Scholarly article on topic 'Pan-European Rail Freight Transport; Evidence from a Pilot Demonstration Result'

Pan-European Rail Freight Transport; Evidence from a Pilot Demonstration Result Academic research paper on "Civil engineering"

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Abstract of research paper on Civil engineering, author of scientific article — Thomas H. Zunder, Dewan Md. Zahurul. Islam, Phil N. Mortimer

Abstract The objective of this paper is to present the evaluation result of the RETRACK pilot rail freight service conducted on a pan-European corridor between Köln, Germany to Győr, Hungary. Qualitative research methods including desktop research, pilot data collection, and surveys were applied. The pilot service implemented a hub-and-spoke concept with single wagon loads. The evaluation found that the service is moving towards commercial direction. It is price competitive, reliable and attractive compared with the existing rail freight services. A new model of privately operated rail freight operations reflecting EU rail reform can compete for and retain cargo from road to rail on merit.

Academic research paper on topic "Pan-European Rail Freight Transport; Evidence from a Pilot Demonstration Result"

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Procedia - Social and Behavioral Sciences 48 (2012) 1346 - 1355

Transport Research Arena- Europe 2012

Pan-European Rail freight transport; Evidence from a pilot

demonstration result

Thomas H. Zundera, Dewan Md. Zahurul. Islama'*9 Phil N. Mortimera,

aNewRail - Centre for Railway Research, Rail Freight and Logistics Group, School of Mechanical and Systems Engineering, Stephenson Building, Newcastle upon Tyne, NE1 7RU, UK


The objective of this paper is to present the evaluation result of the RETRACK pilot rail freight service conducted on a pan-European corridor between Koln, Germany to Gyor, Hungary. Qualitative research methods including desktop research, pilot data collection, and surveys were applied. The pilot service implemented a hub-and-spoke concept with single wagon loads. The evaluation found that the service is moving towards commercial direction. It is price competitive, reliable and attractive compared with the existing rail freight services. A new model of privately operated rail freight operations reflecting EU rail reform can compete for and retain cargo from road to rail on merit.

©2012 Published by Elsevier Ltd. Selection and/or peer review under responsibility of the Programme Committee of the T ransport Research Arena 2012

Keywords: Rail freight; commercial service; pan-European; corridor

1. Introduction

Freight transport is vital for society; it enables economic growth, job creation and differential advantage. However it produces disbenefits such as greenhouse gas emissions, congestion, hydrocarbon dependency and intrusion and all European Union (EU) states recognise the need for sustainability. The future prosperity of Europe will depend on efficient, effective and sustainable freight systems. The EU has stated in Freight Transport Logistics Action Plan (EC, 2007) that this will require core freight corridors optimized in terms of energy use and emissions, minimizing disbenefits, whilst attractive due to their reliability, limited congestion and lower operational and administrative costs. Rail freight services are often seen as and criticized as being unattractive logistically, with slow response to tactical and even

* Corresponding author. Tel.: +441912223972; fax: +441912228600. E-mail address:

1877-0428 © 2012 Published by Elsevier Ltd. Selection and/or peer review under responsibility of the Programme Committee of the Transport Research Arena 2012


strategic changes in demand. In 2010 the Commission reported that "it has not been possible to improve the overall modal share of rail freight and passenger transport in line with the objectives set in the 2001 Transport White Paper... monopolistic positions still exist in many Member States both for freight and for passenger transport services." (EC, 2010b) On the other hand the Commission notes that there are examples in some member states that suggest that market-responsive quality rail freight services are possible (EC, 2011). The differential pattern of adoption of the reforms embedded in various EC reform packages supported underlies the positions described.

Road freight transport in Europe has been on a sustained rise in the pan-continental freight market and more so in the domestic freight markets of the EU27 countries. Many European roads, and indeed parts of the rail network, are highly congested. Modal-shift as defined in the 1990s, has not been achieved, but still remains a key EU policy objective. In 2011 this policy was focused on optimising the performance of multi-modal logistic chains, including by making greater use of more energy-efficient modes. The aspiration is that 30% of road freight over 300 km should shift to other modes such as rail or water-borne transport by 2030, and more than 50% by 2050, facilitated by efficient and green freight corridors (EC, 2011).

