Friday, 9 January 2009

EU Procurement Directive: Excluded postal services

The general European Community (European Union) Procurement Directive 2004/18/EC, also known as the Classic Directive, does not apply to public contracts in the special sectors covered by the Utilities Directive 2004/17/EC.

Here we look at excluded postal services and their inclusion under the Utilities Directive. .

But the operating environment of postal services has changed and continues to move towards guaranteed universal services for consumers, but provided by competing service providers. Thus, the framework for procurement is becoming less public.

Therefore, we take a look at the evolving internal market in postal services.


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Article 12 Procurement Directive

Article 12 of the Procurement Directive 2004/18/EC excludes the sectors to which the so called Utilities Directive 2004/17/EC applies as ‘lex specialis’: water, energy, transport and postal services:

S e c t i o n 3
Excluded contracts

Article 12
Contracts in the water, energy, transport and postal services sectors

This Directive shall not apply to public contracts which, under Directive 2004/17/EC, are awarded by contracting authorities exercising one or more of the activities referred to in Articles 3 to 7 of that Directive and are awarded for the pursuit of those activities, or to public contracts excluded from the scope of that Directive under Article 5(2) and Articles 19, 26 and 30 thereof.

However, this Directive shall continue to apply to public contracts awarded by contracting authorities carrying out one or more of the activities referred to in Article 6 of Directive 2004/17/EC and awarded for those activities, insofar as the Member State concerned takes advantage of the option referred to in the second subparagraph of Article 71 thereof to defer its application.


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Exclusion of utilities explained

Recital 20 of the Procurement Directive refers to Directive 2004/17/EC, the so called Utilities Directive, and explains the exclusion of specific sectors from the Procurement Directive:

(20) Public contracts which are awarded by the contracting authorities operating in the water, energy, transport and postal services sectors and which fall within the scope of those activities are covered by Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors. However, contracts awarded by the contracting authorities in the context of their service activities for maritime, coastal or river transport must fall within the scope of this Directive.


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Postal services excluded (and included)

The headline ‘water, energy, transport and postal services sectors’ gives us a rough indication of the activities, which fall under the Utilities Directive 2004/17/EC, but the scope of the Utilities Directive needs to be defined in order to determine when this Directive takes precedence.

The Utilities Directive is the primary source concerning public contracts awarded by contracting authorities exercising one or more of the activities referred to in Articles 3 to 7 of that Directive and awarded for the pursuit of those activities.

Postal services are excluded from the general Procurement Directive insofar as they are covered by the Utilities Directive. Article 6 of the Utilities Directive determines the postal service contracts covered by that Directive (subject to further precisions):







Article 6 Utilities Directive
Postal services

1. This Directive shall apply to activities relating to the provision of postal services or, on the conditions set out in paragraph 2(c), other services than postal services.

2. For the purpose of this Directive and without prejudice to Directive 97/67/EC:

(a) ‘postal item’: means an item addressed in the final form in which it is to be carried, irrespective of weight. In addition to items of correspondence, such items also include for instance books, catalogues, newspapers, periodicals and postal packages containing merchandise with or without commercial value, irrespective of weight;

(b) ‘postal services’: means services consisting of the clearance, sorting, routing and delivery of postal items. These services comprise:

— ‘reserved postal services’: postal services which are or may be reserved on the basis of Article 7 of Directive 97/67/EC,

— ‘other postal services’: postal services which may not be reserved on the basis of Article 7 of Directive 97/67/EC; and

(c) ‘other services than postal services’: means services provided in the following areas:

— mail service management services (services both preceding and subsequent to despatch, such as ‘mailroom management services’),

— added-value services linked to and provided entirely by electronic means (including the secure transmission of coded documents by electronic means, address management services and transmission of registered electronic mail),

— services concerning postal items not included in point (a), such as direct mail bearing no address,

— financial services, as defined in category 6 of Annex XVII A and in Article 24(c) and including in particular postal money orders and postal giro transfers,

— philatelic services, and

— logistics services (services combining physical delivery and/or warehousing with other non-postal functions), on condition that such services are provided by an entity which also provides postal services within the meaning of point (b), first or second indent, and provided that the conditions set out in Article 30(1) are not satisfied in respect of the services falling within those indents.


