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“In
the spirit of opening up public contracts to the widest possible
competition, as the Community rules intend”, so the European
Court of Justice (ECJ) in his judgment
C-26/03, he has acted out some decisions of greater significance
for the legal status and the practical freedom of action of the
public services. They have several dimensions. First comes the
question to what extent the (different) communal laws in the European
countries which are principally guaranteed in the European treaties
can withstand the enduring attempts of the European Commission
and the Court to generalize the principle of competition. This
is not only an economic and legal but also a genuine political
affair in the sense that the public services include a model for
democratic autonomy, public participation and control.
The second
question is the range of European treaties and especially directives
in the case-law of the ECJ linked with the activities
of communities and public or semi-public utilities. The latter
has gained growing attention because of its sometimes rigid and
offensive interpretation of European law which is not as clear
and free of contradictions as the European institutions like
to pretend. Nevertheless representatives of the public economy
apparently tend to underestimate or even ignore the relevance
of the ECJ´s activities.
The applicable judicial fields mainly are the public subsidies,
the procurement law with special regards to the public supply
and public works contracts and the tender procedures and the
not so clearly visible principle of locality. This principle,
prominent at least in central European municipal regulations,
limits the economic activities of public utilities regardless
of their legal form within the borders of the municipalities.
On the other side it gives them a rather strong protection against
competing private activities. One part of this pattern of independence
may be seen in the legal cross-subsidization between services
of general interest and services of general economic interest
(to adopt the EU terminology) which is constitutive for a self-dependent
municipal economy.
The complexity
of the EU rules and jurisdictions in the named fields can´t
be unfolded here.
The purpose is to identify some problems arising for public
services. from the ECJ´s judgments. They include criteria
for the character of public services, the rules for contracting
(public)
authorities, the inclusions versus exemptions for procurement
rules and subsidies. Especially the submission of municipal contracts
under the public tender procedure which is one of the central
aims of EU competition policy may become a crucial role for the
further liberalisation of stately economy. It is intertwined
with the efforts to foster public private partnerships, that
are mostly contracts and concessions, as a less obvious displacement
of the commons.
According
to Directive 92/50 public service contracts are ”contracts
for pecuniary interest concluded in writing between a service
provider and a contracting authority”. Service provider
is any natural or legal person, including a public body, which
offers services. Contracting authorities are the state, regional
or local authorities, bodies governed by public law, associations
formed by one or more of these authorities or bodies governed
by public law. The list is all-inclusive and assumes a pecuniary
interest for any kind of service. This later on becomes a dogmatic
distinction from the residual rest of public services which so
far has not attracted private commercial interests.
According
to Directive 93/38 “a public undertaking is
one over which the public authority may exercise directly or
indirectly a dominant influence by virtue of their ownership
of it, their financial participation within, or the rules which
govern it. A dominant influence shall be presumed when these
authorities hold a majority of the undertaking´s subscribed
capital , or
control the majority of the votes attaching to shares issued
by the undertaking, or can appoint more than half of the members
of the undertaking´s administrative, managerial or supervisory
board”.
The ECJ
has restricted this Directive applying to the question under
which conditions
a public contract can be made without
a public tender in the judgment C-26/03 (City of Halle). This
can be done if the public authority uses its own administrative
and financial resources. A tender is not mandatory if the other
entity is legally distinct from the contracting public authority
and if this exercises over the separate entity “a control
which is similar to that which it exercises over its own departments
and that entity carries out the essential part of its activities
with the controlling public authority or authorities”.
This appliesalso in the case that the separate entity is wholly
owned by public authorities, see the judgment C-107/98 (Teckal).
C-26/03
moreover prescribes that “the relationship between
a public authority which is a contracting authority and its own
departments is governed by considerations and requirements proper
to the pursuit of objectives in the public interest. Any private
capital investment in an undertaking, on the other hand, follows
considerations proper to private interests and pursues objectives
of a different kind”. And, still more important, “the
award of a public contract to a semi-public company without calling
for tenders would interfere with the objective of free and undistorted
competition and the principle of equal treatment of the persons
concerned, referred to in Directive 92/50, in particular in that
such a procedure would offer a private undertaking with a capital
presence in that undertaking an advantage over its competitors”.
That means, if a pecuniary interest in any semi-public company
has to be assumed, and this is self-evident, this company is
in any case submitted to the public award procedures laid down
in the Directive. Public private partnerships so far appear as
a gangway to the privatization vessel.
The question of subsidies as for example treated in C-280/00
(Altmark Trans) is also related to the operations of public authorities,
but of lower direct relevance for water and wastewater services,
because they normally are not subjects of financial compensations
for public services. But the question is part of the renewed “Monti
Package” originated in 1997 and revised in 2006. Stately
granted financial aids, for example deficit compensations which
a municipality gives to one of its own enterprises, may come
from an economically strong entity, typically from a limited
liability company. The subsidy then is considered as stately
if the municipality has the ruling influence over the company.
