Financing Services of General Economic Interest

AuthorErika Szyszczak
Publication Date01 Nov 2004
Financing Services of General Economic Interest
Erika Szyszczak
Services of general economic interest
play an important role in the lives of the
citizens of Europe. Increasingly such services have come under attack from the
use of the competition and internal market law provisions of the EC Treaty,
revealing that the European Union lacks a clear strategy to promote the role of
such services in the new economy. Article 86(2) ECis one provisionwhich allows
for the mediation between traditional State duties towards citizens and the
demands of competitive markets. Additionally, Article16 EC recognises that such
services have a role toplay in the future constitutional shapeof Europe and this is
enhanced by the recognition of access to services of general economic interest as
one of the fundamental rights of the EU in Article 36 of the Charter of Funda-
mental Rights of the Union.
While of constitutional importance, neither provi-
sion provides a legal base to develop the role of public services in Europe.The
White Paper on services of general interest claims that such services ‘‘were also
the subject of intense debate within the Convention on the future of Europe’’
the issue of competence in the area of services of general economic interest was not
seen as a priority by the Convention on the Future of Europe. TheWorking Group
on Social Europe could not agree on whether Article16 EC should be amended to
provide a legalbase for EU level legislation on services of general economic interest
and the resulting amendment toArticle 16 in the draftTreaty establishing a Con-
stitution for Europe, Article III-6, emphasised that services ofgeneral interest were
subject to European law but did not provide the legal means for the enactment of
such laws, opening up the possibility that the EU could be in breach of its funda-
mental duty to respect the role of such services in competitive markets in Europe.
The EC Commission has used a soft law discourse to promote a more clearly
de¢ned working relationship between the aims of services of general economic
interestand the operationof the internal marketi norder to secure a clearerunder-
Centre for European Lawand Integration, LawFaculty, Universityof Leicester.
1 Thisterm is used to describe a myriad of services embracing ‘‘services of general interest’’,‘‘universal
service obligations’’ and ‘‘public service obligations’’. For a discussion of the various terms see EC
Commission, GreenPaperon Servicesof GeneralInterestCOM(2003) 270 ¢nal, 21May 2003 and Com-
municationFromthe Commissionto the EuropeanParliament,The Council,TheEuropean Economicand Social
Committeeand the Committee of the RegionsWhite Paperon Services of General Interest COM(2004) 374
¢nal,12 May 2004.
2 Now forming Article II-36 of the draft Treaty establishing a Constitution for Europe. The most
recent draft of the Constitution can be found at:
cg0086.en04.pdf.(Last visited 10 Sept. 2004)
3 Supra n 1, para 1.
4 Fi nal Reportof Working Group XI on‘‘Social Europe’’,CONV 516/03.
rThe Modern LawReview Limited 2004
Published by BlackwellPublishing, 9600 Garsington Road,Oxford OX4 2DQ,UK and 350 Main Street, Malden, MA 02148, USA
(2004) 67(6) MLR 982^1011
standing ofthe constitutional foundations of the economic and political constitu-
tion of Europe.
This process has been interrupted by a series of attacks upon the
provision of services of general economic interest using Article 86 EC and the
State Aid provisions, (Articles 87 and 88 EC) in the national courts.The issue of
whether ¢nancing of services of general economic interest can, and should, be
regulated at Europe an level has been on the European political agenda through-
out the1990s but the sensitivity of the issuehas stalled progress towards an accep-
table regulatory regime.
Where the State ¢nances activities which are not of an economic nature, for
example, security, justice, social security and education,
such activities are not
caught by the EC Treaty. But when the State ¢nances activities of an economic
nature the direct ¢nance, or other bene¢ts,
may be a State Aid which must be
approved and monitored by the Commission. The Commission and the Eur-
opean Court of Justice initially took the view that such payment (or advantage)
for providing public services was compensation for providing the service, and
where the payment (or advantage) was not excessive, it fell outside of the scope
of the State Aid regime.
But the Commission and the European Courts have
oscillated between a State Aid and a compensation approach.The ruling in Alt-
could have heralded a new regulatoryapproach towards the provision and
¢nancing of services of general economic interest in Europe, settling di¡erences
of opinion between the Member States of the EU, the Commission, the Advo-
cates General, the Court of First Instance (CFI) and the Court of Justice as to
whether payments for public services are caught by the State Aid rules of the
EC Treaty.
A State Aid approach
The question of whether payments for public services can amount to State Aid
arises because of the wide de¢nition given to the concept of a State Aid by the
European Courts and the focus upon the e¡ects of a measure rather than its cate-
gorisation by a Member State. But payment for public services are not always
5 Commiss ion Communication on Services of General Interest in Europe OJ 1996 C281/3; Com-
mission Communication on Services of General Interest in Europe OJ 2001 C17/4; Commission
Reportto the Laeken European Council, Services of General Interest COM (2001)598 ¢nal.
6 Se e theWhite Paper,supra n 1 atpara 4.1.
7 The Court and the Commiss ion stressthat Member States are free to determine their public ser-
vices.The question of whether such services are bound by the EC Treaty rules is essentially a ques-
tion of Community law, s ee theWhite Paper,supra n 1,para 4.2.
8 For example special tax, social security rules, State guarantees, special or exclusive rights, tari¡
averaging, contributions by market participants and solidarity based ¢nancing.
9C-240/83ADBHU [1985] ECR 531; Disposal ofGerman Waste Oils (1969) EC Bull II 9/10 35^36. It
may be hard to separate out State Aid from revenues earned by the undertaking supplying the
service since in the light of the ruling in PreussenElektrasuch revenues would be deemed not to have
come from Statesources and would not be classi¢ed as State Aid (C-379/98 [2001] ECR I-2099).
10 C - 2 80/ 0 0 AltmarkTrans GmbH and Regierungspraesidium Magdeburg vNahver kehrsges ellschaf t Altmar k
GmbH [2003]ECR I- 7747.
Erika Szyszczak
983rThe Modern LawReview Limited 2004

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