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Services of general interest in Europe

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1) OBJECTIVE

To recognise the contribution made by services of general interest to establishing a single market accessible to all and to clarify the scope of the competition rules in this area and the criteria governing their application.

2) ACT

Commission Communication - Services of general interest in Europe [Official Journal C 281 of 26.09.1996].

Amended by:

Commission Communication - Services of general interest in Europe [Official Journal C 17 of 19.01.2001].

3) SUMMARY

Background

Article 16 of the EC Treaty acknowledges the place of services of general interest among the shared values of the European Union and recognises their place in promoting economic and social cohesion, contributing to the competitiveness of the European economy. Services of general interest provide consumers with better-quality services and place European firms in a better position to compete worldwide.

In 1996 the Commission presented its first notice on services of general interest, followed in 2001 by a new notice designed to clarify the scope and criteria of application of Community rules to services of general interest.

Role of services of general interest

Services of general economic interest (SGEIs) are different from ordinary services in that public authorities consider that they need to be provided even where the market is not sufficiently profitable for the supply of such services. The concept of services of general interest is based on the concern to ensure that a quality service is provided at an affordable price everywhere for everyone. Services of general interest contribute to achieving the objectives of solidarity and equality of treatment underlying the European model of society.

The classic case is the obligation to provide a given service throughout the territory of a country at affordable tariffs and on similar quality conditions, irrespective of the profitability of individual operations.

Article 16 of the EC Treaty recognises the role which services of general interest play in promoting social and territorial cohesion and calls on the European Union and the Member States to ensure that such services operate on the basis of principles and conditions which enable them to fulfil their role. The role assigned to services of general interest and the special rights which may attach to them stem from general interest considerations such as security of supply, environmental protection, economic and social solidarity, regional planning and the promotion of consumer interests. The guiding principles are continuity, equality of access, universality and transparency of the services.

Services of general interest make an important contribution to the overall competitiveness of European industry and to economic, social and territorial cohesion. The concept of services of general interest is flexible and adaptable, evolving in line with the characteristics of the relevant sector and technological change.

Scope

Article 86(2) of the EC Treaty provides that services of general interest are subject "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".

Where the competition rules apply, compatibility with such rules is based on three principles:

  • neutrality as regards the public or private ownership of companies (Article 295 of the EC Treaty);
  • Member States' freedom to define what they regard as services of general interest;
  • restrictions of competition must not exceed what is necessary to ensure effective fulfilment of the relevant task.

These principles allow for some flexibility that takes account of the Member States' different circumstances and objectives and of differences between sectors.

The Court of First Instance recently decided (Case T-106/95 FFSA [1997] ECR) that compensation granted by the State to an undertaking for the performance of general interest duties constitutes state aid within the meaning of Article 87(1) of the EC Treaty. However, aid is subject to the competition rules only where it involves an economic activity and affects trade between Member States. It is rare for a service of general interest to meet these two conditions.

Compensation may nevertheless be deemed compatible with Community legislation if it meets the following conditions:

  • Article 86 provides that the competition rules apply to services of general interest only insofar as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them;
  • Article 87(2) and (3) provides that the following are compatible with the common market: aid having a social character, aid to repair the damage caused by natural disasters, aid to facilitate the development of certain activities or certain regions, and aid to promote culture and heritage conservation;
  • Article 73 covers aid for land transport.

The September 2001 report discusses the possibility of the Commission drawing up a list of services of general interest that are of a non-economic nature.

Procedure

In principle, for any compensation to meet the conditions required to be regarded as aid, it must be notified before being granted. This does not apply to de minimis aid and aid granted under Council Regulation (EEC) No 1191/69 on the concept of a public service in transport by rail, road and inland waterway.

Services of general interest: sectors concerned

At the European Council held in Lisbon in March 2000, the heads of state and government not only acknowledged the key role of services of general interest but also called for more rapid liberalisation in the gas, electricity, transport and postal services sectors.

Some universal services that operate on a European scale, such as air transport, telecommunications, postal services and energy, have already been the target of Community liberalisation measures:

  • Telecommunications: Under the Community definition of universal service, users must be able to have access at a fixed location to international and national calls, as well as emergency services. The definition also covers a number of additional services, such as directory services and other facilities. It does not cover mobile telephony or broadband access to the Internet. Following the development of commercial television mainly since the 1980s, liberalisation in the television broadcasting sector was established by the " Television without frontiers " Directive.
  • Transport: The liberalisation of road transport was first introduced in 1969 through a system of Community quotas for international journeys. The quotas were abolished in 1998. Access to the international market has been liberalised since 1 June 1992.
    In maritime transport, maritime cabotage services were liberalised as of 1 January 1993. However, it is in air transport that the greatest progress has been achieved, following the completion of the process of liberalising the market on 1 July 1998.
  • Energy: The opening-up of the gas and electricity sectors to competition is still too recent to be able to assess it fully. It is only as from 2000 that the Member States have been required to open up 30% and 20% respectively of their domestic demand for electricity and gas to European competition.
  • Postal services: The European Parliament and the Council have adopted a proposal amending Directive 97/67/EC with a view to liberalising postal services by 2003 for mail weighing up to 100 grams and by 2006 for mail weighing more than 50 grams.