Despite many measures from the EU and national governments in Member States, over the years the market share of rail freight has declined (EC, 2010a). One of many important reasons derives from the fact that the national railways in Europe were traditionally government owned and operated. Their operation was aligned according to national necessity, regional products and services and boundaries. The challenge is to ensure structural change to enable rail to compete effectively and take a significantly greater share of medium and long distance freight (EC, 2011).

Different EU directives (since 1991) and Railway Reform Packages (in particular the First and the Second) have made European rail freight operation open and non-discriminatory access strictly on a competitive and commercial basis. Under this open and non-discriminatory regime the incumbent and new rail freight operators are required to operate in a competitive European market environment. This regime also facilitates the development of cross-country pan-European rail freight services which was not always easily achievable before the Railway Reforms.

The RETRACK demonstration project is partially funded by the EU under Framework Programme 6. The intention of the RETRACK project was to demonstrate, within the new market conditions, that private rail operators would be able to collaborate and co-operate in the development of new pan European rail freight services that would be competitive, reliable and attractive compared with the existing rail freight services provided by the national incumbents. These services would exploit the freedoms made available through the railway reform packages established by the EU to open up the rail market to competition between the incumbents and new rail operators and make, as a key strategic objective, rail freight operations more competitive with long and medium distance road transport. The RETRACK pilot rail freight service has been operated since February 2010 and will continue until February 2012.

The objective of this paper is to present an evaluation of this service answering how the service has met business and EU-policy objectives, posed as questions that include:

• Has the RETRACK rail freight service established itself as a commercial service?

• Is the service offering reliable and competitive services?

• Has the service established long-term relationship with customers and partners?

• Is the asset utilization of the service is on the rise?

• Is the service flexible, pragmatic, and adaptive enough to cope with the different market?

• Can it be demonstrated that the service contributes to the development of the EU sustainable transport policy?

• To what extent has EU open non- discriminatory access freight transport policies contributed or was helpful to RETRACK as a commercial service?

• Has the service achieved modal shift, in particular from road, to rail?

• Has the service contributed to make the EU open non-discriminatory access policy effective?

1.2 Methodology:

This paper has applied a qualitative research method. For this, data has been collected from a pilot diary logged by the operators and in addition a customer survey has been conducted, and interviews held with the RETRACK service operators. This covers the period from the start up of the service in February 2010 to June 2011. It should be noted that RETRACK has successfully operated with a small customer base and number of operators so the interviews and surveys reflect that position.

1.3 Organization of the paper

In section 2 the RETRACK operation partners and their roles are reviewed. Then the operational and commercial issues encountered by RETRACK train are discussed in section 3. In section 4 the focus is on the progress of RETRACK towards competitiveness and profitability. In 5 the findings of the interviews are presented. The section 6 summarizes and concludes the current position of RETRACK rail freight service and section 7 puts forward some recommendations.

2. RETRACK Operation Partners and Their Roles

The key initial commercial and operational partners of the RETRACK pilot rail freight service were:

• European Bulls (Netherlands) (no longer involved)

• TransPetrol GmbH (TP) (Germany) (joined later);

• Rail4Chem (Germany); (no longer involved)

• LTE (Austria);

• CER (Hungary); and

• Servtrans (Romania) (dormant).

The Romanian partner (Servtrans) in the RETRACK became inactive in the project. Rail4Chem left the consortium when it was bought by another company (Veolia). European Bulls was wound down as an organisation. This shows the volatility of small companies and changing make up of the sector. The following key commercial and operational partners remain involved in the pilot rail freight operations: TP, LTE and CER.

