European Affairs Department
22 March 2011
Aiming at a “flexi-security” regime for service concessions in Europe
Veolia Environnement provides services of general interest and is active in areas of drinking water
distribution and wastewater treatment, energy efficiency services, collection, sorting and recycling of
waste as well as public passenger transportation.
A significant portion of Veolia’s turnover comes from local authorities (aka “municipal” clients
compared to “industrial” clients). Close to 75% of the company’s turnover is done within the
European Union.
As such, Veolia is particularly sensitive to the legal regime on service concessions in European law
and wishes to contribute to the legislative initiative on concessions announced by the European
Commission.
I. The reform of the legal regime on concessions: an initiative to be part of a political
project for Europe
The European Commission’s legislative initiative on service concessions should not be restricted to a
technical dimension but must support a political project for Europe.
In this perspective, the initiative on service concessions must pursue four objectives:
-
contribute to the completion of the internal market and to the regulated opening up to
competition of new services;
-
in terms of services of general interest, strengthen a high-level public service European
model in which management through a service concession constitutes an alternative to both
in-house management and to privatisation;
-
establish a tool for long term investment needed by the European economy, in the context of
public finance crisis;
-
facilitate, in particular for the fast evolving businesses in the environmental services, the
emergence of European networks of excellence, gaining credentials within the European
market and able to answer the needs of emerging global markets.
It will then be necessary for the Commission to offer a “flexi-security” regime for service concessions:
this regime should conciliate the ability to negotiate between parties and a strict respect of
fundamental principles of transparency and non-discrimination.
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II. Aiming at a “flexi-security” regime for service concessions in Europe
A. The status of service concessions within the European Union must be strengthened and secured
The legal regime of service concessions in European law is barely developed:
-
the secondary Community legislation (“public procurement” directives) merely contains a
definition of what a concession is;
-
service concessions are otherwise submitted to the general principles of treaties, as clarified
by Court of Justice rulings: transparency and equal treatment.
However, the service concession is one of the legal translations of Private Public Partnerships the
development of which is strongly encouraged by the European Commission as a tool to improve
public services efficiency, as a source of private financing and as an instrument for exiting the crisis1.
The expected positive effects of service concessions in the internal market remain subject to the
existence of a clear legal framework securing Member States in their national legislation as well as
local authorities in their capacity as granting authorities, that they can use service concessions in full
compliance with EU law.
In order to ensure a full understanding of the stakes of the service and to adjust the proposals of the
tenderers as close as possible to the expectations of the local authorities and to the needs of such
service, it is appropriate to conciliate the legal certainty of the procedure and the ability to negotiate
between parties.
For this reason, service concessions must be backed by a
“flexi-security” approach enabling the
proper implementation of two fundamental principles of EU law, without future regulation impeding
the
necessary adjustments throughout the duration of the concession contract in order to take into
account the evolution of needs of the service or of rules applying to this granted activity.
Veolia is in favour of setting up a flexible legal basis at European level susceptible of facilitating the
recourse to concessions, in particular in Member States with a lack of national legislation in terms of
concessions. In this perspective, the Commission’s commitment for a “light ” legislative initiative is a
positive sign: “
Clear and proportionate rules will improve market access for EU undertakings by
ensuring transparency, equal treatment and a level playing field for economic operators. They will
also promote public/private partnerships and boost the potential for delivery of better value for
money for users of services and for contracting authorities… The Commission's legislative initiative
will aim to create a supportive EU framework for this type of public-private partnership without
placing an excessive burden on local authorities”. 2
As part of this « light approach » retained by the Commission, it is necessary, however, to pay
particular attention to the link between the future regime for service concessions and the one
currently in force for works concessions. This link must
take into account the evident economic
differences that exist between both service concessions and works concessions and avoid
a strict
alignment of the future regime of service concessions to the current regime of works concessions.
1 Communication from the European Commission 19 November 2009 on developing PPPs (COM(2009) 615).
2 Communication from the European 27 October 2010
Single Market Act (COM(2010) 608).
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B. The provisions of the future European legal regime of service concessions must combine legal
certainty and flexibility
1. Definition
Veolia notes that the current definition of concessions in “public procurement” directives 2004/17
and 2004/18 did not hamper neither the recourse to concessions in Europe nor the recognition by
the Court of Justice of the distinction between concession and public procurement.
Veolia does not therefore ask for a modification of the definition of concessions. However, if the
Commission was to consider supplementing this definition, such a modification should be the
opportunity to
further clarify the distinction between concession and public procurement.
