State-owned train operator Irish Rail (Iarnród Éireann) is likely to face bankruptcy if it loses the right to run services as a result of proposed changes to the way the EU rail sector is run, the Government has warned.

Iarnród Éireann’s contract for operating train services is due to expire in 2019 and the EU Commission has been pressing for changes which would see the sector opened up to tenders from competitors.

The Government is strongly resisting any such move and has privately warned Brussels that if the State-owned operator lost out in a tender process, the company would more than likely face bankruptcy.

The Government fears such a development could leave it having to repay more than €150 million in debts owed by Iarnród Éireann.

It is understood there are also fears that rolling stock worth millions of euro could end up in the hands of a receiver in the event of the State company going bankrupt.

Industrial relations

Government representatives and officials from Iarnród Éireann have been meeting officials in the various institutions of the European Union over the past few months in a bid to ensure that Ireland is not forced to put the contract for Iarnród Éireann out to public tender.

Though the Government is understood to have argued that the size of the Irish market means there would be little appetite from outside investors in pursuing a rail contract in Ireland, the successful operation of the Luas by French company Veolia has convinced EU officials that there would be sufficient demand by other investors for the rail contract.

Under the “Fourth Railway Package” proposed by the European Commission in 2013, the EU is seeking to open up domestic rail markets to competition, with the aim of making competitive tendering mandatory for all public service rail contracts by 2019.

Minister for Transport Paschal Donohue is to attend the next meeting of European transport ministers in October in Luxembourg, where the issue is expected to top the agenda. Compromise proposal Ireland is part of a sub-group of smaller EU countries who have tabled a compromise proposal that a state would be permitted to award a direct contract to a state body on condition that the company is judged to meet a set of criteria or “key performance indicators” on an annual basis.

These indicators, which could be set by an agency such as the European Railway Agency, could include targets relating to travel times, station safety and pay and conditions of staff.

It is understood that Ireland is pushing for these indicators to be regulated at a member state rather than EU level.

Luxembourg, which holds the rotating presidency of the Council of the European Union, is pushing to reach agreement between member states on the Fourth Railway Package before the end of the year.