The original RETRACK pilot demonstration was scheduled to be run in January 2008 to December 2010 this did not happen: the European countries faced a serious recession during 2008/2009. It was not the best time to be developing and starting a new rail freight service. As RETRACK was getting into a position to launch services, demand was falling in response to the international economic recession and significant investment and effort in time marketing the service was rendered useless as traffic volumes withered, existing train service providers were cutting back on provision and competition hardened. The timing for a wholly new entrant was not promising. The start up was delayed and started in February 2010 with the low priced grain cargos to provide a core load. TP has a strategic position to become a major rail freight player in the emergent liberalized market beyond the traditional role of its parent company as a wagon supplier. They lead the commercial and operational planning of the services; control the operation and management of the train including the build up of wagon loads and other cargo offerings, shipper contacts, pricing, in transit monitoring, the resolution of any disruption and delay response, arrangement of train crews and shunting. The concentration and distribution of wagons to/from Köln (Cologne) is done by a railway undertaking controlled by TP and this provides a greater measure of flexibility and control of this activity than that formerly provided by previous sub contractors.

Fig. 1. RETRACK pilot rail freight service corridor

TP has established a small RETRACK project office that has access to the Deutsche Bahn (DB) and Österreichische Bundesbahnen (ÖBB) systems to track and trace the location of the RETRACK train within Germany and Austria. With this real time information system, the shippers and receivers can be advised of any changes in rail freight operation, and this acts to reinforce to shipper confidence in the service. TP uses a simple board based system to plan train loading profiles around the three trains per week schedule on the main corridor with details of any satellite traffic able to be easily identified. The current plan uses the assigned traction resource intensively. There is an emergent need for direct identification of wagon location and cargo condition in transit to match capabilities routinely provided by the road based competition.

There is very limited commercial involvement from LTE & CER. LTE provides traction (a dedicated locomotive) that is capable of operating across pan-European borders and eliminates one of the main stumbling blocks (multiple power supply systems and driver qualification) to rail freight competitiveness. Ironically LTE has implemented a superior ICT system for the management of trains, developed in the project by SOPTIM AG, but the final organisational and commercial shape of the venture has precluded it's use. Shunting services and local traction services are provided or arranged by the incumbent rail operator CER who act as a traditional railway for operational matters within Hungary. Specific traffic destined to Austrian receivers is also moved to/from the RETRACK train by ÖBB/RCA.

3. Main Operational and Commercial Issues

The RETRACK train faced a number of key issues that have constrained the performance of rail in freight services in multilateral operations.

Organisational structure: The start of the RETRACK pilot was constrained by a lengthy and complex period when the respective roles, responsibilities of the operational and commercial partners were unclear and raised doubts about the pilot service. The nature of the partners as both competitors and co-operators meant that the traction suppliers were reluctant to adopt structured and defined roles that are commonplace in other transport domains. The use of a consortium agreement governing roles,

responsibilities and the split of costs and revenue was delayed, and with the volatility in partners, the changing of staff within the partner organizations and the complex market and politics of rail freight in Europe constrained the start up of the project until a strong non traction based leader emerged and agreement was reached.

Crossing borders: The service crosses several borders, nominally national, but more importantly operational. It was found that rail system borders have been an endemic problem due to the multiple issues of documentation formats, scrutiny and compliance, data entry into national systems, technical inspections, checks, differing national technical rulings, varying interpretation of safety issues, train weight and length limits.

Multiple power supply systems: The research phase of the project identified that the RETRACK corridor has differing electric traction power supply systems. This implied a need to switch locomotives at certain borders with the likelihood of delay but the availability and use of modern multi-voltage locomotives has mitigated this problem for RETRACK service.

Driver issues: There were and still are driver related issues including language, inter-operability and cross border driver skill and international competence recognition.

Wagon issues: There have been issues with some individual wagon failures that have exposed problems of responsibility for technical defects when and where located and for their redemption and the individual national interpretations of apparently standardised safety codes. The shipper-owned or leased equipment has to be compliant with industry inspections in transit.

Discrimination from the incumbent: There are concerns over the preponderant power of the rail incumbent in Germany and Austria where the acquisition of private and formerly public rail operators is in effect the reverse of the EU liberalization. This trend reduces incentives to compete on price and service levels and reduces competitiveness between rail operators and between rail and road services.

The inconsistency of the wagon inspection regime at border crossings is a key issue and thus presents a real block to competitive, fast and effective transits. Lengthy inspection and compliance processes and transcription of data need to be reduced to a common inter-operability level comparable to the road transport and aviation sectors.

Securing train paths has not been a significant problem and most bids have normally been accepted.

