Communication from the Commission - Implementing the Community Lisbon programme - Social services of general interest in the European Union {SEC(2006) 516}
Date: 2006-04-26
Institutions: European Commission
Subjects: EU Member State, European social policy, action programme, economic and social cohesion, economic policy, public service, social security, social services

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 26.4.2006 
COM(2006) 177 final 

COMMUNICATION FROM THE COMMISSION 

Implementing the Community Lisbon programme: 
Social services of general interest in the European Union 

{SEC(2006) 516} 

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Table of contents 

Introduction ................................................................................................................................ 3 

I – 

1.1. 

1.2. 

1.3. 

II – 

2.1. 

Social services – pillars of European society and the European economy .................. 4 

Social services in the European Union......................................................................... 4 

A general trend towards modernisation and quality .................................................... 5 

A Community framework that welcomes differences and is favourable to 
modernisation............................................................................................................... 5 

The application of the Community rules in the area of social services – an ongoing 
logic.............................................................................................................................. 6 

Applying the subsidiarity principle and the distinction between economic and non-
economic services of general interest .......................................................................... 6 

2.2. 

Specific situations encountered today by the social services....................................... 7 

2.2.1.  Delegation .................................................................................................................... 7 

- Deciding whether to delegate a social mission in whole or in part ......................................... 7 

- Management of a social service under a public-private partnership........................................ 7 

2.2.2.  Use of public financial compensation .......................................................................... 8 

2.2.3.  Regulation of the market.............................................................................................. 8 

2.2.4.  Compatibility with the rules on access to the market .................................................. 9 

III – 

3.1. 

3.2. 

Better monitoring of and support for social services of general interest in the 
European Union ........................................................................................................... 9 

In-depth consultation on the specificity characteristics ............................................... 9 

Monitoring the situation regarding social services of general interest in the European 
Union.......................................................................................................................... 10 

Conclusion................................................................................................................................ 10 

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INTRODUCTION 

Modernising social services is one of the most important issues facing Europe today: on the 
one  hand,  these  services  play  a  vital  social  cohesion  role;  on  the  other,  their  transformation 
and job-creation potential make them an integral part of the Lisbon Strategy. The conclusions 
of the European Council in March 2006 confirmed this, reiterating that the internal market for 
services must be made fully operational, while preserving the European social model. 

This communication is a follow-up to the White Paper on services of general interest1, which 
announced  a  “systematic  approach  in  order  to  identify  and  recognise  the  specific 
characteristics of social and health services of general interest and to clarify the framework in 
which  they  operate  and  can  be  modernised”,  as  reiterated  in  the  Social  Agenda2  and  the 
Community Lisbon programme3. Following the vote in Parliament on the first reading of the 
proposal  for  a  directive  on  services  in  the  internal  market  on  16 February 2006,  the 
Commission excluded health services from the field of application of its amended proposal4. 
It  undertook  to  present  a  specific  initiative  and  is  now  giving  thought  to  this  subject5. 
Consequently, this communication does not deal with these services. In its amended proposal 
for  a  directive  on  services  in  the  internal  market  the  Commission  excluded  "social  services 
relating  to  social  housing,  childcare  and support of families and persons in need" from the 
scope of the Directive. It  is now the  responsibility  of  the European legislator to  finalise the 
legislative process. 

This  communication  should  be  seen  in  the  context  of  the  shared  responsibility  of  the 
Community and of the Member States for services of general economic interest, established 
by Article 16 of the EC Treaty. It is the result of close consultation6 with the Member States 
and  civil  society  organisations,  which  has  allowed  the  Commission  to  conduct  an  initial 
survey of the issues at stake and the relevant questions. The Commission strongly wishes to 
pursue this open process of consultation and reflection through the following steps as set out 
in this communication. 

