Carl Schurz Vrooman.

American railway problems in the light of European experience, or, Government regulations vs. government operation of railways [electronic resource] online

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been stipulated by the regulations or by agreement. The rate
of interest to be charged to the construction account shall
not exceed the rate of interest on the capital used in connection
with said enterprise.

For lines newly constructed, the expenses for the grading
and ballasting of the track, in so far as they exceed the normal
cost of maintenance, may be charged to the construction
account during the first six months of operation.

Art. 5. After the line has been opened for traffic, the
amounts expended for new or additional constructions or for
the purchase of operating material, shall be charged to the
construction account only in case they constitute an essential
increase or improvement of the existing constructions and
equipment, with the view to their improved operation.

The expense resulting from the improvement or reinforce-
ment of the superstructure shall not be charged to the con-
struction account.

As regards the works and purchases contemplated in the
present article, no cost of organization, administration, or
technical management shall be charged to the construction
account unless these operations shall have caused special
expenditures not within the scope of the operation or main-
tenance of the railways.

Art. 6. The value of constructions and equipment discarded,
or which have disappeared, if charged to the construction
account, shall be deducted therefrom.

If new constructions and equipment replace those whose
use has ceased, their value may be charged to the construction

In case the superstructure (track) is renewed, the cost of its
first establishment is not to be deducted from the construction
account. On the other hand, the construction account shall
not be charged with the cost of the renewal of the super-

Art. 7. For the transportation, by a railway concern, over
its own lines, of articles needed for its own work of construction,



the construction account shall not be charged with more than
actual cost. A special regulation, to be submitted for the
approval of the Federal Council, shall fix the rates to be
applied to this class of transportation.

It is unlawful for a concern to add any profit to the cost of
furnishing material or labour, for construction, on its own
system of lines.

Art. 8. Plans and estimates of any work of new or supple-
mental construction and of all purchases of rolling stock made
after the opening of a line to traffic, shall be submitted to the
Federal Council before said work or purchases are carried into
effect. In case this regulation is not observed, expenditures
of this nature shall not be charged to the construction account.
Art. 9. The following-named expenditures and losses shall
not be charged to the construction account :

(a) The cost of organization, in particular the expenditures
incurred in order to obtain the charter, the cost of
organizing the company, and expenditures for
preliminary studies and plans.

(6) Any expenditures connected with the raising and
collecting of the capital and any losses in market

(c) Any subsidies or contributions furnished for other

railways, as well as for roads, bridges, or buildings
situated outside of the territory of the railway
itself, or which continue to be the property of third
parties, even when the railway concern itself at its
own cost carries out works of this kind.

(d) The cost of constructions and equipment covered by

free subventions and grants (subventions a fonds

(e) The cost of organizing and instituting the operation.
(/) All expenditures not designated in this article, which

under the terms of the present law (Arts. 4 to 8), are
not admitted in the construction account.
Free subventions and grants (subventions a fonds perdus)

received by a railway concern shall not be entered on its



Eenewal Fund. Sinking Fund

Art. 10. The accounts of railway concerns shall comprise
all receipts and expenditures relating to the respective year,
even when the actual payment therein entered has not yet been

The cost of maintenance of existing constructions and
equipment is to be defrayed out of the current receipts of

The interest on debts, the legally prescribed charges on
account of renewal fund, the charges on account of other
funds provided by the charter provisions or regulations, as
well as the prescribed charges on account of amortization,
shall be entered every year among the expenditures under the
head of profit and loss, even when the receipts of operation do
not suffice to cover them.

Art. 11. There shall be established a renewal fund for
constructions and equipment subject to substantial wear, to
wit, the track, the rolling stock, furniture, and tools. For
electric railways, cable railways, tramways, &c., the establish-
ment of a renewal fund shall extend to the means of operation
and the respective equipment used in place of locomotives.

The annual charges to be made on account of this fund shall
be calculated from the cost of construction or the purchase
price and the probable duration of the use of the individual
constructions and articles ; they shall be entered under the
head of profit and loss, as an expenditure of operation.

No interest shall be credited to the renewal fund.

The renewal fund shall exhibit at all times the full equivalent
of the loss in material value suffered in consequence of wear
and other causes, by the constructions and articles mentioned
in the first paragraph of the present article. The amount of
the renewal fund thus calculated shall be entered in the
liability column of the balance-sheet. The difference between
the total amounts thus entered and the total entered to the
credit of this fund shall be treated in accordance with Arts. 13
and 14.

Art. 12. The Federal Council, after consultation with the
managements of railways, shall determine the amounts of the
annual charges to be made on account of the renewal fund.


These charges are determined more specially, in conformity with
the orders of the Federal Council, by the charter provisions,
or by special regulations. The renewal fund may be used only
for purposes named in the charter provisions or the regulations.
The determination of these purposes is subject to the approval
of the Federal Council.

