Paradoxical draft directive: Concession undermined by ‘in house’
By Xavier Bezançon (*) | Tuesday 20 March 2012
Is a draft EU directive about concessions really aiming at the objective it sets to itself and which is the opening of markets in Europe? As a matter of fact, this draft includes, in Article 15, a sizeable extension of the ‘in house’, which significantly deviates from the traditional principles of European public markets, notably relying on competition in the provision of services.
If it is understandable to protect the freedom of contracting authorities to organise their management mode (‘in house’ or ‘delegation’), it is nonetheless important to maintain healthy rules for the management of public funds through the use of competition and to submit the provision of services, whatever their nature, to the requirements of ‘free and undistorted’ competition as prescribed by EU law for the past fifty years.
The objective of the directives is not to close public markets by creating ‘turfs’ in favor of ‘in house’ management systems that would be by essence eternally excluded from competition - all the more so when it is about banal provisions - but instead to open up competition to operators, whoever they may be.
Is it tolerable to include many exceptions to their application, mainly a small part of the case law on the ‘in house’, which constitute an exemption to the fundamental rules of advertising and competition? This approach can only support the member states of the Union to resort to state control, thus risking causing the closure of more sections of markets to private companies.
The proposal currently under discussion does not take into consideration the overall case law on the subject: the Teckal judgement is not the only one relevant to ‘in house’ contracts; it would be interesting to take into account the ANAV judgement (6 April 2006), which reads as follows: “26. It should be made clear that, since it is a matter of a derogation from the general rules of Community law, the two conditions stated in Paragraph 24 of this judgement must be interpreted strictly and the burden of proving the existence of exceptional circumstances justifying the derogation to those rules lies on the person seeking to rely on those circumstances”.
The court has set things right perfectly: the principles of competition are fundamental, a shortage in the provision of services can by itself be detrimental to competition.
The ‘in house’ issue comes through clearly: it is based on exceptional circumstances and is not generalisable since it is a tolerated exception when it is locally demonstrated. EU law should respect the whole case law and not depart from the founding principles of the treaty, that is the opening of markets, the suppression of barriers and the freedom of trade and industry.
For the same reason, horizontal cooperation between contracting authorities planned in Article 15-4 and solely based on the City of Hamburg Decree represents an insufficient basis in light of the treaty principles: How to depart from the principles towards an isolated decree?
The exclusion of contracts between a contracting entity and a related company as planned in Article 11 incorporates a provision of Directive 2004/17, which tackled the specific situation of private companies, which could be qualified as contracting entities when they held exclusive or special rights. This provision has been misguided when it was decided to extend it to all contracting entities, even those that are public (contracting authorities). Introducing this provision into the directive on concessions would mean enabling public or parastatal entities to assign major missions to any qualified entity of a related company without any competition. This would mainly enable German authorities to assign concession contracts to their Stadtwerke even when society includes private capital and to get around the stadt Halle decree.
The European lawmaker would be well advised to use Regulation N°1370/2007 of 23 October 2007 public passenger transport services by rail and by road, which provides rules that strictly outline ‘in house’ activities by resorting to an act (a contract or a unilateral act), by limiting the duration of assigned contracts, which would in turn allow the authorities to check if public management is still the optimal solution, and, on the other hand, by requiring the prior publication of pre-information notices.
But the true respect of the law on public markets would be to always proceed through competition before taking any decision with regard to the organisation mode.
(*) Xavier Bezançon is secretary-general of the Forum Européen des Entreprises Générales and an expert adviser to the European Economic and Social Committee (EESC)