Opinion of the Economic and Social Committee on the "Strengthening of the law governing concessions and public/private partnership (PPP) contracts"
Date: 2000-10-19
Institutions: Provisional data
Subjects: EU law, administrative procedure, contract, private sector, public sector, works contract

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3.4.3.
Such appropriate projects can show very clearly that
environmental protection is not a luxury that only rich
societies can afford, but a sine qua non for ensuring global
environmental and economic stability.

3.4.4.
Finally, it is not clear how the Commission arrives at
the view that ‘Privatisation of environmental services, such as
waste management, sanitation and wastewater treatment,
could also improve economic and environmental efficiency’.

Brussels, 19 October 2000.

The President

of the Economic and Social Committee

Göke FRERICHS

Opinion of the Economic and Social Committee on the ‘Strengthening of the law governing
concessions and public/private partnership (PPP) contracts’

(2001/C 14/19)

On 2 March 2000 the Economic and Social Committee, acting under the third paragraph of Rule 23 of
its Rules of Procedure, decided to draw up an opinion on ‘Strengthening of the law governing concessions
and public/private partnership (PPP) contracts’.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 1 September 2000. The rapporteur was
Mr Levaux.

At its 376th plenary session of 19 October 2000 the Committee adopted the following opinion by
72 votes to 2 with 7 abstentions.

1.

Introduction

1.1.
At its meeting on 14 December 1999, the Section for
the Single Market, Production and Consumption decided to
apply to the Bureau for authorisation to draw up an own-
initiative opinion on Strengthening the law governing con-
cessions and public-private partnership (PPP) contracts as tools
to revive growth in Europe for the benefit of EU citizens and
to aid market integration. Community public-purchasing law
does not cover all PPP contracts. Directive 93/37/EEC (1)
provides a definition and framework for the award of public
works contracts, but not a general framework for public-
private partnership contracts. The Commission acknowledges
this need in a number of ways:

— The high-level group set up by Mr Kinnock proposed
recommendations which were fully adopted by the
Commission, but have remained a dead letter as far as
European legislation or the legal situation in several
countries is concerned.

— The Commission Interpretative Communication on con-
cessions under Community law (2) published after the
January 1997 Green Paper on public contracts, and the
March 1998 note for guidance, make a number of
points which raise several fundamental questions. The
Commission has recognised the variety of contractual
relationships falling within the ambit of PPP and has
focused its analysis on concessions alone.

The Committee intends to focus its deliberations on

1.2.
two main groups of questions.

1.2.1. E c o n o m i c ,
t i o n s

s o c i a l a n d s t r a t e g i c q u e s -

— Should there be a harmonised framework for such
contracts, bearing in mind the slow development of the
trans-European networks (TENs), which were to have
been created with the aid of these contracts?

(1) OJ L 199, 9.8.1993.

(2) OJ C 121, 29.4.2000.

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Should account not be taken of the strategic value of
such contracts:

— with specific reference to the provision of services

of general interest (social, environmental)?

— for achieving consolidation aimed at growth and
creating a real market for private infrastructure
capital? Greater use of
these contracts is being
held back by the uncertainty surrounding present
European contract law.

these principles. The purpose of the directives drawn up by
the European Union is to ensure transparent competition
throughout the field of public procurement (2), and their scope
is sometimes unclear in relation to public/private partnership.
To date only Directive 93/37/EEC concerning the coordination
of procedures for the award of public works contracts defines
the concession contract [in article 1(d)]; and only public works
concessions are defined. Prior publication in the Official
Journal of the European Communities (OJ) is required. This is
unfortunately by analogy with straightforward public works
contracts (3).

— Should a gap be allowed to develop between Europe and
those other regions of the world which are rapidly
pressing ahead with this type of contract? If the EU
lags behind in this field Europe’s longer-term economic
development could slow down.

