Abstract
This introductory chapter outlines the legal and political context which has led services of general economic interest to become a constitutional concept of EU law, and the regulatory developments in the field of social services in the Union. It introduces the main objective of the book which is to find out whether it is possible to understand SGEI as a constitutional EU concept relevant throughout the EU Treaties, and whether a transparent and loyal enforcement of the Treaty principles attached to SGEI can restrict the Member States’ discretion to liberalize social services and the expansion of a European market for social services. In order to answer this main research question, three sub-questions are formulated and addressed in the three main parts of the book. The chapter outlines the theory and method used in the study, which includes a case study on Swedish regulation of social services in part III.
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Notes
- 1.
The term “partial privatization” is used here as these entities, although privately owned, continue to be, for the most part, financed by public resources.
- 2.
See letter of the Head Section for Market and Competition Division at the Swedish Ministry of Enterprise, Energy and Communication, registered under reference COMP/H-2/BC—(2012)33624, dated 29.03.2012.
- 3.
Commission, “The Application of EU State Aid rules on Services of General Economic Interest since 2005 and the Outcome of the Public Consultation”, SEC (2011) 397, p. 30. In this paper, the Commission evokes the decisions without reference to their numbers, but underlines that the public financing was found to comply with EU state aid rules.
- 4.
Commission Decision of 28 October 2009 on the public financing of Brussels public IRIS hospitals (Belgium) in case SA.19864 (ex NN54/2009)—2014/C. The first decision not to raise objections against the aid measures, annulled by the GC, is only available in Dutch and in French.
- 5.
Case C-41/90 Höfner [1991] ECR I-1979, para 21. In this study, the expression “competition rules” is meant “in a broad sense”, in other words both EU competition rules (often improperly called “antitrust rules”), and EU state aid rules.
- 6.
By “EU market law” is meant here EU law on free movement, procurement, competition and state aid.
- 7.
Directive 2011/24/EU of the European Parliament and of the Council of 9 March 2011 on the application of patients’ rights in cross-border healthcare (the Patients’ rights Directive) [2011] OJ L88/45.
- 8.
In this study, the EU procurement directives adopted in February 2014 are referred to as “the 2014 procurement directives”, while the EU procurement directive in force until April 2016 are referred to as “the EU procurement directives”.
- 9.
Krajeswski 2009, p. 503.
- 10.
Van de Gronden holds that “the analysis of the CJEU’s case law demonstrates that EU free movement law may force Member States to introduce elements of competition in their national schemes governing [social services of general interest (SSGI)]. Although it is for the Member States to regulate these services, the stance of EU law is not neutral in this respect; rather it is based on the view that competition should play some role in the national organisation and provision of SSGI.” See van de Gronden 2013a, p. 156.
- 11.
Sauter 2008, p. 3.
- 12.
Commission, “Completing the Internal Market” (White Paper to the European Council, Milan: 28–29 June 1985) COM (85) 310 final. The SEA introduced Article 100a EEC (now Article 114 TFEU) allowing all measures for the establishment and functioning of the internal market to be adopted by a qualified majority through Article 100a, which was described as “the most important of the Act's internal market provisions, being probably more far- reaching in its implications than any other provision in the entire Act”, see Ehlerman 1987, p. 381.
- 13.
Weiler has explained that, for different reasons, the European Parliament and the Commission were “far from thrilled” with the SEA, which in particular led Margaret Thatcher to characterize it as “a modest step forward”. See Weiler 1991, p. 2455, 2459 and 2477.
- 14.
As noted by Weiler, the Member States’ urge for a clearer demarcation of competences was already clear from the Resolution of Parliament of July 12, 1990 (PE 143.504). See Weiler 1991, p. 2463 not 173.
- 15.
Integration theories distinguish between positive and negative integration. Positive integration implies that common rules are adopted by a higher authority to remove regional differences, while negative integration refers to the removal of barriers between countries. Weiler 2005.
- 16.
Case C-320/91 Corbeau, [1993] ECR 1-2563.
- 17.
Case C-393/92 Almelo [1994] ECR I-1477.
- 18.
Case C-157/94 Commission v Netherlands [1997] ECR I-5699; Case C-158/94 Commission v Italy [1997] ECR I-5789; Case C-159/94 Commission v France [1997] ECR I-5815.
- 19.
Case C-280/00, Altmark [2003] ECR I –7747.
- 20.
Case T-289/03 BUPA [2008] ECR II-81.
- 21.
