Instead, the Commission and the European Court of Justice (ECJ) are now working towards a more restrictive interpretation and further development of the existing laws on competition and public procurement. The Commission is also planning a directive on service concessions, the content of which may have dramatic implications for local authorities.

A couple of years ago the issue of in-house awards was still settled by rule of thumb, when it would suffice for the public authority to hold a minimum 80 % interest in a spun-off company. In the wake of last year’s ECJ judgements (Halle and Brixen), however, things have changed dramatically. Now only an Ltd. which is 100 % owned by the local government seems to fulfil the criteria for an in-house award.

Even a joint-stock company (where the owner’s access right is limited) apparently fails to comply with these criteria. The same applies if the awarded company provides its services not exclusively to the public authority. In all these cases a competitive award procedure is required!

Things become even more sophisticated in the case of inter-communal cooperation, the underlying legal arrangements of which vary greatly across EU member states. These legal forms of cooperation may range from public-sector associations (such as the Austrian water or waste associations) to inter-communal cooperatives under private law (the only available option in Great Britain, where public-law arrangements do not exist).

The EU Commission, planning an “interpretative communication” on this matter for the turn of the year 2006/2007, has traditionally viewed these forms of cooperation with a critical eye. It is, for instance, permissible for a community association entirely run by public entities to award a waste collection contract without a competitive award procedure to an Ltd. in which it holds a 100 % interest and which performs its services exclusively for the association.

The Commission may rule differently if:

• the association (as may be the case with Austrian water associations) is partly owned by private companies,
• the inter-communal cooperative awarding the contract is based on private law,
• a public authority awards another public authority only with a partial public-service contract,
• a public authority awards a public-service contract to a (100 %) subsidiary of another public authority,
• the awarded enterprise is a joint-stock company,
• apart from the contracting authorities or their spun-off public-sector enterprises, also private enterprises hold a direct or indirect interest in the joint-stock company, etc.

In an Italian case pending before the ECJ, for instance, an enterprise carries out communal services and is 100 % owned by the public authorities. However, it is not owned by one association of communities but the public authorities all hold an interest in the enterprise.

A close look at the numerous legal arrangements regarding the provision of public services meanwhile also found in Austria suggests what role a Commission interpretative communication or an ECJ judgement may play also in our country. It therefore comes as no surprise that in a hearing held at the EU Parliament on the initiative of European Community associations in April this year, the Commission’s plans were heavily criticised.

Most speakers were unhappy with the fact that in such a sensitive area as in-house procurement the future policy to be pursued should be determined by mere interpretation. Under these circumstances, many of the legal arrangements chosen for the provision of services of general interest in recent years may eventually backfire on the public authorities.
(Source: aqua press Int. 2/2006, DI Dr. Wolfgang Lauber)

Contact & Information:

Kammer f. Arbeiter & Angestellte Wien
Abteilung Umwelt und Verkehr
DI Dr. Wolfgang Lauber
A-1041 Wien, Prinz-Eugen-Straße 20-22