Furthermore, if the transfer of the operating risk from the contracting authority to the
concessionaire is a characteristic of any concession, a new definition could be based on the
qualitative approach by the Court of Justice without quantifying the significant share of this
operating risk in the text of such legislative initiative. The Court clearly
describes a service
concessions contract
“where the supplier assumes all, or at least a significant share, of the operating
risk faced by the contracting authority, even if that risk is, from the outset, very limited on account of
the detailed rules of public law governing that service”. 3
2. Link between service concessions and works concessions regimes
a) Concessions awarding procedure
The awarding of concession contracts must be carried out in the strict respect of the principles of
European law on transparency and equal treatment. This imperative
does not require that the
legislative initiative of the Commission defines at European level the awarding procedure of a
concession.
In this regard, the wording in force for works concessions is a good reference as it brings to Member
States the flexibility needed for developing the use of the concessive tool.
b) Public notice at European level
Establishing a public notice at European level for service concessions is a useful reformation. It would
contribute to reinforcing transparency of the concessions market in Europe.
For the sake of enhancing the legal certainty of concluded concession contracts, Veolia recommends
referring to a
single methodology when calculating the public notice threshold for both service and
works concessions. This threshold should be based on the total turnover generated throughout the
duration of the contract.
The current threshold level for works concessions (€4.850.000) would be a satisfactory reference for
establishing a single public notice threshold for both service and works concessions.
c) Subcontracting
The provisions currently in force for works concessions in terms of subcontracting are unsuitable to
service concessions. It would be
legally inconsistent with the liability regime of the concessionaire
for the
legislative initiative of the Commission to give a contracting authority the ability to make
subcontracting compulsory for the operation of a service concession and to impose a tendering
procedure for the choice of subcontractors.
3 ECJ ruling of 10 September 2009, Case C-206/08 (Gotha/Eurawasser); see also ECJ Case C-271/09 (Stadler) of
10 March 2011.
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Service concessions are indeed characterised by the global liability of the concessionaire towards the
contracting authority throughout the duration of the contract in terms of effectiveness and quality of
the services provided to the end-user. It is worth mentioning that several contracting authorities are
even prohibiting the use of subcontracting in service concession contracts.
When major works are identified within the specifications of the concession, the future operator has
no other choice, if he is not able to do them himself, than to partner with a construction company
whose price is included in the offer. The obligation for concessionaires to open a formal competition
after having signed the concession contract does not correspond to the practical constraints of fixing
a definite price in the main offer.
C. The scope of the future European legal regime on concessions must be coherent
1. Public transportation
The Commission has the responsibility of giving its legal interpretation of the relationship between
regulation 1370/2007 regarding public transportation services for passengers, also known as “PSO
Regulation”, and the legislative initiative on concessions.
As rules for public procurement for transportation derive from directive 2004/17, transportation
concessions could be derived from the provisions of the European legal regime on concessions
without affecting the implementation of the PSO regulation.
2. Drinking water and waste water treatment
Veolia would like to draw the attention of the Commission to the necessity of a common regime for
service concessions for drinking water distribution and service concessions for waste water
treatment4, two similar activities. Indeed, drinking water distribution services fall within the scope of
directive 2004/17 whereas waste water treatment services fall within the scope of directive 2004/18.
Furthermore, the condition for the application of directive 2004/17 allows for confusion as the
contracting authority is no longer the network operator (“
provision or operation of fixed networks”)5.
For service concessions, this creates legal uncertainty and inequality of treatment between service
providers.
3. Priority and non-priority services
At last, the scope of the future
regime on concessions must not be limited to “priority services” 6 within the meaning of “public procurement” directives.
Indeed, the existing distinction in “public procurement” directives between “priority services”
(subject to full provisions of the “public procurement” directives) and “non-priority services” (only
subject to provisions on technical specifications and publication of an award notice) is not suitable
for service concessions.
Maintaining this distinction would significantly restrict the scope of service concessions (essentially
within service sectors such as waste, waste water treatment and passenger transportation -
excluding railways). It would exclude sectors such as drinking water, rail transport, heating networks,
port services, etc., which are naturally likely to be subject to concession contracts.
Such a situation would be contrary to the objective of creating a single market for concessions in
Europe.
4 Directive 2004/17 only applies to procurement “linked to disposal and treatment of waste water” when
awarded via entities also carrying an activity in the drinking water sector (article 4.2.b).
5 Article 4 of Directive 2004/17.
6 “Priority” services are found in annexes
II A of directive 2004/18 and
XVII A of directive 2004/17.
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