By contrast, large areas of the public sector in the Member States, although clearly or increasingly economic in character, are not subject to EU sector law clarifying the principles and conditions of public intervention—justified by objectives of general interest—in the economy of these sectors. This is for instance the case concerning waste and water management, covered by EU sector law of administrative nature not primarily aiming at harmonizing the internal market and/or ensuring undistorted competition.
- 22.
Case C-480/06 Commission v. Germany [2009] ECR I-4747.
- 23.
One exception is the Patients Rights Directive.
- 24.
Case 263/86 Humbel [1988] ECR I-5365.
- 25.
Joined Cases C-159/91 and C-160/91 Poucet and Pistre [1993] ECR I-00637.
- 26.
De Vries 2011, p. 462.
- 27.
Thus, healthcare and other social services are excluded from the scope of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (the “Services Directive”) [2006] OJ L 376/36 , while all SGEIs—regardless of the sector at issue—are excluded from Article 16 in the Services Directive.
- 28.
Davies 2006, p. 16.
- 29.
This term is borrowed from Roth, see Roth 2011, p. 77.
- 30.
Sauter 2008, p. 1.
- 31.
Such signals could be found in Treaty modifications, in the Commission’s “public turn” in the field of competition, but also in EU legislation, for instance the procurement directives adopted on the basis of the White paper of 1985 (as an example of acceptance)—or the Services Directive (as an example of non-acceptance).
- 32.
Commission, “Services of General Interest in Europe” (Communication) 96/C 281/03.
- 33.
Bauby 2013, p. 26.
- 34.
This is the convincing explanation of Szyszczak who has shown how, in spite of the fact that policy competence has mostly not been conferred onto the EU in the field of social services, the Commission has since the 2000s, and very rapidly since the 2006 Communication on Social Services of General Interest in the European Union (COM 2006) 177 final), developed a new governance competence and capacity in the form of soft law and soft governance processes in that field of activities. Launching the term “social services of general interest” has been a very important step. See Szyszczak 2013, pp. 317–345.
- 35.
Bauby 2011, p. 27.
- 36.
Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market.
- 37.
See Neergaard 2008, pp. 97–98, where the author gives a detailed account of the approach to SGEIs in the context of the Services Directive, and explains the carving out of SGEIs and NESGIs by “tensions between what /…/ could be referred to as a more liberal point of view, situated mainly at the Commission, against a more protectionist point of view, situated at some of the Member States” which in her view have existed ever since the birth of the Community”.
- 38.
The first Guide issued in 2007 was replaced by the Commission “Guide to the application of the European Union rules on state aid, public procurement and the internal market to services of general economic interest, and in particular to social services of general interest “SEC(2010) 1545 final (hereinafter the “2010 SGEI Guide”), itself replaced in 2013 by the Commission “Guide to the application of the European Union rules on state aid, public procurement and the internal market to services of general economic interest, and in particular to social services of general interest SWD(2013) 53 final/2 (hereinafter the “2013 SGEI Guide”).
- 39.
The Commission issued two FAQs documents in 2007, see Commission, “Frequently asked questions in relation with Commission Decision of 28 November on the application of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest, and of the Community Framework for State aid in the form of public service compensation” COM (2007) 1516; and Commission, “Frequently asked questions concerning the application of public procurement rules to social services of general interest” COM (2007) 1514. The second guide (hereinafter the “2010 SGEI Guide) was issued in 2010, see Commission, “Guide to the application of the European Union rules on state aid, public procurement and the internal market to services of general economic interest, and in particular to social services of general interest” SEC(2010) 1545 final. The third guide (hereinafter “2013 SGEI Guide) was issued in 2013, see Commission, “Guide to the application of the European Union rules on state aid, public procurement and the internal market to services of general economic interest, and in particular to social services of general interest” SWD(2013) 53 final/2. In the “2013 SGEI Guide” it is explained that “[g]enerally speaking, only services constituting ‘economic activities’ are covered by the Treaty rules on the internal market (Articles 49 and 56 TFEU) and the Services Directive”, see point 223. Also, wishing to clarify the concepts of undertaking and economic activity, the Commission recalled in its 2011 Communication that “[b]ased on Article 107(1) of the Treaty, the State aid rules generally only apply where the recipient is an ‘undertaking’” and that “[t]he only relevant criterion in this respect is whether it carries out an economic activity”, see point 8 and point 9 para 2 of the 2013 SGEI Guide.
- 40.
“Constitutional Treaty” is the name usually given to the Treaty establishing a Constitution for Europe, signed on 29 October 2004 by representatives of the then 25 Member States. The rejection of the document by French and Dutch voters in May and June 2005 brought the ratification process to an end.
- 41.
On this element of negotiation, see Sauter 2014, p. 68.
- 42.
- 43.