It  should  be  remembered  that  the  existing  Community  framework  respects  the  subsidiarity 
principle. Member States are free to define what they mean by services of general economic 
interest, or in particular by social services of general interest. Within the Member States, the 
public  authorities,  at  the  appropriate  level,  define  the  obligations  and  missions  of  general 
interest  of  these  services,  and  how  they  are  to  be  organised.  On  the  other  hand,  the 
Community framework requires Member States to take certain rules into account when they 
determine the arrangements for applying the objectives and principles they have established. 
This  Communication  is  a  further  step  in  taking  the  specific  nature  of  social  services  into 
account at European level and clarifying, to the extent that they are covered,the Community 
rules applicable to them. 

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3 
4 
5 
6 

COM(2004) 374, 12.5.2004. 
COM(2005) 33, 9.2.2005. 
SEC(2005) 981, 20.7.2005. 
COM(2006) 160, 4.4.2006. 
See Annual Policy Strategy for 2007, COM(2006) 122, 14.3.2006, p. 11. 
The results can be found at: 
http://europa.eu.int/comm/employment_social/social_protection/questionnaire_en.htm. 

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I – 

SOCIAL  SERVICES  –  PILLARS  OF  EUROPEAN  SOCIETY  AND  THE  EUROPEAN 
ECONOMY 

1.1. 

Social services in the European Union  

What do we mean by social services in the European Union? In addition to health services, 
which are not covered by this communication, we find two main categories of social services:  

–  statutory  and  complementary  social  security  schemes,  organised  in  various  ways  (mutual 
or  occupational  organisations),  covering  the  main  risks  of  life,  such  as  those  linked  to 
health, ageing, occupational accidents, unemployment, retirement and disability; 

–  other  essential  services  provided  directly  to  the  person.  These  services  that  play  a 
preventive  and  social  cohesion  role  consist  of  customised  assistance  to  facilitate  social 
inclusion  and  safeguard  fundamental  rights.  They  comprise,  first  of  all,  assistance  for 
persons faced by personal challenges or crises (such as debt, unemployment, drug addition 
or  family  breakdown).  Secondly,  they  include  activities  to  ensure  that  the  persons 
concerned are able to completely reintegrate into society (rehabilitation, language training 
for  immigrants)  and,  in  particular,  the  labour  market  (occupational  training  and 
reintegration). These services complement and support the role of families in caring for the 
youngest  and  oldest  members  of  society  in  particular.  Thirdly,  these  services  include 
activities to integrate persons with long-term health or disability problems. Fourthly, they 
also  include  social  housing,  providing  housing  for  disadvantaged  citizens  or  socially  less 
advantaged groups. Certain services can obviously include all of these four dimensions7.  

Although, under Community law, social services do not constitute a legally distinct category 
of service within services of general interest, the list above demonstrates their special role as 
pillars  of  the  European  society  and  economy,  primarily  as  a  result  of  their  contribution  to 
several essential values and objectives of the Community, such as achieving a high level of 
employment and social protection, a high level of human health protection, equality between 
men and women, and economic, social and territorial cohesion. Their value is also a function 
of the vital nature of the needs they are intended to cover, thus guaranteeing the application of 
fundamental rights such as the dignity and integrity of the person. It became clear during the 
consultation  with  Member  States  and  civil  society  organisations  that,  as  a  result  of  these 
specific  features  -  in  the  performance  of  their  general  interest  role  -  social  services  often 
present in practice one or more of the organisational characteristics below8: 

–  they operate on the basis of the solidarity principle, which is required, in particular by the 
non-selection  of  risks  or  the  absence,  on  an  individual  basis,  of  equivalence  between 
contributions and benefits, 

–  they  are  comprehensive  and  personalised  integrating  the  response  to  differing  needs  in 

order to guarantee fundamental human rights and protect the most vulnerable, 

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8 

Education and training, although they are services of general interest with a clear social function, are 
not covered by this Communication. 
These criteria are the result of the survey mentioned above (see footnote 6).  