Infrastructure upgrades: There have been problems of large scale infrastructure upgrades in Germany and these have been a limitation at times. Preference shown to the incumbents has been a concern but is difficult to substantiate.

Train length has normally been less than the 750m maximum allowed on the main operational axis. Very heavy trains have been routinely operated between Koln & Rotterdam as required without major difficulties. Maximum train length is an operational limitation that all rail freight operators must comply with and is a function of infrastructure capacity.

Grain wagon issues: The grain traffic was being carried in older customer owned wagons that had not been used intensively on long haul applications. These were recognized as contributing to train delays due inadequate lubrication of the axle boxes leading to the complete withdrawal in mid 2010 of the wagons. There were also problems with the locking of the doors on the wagons.

In contrast, road based international freight operations enjoy a homogenous infrastructure, vehicles and drivers, and can therefore offer greater flexibility, availability, pricing, and secure transits, contributing to an ever growing market share.

4. Progress towards competitiveness and profitability

The service moved from 1 to 2 and then 3 train rotations a week. A survey amongst customers users revealed (see Table 1) that equivalent or lower prices, a flexible schedule (three departures per week in each direction) and secure transit made the service attractive compared to the incumbent operators'

services. However, competitors are providing even more frequent services, and are, not unsurprisingly, able to offer greater aggregate capacity. The survey reveals that the shippers' positions on trans-shipment time appear to be divided, RETRACK offers reduced transit time compared to other similar services but only part of the current shipper base views this as a significant benefit. The advantages may need to be promoted more clearly in future marketing and selling of the service to other new shippers.

Table 1. Competitiveness of RETRACK service in the corridor

Service type Service level

Higher than Lower than Approximately the


Level of price 75 0 25

Reliability of transport 0 0 100

Available capacity 25 0 75

Information 0 50 50


Transshipment time 0 50 50

Handling time 0 50 50

Frequency of transport 75 0 25

Flexibility 0 66,7 33,3

Source: Survey conducted among the RETRACK service users

Despite some initial internal and external scepticism the service is now seen as a credible commercial offering. Higher traffic volume, customer numbers (see figure 1) and sales revenue (confidential) have been secured on the basis of competitive market bidding. The service is close to a break-even point and moving towards operating profitability. This may have been achieved faster rate had the major service issues with grain wagons not occurred in 2010. The core grain cargo has provided a flexible but consistent source of revenue and volume, allowing salespeople to solicit higher value traffic. This traffic scenario is a different approach to that envisaged in the early phases of the project. The development of single wagon load (SWL) traffic, particularly hazardous and liquid tanker, has secured premium revenue and demonstrated that SWL traffic can be carried profitably which is contra to many industry views.

Fig. 2. (a) Growth of cargo in tonnes; (b) growth of customers (right)

As at mid 2011 revenue is recovering circa 70% of total operating costs plus overhead, and has been improving since early 2011, following significant shortfalls in 2010 due to grain wagon unavailability, severe weather conditions in the winter and other operational problems. This level of cost recovery has been achieved with minimal marketing and sales effort. Marketing and sales has been enhanced from May 2011 and financial position is expected to improve. Despite an original plan based on block trains, the SWL business upon a core grain volume has become a key commercial part of the business plan for the service. Without this the service may not have been developed.

The revenue share and cost recovery position is something the partners have developed using a third party broker, and this remains within their commercial confidentiality. This paper doesn't include details of cost and revenue. The delay caused by the need for a suitable organisation shows that future initiatives need to have an appropriate operational, marketing and financial structure in place at the outset together with some form of consortium agreement between the partners to cover these issues.

5. Findings from interviews

To investigate whether or not and to what extent the RETRACK service meets these public and private policy objectives opinions were collected in the form of question and answers from the existing RETRACK operating partners. These interviews were homogenous in response and therefore this summary has been written synthesizing all responses, taking into consideration both the customer survey and the RETRACK operators' opinions in the form of Question and Answers.

