Friday, 29 February 2008

EU TFEU: Services of general economic interest

Public services or competing producers? Fair competition or unfair state aid?

Services of general economic interest raise important political, economic and legal questions within the European Union.

We take a look at what the Treaty of Lisbon has to offer in this respect, and glimpse at the Commission's efforts to define the parameters in practice.


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In the Treaty of Lisbon the intergovernmental conference repealed or reordered a number of provisions of the Treaty establishing the European Community (TEC), itself renamed the Treaty on the Functioning of the European Union (TFEU). See the Official Journal (OJ) 17.12.2007 C 306/48-49:

22) Articles 7 to 10 shall be repealed. Articles 11 and 11a shall be replaced by Article 10 of the Treaty on European Union and by Articles 280 A and 280 I of the Treaty on the Functioning of the European Union, as set out in this Treaty in point 22 of Article 1 above and in point 278 below.

23) The text of Article 12 shall become Article 16 D.

24) The text of Article 13 shall become Article 16 E. It shall be amended as set out below at point 33.

25) The text of Article 14 shall become Article 22a. It shall be amended as set out below at point 41.

26) The text of Article 15 shall become Article 22b. It shall be amended as set out below at point 42.

27) Article 16 shall be amended as follows:

(a) at the beginning, the words ‘Without prejudice to Articles 73, 86 and 87,’ shall be replaced by ‘Without prejudice to Article 3a of the Treaty on European Union or to Articles 73, 86 and 87 of this Treaty,’;

(b) at the end of the sentence, the words ‘and conditions which enable them to fulfil their missions’ shall be replaced by ‘and conditions, particularly economic and financial conditions, which enable them to fulfil their missions.’;

(c) the following new sentence shall be added:

‘The European Parliament and the Council, acting by means of regulations in accordance with the ordinary legislative procedure, shall establish these principles and set these conditions without prejudice to the competence of Member States, in compliance with the Treaties, to provide, to commission and to fund such services.’.

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Let us see if a glance at the amendments would start to make some sense. The substance of the following repealed provisions does not disappear. What happens is a reordering between and within the treaties. For the latest consolidated version of the TEC, we go to OJ 29.12.2006 C 321 E, starting from page 46:

Article 7 TEC on the institutions of the European Community is repealed. The nearest corresponding provision is Article 9 of the amended Treaty on European Union, TEU (ToL), renumbered Article 13 TEU.

Article 8 TEC on the European System of Central Banks (ESCB) and the European Central Bank (ECB) is repealed. The substance is found in Article 9 TEU ToL, renumbered Article 13 TEU, and in Article 245a TFEU (ToL), renumbered Article 282 TFEU.

Article 9 TEC on the European Investment Bank (EIB) is repealed, but Articles 266 and 267 TEC are preserved with minor amendments as Articles 266 and 267 TFEU (ToL), renumbered Articles 308 and 309 TFEU.

Article 10 TEC on loyal cooperation is repealed. The substance is found in Article 3a(3) TEU (ToL), renumbered Article 4 TEU.

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Article 11 TEC and Article 11a TEC on enhanced cooperation are replaced by TEU and TFEU provisions. The main principles are found in Article 10 TEU (ToL), renumbered Article 20 TEU. Detailed provisions on enhanced cooperation are found in Articles Articles 280a to 280i TFEU (ToL), renumbered Articles 326 to 334 TFEU.

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The text of Article 12 TEC with the prohibition of discrimination on grounds of nationality becomes Article 16d TFEU (ToL), after renumbering Article 18 TFEU.

The text of Article 13 TEC on action to combat discrimination becomes the amended Article 16e TFEU (ToL), after renumbering Article 19 TFEU.
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The text of Article 14 TEC on the progressive establishing of the internal market becomes the amended Article 22a TFEU (ToL), after renumbering Article 26 TFEU.

The text of Article 15 TEC on taking into account different development levels of member states while establishing the internal market and on temporary derogations becomes the amended Article 22b TFEU (ToL), Article 27 TFEU when renumbered.

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We have now accounted for every Article until we reach point 27 of the IGC 2007, on Article 16 TEC. We start with a look at the current provision (OJ 29.12.2006 C 321 E/49):

Article 16 TEC

Without prejudice to Articles 73, 86 and 87, and given the place occupied by services of general economic interest in the shared values of the Union as well as their role in promoting social and territorial cohesion, the Community and the Member States, each within their respective powers and within the scope of application of this Treaty, shall take care that such services operate on the basis of principles and conditions which enable them to fulfil their missions.

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Following the instructions given by the IGC 2007 we should arrive at a consolidated version of the amended provision, under Part One Principles, Title II Provisions having general application:

Article 16 TFEU (ToL), renumbered Article 14 TFEU

Without prejudice to Article 3a of the Treaty on European Union or to Articles 73, 86 and 87 of this Treaty, and given the place occupied by services of general economic interest in the shared values of the Union as well as their role in promoting social and territorial cohesion, the Union and the Member States, each within their respective powers and within the scope of application of the Treaties, shall take care that such services operate on the basis of principles and conditions, particularly economic and financial conditions, which enable them to fulfil their missions. The European Parliament and the Council, acting by means of regulations in accordance with the ordinary legislative procedure, shall establish these principles and set these conditions without prejudice to the competence of Member States, in compliance with the Treaties, to provide, to commission and to fund such services.

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The European Convention proposed the following Article III-6 of the draft Treaty establishing a Constitution for Europe (OJ 18.7.2003 C 169/29):

Article III-6 Draft Constitution

Without prejudice to Articles III-55, III-56 and III-136, and given the place occupied by services of general economic interest as services to which all in the Union attribute value as well as their role in promoting social and territorial cohesion, the Union and the Member States, each within their respective powers and within the scope of application of the Constitution, shall take care that such services operate on the basis of principles and conditions, in particular economic and financial, which enable them to fulfil their missions. European laws shall define these principles and conditions.

