the contract to negotiate the provisions of the agreement. In most cases such lease agreement provides very strict control and termination clauses for the benefit of CFR.
A possible major disadvantage of such lease agreements might be the rather short time period allowed by the legal provisions and the volume of investments necessary to be carried out. On the other hand, in most cases the railway segments are leased together with the whole infrastructure, including the rolling stock.
An alternative to the above described possibility to connect to the interoperable railway infrastructure, are the existent private railway segments in Romania. These are usually property of major companies and are connected to the national railway infrastructure in order to serve the industrial needs of the respective companies. Due to the fact that such railway segments are private property, the access of interested companies has proven to be easier to get than in case of the national non interoperable infrastructure, since in this case there are no legal limitations with respect to the period of time of lease agreements. Furthermore the purchase of such railway segments is unrestricted. Moreover in case of privately held railway segments, the parties have the freedom to negotiate the lease or purchase contracts, as the case may be, in accordance with their particular interests. Nevertheless, the fact that the railway is private property does not exonerate the company from the obligation to get an operating licence from AFER.