# C_2011259EN.01004001.xml

| 2.9.2011 | EN | Official Journal of the European Union | C 259/40 |
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2.9.2011

EN

Official Journal of the European Union

C 259/40

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Opinion of the Committee of the Regions on ‘Reform of the EU State aid rules on services of general economic interest’

2011/C 259/08

THE COMMITTEE OF THE REGIONS

| — | reiterates that the legislative package on State aid in the form of public service compensation should be revised in strict compliance with the principle of subsidiarity and with a view to ensuring freedom of choice and of administration for local and regional authorities as regards methods of organising, funding and carrying out their public service prerogatives; |
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reiterates that the legislative package on State aid in the form of public service compensation should be revised in strict compliance with the principle of subsidiarity and with a view to ensuring freedom of choice and of administration for local and regional authorities as regards methods of organising, funding and carrying out their public service prerogatives;

| — | underlines that, in order to implement the wide discretion to which regional and local authorities are entitled under the Lisbon Treaty, a legal basis of secondary legislation is needed, which – on the basis of a set of definitions – would ensure the utmost flexibility in the application of competition rules to services of general economic interest (SGEI); |
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underlines that, in order to implement the wide discretion to which regional and local authorities are entitled under the Lisbon Treaty, a legal basis of secondary legislation is needed, which – on the basis of a set of definitions – would ensure the utmost flexibility in the application of competition rules to services of general economic interest (SGEI);

| — | opposes the introduction by the Commission of any requirement to assess economic efficiency in SGEI compensation; |
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opposes the introduction by the Commission of any requirement to assess economic efficiency in SGEI compensation;

| — | feels that objective criteria should also be taken into consideration which in principle offset any risk of affecting intra-Community trade such as the limited territorial remit of certain operators governed by authorisation schemes, the limited functional scope of other public or private operators set up specifically to provide a particular public service in a given area and not carrying out any commercial activity on the market, and the not-for-profit nature of certain social undertakings; |
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—

feels that objective criteria should also be taken into consideration which in principle offset any risk of affecting intra-Community trade such as the limited territorial remit of certain operators governed by authorisation schemes, the limited functional scope of other public or private operators set up specifically to provide a particular public service in a given area and not carrying out any commercial activity on the market, and the not-for-profit nature of certain social undertakings;

| — | suggests to the Commission that the de minimis ceiling should be raised to EUR 800 000 a year specifically for public service compensation. This would exclude from the scope of State aid control all local public services relying on the local voluntary sector and local social micro-enterprises. |
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suggests to the Commission that the de minimis ceiling should be raised to EUR 800 000 a year specifically for public service compensation. This would exclude from the scope of State aid control all local public services relying on the local voluntary sector and local social micro-enterprises.

de minimis

| Rapporteur-general | Karl-Heinz LAMBERTZ (BE/PES), First Minister of the Belgian German-speaking Community |
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| Reference document | Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions — Reform of the EU State aid rules on services of general economic interest
  COM(2011) 146 final |

Rapporteur-general

Karl-Heinz LAMBERTZ (BE/PES), First Minister of the Belgian German-speaking Community

Reference document

Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions — Reform of the EU State aid rules on services of general economic interest

COM(2011) 146 final

I.   POLICY RECOMMENDATIONS

POLICY RECOMMENDATIONS

THE COMMITTEE OF THE REGIONS

| 1. | welcomes the Commission's decision to launch a debate with stakeholders and institutions on the revision of the legislative package on State aid in the form of public service compensation, drawing on the conclusions of the evaluation report drawn up following its broad consultation of Member States and numerous stakeholders; |
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1.

welcomes the Commission's decision to launch a debate with stakeholders and institutions on the revision of the legislative package on State aid in the form of public service compensation, drawing on the conclusions of the evaluation report drawn up following its broad consultation of Member States and numerous stakeholders;

| 2. | considers this revision to be a major political initiative for local and regional authorities and the public in that it must aim to frame new rules that are clear and proportionate on the compatibility with the internal market of the various forms of funding public services and thus bring the legal certainty and predictability needed for the development of public services in the EU and for ensuring that the basic needs of the European people are genuinely met; |
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2.

considers this revision to be a major political initiative for local and regional authorities and the public in that it must aim to frame new rules that are clear and proportionate on the compatibility with the internal market of the various forms of funding public services and thus bring the legal certainty and predictability needed for the development of public services in the EU and for ensuring that the basic needs of the European people are genuinely met;

| 3. | notes with interest that the review of the legislative package ties in with the Commission's wider objectives in the area of public services and the internal market, and particularly with proposal No 25 of the Single Market Act
   (1), in which the Commission has undertaken to adopt, by 2011, a communication and a series of measures on public services, underlining that the EU and its Member States must ensure that public services are easier to operate at the appropriate level, adhere to clear financing rules, are of the highest quality and are genuinely accessible to all; |
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3.

notes with interest that the review of the legislative package ties in with the Commission's wider objectives in the area of public services and the internal market, and particularly with proposal No 25 of the Single Market Act
   (1), in which the Commission has undertaken to adopt, by 2011, a communication and a series of measures on public services, underlining that the EU and its Member States must ensure that public services are easier to operate at the appropriate level, adhere to clear financing rules, are of the highest quality and are genuinely accessible to all;

Single Market Act

1

| 4. | reiterates that the package should be revised in strict compliance with the principle of subsidiarity and with a view to ensuring freedom of choice and of administration for local and regional authorities as regards methods of organising, funding and carrying out their public service prerogatives, in accordance with the provisions of national or regional legislation; |
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4.

reiterates that the package should be revised in strict compliance with the principle of subsidiarity and with a view to ensuring freedom of choice and of administration for local and regional authorities as regards methods of organising, funding and carrying out their public service prerogatives, in accordance with the provisions of national or regional legislation;

| 5. | affirms that local and regional authorities are particularly well placed to play an active role in the process of revising the legislative package, being close to the grassroots and involved day-to-day in framing, organising, funding and delivering public services, in response to the ever changing and more varied basic needs expressed by the people in the areas where they live, whether in terms of employment, housing, transport, education, health, and childcare, or with regard to dependent elderly people, culture, sport, leisure activities, etc.; |
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5.