1.2.2. Q u e s t i o n s c o n c e r n i n g l e g a l h a r m o n i s -
a t i o n a n d t h e c l a r i f i c a t i o n o f E u r o p e a n
l a w :

— Should the rules governing these contracts be harmonised

in line with the UNCITRAL proposal (1)?

— Should public procurement law be adjusted to take
account of the marked growth of new types of PPP
contracts and the reorganisation taking place in some
Member States involving infrastructure management by
private operators?

1.3.
This opinion sets out to define, by reference to previous
work done on the subject at European level, a clearer approach
conducive to the establishment of a body of European law on
concessions. A clear definition of concessions and a suitable
framework for these contracts are needed in order to enable
them to develop. By studying the difficulties encountered with
regard to infrastructure concessions, the opinion will put
forward proposals for Europe.

Although public works concessions — involving
2.1.1.1.
the works and the provision of
both the execution of
the associated service — are clearly governed by Directive
93/37/EEC, the same does not apply to telecommunications,
transport, water or energy concessions. Directive 92/50/EEC
relating to the coordination of procedures for the award of
public service contracts does not define concessions or the
procedure for their award. The same is true of Directive
93/38/EEC, which deals with procurement by holders of
concessions or exclusive rights in telecommunications, water
and energy.

There are other inconsistencies of definition and
2.1.1.2.
scope between these directives, where clarification is required
with regard to concession and PPP contracts.

2.1.2.
The definition of public works concessions in Euro-
pean law is open to criticism. The criticism is that the definition
equates concessions with works contracts, which makes no
sense, and the fact that in most Member States the law makes
no provision for private-sector proposals for concessions.

2. Obstacles to PPP and an account of previous Euro-

pean initiatives on the subject

2.1. Legal obstacles

Unclear framework for concessions in European
2.1.1.
directives. Community law on concessions derives, on the one
hand, from the principles and rules laid down in the Treaty,
and on the other hand from the six directives implementing

(1) United Nations Commission on International Trade Law

(2) — Council Directive 93/37/EEC of 14 June 1993 (OJ L 199,
9.8.1993) concerning the coordination of procedures for the
award of public works contracts, which brings together the
two directives drawn up in 1971 and 1989 respectively,
Directive 71/305/EEC (OJ L 185, 16.8.1971) and Directive
89/440/EEC (OJ L 210, 21.7.1989).

— Council Directive 93/36/EEC of 14 June 1993 coordinating

procedures for the award of public supply contracts.

— Council Directive 92/50/EEC of 18 June 1992 relating to the
coordination of procedures for the award of public service
contracts.

— Council Directive 93/38/EEC of 14 June 1993 coordinating
the procurement procedures of entities operating in the water,
energy, transport and telecommunications sectors.

(3) ‘“Public works concession” is a contract of the same type as that
indicated in (a) except for the fact that the consideration for the
works to be carried out consists either solely in the right to exploit
the construction or in this right together with payment.’

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2.1.2.1.
A public works concession is a complex contract
by which a public authority delegates to a private organisation
the responsibility for financing, executing and maintaining a
project in return for the right to operate the facility for an
extended period, thus enabling its investment to be amortised.
This entails the transfer of responsibility from the awarding
authority to the concessionaire and a global contract which
includes numerous functions (construction, financing, oper-
ation), whatever the means of payment of the concessionaire.
The remuneration of capital and of the investor’s risk must
strike a fair balance with the service provided to the consumer
or user.

2.1.2.2.
Following the publication of the European Com-
mission’s green paper in November 1996 (1), the Committee
adopted an opinion on 28 May 1997 (2) in which it asked the
Commission to revise its approach on concessions and define
them separately from public works:

— ‘The question of concessions should also be examined in
depth, given that their award must be transparent and
subject to objective criteria. There are fundamental differ-
ences between a concession and a contract: object,
duration, terms for financing, management methods and
the extent of liability. To encourage the spread of such
contracts the Commission could study what form of legal
tool should be used for their implementation.’

