Services of general economic interest in primary law

In primary EU law, a number of provisions refer to services of general economic interest, without, however, providing a definition of this concept.

Article 106(2) TFEU (ex Article 86(2) EC) stipulates that: ‘Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in the Treaties, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them.’ This provision was particularly important in the liberalization process promoted by the Commission explained before. In several rulings the Court established that Article 106(2) does not per se allow exclusive rights to be granted to national undertakings,[1] but under strict conditions,[2] it can allow an exception to competition law, where this is indispensable and necessary for the application of services of general interest.[3]

Article 14 TFEU (ex Article 16 EC) concerns services of general economic interest in the European Union. It states that ‘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 ( . . . ), which enable them to fulfil their missions’. Article 14 therefore underlines the importance of services of general economic interest as representing common values in society and for enhanced cohesion in the EU.[4] However, this provision foresees no power shift between Member States and the EU.[5]

In addition, Protocol No 26 to the TFEU deals with the wider concept of ‘services of general interest’, which covers both ‘economic’ and ‘non-economic’ services. This Protocol provides interpretative provisions emphasizing the importance of services of general interest to ensure ‘a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights’. While the concept of services of general interest is not defined in the Protocol, the European Commission has provided some guidance in a later document, describing them broadly as ‘services, whether “economic” or not, that the Member States regard as being of general interest, and which they therefore subject to specific public service obligations’.[6]

A third relevant provision can be found in the ‘Solidarity’ chapter of the EU Charter of Fundamental Rights. Article 36 of the Charter explicitly stipulates that ‘(t)he Union recognises and respects access to services of general economic interest as provided for in national laws and practices, in accordance with the Treaty establishing the European Community ( . . . )’. The aim of this provision is to promote the social and territorial cohesion of the EU.[7] The specific reference to ‘national laws and practices’ highlights that national rules and measures regarding access to services of general economic interest are to be respected by the Union.

Divergent views exist with regard to the potential effect of the Charter on services of general interest.[8] On the one hand, a number of scholars argue that it may lead to more flexibility in the use of competition rules when services of general economic interest are necessary. This means that exceptional rights and state aid can be more readily granted to the operators of these services. On the other hand, some scholars argue that the Charter mainly has a political value and does not grant particular rights or obligations that can be claimed before the ECJ.[9]

At a policy level, the European Commission has proclaimed its commitment, both in a Green and a White Paper on Services of General Interest, to actively improve universal services.[10] In particular, the White Paper emphasized that universal services aim at guaranteeing access for everyone, whatever their economic, social, or geographical situation, to a service of a specified quality at an affordable price.[11]

When it comes to the specific interest of these services for the consumer, they are of importance in two ways: first, they promote affordable and easy access to basic consumer products or services; and secondly, they empower consumers in the market and provide a balanced relationship with the operators. In the 2007-2013 EU Consumer Policy Strategy the European Commission stressed its goal to promote and protect consumer rights with regard to services of general interest and specific related sectors.[12]

The evolution in electronic communications law between liberalization and increased competition on the one hand, and universal service on the other, raises questions regarding the balance of these two opposing interests. The EU legislation traditionally followed a trend towards maximum competition, and minimal guarantee of services of general interest.[13] However, the case law does show that the ECJ has taken a more favourable stance towards social values.[14] Such a trend is also visible in the recent ‘Citizens’ Rights’ Directive which promotes an inclusive-oriented framework.

  • [1] Many Member States were against this liberalization trend; see e.g. Case C-202/88, FrenchRepublic v Commission of the European Communities [1991] ECR I-01223; and see J. Baquero Cruz,‘Beyond Competition: Services of General Interest and European Community Law’, in G. deBurca (ed), EU Law and the Welfare State: In Search of Solidarity (Oxford: OUP, 2005), pp. 169 et seq.
  • [2] E.g. derogations from competition have to be made available to all undertakings withoutdiscrimination and limited to specific universal service obligations.
  • [3] See more in J. Maillo, ‘Article 86 EC, Services of General Interest and EC Competition Law’,in G. Amato & C.-D. Ehlermann (eds), EC Competition Law: A Critical Assessment (Oxford: HartPublishing, 2007), p. 591.
  • [4] W Sauter, ‘Services of General Economic Interest and Universal Service in EU Law’, (2008)33 Eur. L. Rev., pp. 167-93; P. Craig & G. de Burca, EU Law: Text, Cases and Materials, 4th edn(Oxford: OUP, 2008), p. 1072.
  • [5] M. Ross, ‘Promoting Solidarity: From Public Services to a European Model of Competition?’,(2007) 44 CML Rev., pp. 1057-80.
  • [6] Commission Staff Working Document Guide to the application of the European Union ruleson state aid, public procurement and the internal market to services of general economic interest, andin particular to social services of general interest, Brussels, 7.12.2010 SEC(2010) 1545 final, p. 15.
  • [7] Nihoul & Rodford (n 9), fn. 5.12.
  • [8] E. Picard, ‘ Citizenship, Fundamental Rights, and Public Services’, in M. Freedland & S.Sciarra (eds), Public Services and Citizenship in the European Union (Oxford: OUP, 1998), pp. 83 et seq.
  • [9] See Nihoul & Rodford (n 9), fn. 5.15.
  • [10] See Green Paper on Services of General Interest, COM(2003) 270; the White Paper of 12May 2004, COM(2004) 374.
  • [11] White Paper on Services of General Interest, COM(2004) 374 final.
  • [12] Communication from the Commission, Consumer Policy strategy 2007-2013, Empoweringconsumers, enhancing their welfare, effectively protecting them, COM(2007) 99 final, 13.3.2007.
  • [13] See Baquero Cruz, ‘Beyond Competition’ (n 26), pp. 169 et seq. Rott, ‘Consumer andServices of General Interest’ (n 7), p. 53; however, for a different opinion, see Prosser, The Limitsof Competition Law (n 7).
  • [14] See in general e.g., Case C-67/96, Albany International BV v Stichting BedrijfspensioenfondsTextielindustrie [1999] ECR I-5751; see also Baquero Cruz (n 26), pp. 169 et seq.
 
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