JUDGMENT OF THE COURT OF FIRST INSTANCE (Second Chamber)

15 September 1998 (1)

(Competition — Transport by rail — Agreements on overnight rail servicesthrough the Channel Tunnel — Restrictions on competition — Directive91/440/EEC — Appreciable effect on trade — Supply of necessary services —'Essential facilities‘ — Statement of reasons — Admissibility)

In Joined Cases T-374/94, T-375/94, T-384/94 and T-388/94,

European Night Services Ltd (ENS), a company incorporated under English law,established in London,

Eurostar (UK) Ltd, formerly European Passenger Services Ltd (EPS), a companyincorporated under English law, established in London,

represented by Thomas Sharpe QC, of the Bar of England and Wales, andAlexandre Nourry, Solicitor, with an address for service in Luxembourg at theChambers of Elvinger, Hoss & Prussen, 15 Côte d'Eich,

applicants, respectively, in Cases T-374/94 and T-375/94,

Union Internationale des Chemins de Fer (UIC), an association constituted underFrench law, established in Paris,

NV Nederlandse Spoorwegen (NS), a company incorporated under Netherlands law,established in Utrecht, the Netherlands,

represented by Erik H. Pijnacker Hordijk, of the Amsterdam Bar, with an addressfor service in Luxembourg at the Chambers of Luc Frieden, 62 Avenue Guillaume,

applicants in Case T-384/94,

and

Société Nationale des Chemins de Fer Français (SNCF), a company incorporatedunder French law, established in Paris, represented by Chantal Momège, of theParis Bar, with an address for service in Luxembourg at the Chambers of AlexSchmitt, 62 Avenue Guillaume,

applicant in Case T-388/94 and

intervener in Cases T-374/94 and T-384/94,

supported by

United Kingdom of Great Britain and Northern Ireland, represented by LindseyNicoll, acting as Agent, and by Paul Lasok QC, of the Bar of England and Wales,with an address for service in Luxembourg at the British Embassy, 14 BoulevardRoosevelt,

intervener,

v

Commission of the European Communities, represented initially by FranciscoEnrique González Díaz, of its Legal Service, then by Giuliano Marenco, PrincipalLegal Adviser, acting as Agents, assisted by Ami Barav, of the Bar of England andWales and of the Paris Bar, with an address for service in Luxembourg at the officeof Carlos Gómez de la Cruz, of its Legal Service, Wagner Centre, Kirchberg,

defendant,

APPLICATION for annulment of Commission Decision 94/663/EC of 21September 1994 relating to a proceeding pursuant to Article 85 of the EC Treatyand Article 53 of the EEA Agreement (IV/34.600 — Night Services) (OJ 1994L 259, p. 20),

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Second Chamber),

composed of: A. Kalogeropoulos, President, C.W. Bellamy and J. Pirrung, Judges,

Registrar: H. Jung,

having regard to the written procedure and further to the hearing on 22 October1997,

gives the following

Judgment

Legal background

1.

    Council Directive 91/440/EEC of 29 July 1991 on the development of theCommunity's railways (OJ 1991 L 237, p. 25) seeks to facilitate the adaptation ofthe Community's railways to the needs of the single market and to increase theirefficiency. First, it ensures the management independence of the railwayundertakings in order to enable them to behave in a commercial manner. Article5(3) provides in that regard that such undertakings are to be 'free to:

—    establish with one or more other railway undertakings an internationalgrouping;

...

—    control the supply and marketing of services and fix the pricing thereof ...;

...

—    expand their market share, develop new technologies and new services andadopt any innovative management techniques;

—    establish new activities in fields associated with railway business‘.

2.

    Second, it provides for separating the management of railway infrastructure fromthe provision of railway transport services, separation of accounts being compulsoryand organisational separation optional (Article 1 and Section III of the directive).

3.

    Finally, the directive constitutes a first step towards progressive liberalisation of themarket for transport by rail in that, for the first time, it gives railway undertakingsengaged in international combined transport and associations of railwayundertakings a right of access to infrastructure within the Community, subject tocertain conditions, as from 1 January 1993.

4.

    Article 10 of the directive provides:

'1.    International groupings shall be granted access and transit rights in theMember States of establishment of their constituent railway undertakings,as well as transit rights in other Member States, for international servicesbetween the Member States where the undertakings constituting the saidgroupings are established.

2.    Railway undertakings within the scope of Article 2 shall be granted accesson equitable conditions to the infrastructure in the other Member States forthe purpose of operating international combined transport goods services.

...‘

5.

    Article 3 defines a railway undertaking as 'any private or public undertaking whosemain business is to provide rail transport services for goods and/or passengers witha requirement that the undertaking should ensure traction‘ and an internationalgrouping of railway undertakings as 'any association of at least two railwayundertakings established in different Member States for the purpose of providinginternational transport services between Member States‘.

6.

    On 19 June 1995, with a view to the implementation of Directive 91/440, theCouncil adopted Directive 95/18/EC on the licensing of railway undertakings (OJ1995 L 143, p. 70) and Directive 95/19/EC on the allocation of railwayinfrastructure capacity and the charging of infrastructure fees (OJ 1995 L 143,p. 75).

Facts

7.

    On 29 January 1993 the Commission received an application seeking a declarationthat Article 2 of Regulation (EEC) No 1017/68 of the Council of 19 July 1968applying rules of competition to transport by rail, road and inland waterway (OJ,English Special Edition 1968 (I), p. 302) did not apply to a number of agreementsconcerning the carriage of passengers by rail through the Channel Tunnel or, failingthat, exemption of the agreements under Article 5 of the regulation.

8.

    That application ('the notification‘) was lodged by European Night Services Ltd('ENS‘) on behalf of British Rail ('BR‘), Deutsche Bundesbahn ('DB‘), NVNederlandse Spoorwegen ('NS‘) and Société Nationale des Chemins de FerFrançais ('SNCF‘). It had previously been approved by Société Nationale desChemins de Fer Belges ('SNCB‘), which at that time had an option to participatein ENS, although that option lapsed in July 1993. SNCB is still a party to one ofthe operating agreements concluded with ENS.

9.

    The first agreement notified concerned the formation, by the four railwayundertakings mentioned above — BR, SNCF, DB and NS — either directly orthrough subsidiaries owned by them, of ENS, a company established in the United

Kingdom whose business was to consist of providing and operating overnightpassenger rail services between points in the United Kingdom and the Continentthrough the Channel Tunnel, on the following four routes: London-Amsterdam,London-Frankfurt/Dortmund, Glasgow/Swansea-Paris and Glasgow/Plymouth-Brussels.

10.

    By letter of 15 October 1997, however, ENS informed the Court that the railservices to and from Brussels had been abandoned in December 1994, that theLondon-Frankfurt/Dortmund route had been replaced by London-Cologne inAugust 1996 and that the only routes now envisaged were London-Amsterdam/Cologne.

11.

    On 9 May 1994, European Passenger Services Ltd ('EPS‘), which was a subsidiaryof BR when the ENS agreements were notified, was transferred by BR to thepublic authorities in the United Kingdom and now ranks as a railway undertakingwithin the meaning of Article 3 of Directive 91/440, in the same way as SNCF, DBand NS (all hereinafter referred to, including EPS, as 'the railway undertakingsconcerned‘ or 'the parent undertakings‘). At the same time, BR's holding in ENSwas transferred to EPS. By letter of 25 September 1997, ENS and EPS informedthe Court that EPS's name had been changed to Eurostar (UK) Ltd ('EUKL‘)and requested that any reference to EPS be deemed to refer to EUKL and viceversa. They further announced that the holding of the United Kingdom publicauthorities in EPS had been transferred to London & Continental Railways on 31May 1996. In the United Kingdom, virtually all of the railway track and associatedinfrastructure, previously owned by BR, is now owned by Railtrack, the railwayinfrastructure manager.

12.

    The second group of agreements notified comprised the operating agreementsconcluded by ENS with the railway undertakings concerned and with SNCB, underwhich each of them agreed to provide ENS with certain services, including tractionover its network (locomotive, train crew and path), cleaning services on board,servicing of equipment and passenger-handling services. EPS and SNCF furtheragreed to provide traction through the Channel Tunnel.

13.

    In order to operate the night passenger services, the railway undertakingsconcerned have procured, through ENS, specialised rolling stock suitable forrunning on the different rail systems and through the Channel Tunnel, financedthrough long-term leasing arrangements over 20 years, extended to 25 years inJanuary 1996, at a total cost of UKL 136.7 million, increased to UKL 158 millionin January 1996, including the contract price, estimated spares costs, variations,deliveries, commissioning and testing and project team costs.

14.

    In the notification, ENS and the railway undertakings concerned stated that, on themarket for the service in question, in competition with air, coach, ferry and cartransport, ENS could achieve an overall market share of some 2.4% of the business

segment and 5% of the leisure segment. Even if that market were defined morenarrowly, taking account only of the routes concerned, ENS's overall market shareswould remain insignificant. None of the railway undertakings concerned couldoperate alone a comparable service on the routes served by ENS, nor was thereany indication that any other group had expressed an interest in, or could deriveany profit from, the same activity. The notifying parties further gave the assurancethat the ENS agreements did not create any barriers to entry additional to thosealready in place for any other undertakings wishing to provide similar services,which could constitute 'international groupings‘ within the meaning of Article 3 ofDirective 91/440; such groupings would thus gain access to railway infrastructures— train-paths on the relevant lines — and would have no difficulty in finding qualifiedstaff and suitable rolling stock.

15.

    Pursuant to Article 12(2) of Regulation No 1017/68, a notice concerning thenotification of the ENS agreements was published in the Official Journal of theEuropean Communities on 29 May 1993 (Notice 93/C 149/07, OJ 1993 C 149,p. 10). In it, the Commission informed the notifying undertakings that it took thepreliminary view that the agreements notified could infringe Article 85(1) of the ECTreaty but that it had not at that stage taken a decision as to the applicability ofArticle 5 of Regulation No 1017/68. It invited all interested third parties to submittheir observations within 30 days of the publication of the notice.

16.

    By letter of 23 July 1993, the Commission informed the notifying undertakings thatthere were serious doubts within the meaning of Article 12(3) of RegulationNo 1017/68 as to the applicability of Article 5 thereof to the agreements notified.

17.

    On 4 June 1994, the Commission published a further notice in the Official Journalof the European Communities pursuant to Article 26(3) of Regulation No 1017/68(OJ 1994 C 153, p. 15), in which it announced that the agreements notified couldqualify for exemption pursuant to Article 85(3) of the Treaty and Article 53(3) ofthe Agreement on the European Economic Area ('the EEA Agreement‘),provided — essentially — that new entrants would be able to purchase from thenotifying parties the same rail services as those parties had undertaken to sell toENS. At the same time, the Commission invited all interested third parties tosubmit their observations within 30 days of the publication of the notice. However,no third party responded to that invitation.

The contested decision

18.

    O n 21 September 1994 the Commission adopted Decision 94/663/EC relating to aproceeding pursuant to Article 85 of the EC Treaty and Article 53 of the EEAAgreement (IV/34.600 — Night Services) (OJ 1994 L 259, p. 20, hereinafter 'thedecision‘ or 'the contested decision‘). It is based on Regulation No 1017/68, inparticular on Article 5 thereof, under which the prohibition of restrictive practiceslaid down in Article 2, in terms almost identical to those of Article 85(1) of the

Treaty, may be declared inapplicable with retroactive effect to certain agreementsbetween undertakings.

19.

    The decision distinguishes two relevant service markets: the market for thetransport of business travellers, for whom scheduled air travel, high-speed rail traveland the rail services to be operated by ENS are interchangeable modes of transport(point 26), and the market for the transport of leisure travellers, for whomsubstitute services may include economy-class air travel, train, coach and possiblyprivate motor car (point 27).

20.

    Contrary to what the notifying parties had maintained, the Commission states thatthe geographic market does not include the whole of the United Kingdom, France,Germany and the Benelux countries, but is confined to the four routes actually tobe served by ENS, namely London-Amsterdam, London-Frankfurt/Dortmund,Paris-Glasgow/Swansea and Brussels-Glasgow/Plymouth (point 29).

21.

    The decision goes on, referring to the 1993 Commission notice of 16 February 1993concerning the assessment of cooperative joint ventures pursuant to Article 85 ofthe EEC Treaty (OJ 1993 C 43, p. 2; hereinafter 'the 1993 communication‘), tofind that ENS is a cooperative joint venture (points 30 to 37). It states that ENS'sparent undertakings are not withdrawing permanently from the relevant market,since their technical and financial resources could easily enable them to set up aninternational grouping within the meaning of Article 3 of Directive 91/440 and toprovide overnight passenger transport services. Furthermore, they continue tooperate primarily on a market upstream from ENS's market, namely the marketin necessary rail services which the railway undertakings sell to transport operatorssuch as ENS. The ENS joint venture thus forms an agreement caught by Article85 of the EC Treaty, as do the operating agreements between it and each of itsparent undertakings and SNCB.

22.

    The decision then notes the restrictions of competition arising out of the ENSagreements (points 38 to 53).

23.

    First, those agreements have eliminated or appreciably restricted, as between ENS'sparent undertakings, the scope for competition provided by Article 10 of Directive91/440 (points 38 to 45). Both existing and new railway undertakings, including subsidiaries of existing ones, are entitled to the rights of access conferred by thatprovision, and Member States may enact domestic legislation which is moregenerous in the access it allows to infrastructure. Thus, for example, DB or NSwould be entitled to form an international grouping with a railway undertaking inthe United Kingdom to operate international transport services through theChannel Tunnel. Similarly, any of ENS's parent undertakings could itself take onthe role of 'transport operator‘, or set up a subsidiary specialising as a 'transportoperator‘, and provide international transport services by buying the necessary railservices from the railway undertakings concerned.

24.

    Second, given the commercial strength of the parent undertakings, the formationof ENS might impede access to the market by transport operators in a position tocompete with it (points 46 to 48). ENS's parent undertakings continue to hold adominant position in the supply of rail services in their Member States of origin,especially as regards special locomotives for the Channel Tunnel. In view of ENS'sdirect access to those services and of its special relationship with its parentundertakings, other operators could be placed at a disadvantage in competition fornecessary rail services. Account also has to be taken of the fact that BR and SNCFcontrol a significant proportion of available paths for international trains throughthe Channel Tunnel, by virtue of the usage contract concluded with Eurotunnel.

25.

    Finally, those restrictions of competition are enhanced by the fact that ENS formspart of a network of joint ventures between the parent undertakings. BR/EPS,SNCF, DB and NS take part to varying degrees in a network of joint ventures forthe operation of goods and passenger transport services, in particular through theChannel Tunnel. BR and SNCF are parties to the formation of Allied ContinentalIntermodal Services Ltd ('ACI‘), which is to provide combined transport of goods,and BR and SNCB are parties to the formation of 'Autocare Europe‘, which is toprovide rail transport for motor vehicles (points 49 to 52).

26.

    However, according to the decision, the agreements in issue, although they do notfall within the exception for technical agreements under Article 3 of RegulationNo 1017/68, since they do not have as their sole object and sole effect to applytechnical improvements or to achieve technical cooperation within the meaning ofthat article (points 55 to 58), do meet the conditions laid down by Article 5 of thatregulation and Article 53(1) of the EEA Agreement (points 59 to 70). Theformation of ENS is likely to favour economic progress by, inter alia, providingcompetition between modes of transport, and users will benefit directly from thenew services offered. The restrictions found to exist are, moreover, indispensablein view of the fact that the services involved are completely new, entailingsubstantial financial risks which could be borne by a single undertaking only withgreat difficulty. Subject, therefore, to the imposition of a condition to ensure thepresence on the market of rail transport operators competing with ENS, theformation of ENS does not eliminate all competition on the relevant market.

27.

    The decision therefore declares Article 85(1) of the Treaty and Article 53(1) of theEEA Agreement inapplicable to the ENS agreements for a period of eight years,ending on 31 December 2002 (Article 1 of the decision) and subjects thatexemption to the condition ('the condition imposed‘) that 'the railwayundertakings party to the ENS agreements shall supply to any internationalgrouping of railway undertakings or any transport operator wishing to operate nightpassenger trains through the Channel Tunnel the same necessary rail services asthey have agreed to supply to ENS. These services consist of the provision of thelocomotive, train crew and path on each national network and in the ChannelTunnel. The railway undertakings must supply these services on their networks on

the same technical and financial terms as they allow to ENS‘ (Article 2 of thedecision).

Procedure

28.

    By applications lodged at the Registry of the Court of First Instance on 22November 1994, ENS and EPS brought actions, registered as Cases T-374/94 andCase T-375/94 respectively.

29.

    By application lodged at the Court Registry on 5 December 1994, UnionInternationale des Chemins de Fer ('UIC‘) and NS brought an action, registeredas Case T-384/94.