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The IGC 2004 agreed on the following Article III-122 in the Treaty establishing a Constitution for Europe (OJ 16.12.2004 C 310/56):

Article III-122 Constitution

Without prejudice to Articles I-5, III-166, III-167 and III-238, and given the place occupied by
services of general economic interest as services to which all in the Union attribute value as well as their role in promoting its social and territorial cohesion, the Union and the Member States, each within their respective competences and within the scope of application of the Constitution, shall take care that such services operate on the basis of principles and conditions, in particular economic and financial conditions, which enable them to fulfil their missions. European laws shall establish these principles and set these conditions without prejudice to the competence of Member States, in compliance with the Constitution, to provide, to commission and to fund such services.

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We notice that the draft Constitution underlined that ‘all in the Union attribute value’ to services of general economic interest and added ‘in particular economic and financial’ to the principles and conditions.

In essence, the Constitution added a further admonition that the principles and conditions be established without prejudice to the competence of the member states, while retaining the present wording on ‘shared values of the Union’.

The other differences between the versions seem to be editorial in nature.

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The IGC 2007 annexed a Protocol on services of general interest to the Lisbon Treaty (OJ 17.12.2007 C 306/156-157):


PROTOCOL
ON SERVICES OF GENERAL INTEREST

THE HIGH CONTRACTING PARTIES,

WISHING to emphasise the importance of services of general interest,

HAVE AGREED UPON the following interpretative provisions, which shall be annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union:

Article 1

The shared values of the Union in respect of services of general economic interest within the meaning of Article 16 of the Treaty on the Functioning of the European Union include in particular:

— the essential role and the wide discretion of national, regional and local authorities in providing, commissioning and organising services of general economic interest as closely as possible to the needs of the users;

— the diversity between various services of general economic interest and the differences in the needs and preferences of users that may result from different geographical, social or cultural situations;

— a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights.

Article 2

The provisions of the Treaties do not affect in any way the competence of Member States to provide, commission and organise non-economic services of general interest.

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There are to concepts the reader should be aware of:

1) Services of general interest (SGIs)

2) Services of general economic interest (SGEIs)

Let us see what the Europa glossary gives us by the way of an introduction:

http://europa.eu/scadplus/glossary/index_en.htm

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General-interest services
The glossary is being updated given the recent signing of the Treaty of Lisbon.
"General-interest services" are services considered to be in the general interest by the public authorities and accordingly subjected to specific public-service obligations. They include non-market services (e.g. compulsory education, social protection), obligations of the State (e.g. security and justice) and services of general economic interest (e.g. energy and communications). Article 86 of the Treaty (former Article 90) does not apply to the first two categories (non-market services and state obligations).
In May 2003 the European Commission adopted a Green Paper on services of general-interest in Europe. This opened a debate on the role of the European Union in promoting the supply of general-interest services, in defining their general-interest objectives and the way they are organised, financed and evaluated.
In May 2004 the Commission went on to issue a White Paper on services of general interest, in which it sets out the approach taken by the European Union to promoting the development of quality general-interest services. It presents the elements of a strategy to ensure that all citizens and firms in the Union have access to quality general-interest services at affordable prices. The Commission has decided to develop its sectoral approach without issuing a general directive for the moment.

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Services of general economic interest
The glossary is being updated given the recent signing of the Treaty of Lisbon.
Services of general economic interest are commercial services of general economic utility, on which the public authorities therefore impose specific public-service obligations (Article 86 of the EC Treaty, formerly Article 90). Transport, energy and communications services are prime examples.
Article 16, which was written into the EC Treaty by the Treaty of Amsterdam, acknowledges the place occupied by services of general economic interest in the shared values of the Union and their role in promoting social and territorial cohesion. Article 16 also states that such services must operate on the basis of principles and conditions which enable them to fulfil their functions.
Article 36 of the Charter of Fundamental Rights of the European Union requires the Union to recognise and respect access to services of general economic interest to promote the social and territorial cohesion of the Union.

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Services of general interest, defined as non-market services and state obligations, vary in scope between the different member states. It may be an oversimplification but indicative to say that the SGIs may be controversial politically, but not from a market point of view.

Services of general economic interest add the dimension of the internal market and its competition rules, including rules on state aid.

We have seen that the member states have emphasized their wide discretion in arranging services of general economic interest. The Commission, on the other hand, is keenly interested in upholding a functioning internal market, which has resulted in a number of policy documents attempting to define the scope of funding to SGEIs in real or potential market competition with private firms.

Recently the Commission’s substantial package on the internal market has included policy documents relevant to SGIs and SGEIs. Here are some fresh policy documents of interest to those who want to delve deeper:

COM/2007/0724 final
Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - A single market for 21st century Europe

COM/2007/0725 final
Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions accompanying the Communication on "A single market for 21st century Europe" - Services of general interest, including social services of general interest: a new European commitment

SEC/2007/1514 final
Commission staff working document - Frequently asked questions concerning the application of public procurement rules to social services of general interest - Accompanying document to the Communication on "Services of general interest, including social services of general interest: a new European commitment"

SEC/2007/1515 final
Commission staff working document - Progress since the 2004 White paper on services of general interest - Accompanying document to the Communication on "Services of general interest, including social services of general interest: a new European commitment"

SEC/2007/1516 final
Commission staff working document - Frequently asked questions in relation with Commission Decision of 28 November 2005 on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest, and of the Community Framework for State aid in the form of public service compensation - Accompanying document to the Communication on "Services of general interest, including social services of general interest: a new European commitment"


Ralf Grahn