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Reform of the EU State aid rules on Services of General Economic Interest
This communication aims to launch the political debate on the upcoming revision of the State aid package on Services of General Economic Interest (SGEI).
Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 23 March 2011 – “Reform of the EU State Aid Rules on Services of General Economic Interest” [COM(2011) 146 final – Not published in the Official Journal].
The package on State aid for Services of General Economic Interest (SGEI) is set to be revised. The current package includes a number of measures adopted in 2005, in particular the SGEI Decision and the SGEI Framework, in which the Commission clarified the application of Articles 106 and 107 of the Treaty on the Functioning of the European Union (TFEU) (on State aid) to compensation for SGEI.
In its communication “Towards a Single Market Act”, the Commission undertook to adopt, by 2011, a communication and a series of measures on services of general interest. The Commission has emphasised that the EU and its member countries must ensure that public services are easier to operate at the appropriate level, adhere to clear financing rules, are of the highest quality and are accessible to everyone. EU competition rules only apply to those services of general interest that are “economic” in nature.
Review of the SGEI State aid rules
The overall objective of the proposed reform of the State aid rules for SGEI is to increase the contribution that SGEI can make to the wider EU economic recovery. EU countries need to guarantee certain services at affordable conditions to their citizens, such as hospitals, education, social services, communications and transport.
In accordance with the requirements of the SGEI Decision and the SGEI Framework, the Commission has conducted a wide consultation. This included asking EU countries to report on the application of the current package on SGEI as well as launching a public consultation. Overall the consultation process concluded that the introduction of the current package on SGEI was generally welcomed and that the existing legal instruments have made a positive contribution to the overall objective of legal certainty. The consultation also, however, demonstrated the need for improvement; in particular, the need for clearer, simpler, more proportionate and more effective instruments to ensure an easier application of the rules. To achieve this, the Commission is considering basing the upcoming reform on the two key principles of clarification and a diversified and proportionate approach.
To ensure an improved clarity, the Commission is considering providing further guidance on core issues in the field of State aid rules for SGEI. Insofar as concepts are defined by the Treaty on the Functioning of the European Union (TFEU) as interpreted by the Courts, the Commission’s role is limited to providing guidance on how it understands the TFEU and the case law. The Commission considers giving guidance, inter alia, on:
- the distinction between economic and non-economic activities under State aid rules and the qualification of certain entities as undertakings;
- the limits that State aid rules impose on EU countries when defining an economic activity as an SGEI;
- the conditions under which compensation for certain SGEI provided at local level affects trade between EU countries, thereby falling within the scope of State aid rules;
- the requirements which public authorities have to follow under State aid rules when they entrust an undertaking with the performance of an SGEI;
- the conditions under which compensation for SGEI does not involve State aid because the tender selects the provider at the least cost for the community or because the price charged is in line with that of an efficient and "well-run" undertaking (these two alternatives derive from the European Court of Justice’s Altmark judgment);
- how to increase convergence between the application of State aid and public procurement rules;
- the interplay between the rules of the package and other sector specific SGEI rules.
The current package on SGEI already distinguishes different levels of scrutiny. In a diversified and proportionate approach, the Commission is planning to differentiate to an even larger extent between different types of services depending on the extent to which State aid in these economic sectors poses a serious risk of distorting competition. This would involve:
- simplification of the application of the State aid rules for certain types of social services organised by local communities, which are particular in their financing structure and objectives and which only have a minor impact on intra-EU trade;
- an increased emphasis on efficiency of large-scale commercial services entrusted with public service obligations, by taking into account the efficiency and quality levels of the SGEI provider in the compensation granted.