30.

    By application lodged at the Court Registry on 13 December 1994, SNCF broughtan action, registered as Case T-388/94.

31.

    By separate document lodged at the Court Registry on 6 February 1995, theCommission raised an objection of inadmissibility in Case T-388/94, under Article114 of the Rules of Procedure of the Court of First Instance. The applicant lodgedobservations on that objection on 20 March 1995.

32.

    On 28 June 1995, the Court of First Instance (First Chamber, ExtendedComposition) made an order joining consideration of the objection ofinadmissibility raised by the Commission to that of the merits. On the same day,it requested SNCF to answer a number of questions in writing and to producecertain documents.

33.

    By orders of the President of the First Chamber (Extended Composition) of 9August 1995, the applications of the International Union of Combined Rail-RoadTransport for leave to intervene in support of the forms of order sought by theCommission in Cases T-374/94, T-375/94 and T-384/94, lodged at the CourtRegistry on 3 April 1995, were dismissed.

34.

    By order of the President of the First Chamber (Extended Composition) of 9August 1995, the applications of SNCF for leave to intervene in support of theforms of order sought by the applicants in Cases T-374/94 and T-384/94, lodged atthe Court Registry on 9 May 1995, were granted.

35.

    By orders of the President of the First Chamber (Extended Composition) of 14 Julyand 10 August 1995, the United Kingdom was granted leave to intervene in supportof the forms of order sought by the applicants in Cases T-374/94, T-375/94,T-384/94 and T-388/94.

36.

    By decision of the Court of First Instance of 2 October 1995, the Judge-Rapporteurwas transferred to the Second Chamber (Extended Composition), to which thecases were accordingly assigned.

37.

    By decision of the Court of First Instance of 8 November 1996, the case wasreferred to a Chamber of three judges.

38.

    By order of the President of the Second Chamber of 6 August 1997, CasesT-374/94, T-375/94, T-384/94 and T-388/94 were joined for the purposes of the oralprocedure and the judgment.

39.

    Upon hearing the report of the Judge-Rapporteur, the Court of First Instance(Second Chamber) decided to open the oral procedure without any preparatoryinquiry. It requested the parties, however, to answer a number of writtenquestions, which they did within the period prescribed.

40.

    The parties presented oral argument and answered the questions put by the Courtat the hearing on 22 October 1997.

Forms of order sought

41.

    In Cases T-374/94 and T-375/94, ENS and EPS claims that the Court should:

—    annul the decision;

—    require the Commission

    (a)    to issue a declaration as to the inapplicability of Article 2 ofRegulation No 1017/68 and Article 85(1) of the Treaty, or

    (b)    to grant an exemption without the condition imposed and for aduration commensurate with the period of the commitment of therailways for the financing of the rolling stock, or

    (c)    alternatively, to grant the exemption subject to any conditionnecessary and proportionate to the alleged restrictions on competitionand for a period commensurate with the period of commitment of therailways for the financing of the rolling stock; and

—    order the Commission to pay the costs.

42.

    SNCF, intervening in support of the forms of order sought by the applicant in CaseT-374/94, claims that the Court should:

—    annul the decision; and

—    require the Commission either

    (a)    to issue a declaration as to the inapplicability of Article 2 ofRegulation No 1017/68 and Article 85(1) of the Treaty, or

    (b)    to grant an exemption without the condition imposed and for aduration commensurate with the period of the commitment of therailways for the financing of the rolling stock.

43.

    In Cases T-374/94 and T-375/94, the Commission contends that the Court should:

—    dismiss the applications;

—    dismiss the arguments raised by SNCF; and

—    order the applicants and the intervener to pay the costs.

44.

    In Case T-384/94, UIC and NS claim that the Court should:

—    declare the contested decision void in its entirety;

—    in the alternative, declare void Article 2 of the decision, as well as Article1 thereof in so far as the duration of the exemption is limited to a periodof less than 20 years;

—    take any further or alternative measures which the Court may deemappropriate; and

—    order the Commission to pay the costs.

45.

    SNCF, intervening in support of the forms of order sought by the applicants, claimsthat the Court should:

—    declare the contested decision void in its entirety;

—    in the alternative, declare void Article 2 of the decision, as well as Article1 thereof in so far as the duration of the exemption is limited to a periodof less than 20 years;

—    take any further or alternative measures which the Court may deemappropriate; and

—    order the Commission to pay the costs.

46.

    The Commission contends that the Court should:

—    declare inadmissible and, in any event, unfounded, the application by UIC;

—    dismiss the application by NS;

—    dismiss the arguments raised by the intervener; and

—    order the applicants and the intervener to pay the costs.

47.

    In Case T-388/94, SNCF claims that the Court should:

—    annul the contested decision;

—    in the alternative, annul Article 2 of the decision in that the conditionimposed is unjustified, as well as Article 1 thereof in so far as theCommission granted an exemption for a period of less than 20 years;

—    take any measures which the Court may deem appropriate; and

—    order the Commission to pay the costs.

48.

    In its observations on the objection of inadmissibility raised by the Commission,SNCF claims that the Court should:

—    find the application admissible; and

—    order the Commission to pay the costs.

49.

    The Commission contends that the Court should:

—    dismiss the application as inadmissible and, in any event, as unfounded; and

—    order the applicant to pay the costs.

50.

    The United Kingdom, intervening in support of the forms of order sought by theapplicants in Cases T-374/94, T-375/94, T-384/94 and T-388/94, claims that theCourt should:

—    annul the contested decision; and

—    order the Commission to pay the costs.

Admissibility

Admissibility of the applications in Cases T-374/94 and T-375/94

Arguments of the parties

51.

    The Commission considers that the applications are inadmissible to the extent thatthe applicants, ENS and EPS, seek an order of the Court requiring the Commission(a) to issue a declaration as to the inapplicability of Article 2 of RegulationNo 1017/68 and Article 85(1) of the Treaty, (b) to grant an exemption without thecondition imposed by the Commission and for a duration commensurate with theperiod of the commitment of the railway undertakings for the financing of therolling stock, or (c) alternatively, to grant the exemption subject to any conditionnecessary and proportionate to the alleged restrictions on competition and for aperiod commensurate with the period of the commitment of the railwayundertakings for the financing of the rolling stock, since it has consistently beenheld that the Community judicature has no power to issue directions to theinstitutions or to substitute itself for them when reviewing legality under Article 173of the Treaty (Case T-74/92 Ladbroke Racing v Commission [1995] ECR II-115,paragraph 75).

52.

    The applicants, ENS and EPS, note in reply that the Commission does not contesteither the admissibility of their applications in so far as they seek annulment of thedecision or the possibility for the Court of annulling it in part, namely as regardsthe condition imposed by Article 2.

Findings of the Court

53.

    It is settled case-law that the Community judicature is not entitled, when exercisingjudicial review of legality, to issue directions to the institutions or to assume therole assigned to them; rather, it is for the administration concerned to adopt thenecessary measures to implement a judgment given in proceedings for annulment. Accordingly, the forms of order sought by the applicants, as set out under (a), (b)and (c) in paragraph 41 above, must be rejected as inadmissible (Case T-67/94Ladbroke Racing v Commission [1998] ECR II-1, paragraph 200). The applicationsin Cases T-374/94 and T-375/94 are thus admissible only in so far as they seek theannulment of the contested decision in its entirety (see paragraph 41 above).

Admissibility of the application in Case T-384/94

Arguments of the parties

54.

    The applicants, UIC and NS, state that UIC is an international association ofrailway undertakings, including all the larger railway undertakings established in theMember States of the European Community, with the object of promotingcooperation between members and carrying out activities to develop the railwaysas a mode of transport in Europe, by consolidating its interoperability with the aim

of strengthening its competitiveness. Under Article 2 of its Statutes, UIC is todevelop standards, regulations and guidelines and to intervene in relation to outsidebodies to represent and defend its members' common interests. In addition, therailway undertakings established within the Community are represented in a specialgroup called the 'Community of European Railways‘ ('CER‘).

55.

    The applicants submit that the decision, although not addressed to UIC, is none theless of direct and individual concern to it within the meaning of Article 173 of theTreaty because it directly affects both UIC's own interests and those of its membersestablished within the Community, which it represents through CER.

56.

    With regard to the interests of the members of UIC established within theCommunity, the applicants state that the contested decision constitutes adisincentive to further innovative initiatives for cooperation between railwayundertakings for the provision of international passenger transport services, andsubmit that its application should be held admissible on the same footing as thoseof its members established within the Community, whether addressees of thedecision or not.

57.

    As regards UIC's own interest in bringing proceedings, the applicants submit thatUIC is directly and individually concerned by the decision because it impairs thefull realisation of one of the most important objectives in its Statutes —reinforcement of the competitiveness of the international railway system. They addthat, even though UIC did not take part in the administrative procedure prior toadoption of the decision (Case T-442/93 AAC v Commission [1995] ECR II-1329),CER, one of its subgroups, did take part in preparatory meetings concerning theadoption of Directive 91/440.

58.

    The Commission submits that the contested decision is not of direct and individualconcern to UIC and that the Court cannot decline to rule on UIC's locus standi. The case-law to the effect that, where a single action is brought by a number ofapplicants, it is enough for one of them to have locus standi for the action to befound admissible in its entirety, gives rise to difficulties as regards costs and anysubsequent right of appeal of the party concerned.

59.

    It adds that it is clear from the case-law that an association, in its capacity as therepresentative of a category of business operators, is not individually concerned bya measure affecting the general interests of that category (Joined Cases 16/62 and17/62 Confédération Nationale des Producteurs de Fruits et Légumes v Council [1962]ECR 471, Case 72/74 Union Syndicale and Others v Council [1975] ECR 401 andCase 60/79 Producteurs de Vins de Table et Vins de Pays v Commission [1979] ECR2429).

60.

    It further submits that, since UIC did not take part in the administrative procedureprior to the adoption of the contested decision or submit any observations afterpublication in the Official Journal of the European Communities of the

Commission's notices of 29 May 1993 and 4 June 1994, it has no interest orstanding to bring the present action (Case 26/76 Metro v Commission [1977] ECR1875, Case 210/81 Demo-Studio Schmidt v Commission [1983] ECR 3045 and CaseT-114/92 BEMIM v Commission [1995] ECR II-147). Finally, the part played byCER in the context of the adoption of Directive 91/440 cannot distinguish UICindividually in relation to the contested decision.

Findings of the Court

61.

    The locus standi of NS, as an addressee of the contested decision, is not in dispute. Thus, since one and the same application is involved, there is no need to considerthe locus standi of UIC (Case C-313/90 CIRFS and Others v Commission [1993]ECR I-1125, paragraph 31, and Case T-266/94 Skibsværftsforeningen and Others vCommission [1996] ECR II-1399, paragraph 51).

Admissibility of the application in Case T-388/94

Arguments of the parties

62.

    The Commission states that the contested decision was notified to the applicant byletter dated 22 September 1994, which was received at its head office on 29September, as attested by the postal acknowledgment of receipt bearing the stampof SNCF showing that date. According to the judgment in Case 42/85Cockerill-Sambre v Commission [1985] ECR 3749, at paragraph 11, notification ofa measure to a company's registered office meets the requirement of legal certaintyand brings that measure to the company's notice, irrespective of whether theperson who is competent to deal with the matter according to the internal rules ofthe company addressed is actually in a position to take cognisance of it.

63.

    Since, in accordance with Article 102(1) of the Rules of Procedure of the Court ofFirst Instance, the period of time allowed for commencing annulment proceedingsis to run from the day following its notification if it has been notified and since inthe present case the total period allowed comes to two months, plus an extensionof six days on account of distance (Article 102(2) of the Rules of Procedure of theCourt of First Instance and Article 1 of Annex II to the Rules of Procedure of theCourt of Justice), the final date on which SNCF could commence proceedingsagainst the contested decision was 6 December 1994. Thus, having been lodged on13 December 1994, the application is out of time and therefore inadmissible (Case108/79 Belfiore v Commission [1980] ECR 1769, Case 209/83 Ferriera Valsabbia vCommission [1984] ECR 3089, paragraph 14, and Cockerill-Sambre, cited above,paragraph 10).

64.

    The Commission disputes the applicant's argument that, since the employee towhom the decision was delivered was not authorised to receive mail, the relevantacknowledgment of receipt for calculating the time allowed for commencingproceedings is not that of 29 September 1994 but a second acknowledgment ofreceipt, the form for which was in the same envelope as the decision and wassigned on 7 October 1994 by a person competent to do so. The Commissionstresses, first, that, according to the judgment in Case T-12/90 Bayer v Commission[1991] ECR II-219, at paragraph 20, the second form for acknowledgment ofreceipt contained in the same envelope as the decision can in no event constitutea second notification separate from that effected by postal delivery, since theproper method of giving notice is always by a registered letter with postalacknowledgment of receipt, which makes it possible to determine with certainty thedate from which time begins to run. The purpose of sending the secondacknowledgment of receipt form is simply that the Commission is thereby able tobe certain of a date by which the undertaking concerned has taken cognisance ofthe decision in cases where the postal authorities fail to return the postalacknowledgment of receipt to the Commission. The precaution of sending asecond acknowledgment of receipt form is thus intended not to guard against thepossibility that the postal services might make the mistake of delivering the mail toa person employed by the addressee but not authorised to receive registered mail,but rather against the possibility that they might not return the postalacknowledgment of receipt to the Commission. Under French law, moreover, thefact that an acknowledgment of receipt is signed by a servant of a corporate bodyto which an item of mail is addressed does not render notice served by registeredmail with acknowledgment of receipt invalid where that servant is not dulyauthorised to receive registered mail.

65.

    With regard to SNCF's arguments of force majeure and unforeseeablecircumstances, the Commission submits that, according to the case-law of the Courtof Justice, a company's internal problems of communication do not constituteunforeseeable circumstances or force majeure (Cockerill-Sambre, cited above,paragraph 12), in particular where the malfunctioning is attributable to faults onthe part of its employees (Case C-195/91 P Bayer v Commission [1994] ECR I-5619,paragraph 33).

66.

    Finally, with regard to SNCF's argument of excusable error, the Commissionsubmits that the concept of excusable error can apply only to exceptionalcircumstances where, in particular, the conduct of the institution concerned wassuch as to give rise to understandable confusion in the mind of a person acting ingood faith and exercising all the diligence to be expected of an experiencedoperator (Case T-514/93 Cobrecaf and Others v Commission [1995] ECR II-621,paragraph 40). In the present case, however, the error was ascribable to a personother than the Commission.

67.

    SNCF claims that the notification was irregular or, in the alternative, that even ifit was regularly effected, the circumstances surrounding the receipt of the decisionamounted to force majeure, unforeseeable circumstances or excusable error.

68.

    In its argument that the notification was irregular, it states that in French law,under Article L 9 of the Code des Postes et Télécommunications (Post andTelecommunications Code), a registered letter must be delivered personally to itsaddressee or to the addressee's 'authorised agent or manager‘. The postalacknowledgment of receipt attesting to its receipt of the decision is thus not valid. In the first place, it was not signed by one of the persons to whom SNCF hadspecifically delegated authority to sign such acknowledgments. Secondly, the postalemployee accepted signature of the acknowledgment of receipt by a person notauthorised to do so. Finally, the acknowledgment of receipt was returned to theCommission by the French postal services in breach of their duty to verify that thesignature on it corresponded to that of the person authorised to sign it.

69.

    SNCF submits that according to the case-law, the signature of a postalacknowledgment of receipt form by an authorised employee in the mail service ofthe undertaking concerned is a decisive factor in determining whether notificationhas been properly effected to that undertaking (Case T-12/90 Bayer, cited above,paragraphs 4 and 20; Opinion of Advocate General Darmon in Cockerill-Sambre,cited above), as the Commission itself accepted in the Ferriera Valsabbia case, citedabove.

70.

    Consequently, in SNCF's submission, the relevant acknowledgment of receipt in thepresent case is that contained on the Commission's own form, included with thedecision in order to enable it to be certain of a date by which the undertaking hastaken cognisance of the decision in the event of a failure on the part of the postalauthorities (Case T-12/90 Bayer, cited above). The kinds of failure to which thecase-law refers involve not only instances where the postal services fail to return theacknowledgment of receipt to the Commission but also those where their failuretakes the form of indicating a date on the acknowledgment of receipt formthemselves without obtaining the signature of a duly authorised representative ofthe undertaking concerned; if the postal services commit an error when performingtheir duty of delivering registered mail, therefore, the information stated on theform should be disregarded (Joined Cases T-80/89, T-81/89, T-83/89, T-87/89,T-88/89, T-90/89, T-93/89, T-95/89, T-97/89, T-99/89, T-100/89, T-101/89, T-103/89,T-105/89, T-107/89 et T-112/89 BASF and Others v Commission [1995] ECR II-729,paragraphs 54 to 60). The date of receipt, and consequently that of notification,should accordingly be 7 October 1994, as indicated on the second acknowledgmentof receipt.