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–  they  are  not  for  profit9  and  in  particular  to  address  the  most  difficult  situations  and  are 

often part of a historical legacy, 

–  they include the participation of voluntary workers, expression of citizenship capacity, 

–  they are strongly rooted in (local) cultural traditions. This often finds its expression in the 
proximity between the provider of the service and the beneficiary, enabling the taking into 
account of the specific needs of the latter, 

–  an asymmetric relationship between providers and beneficiaries that cannot be assimilated 
with a ‘normal’ supplier/consumer relationship and requires the participation of a financing 
third party. 

1.2. 

A general trend towards modernisation and quality 

Social  services  constitute  a  booming  sector,  in  terms  of  both  economic  growth  and  job 
creation. They are also the subject of an intensive quest for quality and effectiveness10. All the 
Member  States  have  embarked  upon  modernisation  of  their  social  services  to  tackle  the 
tensions  between  universality,  quality  and  financial  sustainability.  Although  social  services 
are  organised  very  differently  in  the  Member  States,  certain  general  aspects  of  this 
modernisation process can be seen: 

–  the introduction of benchmarking methods, quality assurance, and the involvement of users 

in administration, 

–  decentralisation of the organisation of these services to local or regional level, 

–  the  outsourcing  of  public  sector  tasks  to  the  private  sector,  with  the  public  authorities 
becoming  regulators,  guardians  of  regulated  competition  and  effective  organisation  at 
national, local or regional level, 

–  the  development  of  public-private  partnerships  and  use  of  other  forms  of  funding  to 

complement public funding. 

This more competitive environment and the taking into account of the specific needs of each 
person,  even  those  that  cannot  be  met,  create  a  climate  favourable  to  a  “social  economy”, 
characterised  by  the  importance  of  not-for-profit  providers  but  faced  with  the  need  to  be 
effective and transparent. 

1.3. 

A  Community  framework  that  welcomes  differences  and  is  favourable  to 
modernisation 

Many financial and political Community initiatives and actions, including the social dialogue, 
are  already  supporting  the  development  and  modernisation  of  social  services.  From  a 
financing point of view, the European Social Fund supports many projects concerned with the 
quality  of  services  intended  to  foster  social  inclusion  and  integration  through  employment. 
Similarly,  the  ERDF  has  earmarked  almost  seven  billion  euro  for  social  services  and 

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In the Sodemare judgment, the Court took the view that a not-for-profit condition could be compatible 
with the principle of freedom of establishment.  
See Annex 1 to Commission working document SEC(2006) 516.  

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healthcare  infrastructure  in  the  EU25  during  the  period  2000-2006.  Among  the  political 
initiatives, the open method of coordination has allowed the identification of good European 
practices for the quality and integration of services intended to combat poverty; it has applied 
directly  since  2005  to  long-term  care  services.  The  action  programme  for  social  inclusion 
encourages  the  exchange  of  good  practices  and  transnational  cooperation.  Other  fields  of 
activity of the Union, in particular in the area of public finances, also provide support and a 
framework to the modernisation of social services. 

The European involvement in the field of social services also has a basis in the application of 
Community law, as a result of the processes of opening up and diversification initiated by the 
Member States themselves, with the consequence that a growing proportion of social services 
in the European Union, until now managed directly by the public authorities, now come under 
the Community rules on the internal market and competition. This European involvement is, 
itself,  a  sign  of  the  trend  towards  modernising  social  services,  via  greater  transparency  and 
greater effectiveness in organisation and financing. It urges better use of budgetary resources, 
limited in principle, earmarked for social policies and contributes to greater variety and higher 
quality of services. 

At the same time, this new situation for those concerned has meant that the conditions for the 
application of certain Community rules need to be clarified11.  

II – 

2.1. 

THE APPLICATION OF THE COMMUNITY RULES IN THE AREA OF SOCIAL SERVICES – 
AN ONGOING LOGIC 

Applying  the  subsidiarity  principle  and  the  distinction  between  economic  and 
non-economic services of general interest 

In  general,  the  case  law  of  the  Court  of  Justice  (“the  Court”)  indicates  that  the  EC  Treaty 
gives  Member  States  the  freedom  to  define  missions of general interest and to establish the 
organisational principles of the services intended to accomplish them.  

