Public Services and Public Infrastructure

Public Services and Public Infrastructure

Public Services

National Perspective

Contrary to the frequent impression of “public services”, at the time of their first identification, they were neither socialist nor interventionist in their nature. The founder of the public service concept in the French legal theory is considered Léon Duguit, one of the founders of the French administrative law. Duguit writes that the term “public service” was created on the day when the differentiation between rulers and ruled arose (gouvernants and gouvernés). The reasons for this differentiation were historically conditioned and diverse. He believes that, from the very beginning, the ruled recognised they can impose the rulers with some obligations, while the execution of these obligation is simultaneously the excuse and consequence of their rising power. This should represent the essence of the public service.

Hence, public services directly and greatly influence the quality of life. The essential goods are nowadays provided through the public service system: provision of drinking water, electricity, heating, waste disposal, education system, health system, etc.

Slovenia has implemented the functional definition of the public service: public services are activities that must be provided in the public interest for various reasons under a special regime. This functional definition is base on French law. The classification of this concept derives from the nature of the activity rather than the manner of its implementation. These are activities that cannot be wholly or partly carried out on the market in the context of market mechanisms for two reasons: in the event that the market fails when it comes to these activities and in the event that it is not permissible to leave them to the market.

The field of services of general economic interest is regulated by the Services of general economic interest Act (Zakon o gospodarskih javnih službah, also Public Utilities Act, hereafter: SGEI Act). Article 2(1) states that services of general economic interest shall be defined by laws in the fields of energy, transport and communications, public utilities, water management, and management of other natural assets, environmental protection, and laws governing other areas of economic infrastructure. Hence, various sector-specific laws and/or ordinances of municipalities determine which activities are carried out as services of general economic interest or non-economic (social) public services. The SGEI Act defines following organisational forms in which services of general economic interest can be provided:

  • Administrative department of public utilities (režijski obrat) as a special organisational unit within the state body or the body of a municipality without legal personality. That form was never widely used in practice. Administrative department of public utilities (režijski obrat) under Slovenian law does is not an independent legal person and it can not be compared with the term Régie under French law.
  • Public commercial institute (javni gospodarski zavod) as a special non-profit form of executing services of general economic interest, established by a person of public law.
  • Public undertaking (javno podjetje) can be established either as Limited Liability Company or Public Limited Company. Therefore, provisions from the Companies Act (Zakon o gospodarskih družbah) are used subsidiary. Public undertaking is suitable for performing one or more services of general economic interest of a larger scope that can be performed with a reasonable profit. Often the aforementioned form is used when a natural monopoly exists for performing a certain service of general economic interest. This is currently the most common form of providing services of general economic interest in Slovenia on state level and also on the level of the municipalities.
  • Concession is the only possible form providing services of general economic interest, performed by a legal person of private law, i.e. the founder of which is not a body governed by public law. By its nature, it is in fact a form of public-private partnership. The SGEI Act defines relatively in detail, the contents of the concessions act, which shall be affirmed by the government or a representative organ of a municipality. Concessions act also defines the content of a service of general economic interest and the procedure of selecting a concessionaire. The provision of public services in the form of public-private partnership (concessions) is regulated by the PPP Act.

Non-economic services of general interest are regulated by the Institutes Act (Zakon o zavodih), performing as the framework act in this field and defining the basic forms of provision of public social services. The implementation of activities that fall under the non-economic public services cannot be left to the market, mainly due to social reasons, as distortions may lead to intolerable situations. These include, e.g. public health system, public education, protection of cultural heritage, activities in the field of pharmacy, etc. Market mechanisms in these areas could be completely equal; however, this would exclude the principle of solidarity and impede the notion of a welfare state. Institutes Act provides that non-economic (social) services of general interest can be carried out as concession or in the organisational form of a public institute in accordance with provisions in the Institutes Act. The public institute (Anstalt des öffentlichen Rechts, établissements de droit public) is specific organisational form of an Institutes Act, while the goal of executing activities is not to make a profit, but providing services of general interest for which the Institute was founded. By Institutes act is defined that Institutes can be established for providing non-economic (social) services of general interest on the fields of education, science, culture, sports, health, social security, childcare, protection of disabled persons, social insurance.