71.

    In the alternative, SNCF submits that, even if its application was in fact lodged outof time, the delay was due to unforeseeable circumstances or force majeure, in thatthe signature of the acknowledgment of receipt form by an unauthorised person

was quite contrary to its intention and it had taken all necessary care to ensure thatregistered mail was received in the proper manner. It stresses that the post officeemployee who delivered the notification on 29 September 1994 was specificallyaware that the person who received it was not authorised to do so, and adds thatthe French courts treat delivery of mail to a person not authorised to receive it asa serious fault on the part of the postal services, such as to cause the administrationto incur liability.

72.

    In SNCF's submission, even if the circumstances surrounding the notification of thecontested decision do not constitute force majeure, they are at least such as to giverise to excusable error. It refers to its arguments concerning the fact that thepostal services failed to comply with its specific instructions concerning delivery ofregistered mail and submits that, in view of the way in which those servicesgenerally perform their duties, their failure in this instance was an isolated andexceptional case. Excusable error is established when an exceptional failure on thepart of the postal services has given rise to confusion within the undertaking inreceipt of the notification; it is not confined solely to cases where such confusionwas caused by the Commission (Case C-195/91 P Bayer, cited above, paragraph 26).

73.

    Furthermore, SNCF claims that the Commission's practice with regard to thenotification of decisions is lax and that in this case SNCF's error was in part causedby that practice. Where much less important letters (containing information on thelodging of a complaint or inviting observations) are concerned, the Commissiontakes care to indicate the addressee by name, whereas here a final decisionapplying Article 85(1) of the Treaty, against which an action could be brought, wassent without any such indication.

74.

    Finally, SNCF draws attention to the deceptive and misleading nature of theCommission's practice in enclosing its own acknowledgment of receipt form withdecisions when notifying them to undertakings, without informing addressees thata decision is considered to have been notified when the addressee has received theregistered letter and signed the postal acknowledgment of receipt.

Findings of the Court

75.

    First of all, it is common ground that in accordance with the third paragraph ofArticle 173 of the Treaty, read in conjunction with Article 102(2) of the Rules ofProcedure of the Court of First Instance and Article 1 of Annex II to the Rules ofProcedure of the Court of Justice, to which Article 102(2) refers, the period forinitiating proceedings in the present case was two months and six days.

76.

    It has, moreover, consistently been held that the strict application of Communityrules on procedural time-limits serves the requirement of legal certainty and theneed to avoid any discrimination or arbitrary treatment in the administration ofjustice. It is also settled law that where a measure is notified to the registered

office of an undertaking, the validity of that notification is in no way conditional onits having been actually brought to the notice of the person competent to deal withit according to that undertaking's internal rules, and that a decision is duly notifiedonce it has been communicated to the addressee and the addressee is in a positionto take cognisance of it (Cockerill-Sambre, cited above, paragraph 10, and BASFand Others, cited above, paragraphs 58 and 59).

77.

    It is therefore necessary to examine whether the contested decision was properlynotified to SNCF in accordance with the rules applicable to mail deliveries inFrance, that is to say, whether it was delivered to an employee of SNCF dulyauthorised to receive such mail (BASF and Others, cited above, paragraph 60).

78.

    It is clear from the case-file and from SNCF's answers to the written questions putby the Court that the French postal services, although they had in their possessionvalid instructions from SNCF delegating to specified persons authority to receivemail addressed to its various departments and staff, did not deliver the contesteddecision to one of those persons but to another person who had no such authority. As the applicant has stressed, however, without being contradicted by theCommission, the rules applicable to the delivery of mail in France require postalemployees to deliver registered mail only to the persons to whom it is addressedby name or, in their absence, to authorised agents or managers, that is to say,persons having valid authority for that purpose.

79.

    Consequently, the contested decision, having been delivered in breach of thoserules to an employee of the applicant who was not authorised to take delivery ofmail, was not properly notified to SNCF, and the period of time allowed forcommencing proceedings thus began to run only from the receipt and signature ofthe second form for acknowledgment of receipt on 7 October 1994, and not fromthe date of signature of the first acknowledgment of receipt on 29 September 1994. The judgment in Cockerill-Sambre, cited by the Commission in support of its pleathat the application was lodged out of time, is irrelevant here because that case didnot turn on whether a Commission decision was properly notified to an agent ofthe undertaking concerned duly authorised to receive such mail but on whether,following proper notification at its registered office, that undertaking could justifya delay in commencing annulment proceedings by relying on its internal rules as tothe persons competent actually to take cognisance of mail addressed to it (seeparagraph 10 of the judgment in Cockerill-Sambre, cited above). Similarly, in CaseC-195/91 P Bayer, cited above, it was not contested that notification of thecontested decision had been properly effected by the postal services to an 'agentor manager‘ in Bayer's mail department. The judgment in that case, too,concerned only whether, even though the Commission's decision had been properlynotified to Bayer's registered office, Bayer could none the less rely on deficienciesin the functioning of its internal services to justify having commenced annulmentproceedings out of time (paragraphs 2 and 20 of the judgment). Here, however,as noted above, the point in issue is whether notification as such was properly

effected; it thus concerns the functioning of the postal services (the external aspectof the notification) rather than SNCF's internal functioning (the internal aspect).

80.

    Proceedings were therefore commenced within the period of time allowed, and theapplication must thus be held to be admissible.

Substance

81.

    In the pleas in law and arguments which they put forward, the applicants submitthat the contested decision should be annulled for, in substance, four reasons: (a)none of the constituent elements of the conduct prohibited by Article 85(1) of theTreaty is established in the present case, since the ENS agreements do not restrictcompetition, and the decision is therefore vitiated by inaccurate and incompleteassessment of the facts, manifest error in law and a failure to state reasons; (b) inits application of the rules on competition, the Commission exceeded the limits ofthe regulatory framework laid down by Directive 91/440; (c) the Commissionimposed disproportionate conditions on its granting of the exemption; and (d) theduration of the exemption granted for the notified agreements (eight years) is tooshort. Finally, in Case T-384/94, SNCF submits in addition that the contesteddecision should be annulled because the Commission considered that the ENSagreements did not qualify for the exception for technical agreements under Article3 of Regulation No 1017/68.

The first plea: inaccurate and incomplete assessment of the facts, manifest error in lawand/or breach of the obligation to provide an adequate statement of reasons for thecontested decision in so far as the Commission concluded that the creation of ENShad as its object and effect the restriction of competition

82.

    This plea falls in two parts: first, that the relevant market was wrongly defined andthat the ENS agreements have no appreciable effect on trade between MemberStates and, second, that those agreements have no restrictive effect on competition.

First part: definition of the relevant market and absence of any appreciable effect ofthe ENS agreements on trade between Member States

Arguments of the parties

83.

    The applicants point out that in the decision the Commission defined the relevantmarkets as those for the transport of business travellers and of leisure travellers oneach of the routes served by ENS. They state that, based on forecast levels ofdemand in 1995 (set out in Table 17, at p. 26 of their notification), ENS serviceswere likely to account for no more than 4% of those markets (2.4% of the marketfor business travellers and 5% of the market for leisure travellers). Taking account

of the Commission's notice of 3 September 1986 on agreements of minorimportance which do not fall under Article 85(1) of the Treaty establishing theEuropean Economic Community (OJ 1986 C 231, p. 2), those market shares arethus negligible. Even on an individual route basis, Table 17 in the notificationdemonstrates that the only market shares in excess of 4% likely to be enjoyed byENS were 6% and 7% for leisure travellers on the London-Amsterdam andLondon-Frankfurt/Dortmund routes respectively. As regards the Commission'sview that a 5% market share warrants considering the undertaking concerned tobe of sufficient importance for its behaviour to be in principle capable of affectingtrade between Member States, the applicants refer to Case T-7/93 Langnese-Iglov Commission [1995] ECR II-1533 and Case T-9/93 Schöller v Commission [1995]ECR II-1611, which confirm that a market share of over 5% is insufficient by itselfto allow the conclusion that there is an appreciable restriction of competition. Thepoint was also made in the notification that ENS's market share was likely toremain static or even fall as the market grew faster than ENS's ability to increasethe frequency of its services (paragraph II.4.c.6, p. 27 of the notification). Therelevant market for both services (business and leisure travel), therefore, is verylarge and it is clear that ENS would have no power to control the price, quality andavailability of services or to exclude or weaken competition.

84.

    The Commission's statement in its defence, that ENS's market share should bemeasured in relation to early morning and late evening flights rather than byreference to all the flights available round the clock on a given route, is, in theapplicants' submission, a redefinition of the relevant market, made without anyprobative evidence in support.

85.

    The Commission submits that ENS's market share should not be calculated, asproposed by the parties in their notification, in relation to the general market forthe transport of passengers between the United Kingdom, on the one hand, andFrance, Germany and the Benelux countries, on the other hand, a geographicalmarket on which ENS was expected to have 2.4% of the business travel segmentand 5% of the leisure travel segment, making an overall market share of around4%. The relevant market is confined to the routes actually to be served by ENS,namely London-Amsterdam, London-Frankfurt, Paris-Glasgow/Swansea andBrussels-Glasgow/Plymouth (decision, point 29). On the basis of that definition,ENS would have a market share of at least 7% of the business segment and 8%of the leisure segment of the market, according to the figures supplied by theparties to the ENS agreement in their notification.

86.

    According to case-law, a 5% market share warrants considering an undertaking tobe of sufficient importance for its behaviour to be in principle capable of affectingtrade between Member States (Case 19/77 Miller v Commission [1978] ECR 131,Joined Cases 100/80 to 103/80 Musique Diffusion Française and Others vCommission [1983] ECR 1825 and Case 107/82 AEG v Commission [1983] ECR3151). The same rule must apply to restrictions of competition liable to result from

an agreement between undertakings. In that regard, the Commission submits that,contrary to the applicants' contention, it is not clear from the Langnese-Iglo andSchöller judgments, cited above, that a market share of over 5% is insufficient byitself to conclude that there is an appreciable restriction of competition.

87.

    Furthermore, in the Commission's submission, ENS's market share in the businesstravel segment of the relevant market is considerably larger. It is clear from theanalysis in the notification that ENS's share in that segment should be measuredin relation solely to early morning and late evening flights rather than by referenceto all the flights available round the clock on a given route. In addition, theCommission emphasises that the market share forecast concerned only 1995, thefirst year during which ENS services were expected to start operation, and that, inview of the effective strength of the railway undertakings concerned on the relevantmarkets and their actual and potential customer base, it was likely that the marketshare would increase. The Commission therefore considers itself justified in takingthe view that the ENS agreements eliminate or appreciably restrict the scope ofcompetition.

88.

    The United Kingdom, in intervention, submits that the Commission's definition ofthe relevant markets was artificially narrow. First, the geographical market shouldinclude the whole of the United Kingdom, France, Belgium, the Netherlands,Luxembourg and Germany. Second, the fact that the relevant markets encompassdifferent modes of transport is taken into account only in the part of the decisionrelating to the granting of an exemption under Article 85(3) of the Treaty. Finally,in the United Kingdom's submission, parties to an agreement having a marketshare of less than 10% do not, in general, exercise any market power, whatevertheir level of turnover, so that below that threshold there must be specificcircumstances for the anti-competitive object or effect of the agreement to besufficiently deleterious or appreciable.

89.

    The Commission replies that the United Kingdom's suggestion that only a marketshare of 10% can justify application of Article 85(1) of the Treaty is unfounded inthe case-law.

Findings of the Court

90.

    First of all, it must be noted that, in order to assess the effects of the ENSagreements on competition and on trade between Member States, the Commissiondefined two relevant service markets in the decision: the market for the transportof business travellers, for whom scheduled air travel and high-speed rail travel areinterchangeable modes of transport (the 'intermodal‘ market for business travel),and the market for the transport of leisure travellers, for whom substitute servicesmay include economy-class air travel, train, coach and possibly private motor car(the 'intermodal‘ market for leisure travel) (see points 26 and 27 of the decision).

91.

    The Commission went on to consider, referring to Case 66/86 Ahmed SaeedFlugreisen and Silver Line Reisebüro v Zentrale zur Bekämpfung unlauterenWettbewerbs [1989] ECR 803, that the relevant geographical market should beconfined to the routes actually to be served by ENS (points 28 and 29 of thedecision), namely:

—    London-Amsterdam,

—    London-Frankfurt/Dortmund,

—    Paris-Glasgow/Swansea and

—    Brussels-Glasgow/Plymouth.

92.

    As that definition of the geographical market has not been challenged by theapplicants, it follows that the ENS agreements fell to be assessed solely on the basisof the four separate geographical markets listed above and solely in the context ofan intermodal market comprising various modes of transport such as rail, air, coachand motor car. On that basis, therefore, it is necessary to examine whether theCommission correctly evaluated ENS's market shares in order to arrive at theconclusion that the ENS agreements would have an appreciable effect on tradebetween Member States, bearing in mind that, according to the applicants'notification, those market shares would not exceed the critical threshold of 5% andwould, in any event, be insignificant.

93.

    It is to be noted here that the contested decision makes no reference to the marketshares of ENS or of any other operators competing with ENS and also present onthe various intermodal markets taken by the Commission as the relevant marketsfor the purposes of applying Article 85(1) of the Treaty. Consequently, even if —contrary to the applicants' submission — the ENS agreements were to restrictcompetition, the Court is not in a position, in the absence of any such dataconcerning the analysis of the relevant market in the contested decision, to makeany finding as to whether the supposed restrictions on competition have anappreciable effect on trade between Member States and are thus caught by Article85(1) of the Treaty, having regard, in particular, to the intermodal competitionwhich is, according to the decision itself, a feature of the two service markets inquestion.

94.

    It was not until the stage of the proceedings before the Court that the Commissionfirst referred to the notification submitted by the parties in support of its contentionthat 'even on the basis of the conservative — and by nature therefore restrictive —forecasts of ENS which are based on a narrower definition of the market, the NightServices' share of the business segment of the market is 7%, and 8% in the caseof the leisure segment of the market‘. It was also during the written procedurethat it first asserted that ENS's market share should be calculated, for the businesssegment, in relation to early morning and late evening flights rather than byreference to all the flights available round the clock on a given route and is thusin fact much larger.

95.

    It is settled law that whilst, in stating the reasons for the decisions which it takesto enforce the rules on competition, the Commission is not required to discuss allthe issues of fact and law and the considerations which have led it to adopt itsdecision, it is none the less required under Article 190 of the Treaty to set out atleast the facts and considerations having decisive importance in the context of thedecision in order to make clear to the Court and the persons concerned thecircumstances in which it has applied the Treaty (Case C-360/92 P PublishersAssociation v Commission [1995] ECR I-23, paragraph 39, Case T-290/94Kaysersberg v Commission [1997] ECR II-2137, paragraph 150, and Joined CasesT-369/94 and T-85/95 DIR International Film and Others v Commission [1998] ECRII-357, paragraph 117). It is also clear from the case-law that, other than inexceptional circumstances, the statement of reasons must be contained in thedecision itself, and it is not sufficient for it to be explained subsequently for the firsttime before the Court (Case T-61/89 Dansk Pelsdyravlerforening v Commission[1992] ECR II-1931, paragraph 131, Case T-230/94 Farrugia v Commission [1996]ECR II-195, paragraph 36, and Case T-16/91 RV Rendo and Others v Commission[1996] ECR II-1827, paragraph 45).

96.

    It follows from the abovementioned case-law that when a Commission decisionapplying Article 85(1) of the Treaty suffers from serious omissions, such as theabsence of any reference to the market shares of the undertakings concerned, theCommission may not remedy that defect by adducing for the first time before theCourt figures and other analytical data from which it may be concluded that theessential elements of a situation in which Article 85(1) applies are in fact presentunless none of the parties had challenged the analytical data in question during theprior administrative procedure.

97.

    Here, according to the estimates put forward by the applicants in the notification,ENS's market shares were not expected to exceed 4%, and it was only on the basisof a narrower market definition that they might reach 7% for the business travelmarket and 8% for the leisure travel market (see point 2.1.2 of the summary of thenotification), without even then having an appreciable effect on competition. It isthus clear that, as regards the effect of the ENS agreements on trade betweenMember States, the applicants and the Commission were starting from differentpremisses, the applicants considering that the agreements did not have anappreciable effect on intra-Community trade. The Commission was thus requiredto provide an adequate statement of its reasons for finding that the ENSagreements had an appreciable effect on trade between Member States.

98.

    Furthermore, even on the assumption that the Commission may adduce figures andother analytical data for the first time before the Court in order to show that itsdecision was well founded, the conclusions which it draws from the notification (seeparagraph 94 above) are incorrect. According to Table 17 on page 26 of thenotification, ENS's market shares for the business travel segment were to be under5% on all the routes concerned:

—    London-Amsterdam            :    3%

—    London-Frankfurt/Dortmund    :    3%

—    Paris-Glasgow/Swansea        :    4%

—    Brussels-Glasgow/Plymouth        :    1%.