However,  this  freedom  must  be  exercised  transparently  and  without  misusing  the  notion  of 
general interest, and the Member States must take account of Community law when fixing the 
arrangements  for  implementing  the  objectives  and  principles  they  have  laid  down.  For 
example, they must respect the principle of non-discrimination and the Community legislation 
on public contracts and concessions when organising a public service. 

Moreover,  when  it  comes  to  services  of  an  economic  nature,  the  compatibility  of  their 
organisational  arrangements  with  other  areas  of  Community  law  must  be  ensured  (in 
particular freedom to provide services and freedom of establishment, and competition law).  

In  the  field  of  competition  law,  the  Court  has  established  that  any  activity  consisting  of 
supplying  goods  and  services  in  a  given  market  by  an  undertaking  constitutes  an  economic 
activity, regardless of the legal status of the undertaking and the way in which it is financed12.  

With regard to the freedom to provide services and freedom of establishment, the Court has 
ruled that services provided generally for payment must be considered as economic activities 

11 
12 

This request for clarification was one of the main results of the consultation exercise. 
See, for example, cases C-180/98 to C-184/98, Pavlov and others. 

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within the meaning of the Treaty. However, the Treaty does not require the service to be paid 
for directly by those benefiting from it13. It therefore follows that almost all services offered 
in the social field can be considered “economic activities” within the meaning of Articles 43 
and 49 of the EC Treaty.  

The  public  authorities  and  the  operators  in  the  field  of  social  services  of  general  interest 
perceive  the  constant  evolution  of  Court  jurisprudence,  in  particular  for  the  notion  of 
“economic  activity”  as  a  source  of  uncertainty.  Whilst  the  case  law  and  Community 
legislation14 have endeavoured to reduce this uncertainty or clarify its impact, they cannot do 
away with it completely. 

2.2. 

Specific situations encountered today by the social services 

To  properly  understand  the  specific  conditions  for  the  application  of  the  Community 
framework to social services, this Communication deals with the most frequent situations.  

2.2.1.  Delegation  

- Deciding whether to delegate a social mission in whole or in part 

If  the  public  authorities  decide  to  delegate  the  mission  to  an  external  partner  or  to  form 
a public-private partnership, Community law on public contracts and concessions may come 
into play.  

In  such  cases,  the  public  body  delegating  a  social  mission  of  general  interest  to  an  external 
organisation must, at the very least, respect the principles of transparency, equal treatment and 
proportionality.  Moreover,  in  certain  cases,  the  public  contracts  directives  impose  more 
specific obligations. For example, Directive 2004/18/EC concerning, inter alia, public service 
contracts  requires  contracting  authorities  to  establish  technical  specifications  for  contract 
documents such as contract notifications, specifications or complementary documents. Certain 
Member  States  and  service  providers  have  pointed  out  the  difficulty  of  establishing  in 
advance  a  precise  description  of  the  specifications  for  social  services,  which  must  be 
adaptable to the individual circumstances of persons in need. 

To  overcome  this  difficulty,  technical  specifications  may  be  established  on  the  basis  of 
performances  and  functional  requirements.  This  means  that  the  contracting  or  awarding 
authorities may decide to define just the aims to be achieved by the service provider. This way 
of defining technical specifications should guarantee the necessary flexibility and, at the same 
time, sufficient precision to identify the subject of the contract. 

- Management of a social service under a public-private partnership 

Public-private  partnerships  (PPPs)  are  being  used  increasingly  to  provide  social  services  of 
general interest.  

In  this  context,  the  term  “concessions”  and  the  rules  concerning  their  award,  as  well  as  the 
application  of  the  provisions  of  public  contracts  relating  to  the  creation  of  mixed  capital 

13 
14 

Case C-352/85, Bond van Adverteerders. 
See Annex 2 to Commission working document SEC(2006) 516. 

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entities  whose  objective  is  to  provide  a  public  service  (institutionalised  PPPs),  should  be 
clarified. Consultation has shown that clarification is required for institutionalised PPPs. 