affirms that local and regional authorities are particularly well placed to play an active role in the process of revising the legislative package, being close to the grassroots and involved day-to-day in framing, organising, funding and delivering public services, in response to the ever changing and more varied basic needs expressed by the people in the areas where they live, whether in terms of employment, housing, transport, education, health, and childcare, or with regard to dependent elderly people, culture, sport, leisure activities, etc.;

| 6. | welcomes the Commission's recognition of the vital role that public services occupy in the shared values of the EU, pursuant to Article 14 TFEU. It is vital that Member States together with local and regional levels are in a position to ensure access to certain basic services under reasonable conditions. Such services strengthen social and territorial cohesion, foster the well-being of the people, play a role in redistribution, combating inequalities and ensuring social justice, and make a substantial contribution to the development of the EU, in line with the 2020 strategy; in this respect, European policy on public services also depends on implementing Article 9 TFEU; |
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6.

welcomes the Commission's recognition of the vital role that public services occupy in the shared values of the EU, pursuant to Article 14 TFEU. It is vital that Member States together with local and regional levels are in a position to ensure access to certain basic services under reasonable conditions. Such services strengthen social and territorial cohesion, foster the well-being of the people, play a role in redistribution, combating inequalities and ensuring social justice, and make a substantial contribution to the development of the EU, in line with the 2020 strategy; in this respect, European policy on public services also depends on implementing Article 9 TFEU;

| 7. | therefore points out that developing quality services of general economic interest must be an ongoing and crosscutting priority for the Commission; in this respect, considers that the Commission should have explicitly highlighted services of general economic interest, and particularly social services of general interest, as part of the EU 2020 strategy as they are essential for achieving the stated goals; moreover regrets that the Commission did not wish to make it one of the 12 major priorities for re-launching the single market when it actually recognised their vital role in overcoming people's lack of interest in the single market; |
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7.

therefore points out that developing quality services of general economic interest must be an ongoing and crosscutting priority for the Commission; in this respect, considers that the Commission should have explicitly highlighted services of general economic interest, and particularly social services of general interest, as part of the EU 2020 strategy as they are essential for achieving the stated goals; moreover regrets that the Commission did not wish to make it one of the 12 major priorities for re-launching the single market when it actually recognised their vital role in overcoming people's lack of interest in the single market;

| 8. | shares the Commission's view that the objective of this reform of the rules on State aid for services of general economic interest must be to boost the contribution of these services to the EU's economic recovery, and the restoration of the social fabric; |
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8.

shares the Commission's view that the objective of this reform of the rules on State aid for services of general economic interest must be to boost the contribution of these services to the EU's economic recovery, and the restoration of the social fabric;

| 9. | points out that, now more than ever, people need quality and accessible services of general economic interest to overcome the economic and social effects of the crisis; therefore feels that implementing programmes to reform and combat public deficits which the Member States have begun should not lead to restricting the scope and quality of the services provided or financed as services of general economic interest; |
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9.

points out that, now more than ever, people need quality and accessible services of general economic interest to overcome the economic and social effects of the crisis; therefore feels that implementing programmes to reform and combat public deficits which the Member States have begun should not lead to restricting the scope and quality of the services provided or financed as services of general economic interest;

| 10. | calls for the adoption of more balanced provisions, better tailored to the nature of public service, to its local, cross-border and EU dimensions, to the wide variation in its forms of organisation and stakeholders, proportionate to the real level of risk of affecting intra-Community trade and of actually distorting competition within the internal market; |
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10.

calls for the adoption of more balanced provisions, better tailored to the nature of public service, to its local, cross-border and EU dimensions, to the wide variation in its forms of organisation and stakeholders, proportionate to the real level of risk of affecting intra-Community trade and of actually distorting competition within the internal market;

Taking account of the Lisbon Treaty's innovations on public services in the revision of the legislative package on State aid

Taking account of the Lisbon Treaty's innovations on public services in the revision of the legislative package on State aid

| 11. | agrees with the Commission's analysis of the new provisions of the Lisbon Treaty concerning public services as part of the shared values of the EU, whereby it refers to: a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights; and the wide discretion of national, regional and local authorities in providing, commissioning and organising [public services]; |
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11.

agrees with the Commission's analysis of the new provisions of the Lisbon Treaty concerning public services as part of the shared values of the EU, whereby it refers to: a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights; and the wide discretion of national, regional and local authorities in providing, commissioning and organising [public services];

a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights;

the wide discretion of national, regional and local authorities in providing, commissioning and organising [public services]

| 12. | emphasises that Article 14 TFEU, which is part of the provisions of general application of the Treaty, provides a new legal basis for the European Parliament and the Council to establish – by means of legislation – the principles and conditions, particularly economic and financial conditions, enabling services of general economic interest to perform their particular tasks; |
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12.

emphasises that Article 14 TFEU, which is part of the provisions of general application of the Treaty, provides a new legal basis for the European Parliament and the Council to establish – by means of legislation – the principles and conditions, particularly economic and financial conditions, enabling services of general economic interest to perform their particular tasks;

| 13. | reminds the Commission that it alone is able to propose that the European Parliament and the Council implement the major democratic step forward taken by the Lisbon Treaty which is described in Article 14 TFEU, and that it bears full political responsibility for not making use of it; |
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13.

reminds the Commission that it alone is able to propose that the European Parliament and the Council implement the major democratic step forward taken by the Lisbon Treaty which is described in Article 14 TFEU, and that it bears full political responsibility for not making use of it;

| 14. | regrets that the Commission's failure to act in this regard has forced the European Court of Justice to rule, on the basis of specific cases, on matters which would warrant clarification by the legislator in accordance with the principle of democratic responsibility and in the spirit of the Lisbon Treaty; |
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14.

regrets that the Commission's failure to act in this regard has forced the European Court of Justice to rule, on the basis of specific cases, on matters which would warrant clarification by the legislator in accordance with the principle of democratic responsibility and in the spirit of the Lisbon Treaty;

| 15. | points out that Protocol No 26 on services of general interest recognises both the specific nature and the diversity of public services, and the primary competence of Member States and local and regional authorities to provide, carry out, fund and organise them; |
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15.

