The rail wagons were seized by a Kyiv court at the request of Ukrainian investigators. Those were working on a tax evasion case, which involved about 200 Russian and Belarusian companies. They maintain that the operators did not pay any taxes between 2020 and 2022.

Russia does not share that view

Russian lawyers have a different view on the matter. According to them, prior to February 24, 2022, an agreement on the avoidance of double taxation was in effect between Russia and Ukraine. That means that companies pay taxes once, as a rule, at the place of registration.

The list of other affected owners goes beyond Russian Railways and Belarusian Railways, and is quite long. Some well-known names, like Freight One and Atlant are among them. Currently, the companies continue to calculate their losses, while, for example, the company GTLK estimates the damage from the seizure of its wagons at 1,4 billion rubles.

Compensation

After the seizure, the wagons were reportedly transferred to the storage of Ukrainian Railways. Earlier, the Ukrainian Bureau of Economic Security (BES) reported that Ukrzaliznytsia received 1,7 billion hryvnia (about 37,7 million euros) from the commercial use of seized railway wagons and containers belonging to companies from Russia and Belarus.

Russian lawyers believe that the initiation of criminal cases may be related to insurance compensation. If the wagons were insured at the time, then the lawsuit may be a way for the operators to recuperate some of their losses.

The Russian Union of Railways Operators claimed that in 2022, around 16,000 Russian wagons were arrested abroad. That was over one per cent of the total fleet at the time. Still, the exact number of Russian wagons confiscated in Ukraine remains unknown. In March 2022, Ukrzaliznytsia’s CEO Oleksandr Kamyshin reported that there were over 15,000 Russian wagons in the country, including about 11,000 gondola wagons, over 2,000 tank wagons, about 600 covered wagons, and about 160 platforms. Of these, according to Kamyshin, about 3,000 belonged to companies that were certainly Russian.

The rail companies, among which are TAC collector DB InfraGO, DB Cargo, DB Fernverkehr, Havelländische Eisenbahn, Metrans Rail Deutschland and BBL Logistik, maintain that the German government meddles too much in the determination of track-access charges. EU law prohibits legislators from determining infrastructure managers’ prices “too specifically”, according to Die Güterbahnen.

A political deal undercutting rail freight

Daniela Morling, press spokesperson for Die Güterbahnen, explains to RailFreight.com that the current German system puts an unfair burden on rail freight and long-distance passenger companies, which has prompted the rail companies to start the lawsuit. A political deal between the federal government and the German states shields local rail companies by upholding a strict limit on TAC increases for the local companies. In 2025, the maximum increase is 0,6 per cent.

Track-access charges are supposed to cover DB InfraGO’s incurred costs and a return on investment that the infrastructure manager is legally entitled to, amounting to 600 million euros. As DB InfraGO’s costs and the required return on investment grow, so will track-access charges. With the strict limit on TAC increases for local passenger rail, the burden primarily befalls rail freight and long-distance passenger rail, Morling says.

The market subsidising the state

In practice, the current system forces the market to subsidise the state. Currently, TACs paid by rail freight companies finance the maintenance of stations used by local passenger rail. “The freight railroads, most of which are privately operated, are subsidising part of the costs of regional rail transport, which should actually be borne by the federal and state governments”, Daniela Morling explains.

At the same time, there is a general and broader dissatisfaction with the planned TAC increase. “We should pay a lot more money for less performance. The condition of the network has not improved and the obstacles in the network are getting bigger and bigger due to more and more construction sites. This means that rail companies’ operating costs are increasing anyway”, Die Güterbahnen CEO Ludolf Kerkeling states.

Moreover, TAC increases seriously endanger the rail freight sector, according to the rail freight organisation. “Companies cannot pass on further cost increases to end customers, and numerous transport operations become uneconomical and are switched from rail to road”, the organisation states.

Onwards to the European Court of Justice

The suing parties are aiming for a decision by the European Court of Justice (ECJ), according to Die Güterbahnen. “​​It is actually our declared aim that it will go to the European Court of Justice. Either the Cologne Administrative Court or the Federal Administrative Court should refer the matter to the ECJ for clarification. They will then decide whether or not it is contrary to European law”, says Daniela Morling.