Other points from the opinion are worth quoting:

— ‘3.7 The use of long-term contracts to provide private
financing for public works is growing in several countries.
These are not the same as public procurement contracts.
Such methods should be promoted and used more widely
as they help states save public money. The Commission
should draw up a communication on interpretation
which safeguards the negotiated status of such contracts
while ensuring they have the necessary publicity.’;

— ‘8.3.6 [The ESC] desires that concessions be the subject
of a specific regime, especially as regards trans-European
networks.’;

‘8.3.7 [The ESC] proposes
the Commission
encourage the promotion of new contractual arrange-

that

ments based on private investment in public infrastruc-
tures.’.

Current European law does not ensure equality of
2.1.3.
treatment for concessions under national
law. The Com-
mission, aware of the problems posed by the current legal
framework, has published a Commission Interpretative Com-
munication on concessions under Community law (29 April
2000).

it

this work is useful,

The final version of

2.1.3.1.
this communication was
published following a consultation at European level; the ESC
was not, however, consulted. The draft deals with the inclusion
of concessions in the Treaty, the concept of concessions and
its field of application. Whilst
is
nonetheless only a step in the right direction and there have
been many expressions of support for a European directive on
the subject aimed at ending unnecessary legal ambiguities and
creating a harmonised legal basis for these contracts in line
with practice in the rest of the world. National laws are not at
present harmonised, and the rights and obligations they
provide and their treatment of concessions and PPP varies very
widely. It is not acceptable that the award and execution of
this kind of contract should vary to such an extent within the
Member States whilst the European authorities constantly
remind us that recourse to PPP would make it possible to
build Europe’s infrastructure. The concepts of public/private
partnership and concession must be clearly spelt out
in
European law to prevent any disincentive to private investment
in public facilities.

2.1.3.1.1.
The interpretative communication contains a
useful reminder of the rules applied by the Treaty to all service
or works concessions and to the granting of exclusive rights (3).
It rightly stresses the need to make public and quasi-public
bodies compete with the private sector over the granting of
contracts or unilateral acts tantamount to concession. In the
treatment the Commission considers that
name of equal
provisions ‘reserving public contracts only to companies in
which the State or the public sector has a majority or complete
participation’ are contrary to the rules of the Treaty referred to
above and to the principle of equal treatment.

(1) Green Paper — Public Procurement in the European Union:

Exploring the Way Forward (COM(96) 583 final).

(2) OJ C 287, 22.9.1997, p. 92.

(3) Bodies must respect the principles of transparency, proportionality
and mutual recognition. ‘Directive 93/37/EEC requires a prelimi-
nary advertisement for all contracts for public works concessions,
irrespective of whether the potential concessionaire is private or
public.’ The communication does not express any view on the
granting of service concessions.

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2.1.3.2.
And yet the communication does not regulate all
the problems, either with regard to the content of concession
contracts or in relation to the law applicable. The Commission
uses ‘the right to exploit the construction or this right together
with payment’ as the sole criterion for distinguishing between
public purchasing and concessions; the Commission states that
the right to exploit the construction confers the right to charge
fees to users, it considers that payment in the form of user fees
distinguishes concessions from public purchasing, and it
equates exploitation with risk of use, which is not in fact the
case in some concession contracts, or in relation to the works
directive, still less the services directive.

2.1.3.3.
Risks vary greatly, depending on the nature of the
service to be provided, and are not restricted solely to risks
related to traffic (hospitals, car parks, water networks etc.).
Before the operating phase the concessionaire is responsible for
planning, financing, the execution of works and maintenance
services over many years. The concession cannot therefore be
reduced to a single criterion, the payment risk; it is a much
broader concept and all its components need to be identified
and ranked in order of importance if the concept is to be
effectively clarified. Moreover, the contractual transfer of risk
is negotiated on a case-by-case basis.

2.1.4.
Different applications of European law give rise to
legal distinctions. The Committee notes that the legal treatment
of concession contracts varies significantly from one Member
State to another. For example, in Belgium, Spain, the United
Kingdom and Portugal only long-term works concessions
involving payments by the public sector qualify as public
works concession contracts. The situation is different, however,
in Germany, France and Italy. And yet these are the same types
of contract, which are moreover at present gaining ground
rapidly in Europe and throughout the world.

