The legal framework of services of general economic interest in the ...

FOURTH ANNUAL CONFERENCE ON
COMPETITION AND REGULATION IN NETWORK INDUSTRIES
25 NOVEMBER 2011
RESIDENCE PALACE, BRUSSELS, BELGIUM
THE LEGAL FRAMEWORK OF SERVICES OF GENERAL ECONOMIC INTEREST IN
THE EUROPEAN UNION
Nicola Ruccia
University of Essex
Wivenhoe Park, Colchester, CO4 3SQ, United Kingdom
Tel. +44 (0) 1206 87333. E-mail: ruccia.nicola@libero.it
Abstract
Liberalization of services of general economic interest (SGEIs) and privatization of public
enterprises providing them are connected processes that are modifying the economic policies of the
Member States of the European Union.
The aim of this paper is to identify the European legal framework of SGEIs. In this context,
it offers a full definition of them, although it is absent in primary and secondary European law.
Furthermore, it seeks: i) to determine whether and to what extent European law contributes to
privatization and liberalization; ii) to acertain the relationship between these two processes. This
allows the understanding of a substantial change of the function of the Member States in the internal
market that is taking place, under the supervision of the European Union institutions, through acts
of soft law.
Keywords:
Privatization – Liberalization – Services of General Economic Interest – Internal Market
1. Introduction
In the European Union, liberalization of services of general economic interest and
privatization of public enterprises providing them are changing the function of Member States
within the internal market.
Although extremely heterogeneous, these processes are strictly connected. The first has its
source in the European Union but its effects only in the domestic economic systems. The second has
its basis inside national legal systems but concerns the European Union as a whole.
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This paper is aimed to identify the European legal framework of services of general
economic interest. It also seeks to determine whether and to what extent European law has
contributed to their liberalization and to privatization of their providers.
Firstly, it analyzes the impact of European law on privatization of public undertakings.
Secondly, it offers a definition, which is not provided by European law, of services of
general economic interest.
Thirdly, it examines the impact of European law on liberalization of these services.
Finally, it evaluates the relationship between liberalization of services of general economic
interest and privatization of their supplier. This would lead to understand whether, under the
supervision of the European institutions, there is a substantial change of the role of Member States
from the suppliers of the services to the regulators of the market forces that guarantee them.
2. Impact of European law on privatization of public undertakings
European law does not offer an accurate legal framework for the alienation of public
enterprises, consecrated by an explicit norm 1 . In fact, art. 345 TFEU provides that the “Treaty shall
in no way prejudice the rules in Member States governing the system of property ownership” 2 .
Member States may take over, control and sale a company under the same conditions as private
operators, with the exclusive limitation of not violating the law which may be applicable in specific
circumstances 3 . The absence of a regulation or a directive in this context leads to not be ruled out, at
present, a turnaround, since domestic provisions have remained unchanged.
Therefore, privatization does not represent a principle firmly acquired in European law.
They do not find their immediate genesis in the aspiration to implement in a concrete manner the
precept enshrined in the Treaty of the European market economy by removing the differences
between public and private enterprises. They result from particular situations related to individual
domestic contexts. The existence of rules related to the specific needs of reduction of the space
reserved for public intervention in the economy can be considered merely an external factor.
The impossibility to identify a standard development of the privatization processes is due
precisely to the inherent limitations of unifying power of European law and, as a result, from the
absence of its uniform impact on them. Nevertheless, the lack of an express provision requiring
them is not in contrast with the orientation that European law favours them. It contains some
principles which, by disregarding the conditions of existence or maintenance of State-owned
enterprises, indirectly promote them. This position is based on a fundamental argument that can be
explained in the form of a syllogism.
Firstly, pursuant to art. 106, para. 1 TFEU: «In the case of public undertakings and
undertakings to which Member States grant special or exclusive rights, Member States shall neither
enact nor maintain in force any measure contrary to the rules contained in the Treaties,…». The
1 EHLERMANN, C.D. (1992) “The Contribution of EC Competition Policy to the Single Market”, Common Market Law
Review, 29: 257-282.
2 AKKERMANS, B. AND RAMAEKERS, E. (2010) “Article 345 TFEU (ex Article 295 EC), Its Meanings and
Interpretations”, European Law Journal, 16: 292-314.