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Die Güterbahnen explains that the path price revenue must cover all of the operating costs of Germany’s infrastructure manager DB InfraGO. In addition, there is a profit requirement in the form of a fixed return on investment. With the TAC increase, path price revenue is expected to amount to 600 million euros. However, DB InfraGO does not incur any operating costs. For this reason, the rail companies now aim for “a fundamental change in the system for determining route prices set out in the 2016 Railway Regulation Act”, according to Die Güterbahnen.

The 2016 Rail Regulation Act

The rail freight organisation explains why the 2016 Act is such a thorn in the side of the eleven companies: “Due to a legal cap on the increase in route prices for local rail passenger transport, the other types of transport – freight and long-distance passenger transport – have to accommodate significantly higher route price increases in their end customer prices.” This has also prompted the DB subsidiaries to join the lawsuit. Since the prices have to be approved by the federal Bundesnetzagentur, the lawsuit is formally directed against that agency.

Rail suffers from TAC increase

Die Güterbahnen is concerned about the TAC jump’s negative impact on the rail freight industry. DB InfraGO charges a fee for every kilometre travelled on the network. At the moment, operators pay 3,21 euros per kilometre, but this will grow to 3,73 euros from mid-December onwards.

“We would pay a lot more money for less performance. The state of the network has not improved and the obstacles in the network are getting bigger and bigger due to more and more construction sites. This means that rail companies’ operating costs are increasing anyway”, says Güterbahnen CEO Ludolf Kerkeling.

Rail’s competitiveness vis-à-vis road transportation stands to worsen from these increases, says Kerkeling. “The path price support cut at the end of 2023 has massively damaged and weakened the freight railways. Companies cannot pass on further cost increases to end customers, and numerous transport operations become uneconomical and are switched from rail to road.” When customers switch from rail to road, CO2 emissions also skyrocket, warns Die Güterbahnen.

Also read:

• Rail industry lambasts DB’s largest ever track price increase programme
• German Passau corridor closes for renovation, diversions seem unviable
• Short-term TAC hikes put transport contracts under strain

Moreover, Skinest is currently said to be over a hundred days late with the delivery of its goods. The company has reportedly already incurred 30,000 euros in delay penalties. LTG Cargo claims that Skinest is also often late to rectify qualitative defects and shortages.

Extreme measures

As a result, LTG Cargo says it had to deal with more than 30 cases of technical problems where it had to delay or suspend scheduled deliveries while cargo was en route. It forced the company to carry out unplanned repairs in over 20 cases.

“We can no longer trust a supplier who constantly fails to properly fulfill its obligations, so we decided to take extreme measures – to terminate the contract and add Skinest Baltija to the list of unreliable suppliers”, says the head of LTG Cargo.

Skinest laments LTG Cargo way of operating

Skinest explains that the supply issues arose due to the covid pandemic and supply chain issues. “We must acknowledge that there have been certain breaches of the contract, namely delays due to the covid pandemic and disruptions in supply chains caused by the war in Ukraine, resulting in shortages of certain positions in the market”, says CEO Valdas Rasimas.

At the same time, Rasimas says that the company communicated these issues with LTG Cargo and requested a change of the supply terms. Rasimas says that “Skinest Baltija has repeatedly requested the possibility of changing the supply terms due to the situation that has arisen, but unfortunately, we received a negative response from LTG Cargo representatives.”

Moreover, Rasimas accuses LTG Cargo of mishandling technical issues. “Some defective reports were filled and submitted without the participation of Skinest Baltija representatives, although we actively requested the presence of our representatives,” the Skinest CEO says. “These reports were based solely on visual inspection without measuring specific parameters of the components, such as surface roughness or the ability of certain parts to withstand pressure. We disagree with such subjective, technically unfounded, and potentially erroneous defect assessments.”

Relationship hits rock bottom after ups and downs

According to Rasimas, there were ups and downs in the company’s relationship with LTG Cargo. “Some representatives attempted to preserve the contract, while others, due to their incompetence in assessing and evaluating components, discredited us as a supplier”, he says. However, he adds, “there were some periods of understanding, we even signed a settlement agreement last year as a proof of goodwill.”

Skinest does not agree with the situation as sketched by LTG Cargo. The relationship between the two companies has hit rock bottom. “Yes, we are preparing to take legal action”, says the CEO. “We will defend our rights according to the provisions of the law.”

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