points out that Protocol No 26 on services of general interest recognises both the specific nature and the diversity of public services, and the primary competence of Member States and local and regional authorities to provide, carry out, fund and organise them;

| 16. | underlines, however, that, in order to implement the wide discretion to which regional and local authorities are entitled under the Lisbon Treaty, a legal basis of secondary legislation is needed, which – on the basis of a set of definitions – would ensure the utmost flexibility in the application of competition rules to services of general economic interest for local and regional authorities; |
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16.

underlines, however, that, in order to implement the wide discretion to which regional and local authorities are entitled under the Lisbon Treaty, a legal basis of secondary legislation is needed, which – on the basis of a set of definitions – would ensure the utmost flexibility in the application of competition rules to services of general economic interest for local and regional authorities;

| 17. | points out that, under Article 106(2) TFEU, undertakings entrusted with the operation of public services are subject to the rules on competition and, in particular, the rules governing the prohibition and control of State aid, only insofar as the application of those rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them by national, regional and local public authorities; |
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17.

points out that, under Article 106(2) TFEU, undertakings entrusted with the operation of public services are subject to the rules on competition and, in particular, the rules governing the prohibition and control of State aid, only insofar as the application of those rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them by national, regional and local public authorities;

| 18. | points out that access to compensation for the net cost of delivering public services is among the economic and financial conditions necessary for undertakings entrusted with the operation of public services to perform the particular tasks assigned to them by public authorities properly, especially in these times of economic and financial crisis, in which public services are playing a vital role as an automatic stabiliser, protecting the most vulnerable sections of the public and thus helping to mitigate the social impact of the crisis; |
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18.

points out that access to compensation for the net cost of delivering public services is among the economic and financial conditions necessary for undertakings entrusted with the operation of public services to perform the particular tasks assigned to them by public authorities properly, especially in these times of economic and financial crisis, in which public services are playing a vital role as an automatic stabiliser, protecting the most vulnerable sections of the public and thus helping to mitigate the social impact of the crisis;

Efficient allocation of public resources, economic efficiency in public service compensation and public service productivity at a time of economic and budgetary crisis

Efficient allocation of public resources, economic efficiency in public service compensation and public service productivity at a time of economic and budgetary crisis

| 19. | would remind the Commission that local and regional authorities have always been committed to meeting local needs and respond to changes in these needs over time. To this end, they strive in their day-to-day management to make the best possible use of public funds so as to ensure the quality, accessibility, security and continuity of public services in their area. Points out that the current crisis has underlined this need for efficiency, which is part of their primary political responsibility in the eyes of the voting public; |
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19.

would remind the Commission that local and regional authorities have always been committed to meeting local needs and respond to changes in these needs over time. To this end, they strive in their day-to-day management to make the best possible use of public funds so as to ensure the quality, accessibility, security and continuity of public services in their area. Points out that the current crisis has underlined this need for efficiency, which is part of their primary political responsibility in the eyes of the voting public;

| 20. | would emphasise here that development of public-public cooperation, by pooling resources, offers great potential for increasing efficiency in the use of public resources and modernising public services to meet the new needs of people in their local areas; |
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20.

would emphasise here that development of public-public cooperation, by pooling resources, offers great potential for increasing efficiency in the use of public resources and modernising public services to meet the new needs of people in their local areas;

| 21. | opposes the introduction by the Commission of any requirement to assess economic efficiency in SGEI compensation; in the Committee's view, neither Article 106 nor a unilateral decision or directive of the Commission, on the basis of paragraph 3 thereof, provide a sufficient legal basis for any such legislative proposal; |
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21.

opposes the introduction by the Commission of any requirement to assess economic efficiency in SGEI compensation; in the Committee's view, neither Article 106 nor a unilateral decision or directive of the Commission, on the basis of paragraph 3 thereof, provide a sufficient legal basis for any such legislative proposal;

| 22. | in this respect affirms that the measure of economic efficiency in public service compensation could, in any event, be only one of the components of a more general framework for assessing the quality of public services which must include purely qualitative (accessibility, continuity of service, response time, user satisfaction ...) and not just economic indicators, and that it alone could not warrant reducing the scope of the service provided; |
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22.

in this respect affirms that the measure of economic efficiency in public service compensation could, in any event, be only one of the components of a more general framework for assessing the quality of public services which must include purely qualitative (accessibility, continuity of service, response time, user satisfaction ...) and not just economic indicators, and that it alone could not warrant reducing the scope of the service provided;

| 23. | states clearly that the remit of the Commission, as the European competition authority, by no means extends to the conditions for the efficient allocation of public resources by Member States' public authorities, nor to the conditions for the effective contribution of public services to the EU's economic, social and territorial cohesion, and to growth and jobs; these matters go way beyond the scope of the principle prohibiting any over-compensation likely to distort competition within the internal market; |
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23.

states clearly that the remit of the Commission, as the European competition authority, by no means extends to the conditions for the efficient allocation of public resources by Member States' public authorities, nor to the conditions for the effective contribution of public services to the EU's economic, social and territorial cohesion, and to growth and jobs; these matters go way beyond the scope of the principle prohibiting any over-compensation likely to distort competition within the internal market;

| 24. | points out that this exclusive role exercised by the Commission, under the supervision of the European Court of Justice, is limited to ensuring the conformity of public service compensation that does not meet the conditions laid down by the Court in its Altmark judgment and thus falls under the rules governing the prohibition and control of State aid; |
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24.

points out that this exclusive role exercised by the Commission, under the supervision of the European Court of Justice, is limited to ensuring the conformity of public service compensation that does not meet the conditions laid down by the Court in its Altmark judgment and thus falls under the rules governing the prohibition and control of State aid;

Pursuing the process of clarifying the key concepts involved in classifying public service compensation as State aid

Pursuing the process of clarifying the key concepts involved in classifying public service compensation as State aid

| 25. | welcomes the fact that the Commission deems it necessary to pursue and place on a formal footing the process of clarifying the key concepts as regards implementing the control system for State aid for public services. This process has been underway for several years on an informal basis (being non-binding on the Commission) with the publication of staff working documents on frequently asked questions (2), the Guide to services of general economic interest (3) and the establishment of the interactive information service concerning services of general interest (4); calls on the Commission to place the process of clarifying the concepts, which are not set out in the Treaty, on a formal footing with a proposal for a regulation of the Council and of the European Parliament, based on Article 14 TFEU and not by means of an interpretative communication which would be non-binding on the Commission; |
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25.