3 DEVROE, W. (1997) “Privatizations and Community Law: Neutrality versus Policy”, Common Market Law Review, 34:
267-306; VERHOEVEN, A. (1996) “Privatisation and EC Law: Is the European Commission “Neutral” with Respect to
Public versus Private Ownership of Companies”, International Comparative Law Quarterly, 45: 861-887.
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principle of equal treatment enunciated in this provision requires the existence of identical
situations between enterprises, regardless of the nature of their owner, i.e. private legal entities or
national government authorities. Furthermore, it admits different treatments, albeit proportional,
when the undertaking themselves are different from each other, especially with regard to the
features of the business.
Secondly, one can individualize detectable differences between public and private
enterprises. The focus is on the assertion that the State-owned enterprises are generally used as an
instrument of economic policy and, because of their role, they divert from the fees described by the
internal regulations for private undertakings and valid for European law. This consideration entails
the conclusion of the syllogism: there is an intrinsic need of a different rule for public undertaking
who are employed as an instrument of economic policies.
The statement which it seems possible to derive strong propensity of the European law for
privatization is less immediate than the previous. The difference of treatment between public and
private enterprises would imply the occurrence of competitive disadvantages for those entities
which also supply services of general economic interest. Market forces would lead these operators
to give up the conduct of such services, if not profitable. The purposes of society relief would be
achieved in another way, e.g. through the regulation mechanism, rather than a direct involvement of
entrepreneurial nature.
Within this ambit it seems that liberalization of specific sectors implies the loss of one of the
traditional justifications for the existence of public undertakings. As a result, the presence of the
State in some relevant sectors, as well as in companies already in a monopoly position, should be
reduced. In fact, the renewed competitive economic environment, generated by the European Union
has made desirable or inevitable the retreat of government from direct management of certain
economic activities. It therefore, reveals the nature of implicit and underlying incentive for
privatization.
Until the beginning of privatization, it was believed that the management of the company by
public authorities would allow the immediate identification, without economic selection
mechanisms, of the best competitive service provider for society. This principle, on which it was
considered unnecessary to launch a tender for the concession of the service, is no longer legitimate.
Theoretically, any company, regardless of its owner, is likely to be the best operator for the service.
The identification of the latter can only take place through a competition organized according to the
criteria of efficiency and economy.
Under these conditions, the new business risk for public undertakings is exactly the same as
that faced by private operators acting in the market. Indeed, as it has been specified, European law
seeks to ensure the effective playing field between all enterprises. Thus, the elimination of the
indisputable privileges enjoyed by public undertakings poses Member States in front of a business
risk that, although ordinary, is far superior than the previous.
The exclusivity of the management of certain activities or the presence of special conditions
for derogation to market rules is permissible only if the monopolistic management of the demand
or, conversely, the monopolistic structure of the supply, is indispensable. This is particularly
required in economic systems which are already not flexible because of the existence of economies
of scale for infrastructures or the insufficient capacity of the demand to interact according to the
ordinary rules. Where these needs are not evident, the European law imposes the necessary
minimum to limit obstacles towards the freedom of enterprise.
In competitive and liberalized markets public service obligations may be fulfilled by a
variety of undertakings, both public and private, in competition with each other, which were entitled
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to carry on their activity by a simple authorization. The renewed competitive organization of public
services makes Member States less willing to bear the associated management risks. The European
law, through the public tender, ensures the society the efficiency of this delivery by private
operators. The current model of the economic system also gives to Member States the role of
regulators through the establishment of independent authority, rather than holders of enterprises.
In conclusion, privatization of public enterprises not only comes from the will of the
Member States but, rather, is the result of a real imposition made by the European Union. European
law, in many cases, controls, even slavishly, the manner and timing of its implementation,
providing very detailed information about the guarantees needed to detect the undertaking. The
purpose is to achieve transparency and effectiveness of competitive comparison between potential
buyers.
However, the achievement of the latter must be contextualized within the ambit of the
renewed purpose of a social order in the European Union. The promoting of a high degree of
competitiveness of enterprises, based on the principles of free competition, has to be opposed to the
objectives of social progress and high level of employment that acquire their own importance and
whose accomplishment has been introduced in primary law. In this regard, one must observe the
relevant estimation assigned to services of general economic interest. Art. 14 TFEU includes them
between the common values of the European Union and recognizes them as having an essential role
in promoting social and territorial cohesion.
3. Definition of services of general economic interest
Services of general economic interest are mentioned in arts. 14 and 106, para. 2 TFEU.
However, both primary sources and secondary legislation do not contain a full definition of them 4 .