2.1.4.1.
These different approaches to public-sector con-
tracts in Europe are a source of disunity. The same contract
would be considered a works contract in one Member State
and a concession in another, with different award procedures.
The interpretative communication does not seem likely to
change this: British Private Finance Initiative (PFI) contracts are
of very long duration, they are fully negotiated and they entail
payment in full by the public sector following the transfer of
risks of varying degree to the private sector. These contracts
can be considered either as public purchasing arrangements, or
as concessions in the light of the interpretative communication.

2.1.5. Many countries throughout the world have intro-
duced specific laws covering proposals put forward by the
private sector outside the public-sector consultation process,
giving private-sector operators the right to propose a project
to the responsible public authorities. If the proposal is accepted
by the public authorities, a competitive call for tenders will be
issued, with rights reserved for the originator of the idea (1).

2.2. Economic obstacles

2.2.1. G a p s

i n E u r o p e a n l a w a r e h i n d e r i n g
t h e p r o p e r d e v e l o p m e n t o f t h e p r i v a t e
f i n a n c i n g o f p u b l i c i n f r a s t r u c t u r e

Investors stress the uncertainties inherent in the
2.2.1.1.
law, which provides few rights, creating an environment which
is hardly conducive to the private financing of infrastructure.
This is all the more regrettable, given that PPP law has made
remarkable progress in the rest of the world, as demonstrated
by the work of the United Nations Commission on Inter-
national Trade Law (UNCITRAL) (2). The UN Commission
established that national
law contains provisions not only
regarding the award of concessions but also laying down
procedures for execution. The question was touched on in part
at the time of the publication of the Green Paper on public
procurement by the European Commission in November
1996. There has so far been no response. A law which focuses
exclusively on the award of contracts is inadequate, even a
disincentive, as the Kinnock report stated.

2.2.2.
The inadequate progress of the trans-European trans-
port network programme has for some time given rise to
questions as to the effectiveness of the current approach to
concession law in Europe. The question was studied in depth
by the Kinnock group, which in May 1997 published the Final
Report of the high-level group of personal representatives on
public-private partnership financing of priority trans-European
transport network projects.

— Numerous proposals were put forward by the working
parties concerned with the various aspects of the law on
concessions. Few of them have so far been followed up,
however, and very few transport infrastructure projects
have been carried out with resort to genuine public-
private partnership. This is of course one of the causes of
the delays noted in the programme adopted at Essen for
14 priority projects.

(1) This practice is followed in Italy, and there is no reason why
other Member States should not also adopt similar procedures.
UNCITRAL has also recently published recommendations for
legislation to this end.

(2) See the report on privately financed infrastructure projects,

2 March 1998 — UNCITRAL, 31st session.

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2.2.3. S u m m a r y
r e p o r t o f
o b s t a c l e s
s h i p i n E u r o p e
2 . 2 . 3 . 3 )

t h e

o f
t h e
p r o p o s a l s
t h e h i g h - l e v e l g r o u p o n t h e
t o p r i v a t e / p u b l i c p a r t n e r -
2 . 2 . 3 . 1 a n d

( p o i n t s

o f

2.2.3.1. A European strategy on concessions

— PPP needs to have a clear policy structure. Projects need
certainty and structured solutions to initial problems.

— Enable repayments to be reinvested.

— Create a long-term financing market and provide access

to near-equity.

— Encourage private investors (reimbursement in the event

of repurchase).

— Create a zero-coupon bond.

— Permit joint concession of additional activities to balance

the main concession.

— There is a lack of coordination and motivation on the

part of the public-sector players.

— Develop recourse to pension funds.

— Sizeable initial public funding will be needed, with project
agencies studying financial viability at a very early stage.
Soil studies will also be needed. The idea has been mooted
of a European agency to ensure cooperation capacity and
continuity on trans-frontier projects.