99.

    Again according to Table 17 in the notification, ENS's market share in the leisuretravel segment was expected to exceed 5% on only two of the four routes to beserved by it, without on any route exceeding the 8% threshold put forward by theCommission:

—    London-Amsterdam            :    7%

—    London-Frankfurt/Dortmund    :    6%

—    Paris-Glasgow/Swansea        :    4%

—    Brussels-Glasgow/Plymouth        :    4%.

100.

    It is further stated in the notification that ENS's market shares in the leisure travelsegment were likely to remain fixed or even, in view of its limited possibilities forincreasing capacity, to fall as the market as a whole grew. Whilst it is true, as hasbeen pointed out above, that the Commission was not required to discuss all theissues of fact and law raised during the course of the administrative procedure priorto the adoption of the contested decision, this latter consideration put forward bythe notifying parties was an essential part of their argument that the ENSagreements had an insignificant effect on trade between Member States. It is thusnot possible to conclude, as the Commission maintains, that according to thenotification ENS's market share on the leisure travel segment was 8%, or even thatit exceeded 5%.

101.

    It must be noted here that whilst at points 2.1.2 of the summary of the notificationand II.4.c.5.2(d) of the notification itself the parties stated, inter alia, that ENS'smarket share might reach 7% in the business travel segment and 8% in the leisuretravel segment, they nevertheless made it clear that those shares would only applyin the context of a narrower definition of the market, based on 'city to city flows‘and excluding residual competition from cars and coaches. Moreover, thoseestimates put forward by the parties related to average shares of an overallgeographical market and not to the four routes actually to be served by ENS andspecifically regarded by the Commission as the different relevant geographicalmarkets within which the ENS agreements fell to be assessed. Consequently, sincethe contested decision defined the relevant markets by reference not to 'city to cityflows‘ but to flows involving more than one destination (for example, from Paristo Glasgow and Swansea), since it did not exclude residual competition from carsand coaches from its definition of the market and since it did not assess the effectsof the ENS agreements on the basis of an overall geographical market but on thatof the four routes actually to be served by ENS, the Commission was not entitledto rely on the abovementioned market shares of 7% and 8%.

102.

    In any event, even if, as noted above, ENS's share of the tourist travel market wasin fact likely to exceed 5% on certain routes, attaining 7% on the London-Amsterdam route and 6% on the London-Frankfurt/Dortmund route (seeparagraph 94 above), it must be borne in mind that, according to the case-law, anagreement may fall outside the prohibition in Article 85(1) of the Treaty if it hasonly an insignificant effect on the market, taking into account the weak positionwhich the parties concerned have on the product or service market in question(Case 5/69 Völk v Vervaecke [1969] ECR 295, paragraph 7). With regard to thequantitative effect on the market, the Commission has argued that, in accordancewith its notice on agreements of minor importance, cited above, Article 85(1)applies to an agreement when the market share of the parties to the agreementamounts to 5%. However, the mere fact that that threshold may be reached andeven exceeded does not make it possible to conclude with certainty that anagreement is caught by Article 85(1) of the Treaty. Point 3 of that notice itselfstates that 'the quantitative definition of ”appreciable” given by the Commissionis, however, no absolute yardstick‘ and that 'in individual cases ... agreementsbetween undertakings which exceed these limits may ... have only a negligible effecton trade between Member States or on competition, and are therefore not caughtby Article 85(1)‘ (see also Langnese-Iglo, cited above, paragraph 98). It isnoteworthy, moreover, if only as an indication, that that analysis is corroborated bythe Commission's 1997 notice on agreements of minor importance (OJ 1997 C 372,p. 13) replacing the notice of 3 September 1986, cited above, according to whicheven agreements which are not of minor importance can escape the prohibition onagreements on account of their exclusively favourable impact on competition.

103.

    That being so, where, as in the present case, horizontal agreements betweenundertakings reach or only very slightly exceed the 5% threshold regarded by theCommission itself as critical and such as to justify application of Article 85(1) of theTreaty, the Commission must provide an adequate statement of its reasons forconsidering such agreements to be caught by the prohibition in Article 85(1) of theTreaty. Its obligation to do so is all the more imperative here, where, as theapplicants stated in their notification, ENS has to operate on markets largelydominated by other modes of transport, such as air transport, and where, on theassumption of an increase in demand on the relevant markets and having regardto the limited possibilities for ENS to increase its capacity, its market shares willeither fall or remain stable. In addition, such a statement of reasons is necessaryin the present instance in view of the fact that, as the Court of Justice held atparagraph 86 of its judgment in Musique Diffusion Française, cited above, anagreement is capable of exercising an appreciable influence on the pattern of tradebetween Member States even where the market shares of the undertakingsconcerned do not exceed 3%, provided that those market shares exceed those ofmost of their competitors.

104.

    There is, however, no such statement of reasons in the present case.

105.

    It must be concluded from the foregoing that the contested decision does notcontain a sufficient statement of reasons to enable the Court to make a ruling onthe shares held by ENS on the various relevant markets and, consequently, onwhether the ENS agreements have an appreciable effect on trade between MemberStates, and the decision must therefore be annulled on that ground.

Second part: assessment of the restrictive effects of the ENS agreements on competition

Arguments of the parties

106.

    The applicants maintain that the ENS agreements do not restrict competitionamong the parent undertakings themselves, between the parent undertakings andENS or vis-à-vis third parties, and that there is no strengthening of the allegedrestrictions of competition as a result of the presence of networks of joint ventureson the market for rail transport. They further maintain that the beneficial effectsof the ENS agreements outweigh any alleged restrictions to which they might giverise. The decision, they claim, therefore contains an inadequate statement ofreasons or, at the very least, manifest errors of assessment.

107.

    In the first place, as regards restrictions of competition among the parentundertakings and between them and ENS, the applicants submit that, in the lightof the substantial difficulties facing the railway undertakings and ENS, it cannot beasserted that any appreciable competition could emerge in the relevant marketsamong the railway undertakings in respect of the new services to be offered byENS. ENS and EPS refer to a letter of 27 April 1992 sent by Lazard Brothers toBR (Annex 7 to the notification) showing that none of the railway undertakingsalone would have accepted those risks, a point with which the Commission agreedin its decision. Moreover, the procurement of rolling stock involves various fixedcosts such that an undertaking could only make a profit by increasing output to aminimum efficient size such as that hoped for by ENS. Individually, none of therailway undertakings would have been in a position to increase the level of servicesto that minimum.

108.

    UIC and NS add that there can be no restrictions of potential competition amongthe parties to the ENS agreements since, under Directive 91/440, none of therailway undertakings is in a position to serve any one of the routes concerned onits own but is bound to participate in an international grouping. The London-Amsterdam route, for instance, could not have been served by SNCF and EPSwithout the participation of NS. Since EPS and NS are 'obligatory tradingpartners‘ in any international grouping serving that route, the additionalparticipation of SNCF, which is not an actual or potential competitor of NS or EPSon the route concerned, could thus not constitute a restriction of competition. Asto the fact that ENS serves a route one of whose destinations is Belgium withoutthe Belgian railway undertaking SNCB being a party to the ENS agreements, the

applicants stress that SNCB's supply of 'necessary services‘ to ENS is the resultof a purely commercial decision and not of any obligation imposed by Communitylaw.

109.

    Since the four routes served by ENS are to be considered as forming four differentgeographical markets (decision, point 29), it also follows that the four connectionsmust be held not to compete with each other, so that combining their operation inone grouping does not constitute a restriction of competition.

110.

    The Commission's argument that the ENS agreements restrict competition betweenthe parties to the agreements and new railway undertakings, including subsidiariesof existing ones, is unfounded. To the extent that it concerns new undertakings, itis irrelevant for the purpose of analysing possible restrictions of competition amongthe participating undertakings. The assertion that the parent undertakings couldset up, in countries served by ENS other than their own countries of establishment,subsidiaries which could acquire the status of 'railway undertakings‘ within themeaning of Directive 91/440 and with which each of the railway undertakingsconcerned could organise night services by means of a grouping excluding any otherparticipant in ENS, is hypothetical. None of the railway undertakings participatingin ENS has subsidiaries of such a kind; nor, moreover, are they able to set upsubsidiaries having the status of railway undertakings in Member States where otherrailway undertakings are established, at least until the two draft directivescomplementing the regulatory framework of Directive 91/440 have beenimplemented. Even if such a framework already existed, moreover, it would betotally unrealistic from a business point of view to assume, for instance, that DBwould set up its own railway undertaking in the Netherlands in order to operate,together with EPS, a night train connection between the United Kingdom andAmsterdam without the involvement of NS. In any event, the Commission'sfindings are all the more challengeable in that cooperation in ENS is not exclusive,there being nothing in the ENS agreements to prevent participants from engagingin a grouping competing with ENS.

111.

    SNCF adds that, contrary to the Commission's contention, the individual railwayundertakings do not have the possibility of setting up a subsidiary in anotherMember State with a view to forming a grouping with it, because there arestatutory monopolies in the Member States and the Council has not adopted anylegislation conferring such a right of establishment. Moreover, the fact that anumber of railway undertakings participate in the ENS agreements is of noconsequence, since they operate on different networks and are thus not incompetition on each of the other geographical markets considered. Finally, SNCFstresses that the financial risks involved in setting up ENS cannot be borne by asingle undertaking, as the Commission accepts at point 63 of its decision.

112.

    Similarly, the Commission's argument that each railway undertaking could performthe role of railway 'transport operator‘ outside its country of establishment bybuying the necessary services from the railways concerned is based on an unrealistic

description of the market and is incompatible with the regulatory framework ofDirective 91/440. There is no justification for supposing, for example, that DBwould be interested in setting up a special structure and negotiating rights of accesswith the United Kingdom infrastructure manager, SNCF and NS in order to set upa night train connection between London and Amsterdam. Such behaviour would,in any event, be commercially unfeasible, since none of the participants in ENS hasthe financial and commercial means to do so.

113.

    The Commission's reasoning is also based on a market model which is incompatiblewith the regulatory framework of Directive 91/440. By drawing an artificialdistinction between railway undertakings and a hypothetical new category of marketparticipants called 'transport operators‘, it creates access and transit rights whichdo not derive from the directive. The conclusion from its analysis, moreover, isthat the formation of any international grouping automatically restricts competitionsimply because its participants could also have formed another grouping. Suchreasoning is all the more unacceptable in that it makes it impossible for theparticipating railway undertakings to assess how the services of ENS should bestructured once the exemption granted has expired, thus discouraging furtherinitiatives for innovative international transport services by the railway undertakingsin the Community.

114.

    In the second place, as regards the alleged restrictions on access by third parties(points 46 to 48 of the decision), the applicants maintain that the Commission'sanalysis is wrong in both fact and law. First, the possibility that third parties mightbe excluded should be assessed in relation to the relevant intermodal markets onwhich the joint venture will be operating and for which, according to points 26 and27 of the decision, there are other, interchangeable, modes of transport. Theanalysis in question, however, is based on another market definition, that of themarket in necessary rail services, which diverges from the definition explicitlyadopted in the decision.

115.

    Second, the Commission's assessment is based on the false premiss that ENSshould be treated as a 'transport operator‘ to which the parent undertakingsprovide rail services. However, ENS is not a transport operator but aninternational grouping of railway undertakings within the meaning of Directive91/440, formed in order to enable the parent undertakings to provide internationalpassenger rail services, in accordance with Article 10(1) of the directive. The factthat the parent undertakings opted for a grouping in the form of a company isirrelevant in that connection with regard to the legal status of ENS. Thus, contraryto the Commission's contention, since the parent undertakings themselves providetransport services to travellers via the grouping in question, there cannot be anupstream market for the provision of rail services to operators and a separatemarket on which ENS operates, as stated in the decision. In any event, theCommission's findings are based on the false assumption that any 'transport

operator‘ of any kind (for example, a hotel chain) is entitled to claim the supplyof locomotives.

116.

    Third, the Commission's argument is based on the erroneous assumption that EPSis a wholly-owned subsidiary of BR and/or the railway infrastructure managerRailtrack and holds a dominant position in the United Kingdom, whereas in factEPS has been transferred by BR to the United Kingdom Government (seeparagraph 11 above) and its position is far from dominant in any market. EPSreminded the Commission in a letter of 30 June 1994 (Annex 9 to its application)that it is not an infrastructure owner or manager and has access only to thereserved paths it needs over the UK network, forming a small minority of the pathson the routes in question. Similarly, EPS employs a small number of railway staffand owns a small fleet of locomotives. It does not, therefore, enjoy a dominantposition as regards access to infrastructure in the United Kingdom.

117.

    Fourth, the Commission has not explained why the alleged commercial strength ofthe participating railway undertakings constitutes as such a barrier to market accessfor third parties. The argument based on the existence of actual or potentialcompetitors and the competitive damage on the downstream markets broughtabout by the alleged special relationship between the railway undertakings and ENSis speculative. Even if the railway undertakings were alone in possessinglocomotives and even if each of them refused to supply locomotives to a newoperator, the effect on the properly-defined relevant markets would be minimal. In any event, under Directive 91/440, the participating railway undertakings areobliged, as infrastructure managers, to provide certain services to third parties. Moreover, the acquisition of (in particular second-hand) locomotives by operationalor financial leases or otherwise does not constitute a major investment for thirdparties, and there is no evidence for the Commission's claim that only the railwayundertakings concerned possess them or that any new entrant would experiencedifficulty in finding them. It is, moreover, possible to adapt existing locomotives tooperate through the Channel Tunnel, rather than ordering new or speciallocomotives. In any event, the mere fact that the setting-up of a joint venturenecessitates certain major capital investments cannot be regarded as a barrier tomarket entry. As to the Commission's reference in its pleadings to the foreclosureeffect arising out of the Channel Tunnel usage agreement, the applicants reply thatit is an agreement which has been granted exemption by the Commission underArticle 85(3) of the Treaty and stress that the paths to be used by ENS will beallocated to the quota reserved by the Eurotunnel Agreement for SNCF and BRand will not reduce the number of paths available for third parties.

118.

    In the third place, as regards the restrictive effect due to the presence of a networkof joint ventures, the applicants point out that the other joint ventures concernedare located on product or service markets — the market for combined transport ofgoods and the market for the transport of vehicles by rail — different from those onwhich ENS will be active and that they do not engage in competing or evencomplementary activities. The decision contains no analysis to show how the

alleged existence of a network of joint ventures for rail transport could have anappreciable effect on competition in the market for passenger transport and is,moreover, inconsistent with the principles set out by the Commission in its 1993communication.

119.

    Finally, as regards the overall assessment of the ENS agreements, ENS and EPSstate that the Court of Justice has consistently held (Case 56/65 Société TechniqueMinière v Maschinenbau Ulm [1966] ECR 235, Joined Cases 56/64 and 58/64Consten and Grundig v Commission [1966] ECR 299, Case 26/76 Metro vCommission, cited above, Case 258/78 Nungesser v Commission [1982] ECR 2015,Case 161/84 Pronuptia [1986] ECR 353 and Case C-234/89 Delimitis v HenningerBräu [1991] ECR I-935) that the pro-competitive effects of an agreement must beweighed up against its anti-competitive effects. If the pro-competitive effectsoutweigh the anti-competitive effects and the latter are necessary in order toimplement the agreement, then the agreement cannot be regarded as having as itsobject or effect the prevention, restriction or distortion of competition within thecommon market within the meaning of Article 85(1) of the Treaty.

120.

    The applicants submit that the agreements in issue have substantial pro-competitiveeffects on both the relevant service markets as defined in points 26 and 27 of thedecision. In particular, the market for the transport of business travellers on theroutes served by ENS is dominated by a small number of airline companies which,according to the International Passenger Survey conducted by the Office ofPopulation Censuses and Surveys, held 74% of that market in 1991. ENS furthershowed, in its notification, that it was likely to have 7% of that market while theairline companies would hold 78% and that its formation would thus to some extentmitigate the domination of the market by air transport. The Commission has,moreover, accepted that the position was the same with respect to the leisuremarket. In fact, the pro-competitive effects of the agreements should outweigh anyspeculative anti-competitive effect.

121.