The subsidy flow may be arranged under the roof of a non-transparent
tax clearing or settlement system or within a public holding.
This is detrimental to the Commission´s conviction of market
liberty.
One
possible exemption from the EU rules for subsidies, cf. EU
Treaty Article 87 and others,
is the lack of competition. The ECJ has developed a strict interpretation
of transnational
limitations of market access. It shall already take place when
several member states of the
EU have opened parts of their public services for private companies.
e..g. local traffic, and if
one of the companies engaged there feels that it should have
the chance to get a contract in
a state with non-liberalised municipal services. If this opinion
really becomes a general rule,
municipal self-organisation will be threatened in a crucial point.
A
second exemption is the local limitation of possible market
discrimination. At first glance
this is no question for water and wastewater services, but EU
rules must be seen as a
holistic attempt of (de)regulation if there are no explicit special
ordinances. The judgment
C-458/03 (Parking Brixen) shows the direction of the ECJ´s
impetus. The municipality
Brixen had converted the special undertaking Stadtwerke Brixen
into a legal personality
with special autonomy. One of the objectives was the management
of car parks at local,
national and international level. Aside of the question whether
the activity meant a contract or public service concession contract,
the Court pointed out that the Stadtwerke Brixen AG had “turned
into a market-oriented company”. “This made
the municipality´s control tenuous”.
The ECJ noted
-
“the
conversion of Stadtwerke Brixen in a company limited
by shares (AG, the
author)) and the nature of that type of company,
-
the broadening of its objects, the company having started
to work in significant
new fields, in particular those of the
carriage of persons and goods …It must be noted that the
company retained the wide range of activities previously carried
on by the special undertaking, particularly those of water supply
and wastewater treatment…,
-
the
obligatory opening of the company, in the short term, to
other capital,
-
the expansion of the geographical area of the company´s
activities, to the whole of Italy and abroad,
-
the considerable powers conferred on its Administrative
Board, with in practice
no management control by the municipality”.
This list,
transplanted on other cities and administrations, may be considered
there
as a medal of pride, proving the ability
to play a role in expanding markets and to convert lazy public
utilities into modern and competing units. The other side of
the medal is the ECJ´s conclusion, that the high autonomy
given to the company limited by shares substantially limits the
chance of control by the municipality.
And seen
as a whole: “Articles
43 EC and 49 EC, and the principles of equal treatment, non-discrimination
and transparency,
are to be interpreted as precluding a public authority
from awarding, without putting it out to competition, a public
service concession
to a company limited by shares resulting from a conversion of
a special undertaking of that public authority, (emphasis
by the author) a company whose objects have been extended to significant
new areas, whose capital must obligatorily be opened in the short
term to other capital, the geographical area of whose activities
has been extended to the entire country and abroad, and whose
Administrative Board possesses very broad management powers which
it can exercise independently.”
The ECJ judgments cited here follow a clear line and can be
applied as well to limited liability companies without or with
private capital involved. The consequences apply to every municipality
which has organized parts of their services of general economic
interest (in the very broad sense of the EU Commission) in a
way that is no truly administrative activity.
The seductive
idea that according to the liberalization of the energy supply
and
the telecommunication services the public services
carried by the municipalities generally have gained an enormous
chance to enlarge their activities in a material and geographical
sense bears o lot of risks. Even the expansion over the geographical
limits given by municipal law and the protective functions of
cartel law (as it is in Germany) make the water and wastewater
services an object of European laws of competition. This not
only opens the obligatory access of private companies to formerly
public services but also limits the liberty of decision of the
public authorities and the (relative) autonomy of their economic
entities in a hardly predictable way. If the way has gone once
it´s almost impossible to leave it without severe judicial
and economic burdens – not to speak of the loss of political
credibility and responsibility.
The
European Parliament in the session from January 14th 2004 refused
the invention of a special sector directive for water
and waste services, wanted in fulfillment of the principle
of subsidiarity to preserve the right of self-production for
the
local and regional bodies under the condition that
the local operator does not carry the competition outside of
the respective
area (number 35 of the protocol, emphasis
by the author). The process described here deserves more attention in both directions.
Commercialisation is no privilege of private capital. The enemies
of public services sometimes can be found within them, due to
personal ambition, ideological addiction, ignorance and political
carelessness.
Activities to preserve the public services via EU legislation
should include
- strengthening
of the European public services and the municipal self-organisation
in a special judicial body
- exemption
of public public partnerships (or intercommunal cooperation)
from European rules of competition under certain
conditions
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