Significant clarifications on the distinction between “internal” and “third party” entities were 
brought by the Court of Justice’s judgment in the Stadt Halle case15. According to this ruling, 
the  procedures  for  awarding  public  contracts  apply  as  soon  as  a  public  authority  intends  to 
conclude a contract for pecuniary interest with a legally distinct enterprise in whose capital it 
has a holding with one or more private enterprises. 

2.2.2.  Use of public financial compensation  

A public authority may decide to pay compensation to an external body for the performance 
of a social mission of general interest. This financial compensation is intended to make up for 
any expenditure involved in accomplishing this mission which would not have been incurred 
by  an  enterprise  operating  solely  according  to  market  criteria.  Following  a  judgment  of  the 
Court16,  the  Commission17  took  a  decision  pertaining  to  State  aid  which  has  already 
considerably simplified the requirements on financial compensation received by social service 
providers and provided the necessary legal certainty. This decision established the thresholds 
and  criteria  in  such  a  way  that  the  compensation  received  by  the  vast  majority  of  social 
services is automatically considered to be compatible with the competition rules and therefore 
exempt  from  the  obligation  of  prior  notification.  Compensation  will  still  have  to  be 
communicated to the Commission for the small number of social services which do not meet 
these thresholds and criteria18. 

However, these simplifications can apply only if the services in question have, in advance and 
by  legal  act,  been  attributed  a  mission  of  general  interest.  The  Commission’s  decision 
therefore  encourages  Member  States  to  make  the  missions  they  delegate  to  social  services 
explicit,  thus  leading  to  transparency  which  is  useful  for  everyone,  both  the  services  in 
question and their users. 

2.2.3.  Regulation of the market  

Where  private  operators  provide  a  social  service,  Member  States  may  decide  to  support  the 
operation  of  the  market  to  ensure  that  certain  objectives  of  general  interest  are  met.  In  so 
doing, they must respect Community law, in particular the rules and general principles of the 
Treaty pertaining to the freedom to provide services and freedom of establishment. It should 
be  remembered  in  this  context  that  services  excluded  from  the  scope  of  the  Directive  on 
services in the internal market will continue to be subject to these rules and principles.  

Freedom  of  establishment  (Article  43  of  the  EC  Treaty)  allows  an  operator  to  perform  an 
economic activity through a permanent base in another Member State for an indefinite period. 
This will often be the case for social services frequently requiring the use of infrastructure in 
practice (social housing, homes for elderly people).  

Freedom to provide services (Article 49 of the EC Treaty) means that an economic operator 
may provide services temporarily in another Member State without being established there. It 

15 
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17 
18 

Case C-26/03, judgment of 11.1.2005. 
Case C-280/00, judgment of 24.7.2003, Altmark Trans. 
OJ L 312 of 29.11.2005, pp. 67-73. 
See Annex 2 to Commission working document SEC(2006) 516. 

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also allows a consumer to use services offered by a provider established in another Member 
State. Articles 43 and 49 of the EC Treaty rule out not only discriminatory national rules but 
also any national rule applied indiscriminately to national and foreign operators which makes 
exercising these  fundamental freedoms more difficult or less attractive.  However,  according 
to  the  case  law  of  the  Court,  social  policy  objectives  are  overriding  reasons  based  on  the 
general interest which may justify the application of measures intended to regulate the market, 
such as the obligation to hold a permit in order to provide a social service. The Court ruled 
that such measures must be based on objective, non-discriminatory criteria which are known 
in advance so as to support the exercise of the national authorities’ powers of appraisal. To be 
compatible with Community law, these measures must also be proportionate. Moreover, the 
opportunity for access to an adequate recourse has to be guaranteed19. 

