Analysis of the draft law:
Greetings. As a lawyer with 15 years of experience, I have analyzed the submitted draft amendments to the legislation concerning the organization of Public Service Obligations (PSO) in rail passenger transport. Below is a detailed analysis.
### 1. Essence of the draft law
This draft is aimed at creating a regulatory framework for implementing the “Public Service Obligation” (PSO) mechanism in the field of rail transport. The document establishes the responsibility of local self-government bodies and state administrations for organizing such transport and integrates this concept into the current Law “On Railway Transport.” The main goal is to change the approach to planning, financing, and managing passenger transport, shifting from administrative regulation to a system of service procurement.
### 2. Structure of the draft and main changes
The draft is presented in the form of a comparative table that introduces systemic changes to four basic acts: the laws “On Local Self-Government in Ukraine,” “On Local State Administrations,” “On Railway Transport,” and Article 10 regarding investment activity.
Key changes compared to the previous regulation:
* **Delineation of powers:** Clear obligations are introduced for local self-government bodies (for urban connections) and local state administrations regarding the functions of a “competent authority” for ordering PSO.
* **Reform of tariff policy:** The outdated approach to setting tariffs for suburban transport exclusively through coordination with JSC “Ukrzaliznytsia” is excluded. Instead, the setting of tariffs for services with PSO status is moved to the regulatory sphere defined by the new law.
* **Planning:** Outdated norms regarding “state orders” for passenger transport are removed and replaced by procedures for organizing public service obligations.
### 3. Most important provisions for experts and business
To understand the legal field, attention should be paid to the following aspects:
* **Article 7 of the Law “On Railway Transport”:** The obligation of “organizing public service obligations” is now directly assigned to the competence of local authorities. This transforms them from passive observers into active service procurers, which involves signing contracts and clear budget planning.
* **Article 9 (Tariffs):** This is one of the most important changes for the market. Previously, the unprofitability of suburban transport was a point of constant conflict between “Ukrzaliznytsia” and local authorities. Now, the issue of tariffs and compensation will be regulated in accordance with the new special law on PSO, which aims to make the relationship between the carrier and local authorities contractual rather than administrative-mandatory.
* **Exclusion of the concept of “state order” (Article 10):** This indicates the state’s intention to abandon the practice of centralized ordering of passenger transport in favor of a decentralized model, where decisions on the necessity of transport on specific routes are made by the bodies closest to the needs of the community.
For businesses and government authorities, this document means a transition to full-fledged contract management, where the quality and scope of services will be fixed in contracts, rather than in instructive letters or vague legislative norms.
Analysis of the explanatory note:
Greetings. As a specialist with 15 years of experience in the field of law, I have analyzed the submitted document. Below is a presentation of the key aspects of this draft law in language understandable to the general public.
### 1. Essence of the draft law
This draft law introduces the European model of organizing passenger rail transport in Ukraine, which has social significance but is not profitable. Instead of chaotic financing, the state and local authorities will move to concluding clear contracts with carriers, where requirements for service quality and mechanisms for compensating losses will be specified.
### 2. Why this is necessary (author’s position)
According to the developers, the main problem today is “cross-subsidization,” where rail passenger transport has been covered for years at the expense of profits from freight transport. This leads to massive losses (19.6 billion UAH in 2025) and ineffective management. Furthermore, the adoption of the law is a direct obligation of Ukraine within the framework of the Association Agreement with the EU and the negotiation process regarding accession to the European Union.
### 3. Main consequences for key stakeholders
* **For the state and the budget:** The draft law provides for a transition to transparent financing. Instead of general expenses, there will be specific budget compensations for performing “public service obligations.” This will force budget managers to clearly differentiate expenses.
* **For business and “Ukrzaliznytsia”:** The company will be required to separate its accounting: infrastructure separately, transport services separately. This will allow for seeing the “real price” of each trip and prevent abuse regarding excessive expense compensation.
* **For communities:** Local self-government bodies receive a clearer role in procuring transport, which corresponds to the principles of decentralization. However, this also imposes on them responsibility for the efficiency of the use of funds in suburban connections.
* **For citizens:** Stability and improvement in service quality are expected. Since the law takes into account requirements for accessibility for persons with limited mobility, service procurement should become oriented toward the actual needs of passengers, rather than just “propping up” a loss-making enterprise.
*Important note:* Despite the resistance of some local self-government associations regarding additional functions, the developers insist that the old model of “irresponsible financing” can no longer exist if we strive for European standards on the railway.
Analysis of other documents:
Greetings. As a lawyer with 15 years of experience, I have analyzed the documents provided by you regarding the draft Law of Ukraine “On the Organization of Public Service Obligations for Passenger Rail Transport.” Below is my professional conclusion.
### 1. Position of the document author
The author of the draft law is the Cabinet of Ministers of Ukraine, which acts as the initiator and fully supports the implementation of this act. The government views this project as a critically necessary instrument for integrating Ukraine’s railway industry into the European space, ensuring the social mobility of the population, and creating transparent mechanisms for financing transport.
### 2. Main provisions of the draft law
For business, legislators, and the expert community, this document is the foundation of a new economic model for passenger transport. The main points are as follows:
* **Introduction of the “Public Service Obligation” (PSO) concept:** The draft law clearly distinguishes between commercial transport and PSO. The state or local authorities act as “competent authorities” that procure transport on socially significant routes and compensate for the difference between the carrier’s expenses and income.
* **Transparency and competition:** The selection of a service operator will generally take place through competitive procedures (public procurement). This opens the door for potential new market players, although it leaves the possibility of direct procurement of services from an “internal operator” (e.g., JSC “Ukrzaliznytsia”) under certain conditions.
* **Financial control and prevention of abuse:** The draft law contains strict requirements for separate accounting. This is done so that state funds allocated as compensation are not used for cross-subsidizing other types of the carrier’s activity, which is a standard requirement of EU legislation.
* **Investment attractiveness and guarantees:** To stimulate the renewal of rolling stock, the document provides for the possibility of concluding long-term contracts (up to 15 years) and mechanisms for investment return, which is extremely important for businesses planning capital investments in railway infrastructure.
* **Protection of employees’ rights:** An important social component is the requirement to preserve the labor rights of personnel when changing the operator on a specific route, which ensures job stability during transition stages.
* **Transition period:** The document takes into account current realities, in particular, allowing for the conclusion of contracts with JSC “Ukrzaliznytsia” without tenders in the initial stages (up to 3 years) to ensure the continuity of traffic under conditions of sector reform.
From a lawyer’s point of view, this is a complex European integration act that transfers the “state — railway carrier” relationship into the realm of civilized contractual relations based on European Regulation (EC) No 1370/2007. For all interested parties, this means a transition from “administrative management” to “service procurement” with a clear financial plan.