welcomes the fact that the Commission deems it necessary to pursue and place on a formal footing the process of clarifying the key concepts as regards implementing the control system for State aid for public services. This process has been underway for several years on an informal basis (being non-binding on the Commission) with the publication of staff working documents on frequently asked questions (2), the Guide to services of general economic interest (3) and the establishment of the interactive information service concerning services of general interest (4); calls on the Commission to place the process of clarifying the concepts, which are not set out in the Treaty, on a formal footing with a proposal for a regulation of the Council and of the European Parliament, based on Article 14 TFEU and not by means of an interpretative communication which would be non-binding on the Commission;

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3

4

| 26. | is concerned that the absence of legislatively consolidated definitions for public services for the internal market is leading the European Commission in its negotiations under the General Agreement on Trade in Services (GATS) to include, a priori, all the services in the negotiations, with no consideration for the specificity of services of general interest; |
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26.

is concerned that the absence of legislatively consolidated definitions for public services for the internal market is leading the European Commission in its negotiations under the General Agreement on Trade in Services (GATS) to include, a priori, all the services in the negotiations, with no consideration for the specificity of services of general interest;

| 27. | suggests that the interactive information system on services of general interest also include a data simulator allowing regional and local authorities to check the categorisation of aids; |
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27.

suggests that the interactive information system on services of general interest also include a data simulator allowing regional and local authorities to check the categorisation of aids;

| 28. | believes that one of the reasons for the low level of implementation of the 2005 Commission Decision by local and regional authorities, besides the ensuing transaction costs, is the difficulty of defining local situations in terms of the EU concepts and terminology used in the Decision, particularly unhelpful terms such as ‘activities that are economic in nature’, ‘undertakings’, ‘affecting intra-Community trade’, ‘economic advantage’, ‘act of entrustment’, ‘typical undertaking, well run and adequately provided with means of transport’ and ‘reasonable profit’; |
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28.

believes that one of the reasons for the low level of implementation of the 2005 Commission Decision by local and regional authorities, besides the ensuing transaction costs, is the difficulty of defining local situations in terms of the EU concepts and terminology used in the Decision, particularly unhelpful terms such as ‘activities that are economic in nature’, ‘undertakings’, ‘affecting intra-Community trade’, ‘economic advantage’, ‘act of entrustment’, ‘typical undertaking, well run and adequately provided with means of transport’ and ‘reasonable profit’;

| 29. | underlines that this real difficulty for local and regional authorities in taking ownership of these concepts is compounded by the fact that they are not uniformly applied to a given type of public service; rather, their application is directly dictated by the chosen form of organisation and contractual arrangements, which vary from one authority to the next, even within the same Member State; |
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29.

underlines that this real difficulty for local and regional authorities in taking ownership of these concepts is compounded by the fact that they are not uniformly applied to a given type of public service; rather, their application is directly dictated by the chosen form of organisation and contractual arrangements, which vary from one authority to the next, even within the same Member State;

| 30. | calls on the Commission to present, at the same time that it puts forward its revised draft Decision, an indicative non-binding EU Register of public services, as defined by the Member States and local and regional authorities; proposes that this Register, which could be developed in collaboration with the Committee of the Regions, should specify, for each form of organisation, the economic and non-economic nature of the activity and should be updated annually, so as to provide a practical illustration for local and regional authorities of the scope of these concepts and the objective reasons for classifying activities as economic or non-economic, and how this evolves over time; |
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30.

calls on the Commission to present, at the same time that it puts forward its revised draft Decision, an indicative non-binding EU Register of public services, as defined by the Member States and local and regional authorities; proposes that this Register, which could be developed in collaboration with the Committee of the Regions, should specify, for each form of organisation, the economic and non-economic nature of the activity and should be updated annually, so as to provide a practical illustration for local and regional authorities of the scope of these concepts and the objective reasons for classifying activities as economic or non-economic, and how this evolves over time;

| 31. | calls on the Commission to extend this clarification exercise to the shared values of the EU in respect of public service, as defined by the Lisbon Treaty, i.e. a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights, and particularly the shared EU value of universal access as applied to the area of public social services, regrets the narrow view the Commission has developed in recent decisions as regards the compatibility of State aid granted to social housing bodies in a growing number of Member States, and in particular in the E 2/2005 and N 642/2009 cases on social housing in the Netherlands, in which the Commission questions the principle of the social mix in social housing by using the single criterion of very low income thresholds. Calls on the Commission to reconsider its position in the context of the appeal currently before the European Union's Court of Justice; |
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31.

calls on the Commission to extend this clarification exercise to the shared values of the EU in respect of public service, as defined by the Lisbon Treaty, i.e. a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights, and particularly the shared EU value of universal access as applied to the area of public social services, regrets the narrow view the Commission has developed in recent decisions as regards the compatibility of State aid granted to social housing bodies in a growing number of Member States, and in particular in the E 2/2005 and N 642/2009 cases on social housing in the Netherlands, in which the Commission questions the principle of the social mix in social housing by using the single criterion of very low income thresholds. Calls on the Commission to reconsider its position in the context of the appeal currently before the European Union's Court of Justice;

a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights,

| 32. | states in this regard, that it is up to the Member States and local and regional authorities to define the specific tasks assigned to social public services and the nature and content of the resulting public service obligations and that consequently it is not within the Commission's remit to intervene in the conditions for allocating these social services to beneficiary households nor in identifying the categories of household whose basic social needs cannot be met by market forces alone; |
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32.