2.2.4.  Compatibility with the rules on access to the market  

An analysis of these examples illustrates the flexibility in the application of the Treaty when it 
comes  to  recognising  (in  particular  in  the  spirit  of  Article  86,  paragraph  2)  the  inherent 
features  of  these  services’  missions  of  general  interest.  When  the  compatibility  of  the 
modalities  of  accomplishing  a  mission  of  general  interest  with  the  rules  of  access  to  the 
market is assessed, these specific features are therefore taken into account. The Community 
rules  encourage  the  public  authorities  to  be  clear  about  the  correspondence  between  the 
burdens or obligations associated with the mission and the restrictions on access to the market 
they  consider  necessary  to  allow  these  organisations  to  perform  properly,  beyond  the 
definition of missions of general interest attributed to a social organisation. 

III – 

BETTER  MONITORING  OF  AND  SUPPORT  FOR  SOCIAL  SERVICES  OF  GENERAL 
INTEREST IN THE EUROPEAN UNION 

3.1. 

In-depth consultation on the specificity characteristics 

This Communication presents an open list of characteristics reflecting the specific nature of 
social  services  as  services  of  general  interest  (see  section  1.1).  In  addition  to  the  traditional 
criteria  of  the  general  interest  (universality,  transparency,  continuity,  accessibility,  etc.) 
recognised  for  social  service  missions,  these  characteristics  refer  to  the  organisational 
conditions  and  modalities  applying  to  them.  They  will  constitute  the  starting  point  for  a 
consultation by the Commission of all the actors concerned: Member States, service providers 
and users. This consultation will notably look at: 

–  the  elements  constituting  these  characteristics  as  well  as  their  pertinence  to  gauge  the 

specific features of social services of general interest; 

–  how  they  could  be  considered  by  the  Member  States  when  defining  the  general  interest 
missions  of  social  services  and  the  arrangements  for  their  organisation,  so  as  to  ensure  a 
good institutionalised link with the Community framework;  

–  the  experiences  with  the  application  of  Community  law  in  the  field  of  social  services  of 

general interest and possible problems that are faced in this context; 

19 

See for instance the judgment of 20.2.2001, Case C-205/99, Analir. 

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–  how the same (or  other) characteristics could  be considered by the Commission where it 
has  to  check  subsequently  and  individually,  the  compatibility  of  the  organisation 
modalities of social services with the applicable Community rules. 

3.2.  Monitoring  the  situation  regarding  social  services  of  general  interest  in  the 

European Union  

In order to improve the reciprocal knowledge of operators and the European Commission of 
questions  concerning  the  application  of  the  Community  rules  to  the  development  of  social 
services  and  to  deepen  the  exchange  of  information  between  operators  and  the  European 
institutions,  a  monitoring  and  dialogue  procedure  in  the  form  of  biennial  reports  will  be 
established.  

The  reports  will  come  within  the  framework  of  other  Community  initiatives  supporting  the 
modernisation of social services, in particular the open method of coordination in the area of 
social protection and inclusion. 

In early 2006, the Commission launched a study to collect the necessary information to draft 
the first biennial report. This information will concern the functioning of the sector, its socio-
economic importance, as well as the implications of the application of Community law. The 
results of the study are expected by mid 2007. 

CONCLUSION 

This Communication is a further step towards taking into account the specific nature of social 
services at European level. On this basis, the Commission will pursue its consultation with the 
Member States, service providers and users of services. 

On the basis of this open process of consultation to which the Commission  attaches a great 
deal  of  importance,  the  results  of  the  ongoing  study  on  social  services  and  the  work  of  the 
Social  Protection  Committee,  the  Commission  will  publish  a  first  biennial  report  and  re-
examine the situation of social services of general interest or certain sectors among them in 
the light of Community law being applied. The aim is to take better account of the diversity of 
social  services,  as  defined  in  section  1.1.  above,  and  to  consider  how  the  specific 
characteristics of social services of general interest can be used by both the Commission and 
the Member States in order to reduce the legal uncertainty inherent to situations where a case-
by-case approach is needed. In the light of this experience, the Commission will decide how 
to  follow  up  this  process  and  identify  the  best  approach  to  take,  including,  giving 
consideration to the need and legal possibility for a legislative proposal. 

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