— A European company statute will be needed for trans-
frontier concessions, as will the development of public
interest groupings.

— Develop harmonised risk assessment on a fair and

reasonable basis.

— Affirm the principle of the financial balance of concession

contracts.

— Ensure that

the concessionaire carries only the risk
relating to the cost of works, and operating and mainten-
ance costs. The public sector should assume the environ-
mental risk and the cost of the initial guaranteed phase.

— Common methods will need to be developed for the
evaluation and presentation of projects, based on trans-
parent cost-benefit analyses and including measurements
of externalities and future tax revenues.

— Cut the cost of studies and the associated risk.

— Cut negotiating costs by taking care over the drawing up

of specifications.

— The task of demonstrating the financial viability of
projects should be entrusted to the private sector.

— Develop minimum revenue guarantees in return for
profit-sharing. The Commission should make use of
publicly-funded concession contracts.

— The ability of the public authorities to set up concession

projects will need to be developed.

2.2.3.3. Adopting common contract award methods

— The key problem of an evolving tax situation will need to

dealt with in a harmonised way.

— Long-term tax guarantees will need to be established. This
is an obstacle to investment (e.g. 20 % VAT in France).

— In order to reduce the cost of

the contract award
procedure, the public authorities should be more closely
involved in the preparation of projects: traffic studies,
geological studies — safeguarding the proposals put
forward by unsuccessful bidders.

— Develop negotiating procedures following restricted ten-

ders — selection of best bid.

— Construction companies will assume the main risk of
planning and putting together a project on time and on
budget.

— Limit detail in specifications for construction work. The

Commission would help to simplify procedures.

2.2.3.2. Developing ad hoc financial methods

— Prohibit changes to programme once construction has

started.

— Develop repayable advances (when traffic targets are

met).

— Calls for tender should be issued only after land has been
purchased, plans approved, feasibility studies carried out
and subsidies determined.

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— Develop procedures for the pre-selection of concession-

aires.

— Permit the submission of proposals on the initiative of

the private sector.

use of PPP agreements. Europe currently makes less use of PPP
than other parts of the world and should therefore try to learn
from their experience. The impact on consumers should in
particular be analysed.

2.2.4.
The legal situation in Europe has not changed since
publication of the Kinnock report. The Committee also thinks
that the procedures should be used to ensure that the three
‘pillars’ (economy, environment and social aspects) are taken
into account.

2.2.5. M a i n t e n a n c e o f m o n o p o l i e s

i n m a j o r

p r o j e c t s

2.2.5.1.
Despite the Commission’s repeated injunctions to
the Member States to make use of PPP contracts, the use of
PPP has in some cases actually declined in certain projects (e.g.
Barcelona-Perpignan link); the private sector is totally excluded
from some projects, such as the Lyon-Turin link, although it
would be able to propose innovative or alternative solutions.

2.2.5.2.
Although economic balancing criteria may justify
a derogation to Article 90(2) of the Treaty (1) (see the report
on privately financed infrastructure projects, 2 March 1998,
UNCITRAL, 31st session), or else the taking into account
of spatial-planning or public-policy considerations (2),
the
objectives of the Maastricht Treaty and the competition rules
do apply. The Treaty requires the Member States to conduct
their activities in accordance with the principle of an open
market economy with free competition (3).

The interpretative communication clearly and
2.2.5.3.
rightly stresses that public and quasi-public entities are subject
to current law governing competition between the public and
private sectors, as set out in the Treaty and the relevant
directives.

2.2.6.
Europe faces wide-ranging challenges, both in the
short term in relation to infrastructure and in the medium and
long term in relation to the maintenance of European firms’
competitiveness and export capacity. The financing problem
arising from government’s limited resources can be solved by

(1) ECJ, Corbeau, 19.5.1993, ECR 1993, p. I-2533.
(2) ECJ, Municipality of Almelo, ECR 1994, p. I-1477.
(3) See The strategy for Europe’s Internal Market and Recommen-
dations for the Review of Target Actions, own-initiative opinion
— rapporteur Mr Little, OJ C 140, 18.5.2000, p. 36.