    The Commission considers that the fact that the participants in ENS have assumedsignificant commercial risks and incurred high expenses and costs does not meanthat appreciable competition among the railway undertakings concerned on therelevant market is improbable. A railway undertaking established in one MemberState is entitled to form an international grouping with another railway undertakingestablished in another Member State and obtain from Eurotunnel, theinfrastructure manager, the paths necessary to pass through the Channel Tunneland thus operate international transport services (decision, point 42). Moreover,any railway undertaking party to the ENS agreement is entitled to take on the roleof 'transport operator‘ itself and to set up a subsidiary which, by buying thenecessary services from the railway undertakings concerned, may likewise provideinternational transport services (decision, points 43 and 44). Thus, by entrustingthe operation and marketing of those services to their joint venture ENS, theapplicants have appreciably limited the scope for competition on that market

(decision, point 45). Finally, it is clear from the decision of the German railwayundertaking DB to form a joint venture with the Swiss and Austrian railways witha view to providing night services between German, Swiss and Austrian cities thatthe possibilities for a railway undertaking party to the ENS agreements to set upa subsidiary in the United Kingdom and/or other Member States in order to offernight train services are neither illusory nor unrealistic.

122.

    As regards the argument that each of the applicants is an obligatory trading partnerfor operation of the routes served by ENS, the Commission replies that ENS is nota railway undertaking within the meaning of the directive but a 'transportoperator‘ which obtains the necessary rail services from railway undertakings. Furthermore, the fact that the Brussels-Glasgow/Plymouth route was to be offeredby ENS even though SNCB is not a party to the agreement demonstrates that theparticipation of all four railway undertakings established in the Member Statesconcerned is not a sine qua non for the operation of the services involved.

123.

    In response to the applicants' argument that the railway undertakings concernedcould not set up subsidiaries having the status of railway undertakings in thedifferent Member States and thus form other international groupings in competitionwith ENS, the Commission contends that there is no legal obstacle to preventrailway undertakings from exercising their right of establishment in other MemberStates. The principle of freedom of establishment enunciated by Article 52 of theTreaty became fully effective at the end of the transitional period; the fact thatwhen the contested decision was adopted the Council had not yet adopted the draftdirective on the licensing of railway undertakings is thus irrelevant, the aim of sucha directive being only to facilitate the exercise of the right of establishment, and notto create that right (Case 2/74 Reyners v Belgian State [1974] ECR 631).

124.

    With regard to the applicants' argument that the regulatory framework set up byDirective 91/440 does not allow the railway undertakings to set up a subsidiary inthe form of a transport operator, the Commission stresses that, whilst Directive91/440 applies admittedly only to railway undertakings whose main business is toprovide rail transport services for goods and/or passengers, with a requirement thatthe undertaking should ensure traction (Article 3), transport operators which do notthemselves qualify as railway undertakings within the meaning of Article 3 of thedirective and thus do not have a right of access to railway infrastructure may nonethe less offer services and/or railway transport of goods by obtaining tractionservices and access to railway infrastructure from railway undertakings. That isprecisely how ACI and ENS operate, as regards combined transport and passengertransport respectively.

125.

    The Commission points out that it had already put forward that point of view inthe letters it sent to the notifying parties on 29 October 1993 (defence, Annex 4)and 28 February 1994 and adds that, after the railway undertakings participatingin ENS had been consulted, ENS's chairman sent a letter dated 13 April 1994 to

the Commission (defence, Annex 6), confirming their agreement to provideovernight services to ENS's competitors on the same routes.

126.

    As regards the assertion that the ENS agreements contain no provision as toexclusivity and thus do not preclude the railway undertakings concerned fromsetting up different international groupings capable of competing with ENS, theCommission stresses that such a possibility is extremely unlikely since, during theadministrative procedure, the railway undertakings concerned insisted on the needto combine their experience and financial resources in order to ensure thecommercial success of ENS.

127.

    The Commission also denies the claim that it failed to make a proper assessmentof the restrictive effects of the ENS agreement on third parties, and refers in thatregard to points 46 and 48 of the contested decision. It considers that, whilst theformation of ENS creates no restrictions on entry by third parties to the othermodes of transport which are interchangeable with the services offered by ENS,access by railway undertakings and transport operators to the rail transport segmentof the relevant market could none the less be impeded because ENS is composedof powerful railway undertakings with control of both the utilisation of railwayinfrastructure and the provision of traction. In the Commission's view, it is notnecessary that barriers to access affect each segment of a composite market of thekind in question here. The fact that a decision was taken exempting theEurotunnel Agreement entered into by BR, SNCF and Eurotunnel under Article85(3) of the Treaty, it adds, in no way renders irrelevant the assessment of theeconomic position of EPS and SNCF, which hold 75% of the path capacity reservedfor international train services in the Channel Tunnel.

128.

    With regard to the restrictions of competition arising out of the supply of necessaryrail services to ENS, the Commission recognises that, as regards train paths,international groupings are entitled under the directive to obtain access toinfrastructure directly from the infrastructure managers. That does not apply,however, to transport operators as regards the provision of train paths or oftraction and skilled crews. In view of the fact that traction may only be assured byrailway undertakings, which possess both the special locomotives designed fortraction in the Channel Tunnel and the skilled crew operating them, it is justifiableto take the view that economic operators seeking to obtain such services would beat a disadvantage if they did not get the same services on non-discriminatory termsfrom ENS's parent undertakings.

129.

    The network of joint ventures in which the parent undertakings take part, theCommission states, concerns the operation of goods and passenger transportservices, namely: Intercontainer, in which all the notifying parties take part; ACI,set up by BR, SNCF and Intercontainer; and, finally, Autocare Europe. Thecontention that joint ventures relating to the combined transport of goods and theprovision of rail transport for motor vehicles have no bearing on night passenger

services such as those operated by ENS is unfounded since, according to the 1993communication, competition is most severely restricted where undertakingscompeting within the same oligopolistic economic sector set up a multitude of jointventures for complementary or unrelated products or services.

130.

    Finally, the Commission challenges the argument that the case-law cited by theapplicants establishes that it is bound to apply a 'rule of reason‘ and to balancethe competitive benefits and harms of the agreement. Such an approach isrequired in the context of Article 85(3) of the Treaty but not in respect of theappraisal of restrictions of competition under Article 85(1).

131.

    The United Kingdom, in intervention, submits that in applying Article 85(1) of theTreaty to the ENS agreements the Commission failed to take account of theeconomic context and, in particular, of the state of competition that would exist inthe absence of the agreements. The ENS agreements do not restrict competitionbecause they are designed to facilitate, and are necessary for, the introduction ofa service which is not currently operating and which none of the parties couldreasonably be expected to introduce by itself.

132.

    Various passages in the decision vouch for the pro-competitive nature of the ENSagreements, the novelty of the service offered, the substantial financial risksinvolved, the financial and technical justification for collaboration — the pooling ofknow-how — and the need to wait several years before the investments made willyield profitable returns (points 59, 61, 63, 64 and 74 to 77 of the decision). It isthus significant that those findings appear in the decision solely in connection withthe question of the exemption of the ENS agreements and not with the applicationof Article 85(1) of the Treaty.

133.

    Nor does the contested decision contain any sufficient explanation of how ENS'sparent undertakings are or could be competitors on the market in question in anyreal sense. It contains no explanation of how real the prospect is of suchcompetition, which shows either that the Commission did not carry out the requiredanalysis of the economic context or that it has failed to comply with Article 190 ofthe Treaty.

134.

    In reply to the United Kingdom, the Commission submits that, whilst the analysisof an agreement must take account of its economic context, it does not follow thatthe rule of reason — a concept which the Court of Justice has hitherto declined toembrace — should be resorted to. That conclusion is not negated by its judgmentin Case C-250/92 Gottrup-Klim v Dansk Landbrugs Grovvareselskab [1994] ECRI-5641, which concerns only the validity of ancillary restrictions in the specificcontext of cooperative organisations and may not, therefore, be regarded as theexpression of a general principle. Consequently, it is necessary to balance thecompetitive benefits and harms of an agreement in relation to the granting ofexemptions under Article 85(3) of the Treaty but not in respect of the appraisal of

restrictions on competition — which were, contrary to the United Kingdom'scontention, fully explained in the decision — in accordance with Article 85(1).

Findings of the Court

135.

    According to the contested decision, the ENS agreements have effects restrictingexisting and potential competition (a) among the parent undertakings, (b) betweenthe parent undertakings and ENS and (c) vis-à-vis third parties; furthermore (d),those restrictions are aggravated by the presence of a network of joint ventures setup by the parent undertakings.

136.

    Before any examination of the parties' arguments as to whether the Commission'sanalysis as regards restrictions of competition was correct, it must be borne in mindthat in assessing an agreement under Article 85(1) of the Treaty, account shouldbe taken of the actual conditions in which it functions, in particular the economiccontext in which the undertakings operate, the products or services covered by theagreement and the actual structure of the market concerned (judgments inDelimitis, cited above, Gottrup-Klim, cited above, paragraph 31, Case C-399/93Oude Luttikhuis and Others v Verenigde Coöperatieve Melkindustrie [1995] ECRI-4515, paragraph 10, and Case T-77/94 VGB and Others v Commission [1997] ECRII-759, paragraph 140), unless it is an agreement containing obvious restrictions ofcompetition such as price-fixing, market-sharing or the control of outlets (CaseT-148/89 Tréfilunion v Commission [1995] ECR II-1063, paragraph 109). In thelatter case, such restrictions may be weighed against their claimed pro-competitiveeffects only in the context of Article 85(3) of the Treaty, with a view to granting anexemption from the prohibition in Article 85(1).

137.

    It must also be stressed that the examination of conditions of competition is basednot only on existing competition between undertakings already present on therelevant market but also on potential competition, in order to ascertain whether,in the light of the structure of the market and the economic and legal contextwithin which it functions, there are real concrete possibilities for the undertakingsconcerned to compete among themselves or for a new competitor to penetrate therelevant market and compete with the undertakings already established (Delimitis,cited above, paragraph 21). Furthermore, according to the Commission notice of1993 concerning the assessment of cooperative joint ventures pursuant to Article85 of the Treaty: 'The assumption of potential competitive circumstancespresupposes that each parent alone is in a position to fulfil the tasks assigned tothe [joint venture] and that it does not forfeit its capabilities to do so by thecreation of the [joint venture]. An economically realistic approach is necessary inthe assessment of any particular case‘ (point 18).

138.

    It is in the light of those considerations, therefore, that it is necessary to examinewhether the Commission's assessment of the restrictive effects of the ENSagreements was correct.

— Restrictions on competition among the parent undertakings

139.

    It is clear from the documents before the Court that, prior to the adoption ofDirective 91/440, the railway undertakings in the Member States were neitheractually nor potentially in competition with each other because most MemberStates provided for exclusive rights precluding, de jure or de facto, both theprovision of international passenger services and access to the infrastructure (thenational rail networks). Prior to the adoption of that directive, as the parties havestressed, the only basis on which such services were provided in the Community wasthat of the traditional cooperation agreements between the railway undertakingsoperating on the various networks concerned. However, following the adoption ofDirective 91/440, conditions of competition on the market for rail transportchanged and the railway undertakings operating on their national networks becameto a certain extent potential competitors for international passenger services,provided that they formed 'international groupings‘ with other railwayundertakings established in other Member States for the purpose of providinginternational transport services between those Member States (Articles 3 and 10of the directive).

140.

    It would appear from the Commission's arguments that the possibility of providinginternational services via international groupings is open not only to existing railwayundertakings but also to new railway undertakings, including subsidiaries of existingrailway undertakings, and that it was on the basis of that premiss that theCommission considered that the ENS agreements restricted competition among theparent undertakings inasmuch as (a) each of the parties to those agreements couldform an international grouping either with an undertaking established in the UnitedKingdom or with its own subsidiary there and thus compete with ENS, (b) each ofthose parties could set up a subsidiary specialising as a 'transport operator‘ andbuy from those parties the same necessary rail services as they sold to ENS and (c)each railway undertaking could itself take on the role of transport operator andprovide international night passenger services by buying the necessary rail servicesfrom the railway undertakings concerned.

141.

    With regard to the possibility for each of the parties to the ENS agreements toform an international grouping either with a railway undertaking in the UnitedKingdom or with its own subsidiary there and thus compete with ENS, it must firstof all be borne in mind that since, in accordance with Article 10 of Directive91/440, an international route may be served only by an international groupingformed by the railway undertakings established in each of the countries concerned,the only 'obligatory trading partners‘ for the constitution of such an internationalgrouping on each route are necessarily the railway undertakings established in each

Member State concerned. As the applicants have pointed out, with regard to theexample of the London-Amsterdam route, the only obligatory trading partners atthe material time were NS and EPS; the fact that SNCF and DB were alsomembers of the grouping could thus have no effect on existing competition since,in the context created by Directive 91/440, neither of those two railwayundertakings could compete with EPS and NS on that route. The situation is thesame for each of the three other routes actually to be served by ENS (seeparagraph 9 above). Consequently, the fact that the four routes in question areoperated jointly by EPS, DB, SNCF and NS cannot have the effect of anappreciable restriction of existing competition among the parent undertakings.

142.

    As regards the view that potential competition is restricted by the fact that each ofthe parent undertakings could set up subsidiaries in the Member States of the otherparent undertakings and form, either with its own subsidiaries or with other railwayundertakings established in the other Member States concerned, internationalgroupings in direct competition with ENS, the Court considers this to be ahypothesis unsupported by any evidence or any analysis of the structures of therelevant market from which it might be concluded that it represented a real,concrete possibility. There is no indication either in the contested decision or inthe documents before the Court that there are any railway undertakings withsubsidiaries in other Member States having themselves the status of railwayundertakings, such as to demonstrate any actual exercise of the right to freedomof establishment on the market for rail transport in the Community.

143.

    It should be stressed here that, as a measure of organisation of the procedure, theCourt requested the Commission to indicate whether any railway undertakingsestablished in the Member States had subsidiaries in other Member States havingthe status of railway undertakings within the meaning of Directive 91/440 and, if so,to specify which railway undertakings had been set up since the entry into force ofDirective 91/440. In its answer, the Commission admitted that it had no knowledgeof other subsidiaries set up by ENS's parent undertakings either before or after theadoption of Directive 91/440, reiterating, however, its view that the right ofestablishment is conferred directly on any interested railway undertaking by Article52 of the Treaty.

144.

    The Court considers that the Commission's argument in this regard, to the effectthat there is in theory no legal obstacle precluding railway undertakings fromexercising their right of establishment in a Member State other than that in whichthey have their registered office, fails to take account of the economic context andcharacteristics of the relevant market as they appear from the documents in thecase and is thus not sufficient, without further support, to establish the existenceof restrictions of potential competition among the parent undertakings or betweenthem and ENS.

145.

    As the applicants have explained at length in their pleadings, it would beunrealistic, given the novelty and the specific features of the night rail services inquestion, for the parent undertakings to set up other subsidiaries in other MemberStates having the status of railway undertakings for the sole purpose of forming anew joint venture to compete with ENS. The prohibitive cost of the investmentrequired for such services through the Channel Tunnel and the fact that there areno economies of scale in the operation of a single route, as opposed to the fourroutes to be operated together by ENS, show how unrealistic potential competitionis among the parent undertakings and between them and ENS. It is, moreover,clear from the documents before the Court that, following the publication in theOfficial Journal of the European Communities of the Commission's notice invitinginterested parties to submit their observations on the ENS agreements assummarised in that notice, no third parties took any steps during the administrativeprocedure to submit observations as a potential competitor capable of beingaffected or concerned by the implementation of the ENS agreements (seeparagraph 17 above). Finally, it may also be seriously questioned whether ENS hasany existing or potential competitors in this context in view of the fact that, as theCommission acknowledged in its answers to the written questions put by the Court,no subsidiaries have yet been set up in other Member States by any Communityrailway undertakings, whether before or after the adoption of Directive 91/440.

146.

    On the basis of the foregoing considerations, the Commission's finding that theENS agreements are such as appreciably to restrict existing and/or potentialcompetition among the parent undertakings and between them and ENS must beheld to be vitiated by inadequate reasoning and/or error of assessment.

147.

    As regards the view that competition among the parent undertakings is restrictedbecause each of the railway undertakings participating in the ENS agreementscould either set up a subsidiary specialising as a transport operator or itself takeon the role of transport operator and compete with ENS by buying the samenecessary rail services, the Court considers that the Commission's assessment ishere again based on an analysis of the market which does not correspond to thereal situation. The Commission takes as its starting-point the assumption that inthe market for rail passenger services there is in addition to railway undertakingsanother category of economic operators — transport operators — providing the sameservices as railway undertakings — passenger transport — but by buying or hiring'necessary rail services‘ — locomotives, crews and access to infrastructure — fromthose undertakings. ENS, being, according to the decision, a transport operator,could thus be exposed to competition either from specialised subsidiaries set up byrailway undertakings as transport operators or by those undertakings themselvesacting directly on the market as transport operators, and its creation thereforerestricts the parties' freedom to operate individually as transport operators on therelevant market.

148.

    However, the Commission's assessment in that regard cannot be examined withoutfirst answering the question whether international passenger services are provided

not only by international groupings as provided for in Directive 91/440 but also bytransport operators. As that question is raised, in substance, by the applicants inthe context of their second plea in law, it will therefore be examined in that context(see paragraphs 161 to 189 below).

