The independent London newspaper

Take EU exit route to renationalise railways

09 February, 2018

• SINCE the Labour Party included in its manifesto a pledge to renationalise the railways, there has been much discussion regarding whether EU membership would be a barrier to achieving this, and if Brexit is a necessary precursor to implementing it.

Hence Paul Lasok’s claim that Article 345 of the EU treaty protects the ability of states to renationalise (Brexit is a right-wing con, February 2).

While it is true that Article 345 states “nothing in the law shall prejudice the right of member states to manage their own system of property ownership”, EU law also mandates that, if a member state restricts the rights of private investors to acquire shares in a given industry, this could be an abridgement of the “free movement of capital” – one of the pillars of the single market.

In other words, private companies can, and have, made legal challenges against EU member states for the right to run services.

The ultimate arbiter on these challenges is the European Court of Justice (ECJ), which makes its decisions based on a concept of “proportionality”, meaning it will only permit a member state to block the full privatisation of an industry if it can prove there are sufficient grounds of national interest.

So, while the ECJ upheld the Belgian government’s right to hold a stake in the provision of gas on grounds of national security, it also ruled that the French government’s wish to maintain a decisive golden share in private oil company Elf-Aquitaine was uncompetitive.

So what could this mean for rail nationalisation? Mr Lasok cited the case of state-owned SNCF in France to demonstrate that EU law does not prevent nationalisation. There is some irony in this since SNCF owns stakes in several British rail franchises (including Thameslink and Southern Rail and plans to bid for HS2 with Virgin).

So, Britain does have many state-run rail services – by other countries, European and otherwise. This “unbundling” process is part of the mass rail privatisation introduced by John Major, using an EU blueprint (Rail directive 91/440/EC).

However, the EU is soon set to introduce the controversial “Fourth Railway Package”, which includes a stipulation that member states must engage in a tendering process – offering control to private companies.

Hypothetically, if a future Labour government bound by EU law was to refuse this mandate, it could face hefty fines if the ECJ ruled that it was acting against free movement of capital and competitive interests.

This “if” is the crux of the arguments on Brexit and rail nationalisation. Hence, many of those who are firmly in favour of this popular pledge to renationalise are of the view that an exit from the EU is the only safeguard to its implementation.



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