states in this regard, that it is up to the Member States and local and regional authorities to define the specific tasks assigned to social public services and the nature and content of the resulting public service obligations and that consequently it is not within the Commission's remit to intervene in the conditions for allocating these social services to beneficiary households nor in identifying the categories of household whose basic social needs cannot be met by market forces alone;

| 33. | calls on the Commission to include in its review process and proposals all of the forms that public service compensation can take given the wide discretionary power of local and regional authorities as regards funding public services, including compensation in the form of long-term investment aid as required for funding local public service infrastructure (hospitals, social housing, accommodation centres, cultural centres, etc.), to not limit its compatibility rationale to annual operating subsidies, which can be carried over from one year to the next in the event of overcompensation, and to clarify the conditions for assessing the absence of overcompensation in the case of long-term investment aid, particularly in property and land infrastructure; |
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33.

calls on the Commission to include in its review process and proposals all of the forms that public service compensation can take given the wide discretionary power of local and regional authorities as regards funding public services, including compensation in the form of long-term investment aid as required for funding local public service infrastructure (hospitals, social housing, accommodation centres, cultural centres, etc.), to not limit its compatibility rationale to annual operating subsidies, which can be carried over from one year to the next in the event of overcompensation, and to clarify the conditions for assessing the absence of overcompensation in the case of long-term investment aid, particularly in property and land infrastructure;

Separating the issue of preventing and monitoring possible overcompensation from the question of the choice of procedure applicable to the selection of the operator by the organising public authority

Separating the issue of preventing and monitoring possible overcompensation from the question of the choice of procedure applicable to the selection of the operator by the organising public authority

| 34. | calls on the Commission to separate the issue of the prevention, monitoring and reimbursement of any overcompensation, which comes under the principle of prohibiting State aid and ensuring undistorted competition, from the issue of the conditions for public authorities as regards contracting arrangements and the selection of undertakings to be entrusted with the operation of public services, which, depending on which kind of arrangement is chosen by the public authority, fall under either the general Treaty principles of non-discrimination, equal treatment and transparency – in the case of service concessions, for example, or the granting of exclusive or special rights – or the directive's provisions on public procurement; |
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34.

calls on the Commission to separate the issue of the prevention, monitoring and reimbursement of any overcompensation, which comes under the principle of prohibiting State aid and ensuring undistorted competition, from the issue of the conditions for public authorities as regards contracting arrangements and the selection of undertakings to be entrusted with the operation of public services, which, depending on which kind of arrangement is chosen by the public authority, fall under either the general Treaty principles of non-discrimination, equal treatment and transparency – in the case of service concessions, for example, or the granting of exclusive or special rights – or the directive's provisions on public procurement;

| 35. | reiterates that use of the tender procedure to select the undertaking(s) to be entrusted with the operation of a public service is only one of several possible arrangements, constituting a public purchase of the external delivery of public services for a price, and not an exclusive means of securing exemption from State aid classification; |
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35.

reiterates that use of the tender procedure to select the undertaking(s) to be entrusted with the operation of a public service is only one of several possible arrangements, constituting a public purchase of the external delivery of public services for a price, and not an exclusive means of securing exemption from State aid classification;

| 36. | calls on the Commission to clarify that carrying out tender procedure in accordance with EU law also always precludes overcompensation for the purposes of rules on state aid; but also points out that tenders do not always take account of how the net cost of delivering the public service may change over time if the price is the result of a power struggle and a market situation at a specific moment in time. Depending on operators' market penetration strategies, the circumstances determining the price set for a given tender may also lead to structural under-compensation which is likely, in time, to undermine the principles of public service financial continuity and affordability; |
| --- | --- |

36.

calls on the Commission to clarify that carrying out tender procedure in accordance with EU law also always precludes overcompensation for the purposes of rules on state aid; but also points out that tenders do not always take account of how the net cost of delivering the public service may change over time if the price is the result of a power struggle and a market situation at a specific moment in time. Depending on operators' market penetration strategies, the circumstances determining the price set for a given tender may also lead to structural under-compensation which is likely, in time, to undermine the principles of public service financial continuity and affordability;

| 37. | points out that, besides the additional transaction costs that tendering entails for local and regional authorities, some public services do not lend themselves to its rigidity because they are liable to change or for reasons of financial continuity or the general-interest need to provide rules for undertakings via an authorisation scheme where there is an information imbalance between service users and providers, particularly for reasons of protecting the vulnerable set against the need to satisfy basic social needs such as health, housing, or employment, reasons to do with granting exclusive or special rights, or simply the lack of a cross-border dimension to the delivery of local and social public services; |
| --- | --- |

37.

points out that, besides the additional transaction costs that tendering entails for local and regional authorities, some public services do not lend themselves to its rigidity because they are liable to change or for reasons of financial continuity or the general-interest need to provide rules for undertakings via an authorisation scheme where there is an information imbalance between service users and providers, particularly for reasons of protecting the vulnerable set against the need to satisfy basic social needs such as health, housing, or employment, reasons to do with granting exclusive or special rights, or simply the lack of a cross-border dimension to the delivery of local and social public services;

| 38. | thus suggests to the Commission that the revision of the legislative package be accompanied by a proposal for an explanatory communication in the form of a ‘toolbox’ aimed at local and regional authorities, clarifying the law applicable to the various forms of public service provision, ranging from direct provision, provision via public-public cooperation by pooling resources, to direct provision by an in-house body, public purchase of the external delivery of a public service for a price, transfer of operating risk to an external operator with or without remuneration, granting exclusive or special rights in the form of authorisation schemes or providing financial support to a not-for-profit project in the general interest; |
| --- | --- |

38.

thus suggests to the Commission that the revision of the legislative package be accompanied by a proposal for an explanatory communication in the form of a ‘toolbox’ aimed at local and regional authorities, clarifying the law applicable to the various forms of public service provision, ranging from direct provision, provision via public-public cooperation by pooling resources, to direct provision by an in-house body, public purchase of the external delivery of a public service for a price, transfer of operating risk to an external operator with or without remuneration, granting exclusive or special rights in the form of authorisation schemes or providing financial support to a not-for-profit project in the general interest;

| 39. | welcomes the fact that, the European Court of Justice has simplified and clarified conditions for direct service provision and, most recently, public-public cooperation between local authorities; calls on the Commission to propose an amendment to the legislation on public procurement in order to establish a definition of direct provision geared to local autonomy and to the need for efficient use of public resources at a time of economic and budgetary crisis; |
| --- | --- |

39.