They could be identified as services which citizenship should be eligible even if their providers do
not receive economic benefits 5 .
Their first essential feature is the public service obligation. National and European
authorities impose it on their provider to ensure the achievement of specific objectives of general
interest, such as transports, supply and distribution of energy, postal services and
telecommunications 6 .
Their second characteristic is the universality of service, which could be interpreted in two
ways. Under the jurisprudential profile it is the instrument through which the European Union limits
the State’s freedom to define public service obligations. Under the normative profile it is a device to
guarantee the rights of citizens-consumer. In the latter valence, one must observe art. 36 of the
Charter of fundamental rights of the European Union, i.e. Charter of Nice. It provides that the
European Union must recognize and respect the access to services of general economic interest in
order to promote its social territorial cohesion. As a result, public service obligations are not only
the guarantee of accessibility of the related services to all citizens but also the additional obligations
arising from the need to protect the users, the environment and the public order 7 .
4 Art. 14 TFEU may be interpreted as an instrument for the interpretation of art. 106, para. 2 TFEU which allows
providers of services of general economic interest to escape the full rigour of the competition rules of the common
market. See, WYATT, D. AND DASHWOOD, A. (2006) European Union Law. London: Sweet & Maxwell.
5 ‟Communication on Services of General Interest in Europe”, COM (2000) 580 final, para. 14.
6 ‟Green Paper on Services of General Interest”, COM (2003) 270 final, para. 20.
7 ROSS, M. (2000) “Art. 16 E.C. and Services of General Interest: from Derogation to Obligation”, European Law
Review, 25: 22-38.
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The services must be guaranteed to the society, regardless of the origin of their supply, i.e.
from private operators or a government authority. In the latter case, it is assumed that Member
States also furnish special provisions although the market will provide them or have the means to
operate independently. In this sense, particular attention is paid to the guarantees for their end-users,
since the nature of the provider – whether public or private – is given only marginal consideration.
According to this opinion, they seem directed “downstream”, rather than “upstream”.
In identifying services of general economic interest, Member States have a considerable
discretionary power. Within this ambit, one should observe art. 1 of the Protocol no. 26 of the
Treaty of Lisbon on them. It highlights «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». However, the margins of this
freedom shrink significantly if these services are intended as the set of universal benefits relating to
a specific activity for which delivery takes place regardless of their economic viability. They are
also the subject of certain public service obligations.
The autonomy of Member States concerning the classification of services of general
economic interest is limited not only through the possibility to impose certain obligations of public
service but also in the quantification and qualification of those obligations. If the company operates
in a specific area of public utility, there is a twofold consequence. On the one hand, the public
interest operates an outer limit to the right of freedom of economic activity. On the other hand, the
duty on the conduct of an activity to protect the public interest implies the limitation of applying
market rules. In this case, the pattern of economic equilibrium of a firm submitted to public
obligations will be integrated with specific corrective actions in order to restore a level-playing field
operation between economic productions in terms of competition. The exception to the common
market rules suggests itself the possibility offered to Member States to impose public obligations,
even in non-profit undertakings. Business can be addressed for social purposes, but within the
narrow limits of art. 106, para. 2 TFEU. The latter represents a balance between the national interest
to use certain facilities as an instrument of economic or social policy and the European interest
towards the observance of competition rules and preservation of the common market unity.
Member States should act as regulators of the market. Through the privatization process,
they transfer enterprises providing services of general economic interest in accordance with the
policy of surrender of interventionist economic models. Within this ambit, the role of public
authorities is reflected by the determination of external market operation rules according to the
principles of neutrality and equality among all the actors involved therein.
Services of general economic interest represent the economic activities submitted to service
obligations under a contract with public authorities 8 . As a result, in the absence of a duty, such
activities must not take place, due to the lack of profit. In this case, the provision would be made
only if the public authorities shall make forced the execution. Economic activity carried on in
relation to a service requirement is a provision that the market would not provide on its own
mechanisms. The lack of profitability for the company charged with this activity requires the
intervention of public authorities to guarantee all related performances. Finally, services of general
economic interest presuppose the market failure. It seems that their definition has a dual meaning.
The first stresses the role they play for their national legal systems. The second emphasizes their
communitarian essence, through the exemption from market rules and the restriction of
entrepreneurial freedom deriving from the imposition of public service obligations.