2.2.7. L a c k o f d i v e r s i f i c a t i o n o f m o d e s o f

p u b l i c m a n a g e m e n t

2.2.7.1. Maintaining the balance of public budgets in
some cases suggests the use of procedures for assigning this
expenditure to the private sector in the form of public/private
partnerships.

2.2.7.2.
A number of states have decided to make PPP a
central instrument of government policy. The British govern-
ment has established the principle that restricting government’s
activities to the essentials leaves it free to concentrate on the
quality of its services. PPP does not just mean having recourse
to the private sector for the financing of investment projects
but also making use of the skills and management know-how
of the private sector for carrying out and operating public
projects more effectively over an extended period.

2.2.8. A b s e n c e o f

c i p l e s a t E u r o p e a n l e v e l
m e n t o f P P P

f i r m a n d u n i f o r m p r i n -
f o r d e v e l o p -

2.2.8.1.
The huge TEN project will only get off the ground
if the Member States also decide to take the necessary measures
to promote it, if they cease assigning all the business to public
or quasi-public corporations and if they make a coordinated
call to the competition, with a view to pressing ahead with
these major projects, welcoming alternative ideas and varied
proposals from the private sector.

2.2.8.2.
It is up to the Commission to encourage the
development of projects and to remind the Member States that
these TEN projects are not the exclusive preserve of public-
sector entities. But, in more general terms, the role of the
Commission is to provide a more satisfactory legal framework
for these contracts so that investment funding will be forth-
coming on a non-discriminatory basis compared with other
forms of investment.

The Commission needs to adopt the strategic view:
2.2.8.3.
either Europe adopts the right methods of public-sector
management for the new millennium, which would be in
keeping with its tradition, or else it remains trapped in a
regulatory straitjacket which involves additional costs both for
consumers and for private-sector investors who have a higher
financing cost.

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3.

The main achievements of PPP in Europe and the
world

4.2. A harmonised framework for the development of concessions

and other PPP contracts

3.1.
All European countries have either had recourse to the
system of concessions in the past or are doing so at present. It
should not be forgotten that the ‘first Europe’, in the time of
the Romans, was already using the concession system in many
areas of services and infrastructure 2000 years ago. Today
these contracts are used in many European countries (France,
Italy, Spain) and
United Kingdom, Netherlands, Portugal,
elsewhere for the construction not only of motorways and car
parks, but also of water networks, museums, airports, tram
networks and underground railways, as well as for urban
renewal and the renovation of schools, hospitals etc.

4.

The Committee’s proposals for improving and unify-
ing concession law

4.1. Definition of concession

4.2.1. A n o v e r a l l l e g a l f r a m e w o r k

4.2.1.1. Maintenance of the liberal approach to concessions:
an approach favouring competition must be maintained in the
wording of Directive 93/37/EEC.

A European financial framework: an appropriate
4.2.1.2.
legal framework is needed for the establishment of long-term
financing, particularly as the funds involved are sizeable and
require resort to international financial markets and certainty
as to the conditions of implementation of the contracts.
However, recourse to financing by pension funds would be ill-
suited to most Member States in the light of their existing
social protection arrangements.

4.2.1.3.
Using the capital and experience of the EIB: this
bank, founded by the Member States, finances a large number
of programmes subsidised by Europe and has a wealth of
experience in the field of partnership.

4.1.1.
So far only public works concessions have been
defined, and even then only sketchily, or regulated at Com-
munity level — in Directive 93/37/EEC of 14 June 1993.
There appears to be no existing definition of concession or
PPP contracts; the primary need is for their content and scope
to be defined.

A harmonised legal framework for concessions in
4.2.1.4.
Europe: rules need to be drawn up applicable to the Member
States guaranteeing an appropriate and equal distribution of
rights and obligations between concessionaire and awarding
body in contracts.

