Council of European Municipalities and Regions (CEMR)
European section of United Cities and Local Governments

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Local and regional governments as service providers

Public services - 17.02.2005

CEMR suggest better definition of services of general economic interest (SGEI)
The Council of European Municipalities and Regions (CEMR) suggests a unique criterion to assess whether a service of general interest is of a commercial nature or not.
Speaking at the conference on public services organised by the European Socialist Party Group in the European Parliament (Brussels 15/16 February 2005), CEMR secretary general Jeremy Smith said there are two core problems with the current situation:
First, the assumption that a single set of rules should apply to all, from the largest pan-European network industry, to the smallest local public service. And second, the fact that the European Commission has not discussed the proper relationship between public services and competition law in one coherent debate. Instead, it has adopted a fragmented and dispersed approach (Green and White Papers on SGIs, Green Paper on Public Private Partnerships, the Monti Package...), making it very difficult to see the whole picture.
What is a service of general "economic interest"?
Jeremy Smith went on stressing on the need to find a propre definition of a service of general economic interest: In any common sense world, it would be accepted that "economic" means that the service is of a commercial nature with a strong financial purpose. On the other hand, it would seem ridiculous to assume that purely social services are economic. Yet the Commission and the European Court of Justice have managed to define almost everything that moves as economic - even if the purpose is purely social, and the service purely local! Their criterion is not the nature of the service, or the public interest the service meets, but rather whether there is a market based operator in the field. If yes, the service is likely to be defined as "economic".
We argue that the legal test of whether a local service is or is not "economic" should not depend on the existence of market operators somewhere in the EU, but on the very nature of the service undertaking, whether it is or not of a commercial nature. Interestingly, the Public Procurement Directive of 2004 gives a definition of "public body"as any body "established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character." Is that not a good definition of a non-economic service?
European competition law is not appropriate or proportionate as an instrument for dealing with purely local, non-commercial services. Local services of a social, non-commercial character should not be within the scope of the European Union, since neither the existing Treaties nor the Constitution cover them. Local authorities need to have a range of choices on how best to deliver their services. If they decide to set up legal entities which they own or dominantly control, there should not be a legal duty to tender out those services, provided the legal entity does not compete on other markets because this is not in any meaningful sense a market activity.
It should also be made clear that the payment of reasonable compensation to an SGEI on whom public service obligations are imposed is the opposite of state aid.
The conference was organised by Evelyne Gebhardt (DE) and Gilles Savary (FR) of the Socialist Party Group in the European Parliament.
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