Home / EUROLAND / Community law applicable to the provision of water supply and sanitation and its development prospects, by Fabien Dupuis*

Community law applicable to the provision of water supply and sanitation and its development prospects, by Fabien Dupuis*

The confusion between the nature of the service and the persons in charge of the above-mentioned service leads the European Commission not to define the notion of public service. In this sense, the terms: Service of General Interest (SGI) and Service of General Economic Interest (SGEI) are preferred. According to the European Commission, SGIs refer to “commercial or non-commercial service activities, considered to be in the general interest by public authorities and therefore subject to public service obligations”. These are non-economic activities such as education, sovereign functions (security, justice), and SGEIs. The latter represent “commercial service activities fulfilling missions of general interest and therefore subject by Member States to specific public service obligations”[1]]. These obligations are very often imposed by the public authority on the service provider in order to respect its universal service mission for which it is responsible. The universal service guarantee provides access for all users, without discrimination, to a quality service, without interruption and at an affordable price.

There are few texts that make it possible to understand how Community law impacts on the public service of drinking water distribution. The ratification of the Treaty of Rome[2] was intended to establish a common market. At that time, and not only at European level, the main idea was the gradual reduction of customs tariffs. Thus, the Treaty did not consider public service activities. Articles 43 and 49 establish the principle of freedom of establishment for any economic operator wishing to carry out an activity in a stable and continuous manner in accordance with national legislation. However, this freedom must not run counter to the public service mission held by the company (Articles 86(2), 87 and 88).

It was not until the “Jacques Delors period” that a second step was taken in 1986 with the adoption of the Single Act[3]. In this essential text of the European construction, the 4 freedoms[4] and qualified majority voting are affirmed. According to some observers, it is from this pivotal date that the liberalisation of public services begins sector by sector and that the dissonance between national definitions of public services and their conceptions at Community level takes root. Indeed, the main effect of the introduction of competition and market logic is the restructuring of many public services. Faced with the logic of liberalism Liberalism must be understood here as advocating Indian freedom[5], the will to give content to the public service is taking shape. Through the European Commission’s Green Paper on Post and Telecommunications, in 1987, the notion of “universal service” appeared.

The ratification of the Maastricht Treaty in 1992, although essential in many respects, did not allow for a precise definition of the terms or their practical application. The turning point really took place in the years 1993-1994. The Corbeau and commune d’Alémo judgments, issued by the European Court of Justice (ECJ), insist on the limitation of competition in certain cases with regard to SGEIs. The special nature of the tasks which must satisfy certain services or local authorities cannot be the result of a simple call for competition. If the content of the decision is important, it is equally important to take into consideration which institution issued the decision. In this particular case, the Court of Justice has taken a decision that fills the existing legal void. The risk is always the same: in the absence of regulation, despite two Green Papers[6] and a White Paper, the ECJ will clarify the law applicable to all sectors. However, the framework of the directives remains very important for the democratic process and the establishment of a Europe built with the representatives of the States and therefore of the citizens.

However, it would be more appropriate in the future to involve the Council of Ministers concerned and the European Parliament more closely in a clarified and simplified institutional relationship. Otherwise, there is a risk that decisions will be imposed on them by an independent authority. It is in this sense that on 11 September 2006 the Commission adopted a Communication on “SGIs in Europe”. Since that time, there has been an acceleration of the process of defining Services of General Interest, but this does not mean the elaboration of a general directive or the elaboration of sectoral directives.

The Treaty of Amsterdam, which entered into force on 1 May 1999, also marks an essential turning point. Article 16 recognises SGEIs as part of the “common values” of the European Union and recognises their role in promoting the social and territorial cohesion of the community. The ambition set out in the article allows the Commission to affirm two fundamental principles of Europe: neutrality and subsidiarity. This is reinforced by article 295, which gives local authorities freedom of choice in the decisions to be taken. In addition, Article 36 of the Charter of Fundamental Rights, which was adopted by the Nice European Council of 7-9 December 2000, also recognises the importance of SGEIs in promoting social and territorial cohesion. However, the above-mentioned article remains in declaratory order, since it does not offer citizens a right of access to these services.

From 1957, the date of the signing of the Treaty of Rome, until the European Summit in Nice in 2000, a step was taken towards the recognition of Services of General Interest and Services of General Economic Interest. This represents an extraordinary step forward which leads to the realisation of a second step consisting of a precise definition of these services, which are very often specific in nature, and a reflection on the desirability of a directive and therefore on its form: general or sector by sector?

The new progress is being made in the run-up to the Barcelona European Council (15-16 March 2002), during which the Lisbon Strategy was defined[7]. This follows the whole debate on the Langen report (2000) in preparation for the Laecken European Council on the Convention on the Future of Europe. Throughout this period, a single liberalisation objective per GIS sector emerged. For some, this calls into question all the previous constructive work done, which led to the hope of a strong balance between the notion of the general interest and the principle of competition.

