The Fourth Railway Package aims to gradually open domestic rail markets, the European Commission said in a statement.
The package aims to revitalise domestic rail markets that have been in decline over the past decade due to "persistent domestic monopolies", the Commission said. New entrants will be allowed to operate from 2020, and from 2023 competitive tenders will be open to bids from across the EU.
Railways also need to become more responsive to market and consumer demand, the Commission said. Competitive pressure should make incumbents adapt to consumer needs, it said.
The package helps to deliver on several Commission priorities, it said, including a fairer and deeper internal market, job creation and decarbonisation.
EU commissioner for transport Violeta Bulc said "This agreement opens a new chapter for European railways. For too long, the rail sector had no incentives to adapt to consumer demand and as a result the market share of rail steadily declined. Gradual market opening will improve the performance of rail services. This agreement will also create new investment opportunities and foster job creation in the sector. Finally, it should encourage Europeans to make a greater use of rail, contributing to our decarbonisation objectives. When railways become more attractive, everybody wins."
The proposals in the package were first proposed by the Commission in 2013, but it has taken until now for the Parliament and the Council to agree in the approach to be taken, the Commission said.
The package now needs to be endorsed by member states and the Parliament, but this week's agreement "paves the way for a swift adoption", the Commission said.
A UK government-commissioned review recently concluded that the government must explore new ways of encouraging private investment in UK railway infrastructure, although Network Rail itself should remain in public ownership.
Infrastructure on individual routes could be operated by the private sector through concession agreements or time-limited licences, while each of the network's geographical 'routes' could be "required and empowered" to seek funding from local developers or businesses that are likely to benefit from new investment. Private sector funding should also be sought for specific infrastructure projects, the report said.
The report proposed the introduction of a 'hybrid concession' model for running the routes, based on a combination of regulated asset ownership and a conventional concession agreement. The model set out in the report would allow the route to be transferred off the government balance sheet, provided that the arrangements were "structured with sufficient risk transfer and autonomy from government to meet Eurostat guidance whilst still meeting public interest tests", it said.
The French government announced last July that it would invest €1.5 billion in replacing the country's intercity train stock.