5.1 Has RETRACK established itself as 'As a commercial service?

Answer: Yes, The RETRACK project has introduced a new international rail freight service concept based on wagon load groupings between key concentration points. The SWL traffic is operated as a positive commercial gain. The service has worked because of the availability of railway sidings and spurs where rail wagons can be loaded and delivered to maximize payload and minimize any intermediate handling. The evolution of hub-and-spoke points served from a main network has been a useful option which was envisaged at the earlier research stage of the project. The progressive move from one train rotation to three per week on a reliable scheduled basis has given shippers options beyond dependency on the services provided by the incumbent train operators. The operation is moving towards commercial viability.

5.2 Is the service reliable and competitive?

Answer: Yes, The schedule is a good fit to maximize the locomotive's productivity commensurate with requirements for maintenance and servicing. On average on-time service performance is circa 90%. Reliability in the delivery of train services has been good and at least comparable to other operators' services. The service is seen as competitive by customers and other rail operators.

5.3 Has the service established long-term relationship with customers and operating partners?

Answer: Yes, long term relationships have been established with customers. This is primarily TP's role

with some limited marketing support from LTE. Examples of long term business relationships include Ford for car components and Glencore for grain. The majority of traffic comes from 10-12 shippers whilst other shippers have also used the train services routinely. The service is working in a collaborative and cooperative way and developed long terms relationship among the operating partners. There is a clear distribution of responsibilities as to who does what and accordingly the cost and revenues are shared among the operating partners.

5.4 Is the loading factor and/or asset utilization on the rise?

Answer: Yes. The move from one round trip per week to three round trips per week has demonstrated the availability of traffic to utilize the train service and capacity. This has resulted in higher asset utilization (locomotive, crew and other equipment). There are still serious operational constraints such as planning the grain wagon round trips including empty re-positioning and the ability to offer space to other types of cargoes and customers.

5.5 Is the service flexible, pragmatic, and adaptive enough to cope with different market demand?

Answer: Yes, The pilot service started with one train rotation per week. Over the months the service developed to gradually higher frequency level to the current three rotations per week which suggests that the service is wholly flexible, pragmatic and adaptive. This also suggests that there is market volume that could be attracted to rail on the basis of pragmatic service availability and reliability together with attractive rates for wagon groups and individual wagons. It represents a service and business model that has been proven in the context of available traffic, service times and route options. Responding to the market demand, the train has been operated at different levels of traffic ranging from very low levels of traffic (a single wagon) to full length and weight limits. This business model demonstrates adaptability to accommodate varying loads. The adoption of the satellite concept for traffic served to points not directly on the main line also demonstrates pragmatism, adaptability and flexibility in terms of commercial and operational response.

5.61s the service able to contribute to the development of sustainable transport policy?

Answer: Yes, the pilot has been able to contribute to the development of EU sustainable transport policy by exploiting rail's inherent generic advantages and specifically by the development of a faster competitive service with higher frequency and reliability, has secured some modal shift, and is competing with road, other rail and water transport services. The use of rail for freight secures advantages in terms of energy efficiency, GHG and C02, reduction of inter-urban road congestion, and reducing traffic accidents. The service deploys electric locomotives, which has a particulate and noise advantage and a C02 advantage dependent on generation techniques used by the power grids.

5.7 Has the service shifted cargo from road, waterways and rail to RETRACK freight service?

Answer: Yes, the RETRACK freight service has been able to shift cargo from road and waterways to

rail. The grain traffic was previously carried in part by water so there is a move to rail for this (>35%). The aluminium oxide traffic for Austria is a direct transfer from road to rail. Other traffic is partly won from other freight train services or is wholly new traffic. The RETRACK service model might be an example for support to other private rail operators or such initiatives to secure commercial funds to develop new services in other pan-European corridors.

5.8 Was EU open non- discriminatory access freight transport policy helpful to the running of the service?

Answer: Yes, the EU policy contributed to the decision to run the train as a commercial freight service. It is a significant contextual change in that EU supported the development of new commercially provided open services compared to those offered by the incumbents, although the operation model is significantly different to that envisaged at the outset of the project. The current operation has been maintained adapting to the changing economic and traffic conditions and the identification of a core traffic base.