— Restrictions on competition vis-à-vis third parties

149.

    The contested decision stresses that third-party access to the relevant markets islikely to be impeded by the existence of a special relationship between ENS andits parent undertakings, placing other operators at a disadvantage in competitionfor the necessary rail services provided by the parent undertakings, and by theChannel Tunnel usage agreement entered into by BR, SNCF and Eurotunnel,which allows BR and SNCF to retain a significant proportion — 75% — of the pathcapacity reserved for international train services.

150.

    With regard, first, to the special relationship between ENS and the railwayundertakings concerned, it must be noted that the Commission's analysis is basedon the premiss that the market for rail passenger transport is split into two parts:an upstream market in the provision of 'necessary rail services‘ (train paths,special locomotives and train crews) and a downstream market in passengertransport, on which transport operators such as ENS operate alongside railwayundertakings. According to the decision, the parent undertakings could abuse theirdominant position on the upstream market by refusing to provide necessary railservices to third parties competing with ENS on the downstream market.

151.

    Here again, however, the Commission's assessment cannot be examined withoutfirst answering the question whether there are also, in addition to internationalgroupings, transport operators on the relevant markets, which will be examined inthe context of the second plea in law, and the question whether the servicesprovided to ENS by the parent undertakings may be categorised as 'necessary oressential facilities‘, which falls within the scope of the third plea and must thereforebe examined in that context (see paragraphs 190 to 221 below).

152.

    As regards, second, any restrictive effects arising out of the Channel Tunnel usageagreement, it must be borne in mind that the Commission's decision exempting thatagreement from the prohibition in Article 85(1) of the Treaty ('the Eurotunneldecision‘) was annulled by judgment of the Court of First Instance of 22 October1996 in Joined Cases T-79/95 and T-80/95 SNCF and British Railways v Commission[1996] ECR II-1491, on the ground that the Commission had made a factual errorin its interpretation of the provisions of that agreement governing the allocation oftrain paths in the tunnel as between SNCF and BR on the one hand andEurotunnel on the other.

153.

    As a measure of organisation of the procedure, the Court requested the parties tostate their position on the relevance of that judgment for the present case. In itsanswer, the Commission considered that it was irrelevant for the appraisal of thelegality of the contested decision, point 47 of which indicates that even if BR andSNCF did not hold all the available paths for international trains they would stillcontrol a significant proportion of them. The applicants, however, took the viewthat the judgment confirms that access to the Channel Tunnel is not closed andthat the Commission incorrectly assessed the restrictive effects of the tunnel usageagreement vis-à-vis third parties.

154.

    The Court considers that, since the Commission specifically took the 'Eurotunnelagreement‘ as its basis in order to demonstrate in the contested decision thatSNCF's and BR's allegedly privileged access to train paths in the tunnel placedundertakings competing with ENS at a competitive disadvantage, and since theEurotunnel decision has been annulled by the Court of First Instance on theground that it contained an error of fact in the interpretation of the provisions ofthe agreement relating to the allocation of train paths, the Commission cannotderive any valid argument from it with regard to the assessment of the ENSagreements.

— Aggravation of the restrictive effects on competition caused by the presence ofa network of joint ventures

155.

    With regard, finally, to the alleged aggravation of the restriction of competitioncaused by the presence of networks of joint ventures (points 49 to 53 of thedecision), it should first be noted that, according to the Commission's 1993communication, special attention must be paid to the presence of networks of jointventures set up by the same parents, by one parent with different partners or bydifferent partners in parallel (point 17 of the communication). In particular,networks of joint ventures can restrict competition where competing parents set upseveral joint ventures for complementary products which they themselves intend toprocess or for non-complementary products which they themselves distribute, thusincreasing the extent and intensity of the restriction of competition. Thoseconsiderations are also valid for the service sector (point 29 of the communication).

156.

    In the contested decision, the Commission considered that to be the case in thepresent instance, inasmuch as BR/EPS, SNCF, DB and NS were taking part tovarying degrees in a network of joint ventures for the transport of both goods andpassengers, in particular through the Channel Tunnel. It referred to the jointventure ACI, set up by, inter alia, BR and SNCF to provide combined transport ofgoods (Commission Decision 94/594/EC of 27 July 1994 relating to a proceedingunder Article 85 of the EC Treaty and Article 53 of the EEA Agreement(IV/34.518 — ACI) (OJ 1994 L 224, p. 28, hereinafter 'the ACI decision‘)), andAutocare Europe, to which BR and SNCB are parties, which provides rail transportfor motor vehicles. In its pleadings, the Commission referred for the first time in

addition to the joint venture Intercontainer, set up by 26 railway undertakings,including BR and SNCF, and also operating on the market for combined transportof goods.

157.

    The contested decision does not, however, specify what joint ventures set up by theparent undertakings concern passenger transport services. As a measure oforganisation of the procedure, the Court requested the Commission to specify thejoint ventures operating on the passenger transport market in which, according topoint 51 of the contested decision, ENS's parent undertakings are participating. In its answer, the Commission stated that it had no knowledge of any other jointventures of ENS's parent undertakings for passenger transport. It noted, however,that 'SNCF, SNCB and BR (subsequently to the latter's privatisation, London &Continental Railways Ltd) jointly take part in Eurostar for passenger transportbetween the United Kingdom and the Continent‘, although it did not assert thatpoint 51 was in fact implicitly referring to Eurostar. The Court therefore considersthat, as regards the alleged presence of a network of joint ventures set up by theparent undertakings, the contested decision is vitiated by an absence of reasoning.

158.

    As regards the participation of the parent undertakings in joint ventures forcombined transport of goods, it follows from point 29 of the Commission's 1993communication that when parent undertakings set up joint ventures for 'non-complementary‘ services, competition may be restricted when those 'non-complementary‘ services are marketed by the parent undertakings themselves.

159.

    There is no indication in the contested decision that the parent undertakingsthemselves market the services provided by ACI, Intercontainer and Autocare. Asa measure of organisation of the procedure, the Court requested the applicants tospecify whether the transport services provided by ACI, Intercontainer andAutocare were marketed by them or by another undertaking. From their answersit appears that none of the parent undertakings markets or sells services providedby any of those three undertakings. In any event, even if they did market thoseservices, the contested decision does not explain how the participation of some orall of the parent undertakings in a network of joint ventures operating on marketsdifferent from that of ENS would restrict competition among them at the level ofthe creation of ENS. Consequently, the Commission's assessment of theaggravating effects on the restrictions of competition caused by the presence of anetwork of joint ventures does not contain a sufficient statement of reasons.

160.

    It follows from the foregoing that, as regards the assessment of the restrictions ofcompetition arising out of the ENS agreements, the contested decision is vitiatedby an absence or insufficiency of reasoning.

The second plea: infringement of Regulation No 1017/68 and of the regulatoryframework established by Directive 91/440

Arguments of the parties

161.

    The applicants submit that in imposing the condition contained in Article 2 of thecontested decision, the Commission used its powers under Article 5 of RegulationNo 1017/68 in a manner inconsistent with Directive 91/440.

162.

    The Commission, they consider, extended the scope of the directive since, underArticle 10(1), rights of access to infrastructure are granted only to internationalgroupings of railway undertakings as defined in the directive and not to anytransport operator wishing to run trains. When exercising its powers underRegulation No 1017/68, the applicants add, the Commission is also obliged to takeaccount of the basic orientations of the common transport policy as defined by theCouncil. Judicial review of the Commission's assessment of the ENS agreementsunder Article 85 of the Treaty must therefore be carried out in the context of theCommunity legislation for the rail transport sector, which constitutes the legalframework within which competition within that sector is supposed to operate.

163.

    In particular, the basic elements of the Community's common transport policy forthe railways sector are now embodied in Directive 91/440 which, for the first time,introduces a certain degree of intramodal competition and seeks to achieve themain objective of the rail transport policy, that of enhancing the efficiency andcompetitiveness of rail transport as against other modes of transport. Under thedirective, access and transit rights are granted only to undertakings having thestatus of railway undertakings and international groupings of such undertakings. The directive addresses, moreover, only rights of access to infrastructure and doesnot provide for rights to the supply of services such as traction (locomotives andtrain crews). Nor does it contain any rules concerning the separation ofmanagement of locomotives and train crews from the operation of other railservices or the allocation of and payment for traction services, which is consistentwith the objective of the directive, namely to allow railway undertakings to operatein a commercial manner and adapt to market needs, in particular in order todevelop new services.

164.

    The distinction drawn by the Commission between railway undertakings andtransport operators is thus fictitious since, for reasons pertaining to safety and theliability for transport risks, only railway undertakings are allowed to register coachesand to transport passengers over the rail infrastructure. Consequently, nobody butrailway undertakings and the international groupings they create can offerpassenger transport services to the public. That does not exclude the possibility fora railway undertaking to supply an entire train to, for example, a hotel chain oreven rent out the coaches, but even in such a case the railway undertaking wouldremain the transport operator, bearing all the risks inherent in the transportservices; the hotel chain would merely sell seat or berth capacity in the train to thepublic. In the applicants' submission, the core activity of railway undertakings isnot to operate a trunk business of running locomotives on railway networks at therequest of transport operators, allowing them to hook coaches on to its locomotives

to run on a given route, but to provide integrated passenger services directly to thepublic.

165.

    ENS, moreover, in the applicants' submission, whilst a joint venture set up betweenfour railway undertakings, constitutes in reality an international grouping of railwayundertakings within the meaning of Article 3 of Directive 91/440 and not a'transport operator‘. It is clear from Article 5(3) of Directive 91/440 that railwayundertakings are free to establish an international grouping with 'one or more‘other railway undertakings, without any specific legal form being prescribed forsuch an association. Nor can the Commission infer from the operating agreementsbetween ENS and SNCB that ENS is a transport operator, as it was on a voluntarybasis that, before the Brussels-Glasgow/Plymouth route was finally abandoned,SNCB decided to supply the 'necessary rail services‘ to ENS and not under anyobligation arising out of Directive 91/440 or Community competition law.

166.

    Consequently, ENS is not a transport operator active on a downstream marketdifferent from that of its parent undertakings but — by very reason of its status asan international grouping of railway undertakings — a vehicle through which thoseparent undertakings can offer rail services to the public. That distinction within theoverall market for rail services between an upstream market and a downstreammarket, drawn by the Commission in order to demonstrate that ENS is a transportoperator, is all the more artificial in that, as far as passenger transport isconcerned, many transport services are provided by integral trains, of which thelocomotive forms an inseparable part, so that, from a merely technical point ofview, it is impossible to distinguish between those two markets.

167.

    Similarly, the fact that ENS must obtain traction from railway undertakings in orderto be able to offer its services does not prevent it from having the status of aninternational grouping within the meaning of Article 3 of the directive, as it issufficient that ENS is an emanation of those railway undertakings, which are bydefinition in a position to provide traction. Rights of access to the railwayinfrastructure of the Member States in which the parent undertakings areestablished are reserved for such groupings. If the Commission's view wereaccepted, however, it would mean allowing any undertaking to offer internationalpassenger services even without being an emanation of railway undertakings andthus without being in a position to provide traction through them.

168.

    The applicants add that the creation of this new category of transport operators,in conjunction with the fact that necessary rail services are treated as 'essentialfacilities‘, deprives Directive 91/440 of its substance since, in its capacity as'transport operator‘, a railway undertaking could claim access to networks inMember States without having to meet the requirements of the directive — beingestablished in those Member States or having formed a grouping with a railwayundertaking established in those Member States.

169.

    The applicants further maintain that, by requiring the railway undertakings toprovide locomotives and train crews to transport operators on the same technicaland financial terms as they allow to their grouping, the Commission ignored thefact that the right of access to infrastructure is conditional upon being able toprovide traction and thus to having the status of a railway undertaking or agrouping of railway undertakings. Such a condition is, moreover, they claim,incompatible with the directive's aim of ensuring that railway undertakings areafforded a status of independent operators behaving in a commercial manner andadapting to market needs (third recital in the preamble) and that they are free forthat purpose to 'control the supply and marketing of services and fix the pricingthereof‘ (Article 5(3) of Directive 91/440).

170.

    Finally, UIC and NS maintain that the contested decision has the effect ofjeopardising the right to establish international groupings inasmuch as theCommission interprets Article 85(1) of the Treaty in such a way that the creationof any international grouping now falls under the prohibition contained therein. Even if the creation of an international grouping may be exempted from thatprohibition under Article 85(3), the conditions to which the Commission hassubjected the exemption in this case — a duration of only seven years and theobligation to provide any transport operator with the necessary rail services on thesame terms as ENS — render the application of Directive 91/440 illusory. Theconditions imposed by the Commission indirectly force the participants ininternational groupings to supply the 'necessary rail services‘ to their grouping onan arm's length basis, thus depriving them of their freedom to decide on thecommercial conditions under which they provide services to third parties. Theymight thus be obliged to share the benefits of their cooperation with any given thirdparty without that third party having contributed to the costs of implementing aninnovative project or sharing in the resulting commercial risks.

171.

    The Commission submits that the assertion that the competition provisions of theEC Treaty do not apply to rail transport is inconsistent with the relevant case-lawand should be rejected (see Case 167/73 Commission v France [1974] ECR 359 andJoined Cases 209/84 to 213/84 Ministère Public v Asjes and Others [1986] ECR1425).

172.

    It maintains that in this case the combined participation of all four railwayundertakings is not required in order to operate the routes to which the ENSagreements relate. Each route to be served by ENS can actually be served by aninternational grouping of two railway undertakings established in the Member Stateof departure and in the Member State of ultimate destination. Thus, the London-Frankfurt/Dortmund route could be served by an international grouping consistingof BR and DB, which have rights of access to infrastructure in their respectiveMember States of establishment and transit rights in Belgium, France and theChannel Tunnel. Similarly, the service between London and Amsterdam could beoperated by an international grouping composed of BR and NS, which have access

rights in the United Kingdom and the Netherlands and transit rights in Belgium,France and the Channel Tunnel.

173.

    That conclusion, in the Commission's view, is corroborated by three facts. In thefirst place, ENS is not a railway undertaking within the meaning of the directive buta transport operator which, in order to provide the night rail services concerned,must obtain the necessary rail services from railway undertakings. The Commissionrejects the applicants' argument that ENS is a mere instrument through which theparent undertakings can offer, within the legal framework introduced by Directive91/440, international rail services to the public. ENS does not itself exercise theright conferred by the directive on international groupings of railway undertakings— to run its own trains by providing its own traction — since it needs to purchasethose services from its parent undertakings and SNCB. Consequently, ENS fallsoutside the scope of the directive, since it is in fact merely a variation on thetraditional form of cooperation between railway undertakings, and so, contrary tothe applicants' assertions, ENS and the railway undertakings concerned do notoperate on the same market. The claim that the decision contradicts the directiveand extends the category of undertakings entitled to access to railway infrastructureis thus, in the Commission's view, irrelevant. In support of its argument that ENSand its parent undertakings operate on different markets, the Commission refersto the case-law according to which it is sometimes necessary to distinguish tworelated, albeit distinct, markets (Joined Cases 6/73 and 7/73 Commercial Solventsv Commission [1974] ECR 223, Case 22/78 Hugin v Commission [1979] ECR 1869,Case 311/84 CBEM v CLT and IPB [1985] ECR 3261, Case T-69/89 RTE vCommission [1991] ECR II-485 and Case T-70/89 BBC v Commission [1991] ECRII-535).

174.

    In reply to the applicants' argument that the distinction between the market fortransport services and the market for necessary rail services is all the moreunjustified in that many transport services are provided by integral trains, of whichthe locomotive forms an inseparable part, the Commission points out that ENSitself obtains only the locomotive from its parent undertakings, and the coachesseparately.

175.

    In the second place, the Brussels-Glasgow/Plymouth route is offered by ENS eventhough SNCB is not a party to the agreement, thus demonstrating that theparticipation of all four railway undertakings established in the Member Statesconcerned is not a sine qua non for the operation of the services involved.

176.

    In the third place, BR, SNCF and Intercontainer have set up the joint venture ACI,specialised in the combined transport of goods between the United Kingdom andthe Continent, which again is not a railway undertaking within the meaning of thedirective but a transport operator, whose shareholders include only two railwayundertakings and which operates in a manner comparable to ENS, that is to say by

obtaining the necessary rail services from railway undertakings in order to providetransport services.

177.

    The Commission further submits that transport operators which do not themselvesqualify as railway undertakings and thus do not have the right of access to railwayinfrastructure must none the less be able to offer railway transport services bypurchasing traction services and access to infrastructure from railway undertakings,in the same way as ENS and ACI. Consequently, the right to offer passenger railservices cannot be reserved to ENS; indeed, by letter to the Commission of 13April 1994 (defence, Annex 6), the chairman of ENS confirmed the agreement ofthe railway undertakings to provide necessary services to competitors on the sameroutes. Even before that letter, ENS had informed the Commission by letter of 4June 1992 of the decision of the notifying parties to provide 'without condition‘traction and other necessary services to competitors of ENS operating on routesserved by ENS.