EU Law Perspective

When talking about public services, we must always distinguish between the national and the EU Law perspective. From the EU law perspective, we mostly come across the concept of services of general economic interest (SGEI) that defines the content of services principally corresponding to the Slovenian notion of “gospodarske javne službe”. When introduced in the Treaty of Rome 1957, the term “services of general economic interest” represented an entirely new concept that has not been implemented in any language of the Member States or in scientific literature. For this reason, a completely new terminology was introduced that coexists with the terminology and institutes established on a national level. Regardless of all possibilities concerning the unification of terminology in this field, it seems that the EU legislator does not wish to intervene in the established national terminologies, while the existence of exclusive EU terminology would not effectively cover the national systems and regulations, which led to the protection of public services at the level of primary EU sources. SGEIs in principle represent economic activities which deliver outcomes in the overall public good that would not be supplied (or would be supplied under different conditions in terms of objective quality, safety, affordability, equal treatment, or universal access) by the market without public intervention. Under the EU law, the services of general economic interest are services that public authorities of the Member States classify as being of general interest and, therefore, subject to specific public service obligations (PSO). A PSO is imposed on the provider by way of an entrustment and on the basis of a general interest criterion which ensures that the service is provided under conditions allowing it to fulfil its mission.

The term “services of general Interest” covers both economic activities and non-economic services. The latter are not subject to specific EU legislation and are not covered by the internal market and competition rules of TFEU. Some aspects of how these services are organised may be subject to other general TFEU rules, such as the principle of non-discrimination. Non-economic services of general interest (NESGEI) were recognised within the EU law with the Treaty of Lisbon, in 2007. In comparison with SGEI, NESGEI still receive less attention; however, a tendency of increasing recognition of these services can nevertheless be seen. The distinction between SGEIs and NESGEIs is of utmost importance, since the latter are not subject to specific EU legislation and are not covered by the internal market and competition rules of the Treaty.

Social services of general interest (SSGI) include social security schemes covering the main risks of life and a range of other essential services provided directly to the person that play a preventive and socially cohesive/inclusive role. Although the CJEU does not classify certain social services (such as statutory social security schemes) as economic activities, the CJEU case law clearly shows that the social nature of the service itself is not sufficient to classify such services as non-economic. The term covers both services of general economic interest and non-economic services.

The notion “public service” is used in Article 93 TFEU in the field of transport. However, outside this area, the term is sometimes used in an ambiguous way: it can relate to the fact that a service is offered to the general public and/or in the public interest, or it can be used for the activity of entities in public ownership.

Public Infrastructure

The word “infrastructure” is a combination of the Latin prefix infra, meaning “below”, and “structure”. According to the Online Etymology Dictionary, the word’s original meaning referred to installations that form the basis for any operation or system. In its widest sense, the concept of public infrastructure includes buildings that serve a certain type of public service, i.e., public interest.

Until 2011, the European Commission and the CJEU have not discussed public financing of infrastructure projects in the light of State aid, in so far as the infrastructure became public and accessible to many users under non-discriminatory terms. In other words, the rules on State aid for financing public infrastructure were not relevant. Following the decision of the General Court in 2011 in Joined Cases T-443/08 and T-455/08, Leipzig-Halle, the Commission took a strict stance on the issue of financing public infrastructure in terms of State aid, representing a complete opposite to the permissive approach, which was in force until then. The decision of the General Court of Justice in this case was upheld by the Court judgment in December 2012 in Case C-288/11 P, Leipzig-Halle. The Commission’s decision in Leipzig-Halle judgment shows that the Commission insists on strict approach and that the Commission takes a closer look at public funding at different levels of the market (ownership, construction, management, end-users usage), which requires public authorities in the Member States to pay special attention to the funding of the project in terms of State aid rules when planning public infrastructure projects.

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