This emulation prompted the European Commission to draw up a Green Paper on “SGIs in Europe” in March 2003. It asks 30 questions to open the debate on the place and role of SGIs in the European Union in the 21st century. This consultation was a success, with 300 responses sent to the European Commission. The 30 questions were grouped into 10 sections. The reading of all these answers led to the drafting of a White Paper published in 2004. 3 main points emerge from this document:

– The definition of SGIs, SGEIs, Universal Service, Universal Service Obligation,

– The existence of important differences, although a consensus has been reached on the need to achieve a balance between market mechanisms and public service missions,

– The service is divided into two principles: on the one hand, the provision of the service can be managed either directly or by delegation, and on the other hand, market regulation, the definition of and compliance with universal service obligations can only be the responsibility of the public authority.

The public service of water distribution is the responsibility of both GIS and Public-Private Partnerships. It is therefore important to understand how the Green Paper on Public-Private Partnerships and Community law on public procurement and concessions[8] and Directive 2004/17/EC on the coordination of procedures and public procurement in the water, energy, transport and postal services sectors[9] impact on the public service of water supply. The period during which these two texts are written is that of the construction of a strategy for the internal market and European growth following the Lisbon strategy. At the community level, Public-Private Partnerships are not defined. They are nevertheless considered as “a cooperation between public authorities and the business world aimed at ensuring the financing, construction, renovation, management or maintenance of infrastructure or the provision of a service”[10]. There are two types of PPPs: contractualized PPPs and institutionalized PPPs. The water service is part of the first category since it can be managed as a public service delegation, the most well-known model of which is the concessive model. It consists of a partnership to provide a service instead, but under the control of the delegating authority, the public authority. The private operator is remunerated by fees charged to users of the service. The concession is indeed a PPP, since it is based solely on contractual links between the delegating authority and the delegatee. This means that there is a possibility of competition at European level. The European Commission guarantees fair competition that is not distorted by national considerations. PPPs are subject to Articles 43 and 49 of the TEC, which require the delegating authority to ensure transparency, equality between candidates, proportionality of the request and mutual recognition.

These principles are reinforced by Directive 2004/17, which defines the criteria on which contracting entities must base their choice of partner:

– That is only the lowest price,

– Or, when the award is made to the most economically advantageous tender, various criteria linked to the subject of the contract.

The European Union is in the process of authorising the introduction of public service delegation, but under no circumstances in the process of fully privatising the service. Public service delegations consist in “entrusting a private, public or mixed operator with the management, financing and sometimes the execution of a public service or a public work”[11]. While the principle is old and extremely developed in France[12], the precise definition of delegated management was formalised when the MURCEF law was adopted in 2001, in which it was enshrined: “a public service delegation is a contract by which a legal person governed by public law entrusts the management of a public service for which it is responsible to a public or private delegate, whose remuneration is substantially linked to the results of the service’s operation. The delegate may be responsible for building works or acquiring goods necessary for the service”[13].

If this organizational model has four distinct modes of contract[14], there is a common basis for identifying them:

– A multifunctional object,

– Substantial remuneration linked to the results of the operation of the service,

– A maximum contract duration of 20 years,

– Private financing for the operation of the contract,

– A complete transfer of risks,

– Flexible rules for the devolution of the contract,

– The principle of intuitu personae.

The legal movement is now closed by Directive 2006/123/EC on the internal market[15], which was born following the controversy surrounding the Bolkestein Directive. Member States have until 2010 to transpose it into national law. 4 objectives have been set:

– Promote freedom of establishment and freedom of provision within the European Union,

– Strengthen the rights of service recipients as users,

– Promote the quality of services,

– Establish effective administrative cooperation between Member States.

Under the Directive, the public water supply service is subject to the right of establishment and not to free movement.

For the time being, SGIs and SGEIs are in a status quo situation. The Constitutional Treaty, rejected by referendum in France and the Netherlands, included in its second part the Charter of Fundamental Rights, i. e. Article 36 (which would have become Article II-96). Article 16 of the Amsterdam Treaty was also amended (before Article III-122) to make it mandatory for all competition policies.

The EU is at an impasse. Admittedly, the priority of the Heads of State and Government, under the impetus of France and its new President Nicolas Sarkozy, is the drafting of a simplified treaty with institutional scope. However, from a medium- and long-term perspective, SGIs symbolize an essential issue. This is part of the conception of the EU and the Europe we want to build. If the simplified Treaty[16] is to make the functioning of the European Union more democratic by requiring qualified majority voting (and not unanimity), the European Parliament must establish itself as a chamber in which it is possible to dialogue, debate and have an influence in the construction of Community rules. There is thus a choice of society and the future that may be much more difficult to organise, take and implement than a simplified treaty.

