They failed. And, less than three years on, it would be unthinkable for the trade unions in one of Europe's most reluctant rail liberalisers to try to halt the many trains now running daily in competition with SNCF.

Two leading companies - Euro Cargo Rail, owned by Deutsche Bahn, and France's Veolia Transport - are growing fast, eroding the market share of SNCF's loss-making freight division. SNCF's management finally appears to be addressing what most observers believe is the division's profound inefficiency.

Competition has developed still further in other parts of Europe. Poland has a surprisingly vigorous competitive rail market, many freight trains out of Italy over the Alps are now run by private companies, and Germany is competitive despite the overwhelming dominance of Deutsche Bahn, Europe's biggest train operator.

Rail freight has grown rapidly over the past decade in many of the European countries that have worked hardest to open up their rail sectors to competition, according to the UK's Association of Train Operating Countries. The fastest growers include the UK, Switzerland, Germany and Austria.

Yet the sector is still far from fulfilling the vision of the European legislators who first started pushing often reluctant national governments into allowing competition. A series of European Commission regulations has been aimed at allowing trains to operate internationally, unhindered by regulatory differences and technical barriers between countries. Under such conditions, Europe's trains would have the same competitive advantages as those in North America, which can range freely between southern Mexico and northern Canada.

Heiko Fischer, chief executive of Germany's VTG, Europe's largest leasing company for rail wagons and a relative optimist about the outlook, says the vision of the rail market set out in European legislation developed during the 1990s has been 50 per cent delivered.

"The European Rail Agency is now harmonising more and more procedures that used to involve red tape," Mr Fischer says

The next few years will see a further boost to rail freight volumes encouraged by more liberal legislation, he predicts.

"It started earlier with more open economies like Britain and Germany and now the laggards are being brought on board," Mr Fischer says.

Progress looks less positive, meanwhile, to Lord Berkeley, chairman of the UK's Rail Freight Group and a member of the board of the European Rail Freight Association, a private-sector lobby group.

Many European railways lack a rail regulatory body with the powers of the UK's Office of Rail Regulation to make government, rail infrastructure owners and others follow clear rules, he complains.

"You need a regulator for two reasons," he says. "One is to regulate the charges the infrastructure owner makes. The other is for the access rights to the network."

It is particularly important to have a strong regulator in the many European countries where the state-owned train operator either belongs to or is closely involved with the company that owns the rail network, according to Lord Berkeley.

The infrastructure company and dominant train operator are jointly owned in Germany, Italy, Poland, Austria, Belgium and several other countries. In France, much of the work of RFF, the rail infrastructure owner, is contracted out to SNCF. Private train operators often complain that such integrated companies offer their own train operators preferential treatment.

Without a strong regulator, it is impossible, Lord Berkeley says, to challenge local authorities' insistence in some parts of Europe that subsidised passenger services should have nearly exclusive access to the track.

"The passenger services always get priority, so getting a path for a freight train is hard," Lord Berkeley says.

The unresolved legal and regulatory issues often distract railway executives from tackling the often tougher question of technical barriers between countries.

Some of the problems were deliberately invented to prevent either military or civilian cross-border rail traffic in eras when there were serious concerns about future European wars. Such concerns help to explain Europe's mish-mash of electrification systems. Italy and Belgium both use 3,000 volt direct current; the Netherlands uses 1,500 volts DC, France mostly 25,000 volts alternating current and Germany 15,000 volts AC. The track gauge in countries once part of Russia - the Baltic states and Finland - is broader than elsewhere to prevent an invasion.

Such fundamental technical barriers are unlikely to be removed except through the greater use of specially-adapted rolling stock - locomotives fitted with multi-voltage electric systems and wagons fitted with adjustable axles for different track gauges.

However, in signalling, the European Rail Traffic Management System (ERTMS) is intended to introduce a single, pan-European standard that will require cross-border trains to carry only one set of electronics to read lineside electronic messages in other countries. The system has faced big problems partly because it is so complex - it needs to be able to apply multiple different operating rules from European railways' still unintegrated rule books.

Yet, even if it is halting and slow, Lord Berkeley says ERTMS is one of many areas in the European railways where steady, unspectacular progress is bringing a more competitive rail system closer.

"There's movement - it's getting better," he says of the overall environment. "But then, in getting better, you find even more, new problems in your way."