Two additional factors are important in this definition. The first is the public interest that
8 ROTT, P. (2005) “A New Social Contract Law for Public Services – Consequences from Regulation of Services of
General Economic Interest in the EC”, European Review Contract Law, 1: 323-331.
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Member States intend to protect. The second is the business of the service production and delivery,
submitted to the government control, which is necessary for the protection of the public interest
itself.
Services of general economic interest are a subset of the wide category of services, which
differs in the accomplishment of a particular public interest. Their release is considered an essential
public task that can be performed in two possible manners. The first is more restrictive in scope and
involves the assessment of possible exemptions from market rules, as set in art. 106, para. 2 TFEU.
The second has a higher impact and consists in the imposition of some specific activities, with the
obligation to ensure a core of non-remunerative services, whether Member States consider that the
market can guarantee the related benefits 9 .
This evaluation, both political and economical, is based on three elements. The first is the
qualification of an interest as essential and necessary for the involved society. The second is the
identification of the business that can be considered functional to the preservation of that interest.
The third is the evaluation of the microeconomic implications of the role of the market and the
exceptions to the rules laid down by the European legislation.
However, Member State’s autonomy in these assessments meets with the strict limits
imposed by the Treaty, which identifies the free market system as the most appropriate means to
achieve economic efficiency. Among the interests to be protected by public authorities, those having
economic nature must be excluded.
Member State’s freedom to identify services of general economic interest is greatly limited
when considering that they cannot be guaranteed by the market. If the latter can assure certain
benefits, the fact that the authorities place them at the level of public interest and support their
supply with governmental financial resources would be in clear contradiction with the spirit of the
Treaty.
The content of services of general economic interest often comes from national traditions
concerning public services. Protocol no. 26 of the Treaty of Lisbon recognises «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».
From this point of view, the European concept receives substance from the national legal order and,
at the same time, returns a wider meaning. The effectiveness of this operation is shown even though
it fears the risk of forgetting that the concept offered at European level is the result of concepts that
seem, in many circumstances, its antithesis.
Special attention should be paid to the considerable difficulties which occur when
circumscribing the boundaries of the category of services of general economic interest and that are
justified by the change of perspective adopted by European law. Originally, the provision of public
services was related to the State policies’ aimed at expanding significantly their demand that made
them essential elements of the public policies themselves, through the interventionist and welfare
master. However, market regulation, as envisaged in the European Union, is a subsidiary of this
technique. It is characterized by the devices of exercise of activities rather than by its contents. It
acts by external instrument that are not antagonistic to the market itself. Within this ambit it is
sufficient to recall the funding criteria for obligations of universality and the method of choice of
the undertaking charged of the service provision to confirm the compliance with the principles of
neutrality and economic efficiency on which the competitive balance is based 10 .
9 ‟Communication on Services of General Interest in Europe”, op. cit., para. 20.
10 “Report on Competition Policy”, 130 (2005), available at http://ec.europa.eu/competition/annual_reports/2005/en.pdf.
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The object of services of general economic interest is lucrative business. If the justification
for the removal of these services from the competition system fails, market regulation will allow the
allocation of efficiency criteria. Indeed, it is justified only when the results of competitive
interaction are weak in comparison to the achievement of specific objectives of general interest.
As previously mentioned, according to art. 106, para. TFEU, persons engaged in economic
activity, are subject to market rules, regardless of whether they are a private or a public organization
which is recognized as having a special or exclusive right 11 . Although Member States can exercise
discretion about the quality of the services of general economic interest they provide, it seems clear
that this freedom is limited insofar as the provision of these services can be made by competitive
market. It should be noted that the concept of market implies evaluations of a political nature 12 . The
absence of a precise definition of its boundaries gives flexibility to the structure of this category of
services, which remains suspended between government choices of policies and European
dynamics.
The regulation model imposed by the European Union is intended to standardize the
regulation of all services of general economic interest. The opening of markets resulting from the
ongoing processes of liberalization implies the development in its propulsive motion, of its
homogenizing forces and operational rules.
In the definition of services of general economic interest, and in their regulation, an
important role is also played by the directive services 2006/123 13 . It covers them, if they have an
economic relevance, and considers two exceptions 14 . The first previews the exclusion from the field
of application of the directive of some services: transports, comprised harbour, healthcare and social
provisions. The second regards the principle of free circulation of services contained in art. 16 15 . It
does not find application, according to art. 17, to services of general economic interest provided in
other Member States and, in particular, to mail services, electric power, gas, distribution and
depuration of water and management refusals. In other terms, the directive leaves opened the gap of
the definition of services of general economic interest, reaffirming the freedom of Member States in
their formulation, with the single limit of the conformity to European law 16 .