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Postal services in Utilities Directive explained

The liberalisation of postal services has been gradual at European Community level and uneven across the European Economic Area. Against this background Recital 28 of the Utilities Directive explains the reasons for including postal services in the Utilities Directive:

(28) Taking into account the further opening up of Community postal services to competition and the fact that such services are provided through a network by contracting authorities, public undertakings and other undertakings, contracts awarded by contracting entities providing postal services should be subject to the rules of this Directive, including those in Article 30, which, safeguarding the application of the principles referred to in recital 9, create a framework for sound commercial practice and allow greater flexibility than is offered by Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts. For a definition of the activities in question, it is necessary to take into account the definitions of Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the development of the internal market of Community postal services and the improvement of quality of service.

Whatever their legal status, entities providing postal services are not currently subject to the rules set out in Directive 93/38/EEC. The adjustment of contract award procedures to this Directive could therefore take longer to implement for such entities than for entities already subject to those rules which will merely have to adapt their procedures to the amendments made by this Directive. It should therefore be permissible to defer application of this Directive to accommodate the additional time required for this adjustment. Given the varying situations of such entities, Member States should have the option of providing for a transitional period for the application of this Directive to contracting entities operating in the postal services sector.


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Postal Directive 97/87/EC

The concept of reserved contracts is heading for extinction.

The Postal Directive, Directive 97/67/EC of the European Parliament and the Council of 15 December 1997 on common rules for the development of the internal market of Community postal services and the improvement of quality of service (originally published OJ 21.1.1998 L 15/14), has been amended three times. The latest consolidated version is from 27 February 2008.

Article 6(2)(b) of the Utilities Directive refers to Article 7 of the Postal Services Directive with regard to reserved postal services and other postal services (postal services which may not be reserved).


Third Postal Directive

The former Article 7 of the Postal Directive was replaced by the amending Directive 2008/6/EC of the European Parliament and of the Council of 20 February 2008 amending Directive 97/67/EC with regard to the full accomplishment of the internal market of Community postal services (OJEU 27.2.2008 L 52/3).

Universal service obligations will replace the notions of reserved and non-reserved postal services. The member states shall bring into force the laws, regulations and administrative provisions necessary to comply with Directive 2008/6/EC by 31 December 2010 at the latest.

By derogation, the following Member States may postpone the implementation of Directive 2008/6/EC until 31 December 2012, in order to continue to reserve services to universal service provider(s), although they may decide to implement the Directive at an earlier stage:

— Czech Republic,
— Greece,
— Cyprus,
— Latvia,
— Lithuania,
— Luxembourg,
— Hungary,
— Malta,
— Poland,
— Romania,
— Slovakia.

The member states with a derogation had to notify the Commission confirming their intention to make use of the implementation delay by 27 August 2008.

Member states that abolish their reserved areas by 31 December 2012 may, between 1 January 2011 and 31 December 2012, refuse to grant the authorisation provided for in Article 9(2) of Directive 97/67/EC for services within the abolished reserved area in question to postal operators providing services within the scope of the universal service, as well as companies controlled by them, which are granted a reserved area in another Member State.

With the distinction between reserved and non-reserved postal services gradually shrinking until it disappears, the new Article 7 is based on the principle of universal service obligations:


New Article 7 Postal Directive

1. Member States shall not grant or maintain in force exclusive or special rights for the establishment and provision of postal services. Member States may finance the provision of universal services in accordance with one or more of the means provided for in paragraphs 2, 3 and 4, or in accordance with any other means compatible with the Treaty.