4.1.2.
Concessions, or delegation in the broader sense,
cannot be summed up in terms of a single criterion, such as
risk or payment, the line taken in Directive 93/37/EEC, nor in
terms of a single payment characteristic; rather they have to be
defined in terms of a number of elements.

4.1.3.
A public works concession is an act (whether by
contract or unilateral) whereby a public authority delegates to
a private organisation the task of designing, constructing,
financing, maintaining and operating an infrastructure and/or
service for a predetermined extended period. Generally it is a
contract by which the public authority instructs a firm to carry
out at its own expense the necessary investment for the
creation of a service and to operate this over an extended
period; the firm may be remunerated by means of a user-fee
and/or by the public authority; the form of remuneration does
not alter the nature of the concession.

4.2.2. H a r m o n i s e d a n d t r a n s p a r e n t a w a r d

4.2.2.1.
Transparent award: the public authorities must
protect themselves against any criticisms which might be
levelled at the award of these contracts. To this end a European
web site should be established containing legal information on
this kind of contract. The competent assemblies in the
countries concerned could then, having consulted the social
partners, express their views with complete transparency and
better monitor the award procedure.

4.2.2.2.
Final choice of concessionaire: the public authority
must define in advance the objectives of the project, leaving to
the private-sector entity the technical and economic responsi-
bility for the solutions set out in its proposal (concessionaires
not being in favour of the competitions envisaged by the
Commission).

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4.2.2.3.
Selection criteria: the selection of tenderers purely
on the basis of quantitative criteria is not suitable for such
large and complex projects. The competition procedure must
be governed by the principle of transparent criteria. Selection
should be based on a combination of suitable criteria: qualitat-
ive, quantitative and realistic criteria using the most transparent
procedure, including perusal of the references provided by
each of the candidates.

Cost of studies: feasibility studies for a concession
4.2.2.4.
being long drawn-out and costly, it is important that firms be
encouraged to participate in the competition by making
provision for compensation for a significant proportion of the
costs incurred in preparing the tender.

4.2.2.5.
Respect for innovation: a candidate’s bid for a
involving major and essential
concession may be original,
technical, financial or commercial innovations. It must at all
costs be ensured that the candidate’s bid is not made available
to the other competitors. Ownership of the concept must
remain with its author. This is a question of ethics and this
guarantee must be offered to the tenderer, as original proposals
cannot generally be protected by patent (the solution suggested
by the Commission).
In the absence of such protection
of intellectual property, candidates would undoubtedly be
unwilling to reveal original ideas, thus depriving the local
authority of an opportunity for progress.

4.2.2.6.
Respect for sustainable development: in view of the
scale of these projects, the public authorities need to take
account of social and environmental issues.

4.2.2.7.
Negotiated procedure: a proposal for a concession
contract must meet the service objective, which must be clearly
spelt out by the awarding authority. The concessionaire must
have every freedom in deciding how to obtain that objective:
project design, scheduling of work, assumption of technical
risks etc. This implies that, once proposals have been submitted
by one or more candidates, a dialogue should be entered into
with the potential concessionaires with the awarding authority
showing flexibility in the definitive drafting of a concession
contract reflecting the awarding authority’s needs.

4.3. The need to adopt a directive

4.3.1.
The directive must define concessions and other
forms of PPP contract in terms of their long-term character and
fundamental constituent parts (planning, execution, financing,
maintenance and management of works). In the case of works
concessions including associated services, the directive must
reaffirm the role assigned to the concessionaire in the design,
financing and execution of the work and subsequent mainten-
ance. A uniform framework is needed for contracts for car
parks, motorways, ports, airports, sewage systems etc.