4. Liberalization of services of general economic interest in European law
The Member States intervention in the economy has been revolutionized by the opening to
competition for public services 17 . This process must be framed under the Treaty on European Union
and the Treaty on the Functioning of the European Union.
Art. 3, para. 3 TEU assigns the European Union the task to promote «the sustainable
development of Europe based on balanced economic growth and price stability, a highly
competitive social market economy, aiming at full employment and social progress, and a high level
of protection and improvement of the quality of the environment». It must also work to «promote
11 LANE, R. (2000) EC Competition Law. Harlow: Pearson Education.
12 PROSSER, T. (2005) The Limits of Competition Law. Oxford: Oxford University Press.
13 Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on Services in the
Internal Market (O.J. 2006 L 376/36-68).
14 HATZOPOULOS, V. (2007) “Que rest – il de la directive sur les services”, Cahiers Droit Européen, 47: 299-358.
15 ROSS, M. (2007) “Promoting Solidarity: From Public Services to a European Model of Competition”, Common
Market Law Review, 44: 1057-1080.
16 D’ACUNTO, S. (2007) ‟Directive services (2006/123/CE): radiographie juridique en dix points”, Revue Droit Union
Européenne, 261-327.
17 DEMARET, P. (2002) ‟Mondialisation et accès aux marchés”, Revue Internationale de Droit Economique, 259-291.
7

economic, social and territorial cohesion, and solidarity among Member States». These objectives,
together with the convergence of economic performance, must be achieved through an internal
market. This is characterized by: i) the abolition of obstacles to free movement of goods, persons,
services and capital among Member States; ii) a system which ensures that competition is not
distorted; iii) the approximation of national laws necessary to its functioning; iv) a contribution to
the strengthening of consumer protection. From the combination of these factors it seems possible
to affirm how the liberalization of services of general economic interest on the one hand contributes
to the objectives identified in art. 3, para. 3 TEU and, on the other hand, is a necessary means to
achieve the same objectives. Within this ambit, an area without internal frontiers, in which the free
movement of goods, persons, services and capital in accordance with the principle of an open
market economy with free competition, allows the establishment of a common model for the
liberalization of services of general economic interest 18 .
These must be also considered in the light of art. 37 TFEU. It makes Member States to
proceed in an adjustment of public monopolies with a commercial character, so that no
discrimination results between nationals of Member States regarding the terms of supply. It is
addressed to Member States and to monopolies delegated to private operators. It does not impose
total and unconditional abolition of monopolies. Their maintenance, like that of exclusive or special
rights, may be admitted under the condition that Member States comply with the provisions of the
Treaty, in particular, with those relating to competition. As a result, article 37 TFEU justifies certain
exclusive rights to import and trade. It also concerns market monopolies of goods having
commercial nature.
Art. 37 TFEU must be analyzed in combination with art. 106 TFEU. Its first paragraph deals
with the monopolies of goods of a non-commercial origin, service monopolies and special rights. It
affirms that Member States shall neither enact nor maintain in force any measure contrary to
competition rules. Its second paragraph contains an exception. This is addressed to companies
which provide services of general economic interest and not to Member States. Even this rule offers
an exemption from competition rules when they do not cause prejudice to the development of trade
in the internal market and when they are compatible with the Treaty, in order to achieve certain
goals deemed worthy of protection. In other words, the prediction of a preferential regime in line
with the principle of proportionality shall be strictly necessary and shall aim to the completion of a
clear mandate to meet a specific interest. Its pursuit should justify the subjugation, by the
undertakings, to special rules, different from those normally applicable to firms operating in similar
conditions.
Article 106 para. 3 TFEU gives the Commission exclusive powers that are not subjected to
limitations under the principle of subsidiarity provided by art. 5 TEU. The power to take actions
against Member States granting to companies exclusive rights, that are contrary to the provisions
contained in the Treaty, is essential in the liberalization processes.
With regard to secondary law, the opening to competition of services of general economic
interest must be placed in the legal and socio-economic path by Directive 80/723/EEC on the
transparency of financial relations between Member States and their public enterprises 19 . According
to it, all businesses, whether public or private, must operate in conditions of perfect equality,
consecrating the primacy of competition rules on monopolies and exclusive rights and special
rights.