Railway concerns have the right of appeal to the Federal
Tribunal against decisions or decrees passed by the Federal
Council by virtue of the present article. The procedure to be
followed is regulated by the provisions contained in Art. 16 of
the present law.

Art. 13. The excess amounts due on account of the renewal
fund in Art. 11, par. 4, as well as all the items which, under
the terms of the present law, cannot be charged to the con-
struction account and do not constitute real assets, shall pro-
visionally be entered on the asset side of the balance-sheet
under the head of amounts to be compensated ; they shall
be covered from the annual receipts of operation.

Art. 14. The Federal Council, on being made cognizant of
a plan of amortization, shall definitely fix the period within
which that operation shall take place and the amounts of the
annual payments. The following rules shall be observed in
this respect :

The losses in market value on loans not yet repaid shall be
compensated during the continuance of the respective loan

The subsidies and contributions referred to in Art. 3, letter c,
shall be set off during the franchise period in equal payments.

The Federal Council shall fix the period of amortization of
the other items, including the supplementary transfers to the
renewal fund, the losses in market value on shares or on loans
repaid or converted before they are due.

Auditing of Accounts. Penalties

Art. 15. The Federal Council shall ascertain whether the
accounts and balances, the special exhibits of the net earnings
and of the aggregate capital, presented by the managements
of railways, comply with the provisions of the present law,
with the rules and regulations of the railway concerns, and
with their charters. With this view, the Council is authorized
to take cognizance of all matters relating to the management
of railway administrations and to make all necessary inquiries.
Art. 16. In case the Federal Council deems that the


accounts, the balance-sheets, and the statements of net earnings
and of the capital to be exhibited according to the charters,
do not comply with the provisions of law, rules, and regula-
tions, or with the terms of the charters, it shall take the
necessary measures, after hearing the managements of the

Apart from cases referred to in Art. 14, railway concerns
have the right to appeal to the Federal Tribunal, within thirty
days from date of notice, against any measures taken by the
Federal Council, and to submit the questions under contest
to that tribunal, whose decision shall be final.

The procedure, in case of such appeal, shall be that pre-
scribed for suits involving questions of public law. In all
cases the Federal Tribunal shall decide which of the con-
testants shall bear the cost of expert testimony.

Art. 17. No dividends shall be distributed until the Federal
Council shall have approved the accounts and the balance-
sheet. If any contest shall arise in regard to the fixation or
the use of the net earnings, the amount under contest shall
be placed in reserve, conformably to the orders of the Federal
Council, until such time as the Federal Court has rendered its

Art. 18. In case any railway management shall fail to
present, within the required period, the accounts, balance-
sheets, and other exhibits that have been lawfully demanded
of it, the Federal Council may proceed to the necessary in-
quiries and examinations at the cost of the railway.

In case any railway concern is repeatedly tardy, or in case
it contravenes or evades the provisions of the present law,
the management guilty of such transgression may furthermore
be condemned to pay a fine not to exceed ten thousand francs.
The fine shall be imposed by the Federal Criminal Court.

There is, moreover, reserved the application of the procedure
laid down in Art. 28 of the Federal Law of December 23, 1872,
concerning the construction and operation of railways.

Art. 19. For lines which may be purchased by the Con-
federation in 1903, by virtue of the provisions in their charters
or by voluntary agreement, there shall be presented, at the
end of 1896 at the latest, conformably to Art. 3 of the present
law, exhibits of their net earnings and capital for the years
1888 to 1895, calculated in conformity with the clauses of
their charters. For subsequent years, these exhibits shall
be annexed to the annual accounts and balance-sheets. In


cases of other dates of purchase, the Federal Council shall fix
the period within which the special accounts required by the
charters shall be presented.

The obligation to present these accounts or exhibits extends
also to the period that elapses between the announcement of
the purchase and the actual transfer of the railway.

The Federal Council has the power to refuse to examine and
approve the accounts and balance-sheets that are not accom-
panied by the required exhibits, until these exhibits are forth-
coming, and to prohibit until then all distribution of dividends.

Determination of the Purchase Value

Art. 20. As soon as the present law takes effect, the Federal
Council shall enter into negotiations with the railway manage-
ment in order to fix, by mutual consent, in conformity with
the present law, the sums which, for the fiscal years elapsed,
may be credited to the construction account and those which
are to be credited to the renewal account.

The Federal Council shall try furthermore to come to an
agreement with the railway managements in regard to the
rules according to which the net earnings and the capital shall
be determined in conformity with the charters.

If no agreement is arrived at, the Federal Council shall
decide the points at issue on the basis of the accounts and
exhibits produced. The railway managements have the right,
by virtue of Art. 16 of the present law, to appeal to the
Federal Tribunal against decisions of this nature.