The aim is to move the European Union from the state of OPNI (Unidentified Political Object) to the state of OPI (Identified Political Object). This would allow for greater ownership and understanding of European integration. Indeed, public services are always used in a general sense without differentiating between sectors. What may be true for one may not be true for the other. While the most common criticism addressed to Europe is the unquantified liberalisation of sectors of the economy leading to the dismantling of public services and the concept of the sovereign nation-state, this is not automatically true in the case of public water and sanitation services. The European Union guarantees the free choice of the competent authorities as to the management mode they wish to implement. Direct management by the public authorities is therefore not called into question. The question is to give those who are considering or wish to set up a public service delegation the opportunity to offer better quality services by introducing competition between operators and management methods.

As Prospeur[17]] indicates, however, there are still significant uncertainties that must be raised in the short term:

– What hierarchy of community standards?

– How to finance GIS investments?

– How is subsidiarity organised between the levels (local, regional, national and European)?

– What social and territorial cohesion?

– What role should SGIs play in the construction of Europe?

This is what the European Parliament wanted[18], recalling the “need to respect the principle of local and regional self-government, which gives the competent authority the right to choose how best to provide each service, taking into account the public interest”, that “local authorities should be able to assign service tasks directly to intermunicipal companies or similar forms and that a framework should be developed that does not categorically exclude the participation of private actors a priori”. In addition, it calls for “urgent need to ensure more legal certainty for the different forms of organisation involving several authorities” and “stresses that public service outsourcing which is not of the same nature as the award of public contracts should be the subject of legal clarification”[19].

It is self-evident for the time being that the European Union does not intend to intervene and reaffirms the principles of subsidiarity and neutrality. If in France, a movement is being formed around associations[20] to promote the return to governance, this is not necessarily the case in the rest of Europe. England has opened its service to private operators, despite the national regulation that OFWAT[21] has inherited from it. The Netherlands and Germany are asking themselves the question of opening up their water services, much more than is being done today. The European Union therefore has a mission not to impose a management method, but to offer Member States a set of solutions enabling them to offer a quality service. This service remains of course a public service. The European Union must therefore develop a European consensus on the principle of SGIs as a common value. The affirmation of neutrality and subsidiarity must enable each State to assert its own concept of public service. On the other hand, the European Union can assert itself by defining objectives, missions and forms of regulation. Its aim is therefore the emergence of a general interest.

* Fabien Dupuis is a researcher within the framework of the EuroFuturs 2030 programme initiated in April 2007 by LEAP/E2020

Born on 3 November 1980 in Limoges, he is currently a doctoral student in political science at the University of Paris II Panthéon-Assas and attached to CERSA (Centre d’Etudes et de Recherches de Science Administrative).

Fabien Dupuis is currently working on the role of the European Union in the public service of water supply and sanitation in relation to the German, French and Dutch systems. During his studies in economics and international relations, he focused his research on water issues through three dissertations: The Tiger and the Euphrates as a source of conflict, The commodification of water as a way of managing a scarce resource? and the delegation of public water and sanitation services: the example of Paris.

In parallel to his university studies, he was an intern at Hubert Védrine Conseil and Notre Europe, a research and reflection group created by Jacques Delors. He was thus able to collaborate on the policy paper, Forgiveness and Promise, for a more regional approach to the Western Balkans issue by the European Union.

1] <span class=”base64″ title=’WzxhIGhyZWY9IiNuaDIiIG5hbWU9Im5iMiIgY2xhc3M9InNwaXBfbm90ZSIgdGl0bGU9ImluZm8gbm90ZXMgMiI+MjwvYT5dIA===’ ></span>The Treaty of Rome or TEC or treaty establishing the European Community was ratified on 25 March 1957

<span class=”base64″ title=’WzxhIGhyZWY9IiNuaDMiIG5hbWU9Im5iMyIgY2xhc3M9InNwaXBfbm90ZSIgdGl0bGU9ImluZm8gbm90ZXMgMyI+MzwvYT5dIA===’ ></span>Signed in 1986 and effective July 1, 1987, the Single Act amends the Treaty of Rome, but retains its main objective: the achievement of a common market. Its completion was set for 31 December 1992. Decisions are now taken by qualified majority.