18 ‟Green Paper on the Liberalization of Telecommunication Infrastructures and Cable Television Network”, COM
(1994) 440 final.
19 Commission Directive 80/723/EEC of 25 June 1980 on the transparency of financial relations between Member
States and public undertakings (O.J. 1980 L 195/35-37).
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5. Privatization, liberalization and regulatory authorities
The neutral approach of the Treaty on the Functioning of the European Union concerning
the property right seems not to consider privatization and liberalization as two related phenomena.
The establishment of an economic system intended to protect the competitive environment has, in
fact, led the European Union institutions to have a role in boosting the sale of public enterprises.
Admitting that liberalization renders the market more efficient, it is possible to affirm that
privatization can be facilitated by the progressive statement of the incompatibility of certain
domestic provisions relating to monopolies with the ultimate goal of market integration.
The formal privatization of a public enterprise, in which its ownership remains firmly in the
hands of the State, is considered mandatory in view of its possible sale to private operators. This
phase leaves open questions concerning the regulation of the economic actors involved, both in
public and private market. The set of rules to introduce into national legal orders will affect the
discipline, the structure and operation of the privatized undertaking 20 . It manifests the danger to
compromise the freedom of competition in the European Union.
Direct negotiations with prospective purchaser would take place where national
governments reckon necessary to develop a plan for economic rehabilitation and recovery, in
consultation with the operators to which it is intended to transfer the control of the enterprise to
privatize.
This process shows its anti-competition nature supporting, through the sale of State
shareholdings, the transition from an organized market in the form of a public monopoly to a
framework of private monopoly. Since the income resulting from a monopoly position makes it
more reliable to dispose of estimates of profit for the company and, consequently, more
advantageous its acquisition, direct negotiations allow national governments to determine the value
of issue of shares at a level higher than the offer to the public depositors. As a result, this transfer
does not lead to improved efficiency of firms operating in a particular economic sector. There is no
evidence to open a protected market but, rather, it merely reflects a desire to reduce public debt.
With regard to services of general economic interest, the establishment of organized markets
in a monopolist framework is, in almost all cases, an option. The process of their erosion does not
cover their scope only in the transformation into private monopolies. In this case, the effective
liberalization of protected markets would be frustrated. It should allow a general redefinition of
skills, approaches and means of intervention models functional and compatible with the objectives
of promoting competition. In this sense, direct Member States intervention to safeguard public
interest gives way to a form of indirect intervention. It consists in determining the legal framework
and thus the rules of competition law before letting the market make its interactions 21 . As a result,
privatization and liberalization could be appreciated as two independent but combined phenomena
employed by States to draw back their direct involvement in domestic economic systems for a new
role of authority regulator.
Within this ambit, the creation of national independent and monitoring authorities is
fundamental. The regulation of tariffs and quality of the services protects consumers. Moreover, it
facilitates the review and possible repeal of the rules that assign special powers to Member States,
coherently with the domestic discipline of corporate governance.
20 ROTT, P. (2007) ‟The Responsibility of the State and the State Liability with a View to Services of General Interest”,
Diritto e Politiche dell’Unione Europea, 2: 89-100.
21 TRIANTAFYLLOU, D.N. (2007) ‟De la libéralisation à la régulation des marchés”, Revue Droit Union Européene, 653-
660.
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The internal activities of monitoring and regulation are coordinated, at European level, by
the networks linking the national authorities in charge of them and the European Commission,
which has the task of promoting the uniform and consistent application of European law and
advising the European institutions 22 . In this regard, one can identify some common features
between “European committees or groups” that play a role of connection in the field of services of
general economic interest, such as ERG for telecommunications 23 and ERGEG for electricity and
gas 24 . Their purpose is to promote cooperation and coordination between national regulatory
authorities in order to contribute to the development of the internal market and to a level playing
field. This kind of cooperation – essentially horizontal – is taking place through acts of soft law that
rarely become legal binding acts 25 . These committees also play an advising role for the European
Commission which has the responsibility of their vertical coordination and the power to make
binding decisions in this topic.
Nevertheless, privatization does not imply deregulation. Its output is a new and profound readjustment
on assumptions that differs from the previous regulations.
Under this approach, one must estimate the relationship between the process of privatization
and competition policies. As a matter of fact, it is necessary to rearrange the monopoly sectors
concerned, removing entry barriers for new competitors and taking into account the undergoing
financial and technology changes at European level 26 .