2. Member States may ensure the provision of universal services by procuring such services in accordance with applicable public procurement rules and regulations, including, as provided for in Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services, competitive dialogue or negotiated procedures with or without publication of a contract notice.

3. Where a Member State determines that the universal service obligations, as provided for in this Directive, entail a net cost, calculated taking into account Annex I, and represent an unfair financial burden on the universal service provider(s), it may introduce:

(a) a mechanism to compensate the undertaking(s) concerned from public funds; or

(b) a mechanism for the sharing of the net cost of the universal service obligations between providers of services and/or users.

4. Where the net cost is shared in accordance with paragraph 3(b), Member States may establish a compensation fund which may be funded by service providers and/or users' fees, and is administered for this purpose by a body independent of the beneficiary or beneficiaries. Member States may make the granting of authorisations to service providers under Article 9(2) subject to an obligation to make a financial contribution to that fund or to comply with universal service obligations. The universal service obligations of the universal service provider(s) set out in Article 3 may be financed in this manner.

5. Member States shall ensure that the principles of transparency, non-discrimination and proportionality are respected in establishing the compensation fund and when fixing the level of the financial contributions referred to in paragraphs 3 and 4. Decisions taken in accordance with paragraphs 3 and 4 shall be based on objective and verifiable criteria and be made public.


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Postal services in the internal market

Because of the link between public procurement and the internal market rules regarding postal services, some readers may want to take a closer look at the development of postal services within the single market. The Commission’s DG Internal Market presents the developments on the introductory web page EU Postal Legislation, with a number of useful links (latest update 8 January 2009):



http://ec.europa.eu/internal_market/post/legislation_en.htm


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Postal Directive report


A recent and overview of the liberalisation of the postal markets is the Report from the Commission to the Council and the European Parliament on the application of the Postal Directive
(Directive 97/67/EC as amended by Directive 2002/39/EC), Brussels, 22.12.2008 COM(2008) 884 final:

http://ec.europa.eu/internal_market/post/doc/reports/report_en.pdf


The report makes the observation that Germany fully opened its postal market as of 1 January 2008. To date four Member States have thus abolished the reserved area before the date foreseen in the Postal Directive (Germany, Finland, Sweden, UK).

The Postal report is accompanied by the more detailed Commission Staff Working Document: Accompanying document to the Report from the Commission to the European Parliament and the Council on the application of the Postal Directive (Directive 97/67/EC as amended by Directive 2002/39/EC), Brussels, 22.12.2008 SEC(2008) 3076, available here:


http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SEC:2008:3076:FIN:EN:PDF

The Staff Working Document presents a view of the postal market situation in individual EU and EEA member states. The section on the Reserved area (page 15 to 17) may be of special interest to the readers of this blog post.




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Article 30 exemption

Article 30(1) of the Utilities Directive 2004/17/EC exempts contracts in the utilities sector from application, if these activities are conducted under competitive market conditions:

1. Contracts intended to enable an activity mentioned in Articles 3 to 7 to be carried out shall not be subject to this Directive if, in the Member State in which it is performed, the activity is directly exposed to competition on markets to which access is not restricted.


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No deferred application from 2009

The second paragraph of Article 12 of the Procurement Directive 2004/18/EC referred to the possibility of deferred application:

However, this Directive shall continue to apply to public contracts awarded by contracting authorities carrying out one or more of the activities referred to in Article 6 of Directive 2004/17/EC and awarded for those activities, insofar as the Member State concerned takes advantage of the option referred to in the second subparagraph of Article 71 thereof to defer its application.


The second subparagraph of Article 71(1) of the Utilities Directive 2004/17/EC offered member states an option to defer the application of Article 6 on postal services for and additional 35 months after 31 January 2006.

This additional transitional period ended on 31 December 2008, so from the beginning of 2009 this exception no longer applies in any member state of the European Union.



Ralf Grahn