<span class=”base64″ title=’WzxhIGhyZWY9IiNuaDQiIG5hbWU9Im5iNCIgY2xhc3M9InNwaXBfbm90ZSIgdGl0bGU9ImluZm8gbm90ZXMgNCI+NDwvYT5dIA==’ ></span>free movement of goods, people, capital and goods

<span class=”base64″ title=’WzxhIGhyZWY9IiNuaDUiIG5hbWU9Im5iNSIgY2xhc3M9InNwaXBfbm90ZSIgdGl0bGU9ImluZm8gbm90ZXMgNSI+NTwvYT5dIA==’ ></span>vidual, intellectual, natural rights, market economy, private initiative and a transparent and guaranteeing State and not as a political doctrine aimed at giving the public authorities prerogatives limited to the sovereign powers alone.

<span class=”base64″ title=’WzxhIGhyZWY9IiNuaDYiIG5hbWU9Im5iNiIgY2xhc3M9InNwaXBfbm90ZSIgdGl0bGU9ImluZm8gbm90ZXMgNiI+NjwvYT5dIA===’ ></span> One focuses on GIS and the other on Public Private Partnerships.

<span class=”base64″ title=’WzxhIGhyZWY9IiNuaDciIG5hbWU9Im5iNyIgY2xhc3M9InNwaXBfbm90ZSIgdGl0bGU9ImluZm8gbm90ZXMgNyI+NzwvYT5dIA===’ ></span>The objective is to make the EU: “the most competitive and dynamic knowledge-based economy in the world by 2010, capable of sustainable economic growth with more and better jobs and greater social cohesion”.

<span class=”base64″ title=’WzxhIGhyZWY9IiNuaDgiIG5hbWU9Im5iOCIgY2xhc3M9InNwaXBfbm90ZSIgdGl0bGU9ImluZm8gbm90ZXMgOCI+ODwvYT5dIA==’ ></span>Published on 30 March 2004, COM (2004) 327

<span class=”base64″ title=’WzxhIGhyZWY9IiNuaDkiIG5hbWU9Im5iOSIgY2xhc3M9InNwaXBfbm90ZSIgdGl0bGU9ImluZm8gbm90ZXMgOSI+OTwvYT5dIA==’ ></span>JOUE 30/04/2004

<span class=”base64″ title=’WzxhIGhyZWY9IiNuaDEwIiBuYW1lPSJuYW1lPSJuYjEwIiBjbGFzcz0ic3BpcF9ub3RlIiB0aXRsZT0iaW5mbyBub3RlcyAxMCI+MTA8L2E+XSA=’ ></span>Green Paper on PPP and Community law on public procurement and concessions, European Commission, OJEU, Brussels, 30 April 2004, p. 3

<span class=”base64″ title=’WzxhIGhyZWY9IiNuaDExIiBuYW1lPSJuYW1lPSJuYjExIBjbGFzcz0ic3BpcF9ub3RlIiB0aXRsZT0iaW5mbyBub3RlcyAxMSI+MTE8L2E+XSA=’ ></span>Institut de la gestion déléguée, La délégation de service public,[www.foundation-igd.org->http://www.fondation-igd.org” class=”spip_out”>http://europa.eu/scadplus/glossary/services_general_economic_interest_en.htm.

12] 85% of the French population is served by a PSD

13] This definition is codified in Article L. 1411-1 of the General Code of Local Authorities

14] Leasing, concession, management and interested management

15] PLAYS 27/12/2006

16] At the summit held on 23-24 June 2007, three major decisions were taken concerning SGIs: the reference to “free and undistorted competition” disappears, the Charter of Fundamental Rights will not be taken up again and, under the impetus of France and the Netherlands, a public services protocol must be drawn up in which the importance of SGIs and “their essential role and the wide margin of manoeuvre of national, regional and local authorities” are recognised.

17] <span class=”base64″ title=’WzxhIGhyZWY9IiNuaDE4IiBuYW1lPSJuYjE4IiBjbGFzcz0ic3BpcF9ub3RlIiB0aXRsZT0iaW5mbyBub3RlcyAxOCI+MTg8L2E+XSA=’ ></On 27 September 2006, the European Parliament adopted Bernard Rap Kay’s report on the White Paper on SGIs (491 votes in favour, 128 against and 31 abstentions).

<span class=”base64″ title=’WzxhIGhyZWY9IiNuaDE5IiBuYW1lPSJuYW1lPSJuYjE5IiBjbGFzcz0ic3BpcF9ub3RsZT0aXRsZT0iaW5mbyBub3RlcyAxOSI+MTk8L2E+XSA=’ ></span>[http://www.unilim.fr/prospeur/fr/prospeur/etudes/msp/index.htm->http://www.unilim.fr/prospeur/fr/prospeur/etudes/msp/index.htm “class=”spip_out”>http://www.unilim.fr/prospeur/fr/prospeur/etudes/msp/index.htm, p 39

20] Emergency water, Trans’Cub, ACME…

21] Regulatory authority for water services

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