Competition Law: EU Law on SGEIs - Essay Example

Competition Law Introduction This essay looks at the EU law on SGEIs and analyzes whether the law strikes a balance between the provision of public services and the law on competition in the internal market. It will define what SGEIs are and funding from the State aid. It will look at the relevant laws that apply to SGEI and rules on competition law. Definition and Analysis Article 106(2) TFEU was a provision that allows regulatory measures that derogate from Treaty rules that invoke it by necessity to enable undertakings that are entrusted with services of SGEIs that fulfill their obligations. SGEI are a constitutional concept in EU law where it is subject to articles of Article 14 of TFEU, and it is subject to the Protocol of SGEIs. SGEI is considered as services that allows balancing of the EU market integration in pursuit of legitimate national policies that are associated with public services. It can also be considered as a political concept where its legal interpretation becomes sensitive. SGEI cannot be contrived to be a narrow concept of the EU competition law that is understood as a public service concept that involves public authorities, undertakings, and public service obligations. CJEU understanding of SGEI in its EU concept is regarded from the Hirschman’s theory that talks of exit, voice, and its background on case law. It exits from market rules in EU for purposes of public services and identifying SGEI voice that has enabled it to the Treaties. CJEU notions of public service obligations and tasks are regarded as using the Treaty SGEI laws effectively without showing their political use in the Institution of Europe and all signatories. SGEI competence lays with members states therefore implementation and funding depends on them. Obligations of public service refer to services of a certain kind that benefit certain services for the benefit of consumers and companies. Such obligations include commercial and nonprofit services with service producers where the public authorities that are entrusted with public service obligations. Services that are beneficial and are of public benefit are regulated as service for the public with obligations. Member states impose public services obligations that are enforced and fulfilled by the private and public companies and this establishes the difference provided by such public authorities. If the service is for economic general interest application of Community law is applied by, member states as the competition rules and state aid rules and rules of public procurement. SGEI is governed by Article 16 and 86 establishes things that are considered as services that enable profits to be created for the interest of the public and of universal interest for the member states and hence enforce impose obligations of public service that are of a special nature. This service is considered to serve the entire community and is able to fulfill their regional, social, and economic functions. SGEI are very essential to officials when the industry does give efficient guidelines in providing such services. Public service fulfillment involves exclusive and special rights with special funding outlines. Services of general interest cannot be viewed as other ordinary services that are found in the market but such services that have special attributes. The state, municipalities, regions, or purposes of the public interest regulate these services. Specific characteristics of such services is that they are not available in the community or otherwise provided with quality that is substandard lower quality or in any limit when consideration is not provided in terms of finances is provided by the public authorities. This financial aid legitimacy for services used for the general interests are conducted in a way that the industry lacks and isn’t perfect in issuing SGEIs. SGEI are a subgroup of such services used for purposes of the general interest. This name represents their economic use or character. Their economic character refers to its economic value and nature in its activities but not to their interest objective. Its social services are also included as part of SGEI. Rules of competent and State aid guidelines are used to apply to SGEIs. SGEIs and Protection of the European Social Model Public services are considered important and are a universal fundamental right that promotes social cohesion in Europe. Its considered as a social pillar for the European Social Model The European union however due to the clash of services are expected to have clear rules and guidelines where the services must have a high standard and be accessible to everyone while being affordable .The SGEIs to be able to protect the European Social Model must be subjected to democratic control and also to accountability especially workers and customers must be involved. The national authorities must promote effective supply of public services even when they are less profitable in the market, The clash has been due to different social models that explain the services structure in Europe .There has been issues of having a legal definition in the community level due to the economic crisis and the social nature of it. This clash has been there due to the different definition of the concept of services varies across Europe. Public authorities can try to avoid the clash by the concepts of SGEIs can be distinguished from public services to avoid misinterpretations. In addition, there needs to be collectivization of such services that would strengthen the feeling of belonging in the national community. SGEIs have a conflict with competition rules and the issue of economic integration SGEI is a key element of the European Social Model .Article 16 of the Lisbon Treaty offers two problems where competences between member states and the Union and balancing the market and its values of the non- market is a problem. The main issue arises as to whether SGEIs can be able to protect the European Social Model. SGEIs are considered as a pillar for the model due to its social and economic impacts in Europe’s integration and therefore are clear that it can be used by and efficient control that is democratic. To protect it however there is need to effectively administer such public services where public officials subject them to transparency through accountability. These services of general social and economic nature can be beneficial in the internal market since they provide for integration and promote effective and proper competition. In defining what is considered as an SGEI member states have discretion together with the EU. However, there are limits that are imposed by the EU law in places where it has been harmonized at the Union level where its discretion cannot contradict rules that apply to the harmonization of such kind. Additionally, it manifests errors in assessment checked by Union courts and the European Commission. The decision made by the Commission regarding its practice shows examples of such errors. In Port operations where there is loading, transshipment storage and movement of equipment and goods. Other instances include activities that include of teleshopping, e-commerce, advertising, and sponsoring of public broadcasting activities and services. State Aid and the SGEI SGEIs depend on subsidies in the public that ensure operations of service provides are financed where such compensation includes state aid. Three situations occur when compensation is issued for provision of SGEIs. It includes where compensation does not include state aid, where it includes aid from the state that is comparable by looking the market internally. This happens only when notification to the Commission is issued, and the state aid after notification had