Actual experience has shown that compliance with the competition rules and the internal market are wholly compatible with maintaining a high level in the provision of services of general interest.

Other Community contributions in support of services of general interest

Other Community policy instruments and actions share the same consumer protection objectives, namely:

  • the implementation of the trans-European networks programme;
  • the initiative for the creation of a European research area;
  • the action plan on consumer policy;
  • the e-Europe action plan entitled: An information society for all.

Horizontal consumer protection legislation also applies to services of general interest, dealing with issues such as unfair contract terms, distance selling, etc.

Lastly, in the context of the World Trade Organisation (WTO), and more particularly the General Agreement on Trade in Services, the Community is committed to maintaining its services of general interest.

4) IMPLEMENTING MEASURES

5) FOLLOW-UP WORK

Report from the Commission on the state of play in the work on the guidelines for state aid and services of general economic interest (SGEIs) [COM(2002) 636 final of 27.11.2002 - Not published in the Official Journal].
Until substantial legal certainty has been established, the Commission considers that the meeting scheduled for 18 December 2002 with Member States' experts should focus on five matters not directly linked to the legal definition of remuneration:

  • definition of SGEIs and freedom of choice for Member States;
  • scope of the Community rules on state aid;
  • relationship between Member States and undertakings entrusted with the operation of SGEIs;
  • procedure for selecting undertakings entrusted with the operation of SGEIs;
  • financing of public service.

Following the meeting of 18 December, a second meeting will be held once the Court's case law has been consolidated.

Report from the Commission on the status of work on the guidelines for state aid and services of general economic interest [COM(2002) 280 final of 5 June 2002 - Not published in the Official Journal].
With a view to starting the first stage of consultations in 2002 (as described in the 2001 report), the report takes stock of the relevant case law, focusing on recent developments. In 1997 the Court of First Instance (Case T-106/95 FFSA [1997] ECR) recognised that the remuneration granted by the state to an undertaking in order to offset the cost of public service obligations constitutes aid within the meaning of Article 87(1) of the EC Treaty. In 2001, however, the Court of Justice (Case C-53/00) held that compensation for public service costs does not constitute state aid provided that the amount does not exceed what is necessary for the operation of services of general interest.
If this case law is upheld, the two-stage procedure proposed by the Commission in its 2001 report cannot be continued. However, the Commission considers that, even in that eventuality, rules on the methods for calculating compensation and the arrangements for selecting service providers should be established.
Pending further judgments from the Court of Justice, the Commission will be holding an initial meeting with experts from the Member States in the autumn of 2002.

Report to the Laeken European Council: Services of general interest [COM(2001) 598 of 17 October 2001 - Not published in the Official Journal].

This report is intended to increase legal certainty by explaining the scope of application of the internal market and competition rules laid down in the Treaty.
Following the meeting held on 7 June 2001 with representatives of the Member States, the Commission is considering a two-phased approach. As a first step, the Commission intends to hold wide-ranging consultations in 2002 in order to establish a Community framework for state aid granted to undertakings entrusted with the provision of services of general economic interest. This could specify the conditions for the authorisation of state aid schemes. As a second step, the Commission will evaluate the experience gained with the application of the framework and, if justified, will consider adopting a regulation exempting certain aid in the area of services of general economic interest from the prior notification requirement. In order to prepare for the possible adoption of such a block exemption regulation, the Commission would need to submit in due time a proposal for an amendment to Regulation (EC) 994/1998.
As regards the list of services of general interest of a non-economic nature referred to in the communication, the abstract definition of non-economic services has, in the light of the definition consistently given by the Court of Justice (namely "that any activity consisting in offering goods and services on a given market is an economic activity"), proved in practice to be very difficult. The report proposes that the Commission should in future add a specific section on services of general interest to its annual report on competition policy setting out how the competition rules were applied to such services. The Commission will in future also identify cases relating to services of general economic interest in its state aid register.
While Member States are free to decide how the service should be operated and may decide to provide a public service themselves, directly or indirectly, they must follow the procedural rules where they decide to entrust the provision of the service to a third party. The Commission will examine whether additional measures are required to clarify further the rules and principles applicable to the selection of the provider of services of general interest.
In order to ensure high-level performance of services of general economic interest, the Council has called for a more systematic evaluation to be carried out by national, regional and local authorities. The Commission will also draw up sectoral reports and introduce a horizontal and comparative evaluation procedure on the effectiveness of implementing measures in the Member States.
The report points out that access to services of general economic interest has been placed among the fundamental rights of the European Union, constituting Article 36 of the Charter of Fundamental Rights of the European Union.

This summary is for information only. It is not designed to interpret or replace the reference document, which remains the only binding legal text.

Last updated: 08.02.2003
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