4.3.2.
A legal framework appropriate to concessions is
essential for the execution of concession or PPP contracts.
Partnership contracts will be possible only if contractual
balance can be established and observed; without this no
operator would be willing to undertake a concession contract.
Principles must therefore be established enabling risks to be
fairly shared between the awarding authority and concession-
aire, both for works and services concessions. The following
principles should be incorporated into European law:

4.3.2.1.
The risks of an infrastructure concession must be
identified, quantified and clearly assigned to the party better
able to assume them.

4.3.2.2.
The concessionaire and its financiers must receive
guarantees that the contract will continue for its whole term
without change. Any change to the financial conditions of the
initial contract would require renegotiation. There must be
contingency arrangements for government action risk and
force majeure (principle of contractual stability).

4.3.2.3.
Rules must be drawn up by the awarding body to
cover exceptional risks: sudden, unforeseeable events which
increase the cost of the contract, e.g. changes to administrative
requirements.

4.2.2.8.
Need for flexibility. No other procedure should be
followed, as this would not include the dialogue phase which
is essential to the awarding authority in choosing the tender
best suited to its needs. The provisions of Directive 93/37/EEC
do not require the awarding authority to choose between the
open/restricted or negotiated procedure for the purposes of
the award of public works concessions. It should therefore be
stipulated that the negotiated procedure must be used in
concluding contracts of this type.

The concessionaire must enjoy sufficient flexibility
4.3.2.4.
in carrying out the task delegated to it by the awarding
authority. The awarding authority must not unduly interfere
in the execution of the contract. Its role must be restricted to
questions of prerogative, security or public policy, maintaining
and taking into account its policy-making function and social
responsibility.

16.1.2001

EN

Official Journal of the European Communities

C 14/99

4.3.3.
Clear rules should be drawn up at European level
on access to essential resources, i.e. infrastructure constructed
in the past by monopolies using public resources which
ought to be made accessible to all. This issue has been well
regulated in relation to transport by Directive 91/440/EEC
on the exploitation of railway infrastructure, but not
in
other areas. For example, firms entering into competition

with the old monopolies should be allowed to benefit from
past public investment in Hertzian radio.

The Commission must propose a clear legislative
4.3.4.
text, to be adopted at European level as soon as possible,
establishing a basis for partnership between the public and
private sectors in order to develop the infrastructures and
services which Europe needs.

Brussels, 19 October 2000.

The President

of the Economic and Social Committee

Göke FRERICHS

Opinion of the Economic and Social Committee on the ‘Proposal for a Regulation of the European
Parliament and of the Council on unbundled access to the local loop’

(2001/C 14/20)

On 20 September 2000 the Council decided to consult the Economic and Social Committee, under
Article 262 of the Treaty establishing the European Community, on the above-mentioned proposal.

On 11 July 2000, the Bureau of the Economic and Social Committee instructed the Section for Transport,
Energy, Infrastructure and the Information Society to prepare the Committee’s work on the subject.

At its 376th plenary session of 19 October 2000, the Economic and Social Committee, in view of the
urgency of the matter, appointed Mr Cambus rapporteur-general and adopted the following opinion by
77 votes to one.

1.

Introduction

the end of 2000. To this end, Member States are required
under the Lisbon and Feira Council conclusions to open up
local loops to competition by 1 January 2001 at the latest.

1.1.
Telecommunications technology is evolving all the
time — and at an ever increasing pace since the most modern
computer technologies are used in the main to run the physical
and virtual networks and the services which make up this
sector. This sector makes a key contribution to the spread of
new information technologies and thus to meeting the Union’s
objectives for a society based on knowledge and innovation.

This is why telecommunications operators have been
1.2.
explicitly asked to offer quick, easy and cheap Internet access
both to the corporate sector and to private individuals before

1.3.
In legal terms the telecommunications sector has been
open to full competition since the enactment of the 1996
directive, which had to be implemented by 1 January 1998.
Hence, any new operator can now enter this sector and
compete with incumbent operators. Moreover, the new tech-
nologies have been both a reason and a vehicle for broadening
competition; the GSM system, for example, has enabled new
operators to build up a customer base at a reasonable level of
investment. On the other hand, the objective of opening up