welcomes the fact that, the European Court of Justice has simplified and clarified conditions for direct service provision and, most recently, public-public cooperation between local authorities; calls on the Commission to propose an amendment to the legislation on public procurement in order to establish a definition of direct provision geared to local autonomy and to the need for efficient use of public resources at a time of economic and budgetary crisis;

| 40. | points out that public-public cooperation among local and regional authorities offers great potential for economic efficiency, for ensuring optimal allocation of public resources and for modernising public services in response to changes in the basic needs of people in their local areas; |
| --- | --- |

40.

points out that public-public cooperation among local and regional authorities offers great potential for economic efficiency, for ensuring optimal allocation of public resources and for modernising public services in response to changes in the basic needs of people in their local areas;

| 41. | calls on the Commission to consider administrative cooperation between local and regional authorities and between bodies governed by public law as a domestic, organisational matter not covered by public procurement law, in line with the principles of the Treaty on the Functioning of the European Union; |
| --- | --- |

41.

calls on the Commission to consider administrative cooperation between local and regional authorities and between bodies governed by public law as a domestic, organisational matter not covered by public procurement law, in line with the principles of the Treaty on the Functioning of the European Union;

A diversified and proportionate response to actual effects on intra-Community trade

A diversified and proportionate response to actual effects on intra-Community trade

| 42. | supports the Commission in its desire to reduce the administrative and financial burden on local and regional authorities and undertakings entrusted with public service provision as regards regular checks on overcompensation, which currently determine the exemption from notification and the a priori compatibility of public service compensation; |
| --- | --- |

42.

supports the Commission in its desire to reduce the administrative and financial burden on local and regional authorities and undertakings entrusted with public service provision as regards regular checks on overcompensation, which currently determine the exemption from notification and the a priori compatibility of public service compensation;

a priori

| 43. | supports the method proposed by the Commission, in line with the proportionality principle laid down by the Treaty, to diversify the procedures for monitoring possible overcompensation, to provide a more tailored response to the exclusively local nature of certain local public services, particularly social public services which have, at the current stage of the internal market's development, no impact, or a very low risk of impacting on intra-Community trade, and to focus its attention on public services with an EU or cross-border dimension, which have a greater impact on the internal market because of their regulation by sectoral liberalisation directives or the European or cross-border structure of their operators; |
| --- | --- |

43.

supports the method proposed by the Commission, in line with the proportionality principle laid down by the Treaty, to diversify the procedures for monitoring possible overcompensation, to provide a more tailored response to the exclusively local nature of certain local public services, particularly social public services which have, at the current stage of the internal market's development, no impact, or a very low risk of impacting on intra-Community trade, and to focus its attention on public services with an EU or cross-border dimension, which have a greater impact on the internal market because of their regulation by sectoral liberalisation directives or the European or cross-border structure of their operators;

| 44. | thus believes that a distinction should be made between: 1. situations in which de minimis public service compensation does not affect intra-Community trade and is thus not comparable to State aid; 2. compensation for local public services that exceeds the de minimis thresholds but which, because of the way they are organised and the current state of internal market development, does not affect intra-Community trade to an extent that would be detrimental to the EU's interests; and 3. compensation for other public services with an EU or cross-border dimension, governed by sectoral directives or regulations or where the undertakings have a supra-national structure; |
| --- | --- |

44.

thus believes that a distinction should be made between: 1. situations in which de minimis public service compensation does not affect intra-Community trade and is thus not comparable to State aid; 2. compensation for local public services that exceeds the de minimis thresholds but which, because of the way they are organised and the current state of internal market development, does not affect intra-Community trade to an extent that would be detrimental to the EU's interests; and 3. compensation for other public services with an EU or cross-border dimension, governed by sectoral directives or regulations or where the undertakings have a supra-national structure;

de minimis

de minimis

| 45. | feels that other objective criteria should also be taken into consideration which in principle offset any risk of affecting intra-Community trade, distorting competition or cross-subsidisation, such as the limited territorial remit of certain operators governed by authorisation schemes, the limited functional scope of other public or private operators set up specifically to provide a particular public service in a given area and not carrying out any commercial activity on the market, and the not-for-profit nature of certain social undertakings which re-invest any surpluses into funding the public service that they operate, such surpluses being deducting from future compensation. These objective characteristics, linked to the particular nature of the operator and to the fact that it is locally based, offset any risk of distorting competition or affecting intra-Community trade; |
| --- | --- |

45.

feels that other objective criteria should also be taken into consideration which in principle offset any risk of affecting intra-Community trade, distorting competition or cross-subsidisation, such as the limited territorial remit of certain operators governed by authorisation schemes, the limited functional scope of other public or private operators set up specifically to provide a particular public service in a given area and not carrying out any commercial activity on the market, and the not-for-profit nature of certain social undertakings which re-invest any surpluses into funding the public service that they operate, such surpluses being deducting from future compensation. These objective characteristics, linked to the particular nature of the operator and to the fact that it is locally based, offset any risk of distorting competition or affecting intra-Community trade;

| 46. | calls on the Commission, with regard to the regular checks on overcompensation, which currently determine the exemption from notification of public service compensation and the prevention of possible overcompensation, to make the decision more flexible, and to entrust responsibility for defining the practical procedures for prevention and the frequency of checks to the relevant public authorities and, by the same token, to simplify the procedures open to undertakings where overcompensation is detected; |
| --- | --- |

46.

calls on the Commission, with regard to the regular checks on overcompensation, which currently determine the exemption from notification of public service compensation and the prevention of possible overcompensation, to make the decision more flexible, and to entrust responsibility for defining the practical procedures for prevention and the frequency of checks to the relevant public authorities and, by the same token, to simplify the procedures open to undertakings where overcompensation is detected;

| 47. | calls for particular attention to be given to the specificity of the local and social public services run by local and regional authorities on a relatively small and limited scale and not affecting trade between Member States; calls for provision to be made, in such cases, for simplified procedures and rules for exemption from State aid rules, given the local and small-scale nature of these public services, especially in the most isolated and remote regions such as the outermost regions, islands and upland regions; nevertheless feels that this small and limited scale cannot be verified solely on the single criterion of the population of a given authority, but must be based on a range of indices that take account, in particular, of the geographical location of an authority and the range of the potential public service users involved; |
| --- | --- |