5.9 Has the service contributed to make the EU open non-discriminatory access policy effective?

Answer: Yes, through research the RETRACK consortium identified different issues (e.g. direct or

indirect discriminatory access, path allocation process, technical issues, driver issues, language issues, multi-voltage electric locomotive issue) that constrain international commercial rail freight service. The

research recommended different actions to make the non-discriminatory access policy into reality. However there are more issues that should be addressed to make non-discriminatory policy more effective including an effective common regulatory regime.

6. Summary and conclusions

This evaluation exercise was conducted in the middle of the pilot demonstration and the conclusions of this report should be considered as interim. So far we can conclude that the service has been a success from both business and EU policy perspectives. From a business policy point of view the RETRACK rail freight service has established itself as a credible and competitive commercial service. It is offering a reliable and competitive service at a price that has attracted new shippers. It is not offering deep price cuts to secure traffic and this may not be necessary or desirable. The service has established long-term relationships with a few key customers. The partners are now working collaboratively for the long term duration of the service beyond EU funding. The service has increased its frequency due to higher demand from increased number of customers and also has increased its asset utilization and is offering flexible, pragmatic, adaptive service to cope with the changing market demands and circumstances.

The partners recognise that the service needs to be more efficient in terms of productivity to compete with dynamic road hauliers and for this they will have to adopt new operational and technical measures. They need to be proactive to meet changing customer requirements in a similar fashion to the road hauliers. As the RETRACK service is consuming largely electrical energy for the main transport haul this means it may be producing less C02 and is less dependent on liquid hydrocarbon fuel, supporting EU energy policy and the 2020 agenda. The service is moving towards the operational break-even point and we foresee that at the end of the pilot demonstration period the RETRACK service will move to operating cost profitability.

It is concluded that the service can continue (as RETRACK or another name) operation provided the operators continue co-operation each other on a clear commercial roles, responsibilities and cost-revenue sharing basis. For this they have to start planning for the EU post-funding era.

It is concluded that the RETRACK service has practiced the EU open non-discriminatory open access freight transport policy. Through its development and implementation the service, RETRACK is contributing to removing the remaining barriers to the implementation of EU open non-discriminatory open access freight transport policy. (It should be noted here that the reality of the regulatory regime and its real effectiveness in Germany and Austria is still debatable.)

It is believed that the RETRACK service has demonstrated that private rail operators are able to collaborate and co-operate in the development of new pan-European cross country services that would be competitive, reliable and attractive compared with the existing rail freight services provided by incumbents or other new entrants operating on national railways. This service has exploited the freedoms made available through the railway reform packages and directives established by the EU to open up the rail market to competition between the incumbents and new rail operators. This is an essential precursor to taking on and succeeding against the international road freight operators who have dominated this market on the back of well known failings by the rail operators.

7. Recommendation

From the experience of RETRACK pilot it is recommended that future project support by the EU to sponsor new services on other corridor start ups in the form of repayable working capital or similar facility is considered for implementation either through new funding mechanisms or via existing instruments such as Marco Polo.

At national level, the Member States need to ensure that the incumbents do not retaliate on pricing to drive away the new entrants. The Member States need to honour their commitments to the railway reform packages and allow new entrants to be able to operate non-discriminatory services on a routine and unrestricted basis. Several have failed to do this but are also failing to modernize their services and systems together with their commercial, operational, technical and managerial models to take full account of the new freedoms. The Member States need to take proactive actions so that rail operators become efficient in terms of enhancing productivity by significant amounts to compete with other modes.

There are residual issues that constrain the development and implementation of new services. For example, the regulatory regimes between Member States are not consistent. There are also ongoing technical and driver related issues to do with border crossing protocols/inspections/documentation that need to be resolved. The European rail freight sector cannot retain a supply side model of operations in the vague hope that traffic will elect to use rail services under economic or environmental duress. It needs to demonstrate that it can deliver a model of operation that is routinely consistent, reliable, customized, secure and cost effective.


The authors thank the European Commission for part-funding the research under the 6th Framework Programme, within the project "RETRACK: REorgansiation of Transport networks by advanced Rail freight Concepts". The authors would also like to thank all RETRACK consortium partners, and customers. The content and the opinions expressed in this article are the full responsibility of the authors.


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