178.

    The Commission further considers that the independence of the railwayundertakings is in no way compromised by the condition imposed. Like allCommunity undertakings, they are subject to the obligation of non-discriminationand the rules on competition law, as is clear from the judgments in Commission vFrance and Ministère Public v Asjes and Others, both cited above.

179.

    Finally, the Commission rejects the applicants' argument that it regards anyinternational grouping as falling within Article 85(1) of the Treaty and that theconditions it is imposing on the notifying parties are dissuasive and jeopardise theobjectives of Directive 91/440 and the creation of other international groupings. It stresses that the encouragement for the constitution of such groupings does notimply that all international groupings of railway undertakings are automaticallydeemed to be consistent with Community competition law.

Findings of the Court

180.

    According to the contested decision, the railway undertakings concerned arepresent on two markets — an upstream market for the supply of necessary railservices and a downstream market for the provision of passenger services. Operators on the latter market include not only railway undertakings but also acategory of undertakings — transport operators — which, however, in order tooperate on that market, must first purchase the necessary rail services provided byrailway undertakings on the upstream market. ENS, in the Commission's view, isa specific instance of that category of transport operators, and thus any specialtreatment accorded to ENS by the notifying undertakings should also be accordedto third parties, whether international groupings or transport operators, on thesame technical and financial terms. Finally, it is specified in Article 2 of thedecision that the necessary services in question consist of the provision of the

locomotive, train crew and path on each national network and in the ChannelTunnel.

181.

    It must therefore be considered whether, by imposing on the parent undertakingsthe condition that necessary rail services must be provided not only to internationalgroupings but also to transport operators like ENS, the Commission applied therules on competition in a manner contrary to the regulatory framework set up byDirective 91/440, so that the contested decision is vitiated by misuse of powers orlack of competence, as the applicants contend. In order to answer that question,it must first be determined whether ENS is a transport operator, as claimed by theCommission, or on the contrary an international grouping within the meaning ofDirective 91/440, as claimed by the applicants. The latter question must also beanswered in order to consider whether the Commission was correct in its analysisof the restrictions on competition among the parent undertakings as a result of thefact that each of the railway undertakings participating in the ENS agreementscould either set up a subsidiary specialising as a transport operator or itself takeon the role of transport operator and compete with ENS by buying the samenecessary rail services (see paragraphs 147 and 148 above).

182.

    Under Article 3 of Directive 91/440, an international grouping is defined as 'anyassociation of at least two railway undertakings established in different MemberStates for the purpose of providing international transport services betweenMember States‘. That provision does not lay down any specific mandatory formfor such an association. The essential feature which is clear from that definitionis merely that it must be a form of association under which the provision ofinternational transport services is possible. The Court therefore considers that,failing a precise definition in Directive 91/440, use of the term 'internationalgrouping‘ cannot be confined, as the Commission contends, to 'cooperativeassociations‘ among railway undertakings ('traditional joint operationagreements‘), to the exclusion of any other form such as a cooperative, or evenconcentrative, joint venture.

183.

    That conclusion is not negated by the argument that, by virtue of Article 2 thereof,Directive 91/440 applies only to railway undertakings, that is to say undertakingswhose main business is to provide rail transport services for goods and/orpassengers and which themselves ensure traction (Article 3 of Directive 91/440), sothat ENS, because it has to buy traction from the notifying undertakings, may notrely on the provisions of the directive or claim the status of an internationalgrouping. In the first place, as the Commission has itself stressed in its pleadings,it was specified in a joint declaration by the Council and the Commission madewhen Directive 91/440 was adopted that the reference to traction did notnecessarily imply ownership thereof. Whilst it is true that such declarations haveno force in law, the Commission has none the less already incorporated thatdeclaration into its practice when adopting decisions in the field, as may be seenfrom point 6 of its Decision 93/174/EEC of 24 February 1993 relating to a

proceeding under Article 85 of the EEC Treaty (IV/34.494 — Tariff structures in thecombined transport of goods) (OJ 1993 L 73, p. 38), in which it is stated that'”railway undertaking” means any undertaking, established or to be established ina Member State, which has the means to provide rail haulage, the concept ofhaulage not necessarily implying ownership of the haulage equipment or the useof the undertaking's own workforce‘.

184.

    In the second place, since, as noted above, an international grouping may take theform of a cooperative joint venture, as is the case for ENS, the very nature of sucha form means that the parent undertakings may, as railway undertakings exercisingthe rights conferred on them by the directive, provide their joint venture with theequipment and staff required to perform its role on the market not directly but onthe basis of cooperation agreements entered into with it, without thereby affectingthat joint venture's legal status as an international grouping within the meaning ofDirective 91/440. As the applicants explained in their written answers to thequestions put by the Court and at the hearing, without being contradicted by theCommission, the decision to provide ENS with locomotives and train crews on thebasis of operating agreements was due solely to tax considerations and not to thefact that ENS was supposed to operate on the market as a transport operator. Thefact that ENS is not registered as a railway undertaking in the United Kingdom, asthe applicants stated in their answers to the written questions put by the Court, hasno effect on its legal status as an international grouping since, as the Commissionitself stated at the hearing, the parent undertakings' operating licences are sufficientto enable ENS's trains to run on the routes concerned.

185.

    In the third place, it appears from the papers before the Court that in theeconomic context of the rail sector, as the applicants have argued, the activity oftransport operator is unknown in the field of passenger services. Nor, moreover,has the Commission provided any instances of such a category of undertakings inthat field, either in the contested decision or in its pleadings. Its reference to ACIis not relevant here. That reference ignores the specific features of the market forrail passenger services, a market quite distinct from that for combined transport ofgoods, on which ACI does operate as a transport operator. More particularly, onthe market for combined transport of goods, railway undertakings do not selltransport services directly to consignors, except in very exceptional cases involvinglarge consignments. Combined transport services are rather arranged and sold toconsignors by combined transport operators, which may be subsidiaries of railwayundertakings. Such operators are transport undertakings with their own specificequipment — handling equipment and specialised wagons — and, in order to performthose services operators must purchase rail traction and access to infrastructurefrom railway undertakings, the only parties able to supply them (see the ACIdecision, cited above, points 6 to 8, and Commission Decision 94/210/EC of 29March 1994 relating to a proceeding pursuant to Articles 85 and 86 of the ECTreaty (IV/33.941 — HOV-SVZ/MCN) (OJ 1994 L 104, p. 34, points 10 to 12)).

186.

    Whilst the rail segment of the market for combined transport of goods is currentlyto a certain extent an open market, in that railway undertakings are not the onlyoperators on it, the same is not true of the market for rail passenger services, onwhich the only operators are railway undertakings and, to a certain extent,international groupings of railway undertakings.

187.

    The Commission cannot, therefore, validly refer to the characteristics of another,separate market — the market for combined transport of goods — to justifycategorising ENS as a transport operator.

188.

    Nor can that conclusion be undermined by the fact that ENS was originally to servethe Brussels-Glasgow/Plymouth route even though SNCB, from which ENS hadobtained a right of access to Belgian infrastructure, was not one of its parentcompanies. As the applicants have submitted, that was the result of a traditionalcooperation agreement between railway undertakings. Furthermore, the directivein no way affects the possibility for ENS, as an international grouping within themeaning of Directive 91/440, to sign such agreements with other railwayundertakings in order to obtain a contractual right of access to their infrastructure.

189.

    It follows from the foregoing, without there being any need to examine whether theCommission was guilty of misuse of powers or whether the decision is vitiated bylack of competence, that the Commission's assessment of ENS's legal status as thatof a transport operator is based on false premisses. Moreover, since, as notedabove, the activity of transport operator plays no role on the market for railpassenger services as that market actually functions at present, the Commission'sanalysis regarding restrictions on competition among the parent undertakingsderiving from the fact that they could each act on the relevant market as transportoperators in competition with ENS and the other parent undertakings (seeparagraph 147 above) is also based on the same false premisses and thus cannotbe upheld (see paragraph 148 above).

The third plea: the condition imposed in Article 2 of the contested decision isdisproportionate and unnecessary

Arguments of the parties

190.

    EPS, ENS and SNCF submit that in requiring the notifying parties to supply toother international groupings or transport operators the same necessary railservices as they supply to ENS, the Commission has misapplied the 'essentialfacilities‘ doctrine, inasmuch as, with the exception of the provision of train paths,which is required by Directive 91/440 under certain conditions, none of the servicessupplied to ENS can meet the criteria for the application of that doctrine. NS addsthat such an obligation has the effect not merely of undermining the railwayundertakings' efforts in setting up international groupings but also of obliging them

to share the benefits of their cooperation with third parties without those thirdparties having to bear any of the commercial risks involved. In NS's submission,the economic effect of obliging the railway undertakings to make necessary servicesavailable to transport operators on terms which they cannot freely decide amounts,moreover, to an expropriation.

191.

    Furthermore, the applicants argue, the 'essential facilities‘ doctrine is applicableonly under Article 86 of the Treaty, and only in a situation where one undertakingdenies rivals access to facilities which are both essential to the rival's competitivecapacity and to the existence of competition.

192.

    In this case, the Commission did not draw a distinction between facilities which aremerely advantageous to a competitor and those which are essential for competition. The latter aspect in particular was not examined: whilst possession or control ofinfrastructure may be regarded as an 'essential facility‘, access to thatinfrastructure is nevertheless guaranteed for international groupings by Directive91/440; nor does the decision contain the slightest evidence that the railwayundertakings have exclusive access to the locomotives used for night servicesthrough the Channel Tunnel, crews or support staff, or that any actual or potentialcompetitor would face any difficulty in securing them. ENS and EPS state thatlocomotives designed specifically for or capable of operation through the ChannelTunnel can be acquired from manufacturers or hired from other train operators onan open market. Nor has the Commission addressed the question of theavailability of locomotives or train crews, or established the existence of anyshortage of trained railway crews. Furthermore, the condition imposed obliges therailway undertakings to supply necessary rail services to international groupings andtransport operators on their networks, that is to say outside and beyond therelevant routes.

193.

    The applicants further submit that the condition imposed is unnecessary. It isirrelevant to the first restriction of competition identified in the decision — ofcompetition among the parties as a result of the formation of the joint venture. Nor is it justified as regards the restriction of competition vis-à-vis third parties,deriving from the alleged dominant position enjoyed by ENS's parent undertakingsin the provision of rail services in their Member States of origin. None of therailway undertakings has entered into any exclusive relationship with ENS, and theyare thus all free to deploy their locomotives, staff and any track over which theymay have rights to any other undertaking. Moreover, since the business and leisuretravel markets over the relevant routes also include air, coach and car travel, ENSdoes not occupy a dominant position and any refusal to supply a third party withthe services referred to in the decision would thus have no impact on competitionon those downstream markets. It is therefore unnecessary for a future provider ofpassenger services to obtain the rail services in issue in order to be present on themarket as defined in the decision. In any event, the Commission has not adducedany evidence from third parties, in particular from actual or potential operators ofcompeting services, to substantiate its assertion that the joint venture might place

other operators at a disadvantage. The Commission's concern is thus entirelyhypothetical.

194.

    The Commission points out, first of all, that a similar condition was imposed in theACI decision — ACI being a joint venture set up between BR, SNCF andIntercontainer for the transport of goods between the United Kingdom and theContinent — against which, it stresses, no action has been brought by the parentundertakings.

195.

    The Commission further points out that the condition imposed does not requireENS's parent undertakings to supply to third parties all the services which theyprovide to their joint subsidiary (such as cleaning and marketing services), and inparticular that no requirement is imposed on them in respect of rolling stock, thecost of which is regarded by the parent undertakings themselves as the main barrierto entry into the market.

196.

    It states, moreover, that access to rail infrastructure is at present for the most partcontrolled by the railway undertakings in their capacity as infrastructure managersand that the need to obtain access to infrastructure constitutes an important barrierto entry to the rail segment of the relevant market. To the extent thatinfrastructure managers and railway undertakings are distinct undertakings, theobligation imposed on the latter by the condition is not relevant.

197.

    Although in theory undertakings other than ENS's parent undertakings may havespecial locomotives and crews and although such locomotives may in theory bepurchased or rented by any transport operator, the Commission notes, in realityonly ENS's parent undertakings actually have them. It is thus a real and practicalimpossibility for transport operators to find an alternative. Consequently, it isundeniable that the railway undertakings concerned occupy a dominant position onthe essential services market, which, according to the case-law (see the judgmentsin Commercial Solvents, CBEM, RTE and BBC, all cited above) justifies thecondition imposed.

198.

    With regard to the claim that the condition imposed is disproportionate, theCommission states that the fact that the right of access to infrastructure is reservedby the directive for railway undertakings and international groupings of railwayundertakings does not mean that other transport operators cannot operate servicesidentical to those offered by ENS. Given that only railway undertakings haveaccess to infrastructure and that new entrants have no independent right under thedirective to request train paths from the relevant infrastructure managers, therailway undertakings must supply train paths to such operators in order to allowthem access to the market. The condition imposed relates, moreover, only to therail services necessary for entry to the rail segment of the relevant markets; it isthus not disproportionate and makes it possible to ensure the presence of a number

of rail transport operators in order to enhance competition with other modes oftransport.

199.

    The Commission denies, moreover, the assertion that the condition imposed on therailway undertakings concerned obliges them to supply necessary rail services onthe whole of their networks, outside the relevant routes. The obligation concernsonly access to the markets identified in the contested decision.

200.

    Finally, the Commission submits that the non-exclusive nature of the agreementbetween the railway undertakings and ENS is of no significance. Since, under theagreement, the railway undertakings share the risks and fortunes of ENS, it isunlikely that the same railway undertakings would wish to provide services topotential competitors.

201.

    The United Kingdom, in intervention, submits that the condition imposed could notbe regarded as necessary since the Commission had already found at point 65 ofthe decision that the restrictions on competition were necessary in this case. Thejustification put forward, concerning the need to ensure the presence on the marketof rail transport operators competing with ENS is, moreover, inappropriate sincethere are no such competing operators. The Commission has thus distortedcompetition by artificially encouraging operators to enter the market, a step whichtherefore does not lie within its powers under Article 13 of Regulation No 1017/68.

202.

    The decision is also vitiated by a failure to state properly and sufficiently thereasons for which the Commission applied the 'essential facilities‘ doctrine. In anyevent, the conditions required for that doctrine to be applied are not met. First,since the railway undertakings do not enjoy a dominant position on the marketsidentified by the Commission in its decision, the rail services in issue cannot beregarded as essential for competitors to enter those markets. The justification ofthe condition imposed based on a segmentation of the relevant marketsdemonstrates the Commission's defective reasoning, which is inconsistent in thatregard with the market analysis set out in the decision. Second, by stating in thedecision that the parties to the ENS agreements must provide the 'necessary railservices‘ to new entrants if those entrants are not able themselves to supply them,the Commission implies that the railway undertakings may not have sole control offacilities the access to which is regarded as essential, and the condition imposed isthus unjustified on the facts.

203.

    In reply to the United Kingdom, the Commission states that a finding that anagreement setting up a joint venture entails restrictions on competition which areregarded as necessary does not mean that all the restrictions are indispensable. The condition imposed was specifically intended to ensure that the restrictions oncompetition remain within what is indispensable. Furthermore, the conditionimposed reflects a concern distinct from the 'essential facilities‘ doctrine, seekingin this case to ensure that the conditions for exemption required by Article 85(3)of the Treaty and by Article 5 of Regulation No 1017/68 are satisfied.

204.

    Finally, the Commission submits that, in a composite market such as that definedin the decision, a barrier to access need not necessarily be erected in respect of allits segments. If such an approach were followed in the case of the predominanceof one mode of transport within a multimodal market, only barriers to third-partyentry to that mode of transport would be caught by Article 85 of the Treaty, leavingthe other modes outside the ambit of competition law.

Findings of the Court

205.

    According to point 79 of the contested decision, the aim of the condition imposedin Article 2 of that decision is that of 'preventing the restrictions of competitionfrom going beyond what is indispensable‘.

206.

    However, as the Court has concluded from its examination of the first and secondpleas in law, the Commission must be regarded as not having made a correct andadequate assessment in the contested decision of the economic and legal contextin which the ENS agreements were concluded. It has thus not been demonstratedthat those agreements restrict competition within the meaning of Article 85(1) ofthe Treaty and that they therefore need to be exempted under Article 85(3). Consequently, since the contested decision did not contain the relevant analyticaldata concerning the structure and operation of the market on which ENS operates,the degree of competition prevailing on that market or, therefore, the nature andextent of the alleged restrictions on competition, the Commission was not in aposition to assess whether the condition imposed by Article 2 of the contesteddecision was or was not indispensable for the purpose of granting a possibleexemption under Article 85(3) of the Treaty.

