Finnish passenger rail transport opens to competition

The Government has decided to open passenger rail transport to competition. In the 2020s, VR will no longer have exclusive right to the provision of rail transport services in the Finnish rail network and other operators can enter the passenger rail transport market as well. The reform will be carried out in an orderly manner, divided into stages and follow the principles of good human resources policy.

Minister of Transport and Communications Anne Berner and Minister of Economic Affairs Mika Lintilä announced the Government decision on 9 August.

“In Finland, passenger and freight transport has been opened to competition at land, sea and air but not on rails. The reform aims to encourage rail operators to become more responsive to customer needs, improve the quality of services, and increase the share of rail services in passenger transport. The opening to competition will promote fare competition and reduce transport costs with easier access to rolling stock,” says Minister of Transport and Communications Anne Berner.

The opening of rail passenger transport will provide counties, large cities and urban regions opportunities to organise regional and local rail transport services. For that reason, counties will be involved in the national tendering process right from the beginning.

“In future, counties and cities may provide regional rail transport services which will improve opportunities to accept work further away from home. Problems relating to the mobility of workers is one of the bottlenecks of our economic growth,” says Minister Berner.

The implementation of the EU’s fourth railway package, adopted in December 2016, requires that competitive tendering be undertaken as the aim of the package is to promote competition in rail passenger services. In most EU Member States, national passenger rail transport has been opened to competition.

Opening to competition will take place in stages and in close cooperation with Helsinki Region Transport (HSL)

Passenger rail transport services will be opened to competition in stages. Transport services will be tendered out based on a concession contract model. This is to safeguard access to passenger rail transport services across the country.

Under the concessions, companies have obligations to ensure a certain level of service. This will guarantee service provision in areas which currently rely on contractual rail transport services and public service obligations.

The opening to competition will start with local transport in Southern Finland. The process is scheduled to run in parallel with the competitive tendering of commuter rail services of the Helsinki Region Transport (HSL). The objective is to have the tendering process completed and services up and running in the early 2020s. A more detailed schedule will be defined in the course of preparatory work. The intention is that transport services based on the new contracts would be in place throughout the country by June 2026.

In the tendering process, attention will be attached to ensuring that cooperation with regard to ticketing will continue with HSL.

Rail transport safety will not be compromised

The safety of rail services will be ensured and all rail transport operators must comply with national and EU legislation in matters relating to railway safety.

Operators must apply for a safety certificate from the Finnish Transport Safety Agency to start rail transport operations. With the certificate, the operator will assert that it has implemented a safety management system and that it will be capable of complying with legislation and regulations relating to railway safety.

State-owned companies to be separated from VR Group Ltd

The opening to competition of passenger rail transport requires an equal and competition-neutral environment in the railway market so that all rail transport services are available to operators on equal terms. This is in line with the objectives of EU regulation which calls for non-discriminatory access to the supporting services for rail transport.

“To ensure access to the market, three state-owned companies will be separated from VR Group Ltd: a rolling stock company, a maintenance company and a real estate company. “The role and competitiveness of VR Group Ltd as a state-owned rail company will be safeguarded as part of the restructuring,” says Minister of Economic Affairs Mika Lintilä.

The Prime Minister’s Office and the Ministry of Transport and Communications will implement the corporate arrangements together with VR Group Ltd. The aim is to conclude the required restructurings as soon as possible. The ownership steering of the special assignment companies wholly owned by the state will be the responsibility of the Ministry of Transport and Communications.

The rolling stock of VR Group Ltd will be transferred to the rolling stock company in stages as the rolling stock will be needed in the operation of the transport services under tendering. Freight rolling stock will be transferred to the rolling stock company without disrupting transport of goods, with consideration of VR Group Ltd’s transport contracts. Better access to freight rolling stock will accelerate competition and increase the supply of logistics services. With reduced fright transport costs, it will also support the organisation of the transport of bioeconomy products in Finland.

The current agreement between the VR Group Ltd and the Ministry of Transport and Communications that guarantees the VR Group Ltd exclusive right to passenger rail transport is valid until the end of 2024. The opening to competition calls for a renegotiation of the agreement.

Reform to be carried out in line with the principles of good human resources policy

Depending on their tasks, staff members will be transferred from VR Group Ltd to the new state-owned companies so that they retain their current terms of employment. Members of the working group preparing the details of the reform will include representatives of VR’s staff.

Further work to be initiated immediately

A briefing on the competitive tendering of the local rail service package in Southern Finland and that of the HSL commuter rail services will be organised to interested operators and other stakeholders on 4 October 2017. The competitive tendering of the HSL commuter rail services was announced earlier this year. The provision of the HSL local rail services on market terms is to start on 1 June 2021.

Preparatory work on the details of the competitive tendering of the local and long distance rail services will be continued under the Ministry of Transport and Communications. Preparatory work will be carried out in working groups and representatives from the Government Ownership Steering Department of the Prime Minister's Office, Ministry of Finance, Finnish Transport Safety Agency, Finnish Transport Agency, VR Group Ltd, HSL and Finrail Oy will be invited to participate in the work. VR staff representatives will also take part in the preparation.

About The Ministry of Transport and Communications Finland

The mission of transport policy and The Ministry is to ensure safe and smooth everyday travel, maintain the competitiveness of businesses and mitigate climate change by reducing emissions.

Finland's location far from the main traffic and logistics arteries of Central Europe poses major challenges to traffic policy. The needs of various demographic groups must be taken into consideration in the development of the transport system. Efficient and smooth public transport services support the achievement of transport policy objectives. Every effort is made to continuously improve traffic safety and the efficiency of the transport system by means of, for example, intelligent transport services