Art. 21. The Federal Tribunal takes cognizance of all cases
which, under the terms of the clauses regarding purchase
contained in the charters, are subject to arbitration. The
procedure provided in Chapter II, Number 1 of the Federal
Procedure Law is applicable in such cases, according to which
the Federal Tribunal is the court of sole instance in suits
brought by a railway corporation.

The clauses of the charters providing for the establishment
of tribunals of arbitration charged with the determination of
the purchase price and with the decision of all other con-
troversial matter relating to purchase, are herewith repealed.

Final Provisions

Art. 22. In derogation of the provisions of the Federal
Code on obligations, the confederation and the cantons retain
the rights which they at present enjoy toward certain railway


corporations in the matter of the right to vote. The Federal
authorities shall have the power of stipulating or sanctioning
similar rights in the future, either in the charters or at the time
of examination of the regulations or special agreements.

Art. 23. The regulations of railway companies shall be made
to conform to the provisions of the present law within a period
to be fixed by the Federal Council.

Art. 24. The Federal Law of December 21, 1883, on the
accounting of railway companies, is herewith repealed.

The conventions entered into by virtue of the provisions of
the law of 1883 in regard to amortization, shall be modified in
accordance with the provisions of the present law. In deter-
mining new modes of amortization compliance shall be had
with the provisions of the present law concerning the supple-
mentary transfers to the renewal fund. However, the decisions
of the Federal Council relating to amortization shall have no
retroactive effect.

The provisions of the present law do not apply retroactively
to construction accounts modified in conformity with the law
of 1883 and approved by the Federal Council.

Until a new law shall have been promulgated relating to
secondary railways, the Federal Council is authorized, in the
application of the present law, to grant to these railways all
possible alleviations, taking into account the special circum-
stances affecting these railways, particularly in determining the
regular transfers to be made to the renewal fund as well as
the terms of amortization of such items of transfer as may
be in arrears.

Art. 25. Conformably to the provisions of the Federal Law
of June 11, 1874, concerning the referendum vote on Federal
laws and decrees, the Federal Council is charged with the
promulgation of the present law and with the determination
of the time when it shall take effect.

Thus decreed by the Council of States,
Berne, March 26, 1896.

The President : JORDAN-MARTIN.
The Secretary : SCHATZMANN.

Thus decreed by the National Council,
Berne, March 27, 1896.

The President : STOCKMAR.
The Secretary : RINGIER.



The above Federal Law promulgated on April 1, 1896, and
accepted by the people in its vote of the 4th instant, shall be
inserted in the Collection of Laws of the Confederation and
shall take effect on November 1, 1896.
Berne, October 20, 1896.

In the name of the Swiss Federal Council :
The President of the Confederation :

The Chancellor of the Confederation :



The Federal Assembly of the Swiss Federation having duly
considered the message of the Federal Council of March 25,
1897, and in conformity with Articles 23 and 26 of the Federal
Constitution, decrees as follows :


Art. 1. The Confederation shall acquire and operate on its
account under the name of Swiss Federal Railways ' those
Swiss railways, which because of their economic or strategic
importance serve the interests of the entire Confederation or
a considerable part thereof, and whose acquisition can be
effected without undue sacrifice (expense).

Together with a railway the Confederation may also acquire
the holdings of the former in secondary lines, also its sub-
sidiary business undertakings (steamboat enterprises, &c.),
which are closely related to the operation of the railway.

Art. 2. The acquisition of railways shall take place by
means of purchase in accordance with Federal Legislation
and the franchises.

The Federal Council shall accordingly give notice of the
purchase at the nearest term of purchase to the following rail-
way lines in operation at the time the present law becomes
effective :

First. The Jura-Simplon Railway.

Second. The Swiss Central Railway including its share of
the commonly owned lines.


Third. The Swiss North-East Railway including its share
of the commonly owned lines.

Fourth. The railway enterprise Wohlen-Bremgarten as far
as the share of the Municipality of Bremgarten is concerned.

Fifth. The United Swiss Railways.

Sixth. The Gotthard Railway.

In case the purchase of the entire North -East system cannot
be arranged on the basis of the provisions applicable to the
main line, the Federal Council may exclude from the purchase
those lines which are operated under separate franchises, but
whose acquisition could be effected only with undue sacrifices
and the possession of which is not indispensable for the proper
operation of the Federal railways.

The Federal Council with the sanction of the Federal
Assembly is authorized to effect the purchase of the above-
mentioned lines also by mutual agreement with the com-
panies ; in this case the fixation of the purchase price shall
conform to the provisions of the Federal Legislation and of
the franchises.