Case C-147/03 Commission v Austria [2005] ECR I-5969.
- 44.
Weatherill 1995, p. 185.
- 45.
Ross 2000.
- 46.
Van de Gronden 2013b, p. 283.
- 47.
Commission, “A Quality Framework for Services of General Interest in Europe” (Communication) COM (2011) 900 final, hereinafter called “the SGI Quality Framework”.
- 48.
Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts (hereinafter called “the 2014 Concessions Directive”) [2014] OJ L94/1, and Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement (hereinafter called “the 2014 Public Sector Directive”) [2014] OJ L94/65 and Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC [2014] OJ L 94/243 (hereinafter called “the 2014 Utilities Directive”).
- 49.
Social Protection Committee, “A Voluntary European Quality Framework for Social Services” SPC/2010/10/8 final.
- 50.
Ibid, p. 14. See Commission Communication “Social Business Initiative—Creating a favourable climate for social enterprises, key stakeholders in the social economy and innovation” COM (2011) 682 final of 25 October 2011, {SEC (2011) 1278 final}.
- 51.
Ibid, p. 2.
- 52.
Commission Decision 2005/842/EC of 28 November 2005 on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest, [2005] OJ L 312/67, hereinafter the “2005 SGEI Decision”.
- 53.
Former President of the European Commission J-M. Barroso stated 21 November 2011: “Sweden has very much shown the lead. In Sweden we are clearly seeing the fruits of previous ambitious reforms, both in terms of fiscal and structural reforms.” Statement by President Barroso ahead of the meeting with Swedish Prime Minister Fredrik Reinfeldt, Speech 11/781. See also economist Jean Tirole’s views addressed to Members of the French Senate: “The French public services must be quality services. We are all very fond of it, but it must be rendered sustainable, and to that purpose reforms must be conducted. I will take the example of four countries, Germany, Sweden, Australia and Canada. /…/ they have all maintained their social models, while conducting reforms, and downsizing the State. Sweden did it after the crisis of 1991, as Canada and Australia. /…/ all the reforms have been conducted by socialists, and the right has retained them when it returned to power.” It is interesting to notice that Tirole’s view of “who did what” in Sweden is somewhat mistaken, hopefully unintentionally. Own translation of the French version of the Minutes of the audition of Jean Tirole (winner of The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2014) by the Commission of Economic Affairs at the French Senate, 19 November 2014, available at http://www.senat.fr/compte-rendu-commissions/20141117/afeco.html#toc10.
- 54.
These rules are autonomous from EU law, the first ones constituting a “competence restriction” rule introduced in a number of sectors to radically avoid the risk of municipal undertakings being conducted in “anti-competitive” ways, the second one—in the Swedish Competition Act - being a horizontal “balancing rule”, commonly called the “conflict-solving rule” and aimed at securing competition neutrality between public and private undertakings in sectors within the competence of local and regional authorities.
- 55.
See Sweden’s report to the European Commission on the application of Commission’s decision of 28 December 2005 on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest, C(2005) 2673, N2008/5126 p. 2. See also the report of the commission of inquiry on LRAs’ competence “Kommunal kompetens i utveckling” SOU 2007:72, p. 113 and 116.
- 56.
Case C-41/90 Höfner [1991] ECR I-1979. In Höfner, the CJEU considered the tax-financed activities of the German Federal Office of Employment to be economic. This aspect of the Höfner ruling is underlined by Buendia Sierra, see Buendia Sierra J. L., 1999, p. 59. Van de Gronden holds that “the ECJ almost automatically regards health care providers as undertakings within the meaning of European competition law. In other words, these providers cannot escape from the competition rules.” See van de Gronden 2009b, p. 10.
- 57.
This argument has been raised in the frame of the reform of national rules on rental housing, liberalized since 2011. The Commission of inquiry on municipal housing companies stressed that neither housing supply in general nor LRAs’ responsibility for housing supply to any part ought to be characterized as SGEI, as local authorities willing to entrust tasks that are not economically profitable would apply the procurement rules. See the report of the ministry publication on municipal housing companies “Allmännyttiga kommunala bostadsaktiebolag - övervägande och förslag” Ds 2009:60, p. 90 ff.
- 58.
It was raised in general terms in the Swedish report on the application of the 2005 SGEI Decision. See the Swedish report to the European Commission on the application of Commission’s decision of 28 December 2005 on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest, C(2005) 2673, N2008/5126 p. 2.
- 59.
Thus LRAs must comply with national provisions imposing procurement procedures for so-called B-services and contracts under EU-threshold values which go beyond the directives it builds on.
- 60.