Liberalization of services of general economic interest and privatization of public enterprises
providing them are taking place contemporary in order to maintain the proper functioning of
competitive mechanisms. The safeguard of the public interest can be guaranteed through the
provision of instruments for Member States to control the privatized enterprises. The most relevant
among these ones are golden shares 27 . They are nominal shares, held by governments, that give the
right of decisive vote in a shareholders-meeting and in specified circumstances. Usually they are
implemented through clauses in the company’s articles of association, and they are designed to
prevent stake building above a certain percentage ownership level, or to give a veto powers over
any major corporate action, such as the sale of a major asset or subsidiary or of the company as a
whole.
Finally, on the one hand, through independent authorities, Member States become the
regulators of the liberalized market, according to the instructions and the requirements defined by
European law. On the other hand, they continue to play an active role in the dynamics of the same
22 BAVASCO, A.F. (2004) “Electronic communication: a new paradigm for European Regulation”, Common Market Law
Review, 41: 87-118.
23 Commission Decision 2002/627/EC of 29 July 2002 establishing the European Regulators Group for Electronic
Communications Networks and Services (O.J. 2002 L 200/38/40).
24 Commission Decision 2003/796/EC of 11 November 2003 on establishing the European Regulators Group for
Electricity and Gas (O.J. 2003 L 296/34–35).
25 SCUTO, F. (2007) “La governance nel settore dell’energia e gas attraverso la rete europea delle autorità indipendenti”,
Rivista Italiana Diritto Pubblico Comunitario, 267-302.
26 SNELL, J. (2010) “The Notion of Market Access: A Concept or a Slogan”, Common Market Law Review, 47: 437-
472.
27 ARTES, A. (2009) “Advancing harmonization: should the ECJ apply golden shares’ standards to national company
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market through the control of privatized companies’ work with the golden shares. If, through the
processes of liberalization and privatization, Member States try to back their position in the
European economic system, golden shares are the instrument through which this decline remains
modest and limited in scope.
6. Conclusion
Originating from a set of causes that are common to most Member States, liberalization of
services of general economic interest and privatization of public enterprises providing them are the
most important processes that have characterized the internal market in the last fifteen years.
Their evolution cannot be related only to the mere impact of European law although it has
contributed to them in a significant way.
Privatization has its basis in national legal systems and must be regarded as a phenomenon
in addition to that of liberalization, whose source is in the European Union. The latter implies the
loss of one of the traditional reasons for the existence of the public undertakings and, as a result,
justifies the former.
However, the relationship between European law and privatization may not yet be
considered fully defined. The sale of public enterprises is not solely a mechanism of transfer of
ownership of an undertaking by the State to a private trader. Its analysis should not only be done in
this respect, but must take place within the wider context of radical change of the role of the
Member States in the internal market. This new role is also achieved through the liberalization of
certain sectorial markets and the provision of special legal instruments designed to safeguard the
collective interests that give rise to the establishment of public enterprises.
The definition of services of general economic interest remains in full evolution, flexible
and with some gaps. It will raise many interpretative issues in the future. The possibility to adopt a
directive on them is still far in the time, and it is not therefore possible to supply a European
definition that on a national level leaves aside from the attribution of a detail mission. In fact,
according to Protocol no. 26 of the Treaty of Lisbon on them, an important role on this field is
played by national, regional and local authorities since they have a wide freedom to delineate the
existence and the structure of services of general economic interest. This allows the safeguarding of
the peculiarities of national legal orders in the European Union in which the opening towards legal
order of other States becomes more and more important. In conclusion, the flexibility of the notion
in question can be estimated positively.
Liberalization of services of general economic interest and privatization of their providers
need an appropriate re-balance of powers in the internal market. This could have place through the
antitrust vigilance. Such activity must prevent that exceptional devices acquire dimensions or
produce effects exceeding their justification and must avoid alterations of the economic competition
that do not answer to some authentic social public mission. As a result, antitrust rules can carry out
a function of balance for the free market. In this context, Member States change their function but
maintain an important role. From the supply of the services of general economic interest they
become the responsible of the regulation of the forces of the internal market that guarantee the
services themselves. The European Union promotes their activity through the implementation of a
system of coordination between national regulation authorities and between the latter, considered as
a whole, and the European Commission. The first coordination takes place through acts of soft law
while the second leads to binding decisions.
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