Liberalisation and open access: the original European vision for the rail industry should have created a competitive and efficient market. Some 30 years on, EU efforts have resulted in the opposite outcome today, according to rail innovator Patrick Sluga. The pursuit of bureaucratic perfection has made rail innovation gasp for air.
The rail freight industry has long discussed the need for innovative solutions to boost the sector’s competitiveness. Promising concepts definitely exist, but have a difficult time coming to fruition. Europe has a problem: the regulatory framework has gone, in simple terms, too far. That is what Patrick Sluga, founder and CEO of rail technology company SWS Power Solutions, tells RailFreight.com.
No innovation without regulation
“They looked at it [the innovation] and said, ‘But there’s nothing on the list [of rules]—what can we do? There’s nothing there!’”, explains Sluga. “That’s not how you regulate innovation. But that is how they did it, and now you have 3,000–4,000 pages of documentation.” Sluga had to wait for the European institutions to create rules before he could move forward with his project.
Anecdotes about Sluga’s personal encounters with regulations are not the point, but it exemplifies a broader issue. It is the practical implementation of harmonisation ambitions that is problematic. Harmonisation is good, but national systems and rules continue to dominate contrary to official objectives and despite the implementation of European guidelines, maintains Sluga.
“If member states do not fully implement European harmonisation, and if there are no real consequences for this, then the common European framework becomes weak in practice”, Sluga argues.
“In the freight wagon sector, older systems such as UIC-based approaches were often more practical for cross-border operation. Today, even refurbishments of vehicles that have operated safely for decades can become extremely difficult, because national approval requirements, unclear responsibilities and missing practical grandfathering create legal and operational uncertainty.”
Regulatory complexity scares away private investment
By adding new rules on top of old structures, Europe is creating a complex patchwork of regulations. As a result, navigating this landscape becomes more difficult, particularly for small companies, even if they have a solid business case. “Investments in rail assets and rail technologies require long planning horizons. If approval paths, responsibilities and future requirements are unclear, the investment case becomes much weaker.”
In short, private investment in rail innovation is discouraged by the current regulatory framework. Still, not only are regulations difficult to navigate: manufacturers are also forced to spend exorbitant amounts of money on engineering hours for certification. This negatively impacts the market because there are fewer equipment manufacturers, fewer new products and higher prices that exceed regular inflation.
For Sluga’s company SWS Power Solutions, the outcome is a shift of its business activities outside of Europe, because implementing rail freight innovation on the continent has become too slow, too expensive and too uncertain. Those that can invest despite all this complexity, namely the large established companies, are merely innovative on paper, according to Sluga. Their innovations are designed to protect their market product only, and that does not move the industry forward.
Liability and responsibility are key
How does Europe even go about resolving these challenges? Possibly, it could start by acknowledging that those 4,000 anecdotal pages of documentation add little value: that still leave gray zones and cause unnecessary costs and add no planning certainty.
Then, says Sluga, Europe should focus more on liability and responsibility rather than using safety as an unrestrained argument for more regulation. Safety must remain essential, but it has to be risk based and proportionate. An acceptable level of safety means that real risks are controlled, while innovation is not blocked by requirements that add cost and delay without measurable safety benefits.
“If decision-makers, owners, or manufacturers are knowingly doing wrong, then these people should be punished, and quickly, through prosecution, liability, and the full force of the law”, argues Sluga.
Look beyond the games being played
When he was employed in investment banking, Sluga continues, they just looked at the responsible person at the end of the day. Yes, maybe someone used one unauthorised trailer, but does that change the system? Immediate calls for new regulations are not useful, the rail innovator says.
“We need to look behind these kinds of arguments, like safety, for instance, because sometimes it’s just about saving my job, saving my slice of the cake. That’s what’s happening. And I would say it’s about money-making, old-fashioned structures, and the games being played in all these sectors.”