At present, the Act on Systems of Choice is mandatory only for the procurement of primary healthcare and voluntary for the other services covered by the Act.
- 61.
EU secondary law on waste management is mostly based on Article 192 TFEU and has environmental protection (not market harmonization) as primary objective. The legislation adopted on this basis leaves to judicial interpretation crucial issues on the legal instruments which the Member States—and public authorities in the Member States in charge with the environmental protection at issue—may rely on to fulfil their obligations without illegally breaching against the Treaty imperatives of free movement and competition. Although the Commission has underlined that SGEIs exist in those areas, there is much controversy in Sweden as to whether local authorities may invoke environmental principles governing waste management as justifying exemptions from EU market rules.
- 62.
The reform process was pushed forward by two complaints filed to the Commission in 2002 and 2005 by the Swedish Property Federation, arguing that municipal housing companies were granted illegal state aid from the State respectively from their owning municipalities. The first complaint concerned a government Bill proposing a temporary scheme of aid to restructuring of municipal housing companies and was filed 1 July 2002. The second complaint concerning aid to municipal housing companies was filed 30 May 2005. Both complaints have been filed under the number CP115/02. These object and arguments of these complaints will be presented at more length in Chap. 2.
- 63.
See government Bill on municipal housing companies, Allmännyttiga kommunala bostadsaktiebolag och reformerade hyressättningsregler, proposition 2009/10:185, p. 27.
- 64.
In a report commissioned by the Swedish Social Ministry, the Swedish National Board of Housing, Building and Planning has taken the view that it is necessary to strengthen local authorities’ capacity to fulfil their missions, in particular on markets where demand is weak (which is the case in many parts of Sweden), or when LRAs try to achieve social and/or environmental objectives through housing measures. The Board proposes that LRAs’ missions concerning housing supply be specified and that certain objectives may be invoked to entrust SGEI tasks to housing companies—municipal or not. See the report of the Swedish National Board of Housing, Building and Planning Boverkets översyn av bostadsförsörjningslagen, rapport 2012:12, p. 26.
- 65.
See the report of the commission of inquiry on municipal housing companies “EU, allmännyttan och hyrorna” SOU 2008:38, p. 36 and 419–421.
- 66.
Commission, “A Quality Framework for Services of General Interest in Europe” (Communication) COM (2011) 900 final, p. 2, referring to Commission, “Europe 2020: A Strategy for smart, sustainable and inclusive growth” (Communication) COM (2010) 2020).
- 67.
Regarding social services, the threshold is at present set at EUR 750 000 for public service contracts and at EUR 5 186 000 for service concession.
- 68.
Habermas 2013.
- 69.
Hirschman 1970.
- 70.
The distinction between a rights and a consensus model, made by Groussot, has been summarized by Neergaard and Nielsen as follows: “[A] judge following a rights model is inspired by Dworkin’s theory of law and focuses on securing individual’s rights in accordance with justice and fairness. A judge following a consensus model focuses on delivering judgments that can be expected to be accepted by the community he/she functions in as representing its values.” see Groussot 2005, p. 186ff. To refer to this less explicit element in the Court’s interpretative approach of the criteria of applicability of EU market rules in sensitive cases, the notion of “acceptance” is used several times in Chap. 2.
- 71.
See Wehlander 2015.
- 72.
The quotations are borrowed from van de Gronden and Sauter. See their conclusions in Sauter and van de Gronden 2010, p. 45.
- 73.
Commission, “A Quality Framework for Services of General Interest in Europe” (Communication) COM (2011) 900, p. 5.
- 74.
Case C-372/04 Watts, para 103, Kohll, para 41; Smits and Peerbooms, para 72; and Müller-Fauré and van Riet, para 73.
- 75.
Commission, “A Quality Framework for Services of General Interest in Europe” (Communication) COM (2011) 900, p. 5.
- 76.
Van de Gronden and Rusu 2013, pp. 185–186.
- 77.
The Commission acknowledges distortions of competition can occur in in the field of social services, but considers that such funding, even with large sums, will have only limited and acceptable effects on competition. See Commission Decision 2012/21/EU of 20 December 2011 on the application of Article 106(2) of the Treaty on the Functioning of the European Union to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest [2012] OJ L7/3, para 11.
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Wehlander, C. (2016). Introduction: The Constitutionalisation of the EU Concept of SGEI as a Story of Exit, Voice and Loyalty for Public Services in EU Law. In: Services of General Economic Interest as a Constitutional Concept of EU Law. Legal Issues of Services of General Interest. T.M.C. Asser Press, The Hague. https://doi.org/10.1007/978-94-6265-117-3_1
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