47.

calls for particular attention to be given to the specificity of the local and social public services run by local and regional authorities on a relatively small and limited scale and not affecting trade between Member States; calls for provision to be made, in such cases, for simplified procedures and rules for exemption from State aid rules, given the local and small-scale nature of these public services, especially in the most isolated and remote regions such as the outermost regions, islands and upland regions; nevertheless feels that this small and limited scale cannot be verified solely on the single criterion of the population of a given authority, but must be based on a range of indices that take account, in particular, of the geographical location of an authority and the range of the potential public service users involved;

| 48. | notes that the first two criteria of the Altmark judgment, namely that the public service obligation with which the recipient undertaking is entrusted must be clearly defined, and that the parameters on the basis of which the compensation is calculated must be established in advance in an objective and transparent manner, require local and regional authorities to endeavour to explain their public service obligations; is concerned that the requirements for the entrustment act should not lead to any unintended VAT liabilities for local and regional authorities, and therefore calls for the criteria to be brought into line with the provisions of the European VAT directive; |
| --- | --- |

48.

notes that the first two criteria of the Altmark judgment, namely that the public service obligation with which the recipient undertaking is entrusted must be clearly defined, and that the parameters on the basis of which the compensation is calculated must be established in advance in an objective and transparent manner, require local and regional authorities to endeavour to explain their public service obligations; is concerned that the requirements for the entrustment act should not lead to any unintended VAT liabilities for local and regional authorities, and therefore calls for the criteria to be brought into line with the provisions of the European VAT directive;

| 49. | believes that this endeavour will lead to greater transparency and democratic accountability in the management of public services, provided that it is proportionate and reasonable, does not entail an excessive administrative burden for public authorities and undertakings and does not go against the principle of public service adaptability to changes in collective needs. Proposes that the Commission, in line with the principle of transparency laid down by the Treaty and in response to the need to demystify public services for the people, make each of these decisions on public service compensation conditional on the existence of a ‘public service contract’ in place of the current ‘act of entrustment’, which remains a rather obscure concept to public authorities and individuals; |
| --- | --- |

49.

believes that this endeavour will lead to greater transparency and democratic accountability in the management of public services, provided that it is proportionate and reasonable, does not entail an excessive administrative burden for public authorities and undertakings and does not go against the principle of public service adaptability to changes in collective needs. Proposes that the Commission, in line with the principle of transparency laid down by the Treaty and in response to the need to demystify public services for the people, make each of these decisions on public service compensation conditional on the existence of a ‘public service contract’ in place of the current ‘act of entrustment’, which remains a rather obscure concept to public authorities and individuals;

Constructive, balanced proposals to ensure, in line with the principles of proportionality and transparency laid down in the Treaty, that the development of public services within the EU maintains full legal certainty for public authorities, the undertakings entrusted with the services and the people who benefit from them

Constructive, balanced proposals to ensure, in line with the principles of proportionality and transparency laid down in the Treaty, that the development of public services within the EU maintains full legal certainty for public authorities, the undertakings entrusted with the services and the people who benefit from them

| 50. | would like to submit to the Commission concrete, constructive, balanced proposals for simplifying and clarifying the currently applicable regulations and for ensuring that local and regional authorities apply them properly in the interests of legal certainty and predictability. Its proposals are founded on the principles of proportionality and transparency laid down in the Treaty; |
| --- | --- |

50.

would like to submit to the Commission concrete, constructive, balanced proposals for simplifying and clarifying the currently applicable regulations and for ensuring that local and regional authorities apply them properly in the interests of legal certainty and predictability. Its proposals are founded on the principles of proportionality and transparency laid down in the Treaty;

| 51. | suggests to the Commission that the de minimis ceiling of EUR 200 000 (5) over three years below which public aid is not regarded as State aid should be raised to EUR 800 000 (6) a year specifically for public service compensation. This would exclude from the scope of State aid control all local public services relying on the local voluntary sector and local social micro-enterprises, including those relating to local social development such as social inclusion, combating exclusion, community work, promoting cultural, sporting and socio-educational activities, and such like. This proposal is based on the fact that there is no risk of this kind of local public service affecting intra-Community trade and that it would be physically impossible for local and regional authorities to subject this kind of local operator to State aid control, because there are so many of them; |
| --- | --- |

51.

suggests to the Commission that the de minimis ceiling of EUR 200 000 (5) over three years below which public aid is not regarded as State aid should be raised to EUR 800 000 (6) a year specifically for public service compensation. This would exclude from the scope of State aid control all local public services relying on the local voluntary sector and local social micro-enterprises, including those relating to local social development such as social inclusion, combating exclusion, community work, promoting cultural, sporting and socio-educational activities, and such like. This proposal is based on the fact that there is no risk of this kind of local public service affecting intra-Community trade and that it would be physically impossible for local and regional authorities to subject this kind of local operator to State aid control, because there are so many of them;

de minimis

5

6

| 52. | suggests to the Commission that compensation exceeding EUR 800 000 a year granted by local and regional authorities to undertakings that manage local public services – including public social services – should be subject to a new, simplified decision concerning a priori compatibility with the rules on State aid, based on the very low risk of affecting intra-Community trade, given the current state of development of the single market. This low risk of affecting trade is due to the purely local nature of the public service, to its sectoral organisation and, not least, to the resultant specific characteristics of operators in the sector, who tend to be locally based and not to have an EU or cross-border dimension; |
| --- | --- |

52.

suggests to the Commission that compensation exceeding EUR 800 000 a year granted by local and regional authorities to undertakings that manage local public services – including public social services – should be subject to a new, simplified decision concerning a priori compatibility with the rules on State aid, based on the very low risk of affecting intra-Community trade, given the current state of development of the single market. This low risk of affecting trade is due to the purely local nature of the public service, to its sectoral organisation and, not least, to the resultant specific characteristics of operators in the sector, who tend to be locally based and not to have an EU or cross-border dimension;

a priori

| 53. | feels that the implementation of the simplified decision should depend on the following objective criteria, as they ensure, given the current state of the single market, that there is a very low risk of affecting intra-Community trade: (1) the compensation must be granted by a local and/or regional authority, by a group of local and/or regional authorities or by any body mandated to do so by a local and/or regional authority; (2) it must be granted for providing a local or regional public service that is limited to a given geographical area and meets the specific needs of people in that area; and (3) it must be granted to undertakings whose territorial remit is, de facto or de jure, limited to the area where the public service is delivered or that exclusively provide public services and undertake no other, commercial, activities, and that were created specifically to meet these basic needs or return any surpluses into funding the public service they operate, such surpluses being deducted from future compensation; |
| --- | --- |