Art. 3. The Federal Council is also authorized with the
approval of the Federal Assembly to acquire other existing
railways provided they conform to the conditions mentioned
in Art. 1.

Art. 4. In case the Confederation proposes in the future to
acquire railway lines other than those enumerated in Articles 2
and 3 or proposes to construct new lines, a special federal law
shall be passed for each case of purchase or construction.

Art. 5. The Federal Council is authorized with the approval
of the Federal Assembly to take over the operation of secondary
lines as well as to assume the obligations resulting from working
agreements existing between the said principal and secondary

Art. 6. The transfer of ownership of the railways acquired
by the Confederation shall take place for each of them at the
time fixed in the franchise or in the convention, without the
necessity of observing the general formalities required for
the transfer of ownership.

No taxes or fees shall be levied other than the proper fees
for the entry in the public registers of the transfer of ownership.
Art. 7. The funds required for the acquisition, the construc-
tion, and the operation of the railways, shall be procured by
means of loans through the issue of bonds or annuities (' obliga-
tions ou des titres de rente ').


These loans are to be repaid according to a fixed amortiza-
tion plan, at the latest within sixty years.

By mutual agreement with the owners of the roads and in
observance of the general principle of the debt amortization
within a period not to exceed sixty years, some other mode of
payment for the acquisition of the railways may be chosen.

The sanction of the loan operations and of the plan of
amortization is reserved to the Federal Assembly.

Art. 8. The accounts of the Federal railways shall be
separated from those of the other branches of the Federal
Administration, and be kept in such a manner that the exact
financial situation can be determined at any time.

The net income of the Federal railways is to be used in the
first place for the payment of interest on and the amortization
of the railroad debt.

Out of the further surplus 20 per cent shall be paid into
a special reserve fund, to be kept separate from the other assets
of the Federal railways until this fund including the accrued
interest shall have attained the amount of fifty million francs.
The remaining eighty per cent are to be employed in behalf
of the Federal railways, in improving the transportation
facilities and notably in reducing proportionally passenger and
freight rates, and in extending the Swiss railway system
particularly its secondary lines.

In case the ordinary revenues, including the balance of the
surplus carried forward from the previous year, are not
sufficient to defray the expenses of operation and to pay the
interest and amortization charges, a corresponding amount is
to be taken from the reserve fund.

Art. 9. With the transfer of a railway to the Confederation
all the provisions of the respective franchises become void,
except obligations of a private nature in favour of third persons
that may be contained therein and regarding which these
persons may seek settlement exclusively with the former
holders of the franchises. Obligations resulting from the
franchises which affect immediately the existence and opera-
tion of the railways, shall be taken over by the Confederation.

Art. 10. The Federal railways are exempted from all taxa-
tion by the cantons and the communes.

This provision does not, however, apply to real estate which,
while owned by the Federal railways, is not essential for their

The Federal railways are not subject to the legal enact-


ments of the cantons regarding the insurance of their rolling

The Confederation renounces its right to demand from the
Federal railways the franchise tax for the regular periodic
transportation of passengers, according to Art. 19 of the
Federal law regarding the construction and operation of
railways of December 23, 1872.

Art. 11. The existing Federal railway legislation is also
applicable to the Federal railways in the measure, as it is
compatible with the provisions of this Act.


Art. 12. The administration of the Federal railways forms
a separate division of the Federal administration.

The officials and employees of the Federal railways are
subject to the laws relating to the Federal officials.

The administration of the Federal railways has its legal
domicile at the place where the Central Board of Directors
is located.

The latter shall also choose a domicile in the capital of
each canton touched by its lines, at which place it may be
proceeded against by the inhabitants of the respective cantons.

Actions concerning real estate shall be brought before the
Tribunal where the real estate is located.

The proceedings in and adjudication of civil actions against
the Federal railways are subject to the existing cantonal and
federal laws, provided, however, that the Federal Supreme
Court shall be the Court of single instance in matters where
the cause of action represents a capital value of at least
thirty thousand francs.


Art. 13. The following provisions regulate the supreme
management of the administration by the Federal authorities :

A. The Federal Assembly has cognizance of the following
matters :

1. The ratification of loan operations and of plans of

2. The ratification of contracts relating to the acquisition
of other existing lines, as well as to the taking over of the


operation of secondary railways and the assumption by the
Confederation of existing contracts of operation between
the principal railways mentioned in Art. 2 and secondary

3. Legislation establishing the general principles governing
railway rates.

4. The elaboration of laws having for their object the
acquisition and the construction of railways.

5. Legislation concerning salaries.

6. The approval of the annual budgets.

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Online LibraryCarl Schurz VroomanAmerican railway problems in the light of European experience, or, Government regulations vs. government operation of railways [electronic resource] → online text (page 22 of 28)