207.

    However, even if the Commission had made an adequate and correct assessmentof the restrictions of competition in question, it would be necessary to considerwhether it was a proper application of Article 85(3) to impose on the notifyingparties the condition that train paths, locomotives and crews must be supplied tothird parties on the same terms as to ENS, on the ground that they are necessaryor that they constitute essential facilities, as discussed by the parties in theirpleadings and at the hearing.

208.

    In that regard, it follows from the case-law on the application of Article 86 of theTreaty that a product or service cannot be considered necessary or essential unlessthere is no real or potential substitute (Joined Cases C-241/91 P and C-242/91 PRTE and ITP v Commission [1995] ECR I-743, paragraphs 53 and 54, and CaseT-504/93 Tiercé Ladbroke v Commission [1997] ECR II-923, paragraph 131).

209.

    Consequently, with regard to an agreement such as that in the present case, settingup a joint venture, which falls within Article 85(1) of the Treaty, the Courtconsiders that neither the parent undertakings nor the joint venture thus set up

may be regarded as being in possession of infrastructure, products or services whichare 'necessary‘ or 'essential‘ for entry to the relevant market unless suchinfrastructure, products or services are not 'interchangeable‘ and unless, by reasonof their special characteristics — in particular the prohibitive cost of and/or timereasonably required for reproducing them — there are no viable alternativesavailable to potential competitors of the joint venture, which are thereby excludedfrom the market.

210.

    The question whether the Commission could validly regard the supply of (a) trainpaths, (b) locomotives and (c) crews to ENS by its parent undertakings as necessaryor essential services which had to be made available to third parties on the sameterms as to ENS and whether, in so doing, it provided a valid statement of reasonsfor its decision must be examined in the light of the above considerations and byanalogy with the case-law cited in paragraph 208 above. Finally, that examinationwill also serve as the basis for determining whether the Commission made a correctanalysis of the alleged restrictions of competition with regard to third parties arisingout of the special relationship between the parent undertakings and ENS (seeparagraph 151 above).

211.

    With regard, first, to train paths, whilst it is true that Article 2 of the contesteddecision requires the notifying undertakings to 'supply [train paths] to anyinternational grouping of railway undertakings‘, it has none the less been held thatthe operative part of a decision must be read in the light of the terms of itspreamble, which provide its basis — in the present case, point 81 of the contesteddecision. Point 81 states that the notifying undertakings 'should not ... be requiredto provide a path if the applicant is a grouping of railway undertakings within themeaning of Article 10 of Directive 91/440/EEC, so that it would be able to requesta path itself from the infrastructure managers‘. That obligation is thus imposedby the contested decision only in cases where the third party is not an internationalgrouping but, as the Commission contends, a transport operator such as ENS. However, as has been held above, ENS is not a transport operator but aninternational grouping within the meaning of Directive 91/440. Moreover, transportoperators as a category play no role on the market for rail passenger services asthat market actually functions at present. Consequently, there are no grounds forthe condition imposed in so far as it seeks to oblige those parent undertakingsalready in possession of train paths to supply paths to third parties operating on themarket as transport operators, since it is based on false premisses.

212.

    With regard, second, to the supply of locomotives, as pointed out above,locomotives cannot be regarded as necessary or essential facilities unless they areessential for ENS's competitors, in the sense that without them they would beunable either to penetrate the relevant market or to continue operating on it. However, since the decision defined the relevant market as the market for thetransport of business travellers and the market for the transport of leisuretravellers, both of which are intermodal, and since ENS's market share does notexceed 7% to 8% according to the Commission, or 5% according to the notification

of the parties, on either of those intermodal markets, it cannot be accepted that apossible refusal by the notifying undertakings to supply ENS's competitors withspecial locomotives for the Channel Tunnel could have the effect of excluding suchcompetitors from the relevant market as thus defined. It has not beendemonstrated that an undertaking having such a small market share can be in aposition to exert any influence whatever on the functioning or structure of themarket in question.

213.

    Only if the market under consideration were the completely different, intramodal,market for business and leisure travel by rail, on which the railway undertakingscurrently hold a dominant position, could a refusal to supply locomotives possiblyhave an effect on competition. However, it was not that intramodal market whichwas finally considered relevant by the Commission, but the intermodal market (seepoints 17 to 27 of the contested decision). The first time that the Commissionreferred to the intramodal market for rail services as a segment of the intermodalmarket for business and leisure travel, in justification of the obligation imposed onthe notifying undertakings to supply locomotives to ENS's competitors, was duringthe written procedure before the Court. Whilst it cannot be denied that the effectsof an agreement may be analysed both with regard to a principal market and withregard to a segment thereof, both the distinction between the principal market andits segment or segments and the reasons for drawing such a distinction mustnevertheless be stated clearly and unambiguously in any decision applying Article85(1) of the Treaty, which is not the case here.

214.

    Even if it may be assumed that the Commission's explanations given in that regardin its pleadings do not in fact involve a redefinition of the relevant market asdefined in points 17 to 27 of the contested decision but seek, rather, to providefurther clarification of that definition, its assessment is still vitiated by a failure tostate the reasons on which it is based.

215.

    As the applicants have argued, the contested decision does not contain any analysisdemonstrating that the locomotives in question are necessary or essential. Morespecifically, it is not possible to conclude from reading the contested decision thatthird parties cannot obtain them either directly from manufacturers or indirectly byrenting them from other undertakings. Nor has any correspondence between theCommission and third parties, demonstrating that the locomotives in questioncannot be obtained on the market, been produced before the Court. As theapplicants have stated, any undertaking wishing to operate the same rail servicesas ENS through the Channel Tunnel may freely purchase or rent the locomotivesin question on the market. It is clear, moreover, from the papers before the Courtthat the contracts for the supply of locomotives entered into between the notifyingundertakings and ENS do not involve any exclusivity in favour of ENS, and thateach of the notifying undertakings is thus free to supply the same locomotives tothird parties and not only to ENS.

216.

    It must further be pointed out in that regard that the Commission has not deniedthat third parties may freely purchase or rent the locomotives in question on themarket; it has merely asserted that the possibility is in fact purely theoretical andthat only the notifying undertakings actually possess such locomotives. Thatargument cannot, however, be accepted. The fact that the notifying undertakingshave been the first to acquire the locomotives in question on the market does notmean that they are alone in being able to do so.

217.

    Consequently, the Commission's assessment of the necessary or essential nature ofthe special locomotives designed for the Channel Tunnel and, thus, the obligationimposed on the parent undertakings to supply such locomotives to third parties arevitiated by an absence or, at the very least, an insufficiency of reasoning.

218.

    For the same reasons, the obligation imposed on the parent undertakings also tosupply train crews for special locomotives for the Channel Tunnel to third partiesis similarly vitiated by an absence or an insufficiency of reasoning.

219.

    Consequently, the contested decision is vitiated by an absence or, at the very least,an insufficiency of reasoning in so far as it requires the applicants to supply to thirdparties in competition with ENS the same 'necessary services‘ as it supplies toENS.

220.

    It further follows from the foregoing that the Commission's analysis of therestrictions of competition vis-à-vis third parties as a result of the specialrelationship between ENS and its parent companies is also unfounded (seeparagraphs 150 and 151 above). Since, as demonstrated above, ENS is not atransport operator, the market for rail services can in fact be split into only twoservice markets: an integrated market for passenger services on which only railwayundertakings and international groupings of railway undertakings operate, and amarket for access to and management of railway infrastructure, controlled byinfrastructure managers within the meaning of Directive 91/440 (see paragraphs 1to 6, under 'Legal background‘, above). It must be added that the argumentraised by the Commission at the hearing that, according to paragraph 55 of thejudgment of the Court of First Instance of 21 October 1997 in Case T-229/94Deutsche Bahn v Commission [1997] ECR II-1689, the rail services marketconstitutes a sub-market distinct from the rail transport market in general isunfounded, since the Court's finding in that case related solely to the rail transportmarket in relation to combined transport of goods. Restrictions of competitionwith regard to third parties should therefore have been analysed on the twomarkets mentioned above.

221.

    As regards, first, access to infrastructure (train paths), it is true that access for thirdparties may in principle be hindered when it is controlled by competitors;nevertheless, the obligation of railway undertakings which are also infrastructuremanagers to grant such access on fair and non-discriminatory terms to internationalgroupings competing with ENS is explicitly provided for and guaranteed by

Directive 91/440. The ENS agreements therefore cannot, by definition, impedeaccess to infrastructure by third parties. As regards the supply to ENS of speciallocomotives and crew for the Channel Tunnel, the mere fact of its benefiting fromsuch a service could impede access by third parties to the downstream market onlyif such locomotives and crew were to be regarded as essential facilities. Since, forthe reasons set out above (see paragraphs 210 to 215), they cannot be categorisedas such, the fact that they are to be supplied to ENS under the operatingagreements for night rail services cannot be regarded as restricting competition vis-à-vis third parties. That aspect of the Commission's analysis of restrictions ofcompetition vis-à-vis third parties is therefore also unfounded (see paragraphs 150and 151 above).

The fourth plea: insufficient duration of the exemption granted

Arguments of the parties

222.

    The applicants emphasise that the ENS agreements relate to a major long-terminvestment and that the return on the project is dependent on the securing ofadvantageous 20-year financing for the purchase of the specialised rolling stock, sothat the limitation of the exemption to eight years is inadequate. The reference inthe decision to the period considered necessary by certain railway undertakings toensure the viability of another agreement, concerning the combined transport ofgoods through the Channel Tunnel, is irrelevant since it relates to a joint ventureoperating in a different sector from ENS and in which none of the notifying partiesparticipate.

223.

    As regards the justification in point 73 of the decision, to the effect that theduration of the exemption will depend, inter alia, on the period for which it canreasonably be supposed that market conditions will remain substantially the same,the applicants consider that the Commission has provided no evidence of any suchforeseeable changes at the end of the period of exemption, whereas the financialrisks are exacerbated by the relatively short duration of the exemption.

224.

    The applicants add that the Commission's practice in taking decisions has alwaysbeen to consider that joint ventures requiring substantial long-term investments andseeking to develop a new product necessarily require a long lead time to ensure areturn on capital. They consider that it is wrong to assert in the decision that thejoint acquisition of the equipment can be distinguished from its commercial use,since the rolling stock used by ENS can only be used on the routes between theUnited Kingdom and the Continent. For all those reasons, the applicants concludethat the contested decision is vitiated by a manifest error of assessment and/or byabsence or insufficiency of reasoning.

225.

    The Commission states that the duration of an exemption must be determined inrelation to the market conditions at the time when the decision is made, accountbeing taken of the reasonably foreseeable alterations on the relevant market in thefuture. In the present case, it considers, the duration fixed for the exemption — tenyears from the notification and eight years from the date on which the decision wasadopted — allows reconciliation of realistic economic projections with the needs oflegal certainty for undertakings. According to the notification of the agreements,the financial projections of the railway undertakings concerned suggest that thenight services provided by ENS would generate sufficient revenue to cover expensesby the fourth year of operation (notification, p. 35, paragraph II.4.e.1.4, Annex 1to the defence). In the Commission's view, the fact that the financing of theacquisition of the rolling stock extends over a period of 20 years does not justifygranting a longer exemption, since a distinction can be made between the jointinvestment in equipment and the commercial use to which it is put.

226.

    In any event, the Commission adds, the exemption can be renewed more than onceunder Article 13(2) of Regulation No 1017/68 if the circumstances so justify, andrenewal is in practice granted where the market conditions have not substantiallychanged. If substantial changes were to take place, the Commission could stillrenew its decision by attaching conditions differing from those in the previousdecision.

227.

    The United Kingdom, in intervention, contends that the condition imposed on therailway undertakings and the duration of the exemption alter the financial basis onwhich the parties to the ENS agreements undertook to provide the new railservices in question. The scale of the investment made by the parties should havebeen an essential factor in determining the duration of the exemption. By nottaking that into account, the decision is inconsistent with the policy of encouragingprivate-sector involvement in the development of trans-European networks.

228.

    In reply, the Commission states that the duration of the exemption granted is bothadequate and justified and that, contrary to the United Kingdom's contention, thedecision is consistent with its policy on the role of the private sector in thedevelopment of trans-European networks.

Findings of the Court

229.

    As the Court has concluded from its examination of the first and second pleas inlaw, the Commission must be regarded as not having made a correct and adequateassessment in the contested decision of the economic and legal context in which theENS agreements were concluded. It has thus not been demonstrated that thoseagreements restrict competition within the meaning of Article 85(1) of the Treatyand that they therefore need to be exempted under Article 85(3). Consequently,the Commission was not in a position to assess the appropriate duration for anyexemption to be granted under that provision.

230.

    However, even if it is assumed that the Commission's assessment of the restrictionson competition in the contested decision was adequate and correct, the Courtconsiders that the duration of an exemption granted under Article 85(3) of theTreaty — or, as here, Article 5 of Regulation No 1017/68 — and Article 53(3) of theEEA Agreement must be sufficient to enable the beneficiaries to achieve thebenefits justifying such exemption, namely, in the present case, the contribution toeconomic progress and the benefits to consumers provided by the introduction ofnew high-quality transport services, as stated in points 59 to 61 of the contesteddecision. Since, moreover, such progress and benefits cannot be achieved withoutconsiderable investment, the length of time required to ensure a proper return onthat investment is necessarily an essential factor to be taken into account whendetermining the duration of an exemption, particularly in a case such as thepresent, where it is undisputed that the services in question are completely new,involve major investments and substantial financial risks and require the pooling ofknow-how by the participating undertakings (see points 63, 64 and 75 of thedecision).

231.

    The consideration set out in point 73 of the decision, that 'the duration of theexemption will therefore depend inter alia on the period for which it canreasonably be supposed that market conditions will remain substantially the same‘,cannot, therefore, be regarded as decisive, on its own, for determining the durationof the exemption, without also taking account of the length of time necessary toenable the parties to achieve a satisfactory return on their investment.

232.

    However, the contested decision does not contain any detailed assessment of thelength of time required to achieve a return on the investments in question underconditions of legal certainty, in the light, in particular, of the fact that the partieshave entered into financial commitments covering a period of 20 years for thepurchase of the special rolling stock. The Commission's statement at point 76 ofthe decision that, in connection with the combined transport of goods, somerailways had informed it that a period of five years was needed in order to set upthe new services and ensure their viability is irrelevant since it concerns a jointventure operating, as noted above (see paragraphs 185 to 187) on a differentmarket from that on which ENS operates.

233.

    As regards the Commission's conclusion at point 75 of the contested decision, thatthe scale of investment cannot be allowed to become a decisive factor indetermining the duration of the exemption because there is no necessary linkbetween the joint acquisition of 'plant and machinery‘ and the commercial use towhich it is to be put, it must be held that there is nothing in the decision to explainwhy there is 'no necessary link‘ between the acquisition and the use of suchequipment, given that the rolling stock in question was acquired, and the financialcommitments relating thereto were entered into, exclusively in the context of theagreements notified. In any event, the Commission has not challenged the

applicants' assertion that other possibilities for the use of the rolling stock inquestion are extremely limited.

234.

    Consequently, the Commission's decision to limit the duration of the exemptiongranted for the ENS agreements is in any event vitiated by an absence ofreasoning.

235.

    In the light of the foregoing, the applicants' fourth plea in law must be held to bewell founded.

236.

    It follows from all the foregoing, without there being any need to examine the pleain law alleging infringement of Article 3 of Regulation No 1017/68, put forward bySNCF in Case T-384/94, that the contested decision must be annulled.

Costs

237.

    Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to beordered to pay the costs if they have been applied for in the successful party'spleadings. Since the Commission has been unsuccessful and the applicants haveapplied for costs, the Commission must be ordered to pay the costs, including thoseincurred by SNCF as intervener in cases T-374/94 and T-384/94.

238.

    Under Article 87(4) of the Rules of Procedure of the Court of First Instance, theUnited Kingdom must bear its own costs.

On those grounds,

THE COURT OF FIRST INSTANCE (Second Chamber)

hereby:

1.    Annuls Commission Decision 94/663/EC of 21 September 1994 relating toa proceeding pursuant to Article 85 of the EC Treaty and Article 53 of theEEA Agreement (IV/34.600 — Night Services);

2.    Orders the Commission to pay the costs;

3.    Orders the United Kingdom of Great Britain and Northern Ireland, asintervener, to bear its own costs.

Kalogeropoulos Bellamy Pirrung

Delivered in open court in Luxembourg on 15 September 1998.

H. Jung

A. Kalogeropoulos

Registrar

President

1: Languages of the cases: English and French.