53.

feels that the implementation of the simplified decision should depend on the following objective criteria, as they ensure, given the current state of the single market, that there is a very low risk of affecting intra-Community trade: (1) the compensation must be granted by a local and/or regional authority, by a group of local and/or regional authorities or by any body mandated to do so by a local and/or regional authority; (2) it must be granted for providing a local or regional public service that is limited to a given geographical area and meets the specific needs of people in that area; and (3) it must be granted to undertakings whose territorial remit is, de facto or de jure, limited to the area where the public service is delivered or that exclusively provide public services and undertake no other, commercial, activities, and that were created specifically to meet these basic needs or return any surpluses into funding the public service they operate, such surpluses being deducted from future compensation;

de facto

de jure

| 54. | suggests that, in accordance with the subsidiarity and proportionality principles set out in the Treaty, the simplified decision concerning the a priori compatibility of local and/or regional public service compensation should make it incumbent on the public authorities granting the compensation to take all necessary steps to prevent, detect and offset any overcompensation, given that it is directly in the interests of the local and regional authorities to prevent any such situation. By the same token, the procedures open to undertakings where overcompensation is detected should be simplified; |
| --- | --- |

54.

suggests that, in accordance with the subsidiarity and proportionality principles set out in the Treaty, the simplified decision concerning the a priori compatibility of local and/or regional public service compensation should make it incumbent on the public authorities granting the compensation to take all necessary steps to prevent, detect and offset any overcompensation, given that it is directly in the interests of the local and regional authorities to prevent any such situation. By the same token, the procedures open to undertakings where overcompensation is detected should be simplified;

a priori

| 55. | suggests that, in the case of public services with an EU or cross-border dimension, governed by EU directives or regulations (for example the regulation on public service obligations in land transport (7)), and other public services that are not governed by EU law but do not fit the criteria set out in the new simplified decision (for example because the operators have an EU or cross-border structure), issues surrounding the compatibility of public service compensation (including the net cost of delivering such services), the efficiency of operators and any rules on reasonable profits should be approached from a sectoral, not cross-cutting, point of view that is compatible with the specific features of each public service, and that such issues should be dealt with in codecision between the European Parliament and the Council. Pending the revision of existing directives and regulations and the adoption of new sectoral directives and regulations, the current EU framework must be retained, taking account of the proposed simplifications in terms of de minimis public service compensation and the revision of the decision concerning the a priori compatibility of local public services; |
| --- | --- |

55.

suggests that, in the case of public services with an EU or cross-border dimension, governed by EU directives or regulations (for example the regulation on public service obligations in land transport (7)), and other public services that are not governed by EU law but do not fit the criteria set out in the new simplified decision (for example because the operators have an EU or cross-border structure), issues surrounding the compatibility of public service compensation (including the net cost of delivering such services), the efficiency of operators and any rules on reasonable profits should be approached from a sectoral, not cross-cutting, point of view that is compatible with the specific features of each public service, and that such issues should be dealt with in codecision between the European Parliament and the Council. Pending the revision of existing directives and regulations and the adoption of new sectoral directives and regulations, the current EU framework must be retained, taking account of the proposed simplifications in terms of de minimis public service compensation and the revision of the decision concerning the a priori compatibility of local public services;

7

de minimis

a priori

| 56. | suggests to the Commission, in line with the transparency principle laid down by the Treaty and the provisions of Articles 14 and 106(2) TFEU, that the application of these three provisions should be conditional, firstly, on the existence of a ‘public service contract’ (8), i.e. of any official document (1) acknowledging that the task performed by the operator is a service of general interest and falls within the scope of Articles 14 and 106(2) TFEU and Article 2 of Protocol 26, (2) setting out the nature of the specific obligations arising and the geographical area concerned, and (3) setting out the parameters for calculating the public service compensation, and, secondly, on this public service contract being published in the Official Journal of the European Union in a specific register set up for this purpose. |
| --- | --- |

56.

suggests to the Commission, in line with the transparency principle laid down by the Treaty and the provisions of Articles 14 and 106(2) TFEU, that the application of these three provisions should be conditional, firstly, on the existence of a ‘public service contract’ (8), i.e. of any official document (1) acknowledging that the task performed by the operator is a service of general interest and falls within the scope of Articles 14 and 106(2) TFEU and Article 2 of Protocol 26, (2) setting out the nature of the specific obligations arising and the geographical area concerned, and (3) setting out the parameters for calculating the public service compensation, and, secondly, on this public service contract being published in the Official Journal of the European Union in a specific register set up for this purpose.

8

Official Journal of the European Union

Brussels, 1 July 2011.

The President of the Committee of the Regions

Mercedes BRESSO

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(1)  Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions – Towards a Single Market Act. For a highly competitive social market economy. 50 proposals for improving our work, business and exchanges with one another, COM(2010) 608 final.

1

(2)  Frequently asked questions related to Commission Decision 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 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. Accompanying document to the Communication on ‘Services of general interest, including social services of general interest: a new European commitment’ COM(2007) 725 final SEC(2007) 1516.

2

Frequently asked questions related to Commission Decision 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 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. Accompanying document to the Communication on ‘Services of general interest, including social services of general interest: a new European commitment’

(3)  SEC(2010) 1545, 7.12.2010.

3

(4)  http://ec.europa.eu/services_general_interest/index_en.htm.

4

(5)  Commission Regulation (EC) No 1998/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to de minimis aid.

5

(6)  This corresponds to the average net operating costs of a local public service, excluding a reasonable profit, for an association with 20 to 25 employees.

6

(7)  Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70.

7

(8)  As defined in the aforementioned Regulation (EC) No 1370/2007.

8

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