taken place. The third situation is dealing with compensation that includes finance that is comparable in the internal market form state aid. In determining funding for SGEI whether it constitutes state aid or it does not it is found in the case of Altmark a case in the European Court of Justice where it was established such compensation from the public is not a representation of an advantageous position in the provision of SGEI if all conditions are met. The most defining characteristics of state aid is clearly not included this shows that the compensation given is not an inclusion of finance from state aid for purposes of SGEI. This case law gave out four conditions that are that the recipient undertaking must possess obligations of public service that is well defined Calculation for such parameters when it comes to compensation are required to objective and be given in advance. Compensation of this kind does not go overboard in costs that are used for obligations for the public service, and this must take into account all receipts using a reasonable profit. Finally, Undertakings that discharges such obligations of public service must follow a public procurement procedure that enables selection of tenders to be able to issue services at a lower cost to the society. In addition, the compensation level is determined because of costs analyzed in firms that ue resources for SGEIs. Functionality of SGEI under State Aid It is clear that compensation in SGI depend because of this case where it has laid out the cumulative rules where compensation must constitute state aid. With this case, the Commission established that it would be hard to meet all conditions cumulatively in various circumstances. The Commission issued a regulation known as the Monti package that regulated State Aid issues of compensation under SGEI. The Monti Package gives the comparative method for analysis in the industry for such actions that include competition. It requires signatories to have their SGEIs compensation and have systems for aid that must be in line with the regulation of the Commission. Members States can fairly and flexibly extend the services that are in the scope of economic general interest. The Commission is tasked with monitoring such extension by Members States. This Package contains certain documents that include the Commission Decision on application of Article 86(2) in regards to compensation for public service by the state aid that deals with undertakings that are entitled to functioning for SGEIs. It’s also has the Community Framework that deals with State Aid for of the public service and the Commission Directive 2005/83/EC that amended Directive 80/723/EEC on issues of accountability of relations that focus on finances in public undertaking and Member States. Public duties are followed according to principles in the Decision of 2005. The legal positions on public services have not changed where it defines its compatibility to its obligation of notifying the public service required as in Article 88(3) of the Treaty. This law defines the conditions where notifications to the Commission and if not fulfilled notification must be given to the Commission of the compensation system. This conditions if not all them are fulfilled compensation can be regarded to be compatible with facilities of the internal market where it become legally granted. The regulations that govern such procedures are the SGEI Decision and SGEI Framework. These regulations differences is found where there are positions that conditions of SGEI must be met, and compensation viewed as aid from the state automatically as being stated aid. This requires no notification to the European Commission. When it fails the qualifications of SGEI Decision the SGEI Framework can apply. The Commission must be notified in such cases to enable them to assess its compatibility with the internal market as meeting regulations stipulated in the SGEI Framework. There can also be funding by the general regulation of de minimis aid. In addition, the Commission Regulation no. 360/2012 for purposes of article 107 and 108 TFEU and to the de minimis aid that is granted in cases of undertakings that issue SGEIs. Several interpretations have been given in regards to the relationship between SGEI and aid form the state relating to articles in the EC Treaty and cost of such services. It held the position that such finance form the state given in undertakings by member states that issue SGEI do not correspond with state aid in the meaning of Article 87(1) of the treaty. It was however reviewed under the condition that the public sector would add costs incurred in fulfilling imposed obligations in the public service sector. In 1999 there was a ruling under FFSA(Case T- 106/95, 27/2/1997) and SIC (Case T- 46/97, 10/5/2000) where it was stated that advantages in finance is issued by public officials safer an undertaking to offset costs is assumed as having no bearing on its measure of aid within article 87.It created problems with the methods applied traditionally when giving State aid. This introduced the condition that the Commission must be notified of such matters. In Ferring of November 2001 the court however stated that any exemption of tax that is granted in discharging public services obligations like compensation for extra costs when issuing services and aren’t enjoying advantages of article 87(1) and therefore cannot receive state aid. Regardless of this situation, such exemption of tax that exceeds the amount to be used to fulfill such obligations is considered as state aid. The Ministry of Employment has a duty in relation to SGEIs where there are always measures of implementation in the Monti package that are always underway Ministries are responsible for implementing compensation systems in their policies are compatible with the laws of competition and necessary regulations. Public Service and Competition Law There has been controversy in UK on interactions of public services and issues in competition rules and its effects to duties and State duties. Treatment of public services is raised by complaints from business on issues of anti-competitive conducts and rules and regulations. Such laws become inconclusive where people party to such agreements and favored by the aid and follow practices and conduct are considered as undertakings to enable competition law to be effective. This must positively impact trade matters between such signatories of EC. It’s always easy to outline where article 81 and 82 are considered in domestic law, and this leads to its application regardless of its effect on trade. The case of Fenin sheds light on whether public service providers can act as an undertaking. In this case, it was established that the health care service referred to as Spanish was not operating in conditions under an undertaking due to its large purchases of services and goods from markets that are competitive. Necessity test applied was checking purpose of a purchase to offer goods in the market. This means when a situation arises that undertakings are used then it is seen as a reason of issuing things like promotion of services like a commercial organization. DG Competition that was published in the year 2004 in implementation of Article 86(2) summarized the justification of compensation for public services by state aid especially when it doesn’t meet conditions laid outline the Altmark case. Even where natural considerations like entrustments in the undertaking are present in public service it still seeks to enable aid that requires a minimum amount that enables the undertaking in delivering its duties. Case in this ground is limited due to a shortage of competition cases where services are considered as the general interest that shows stringent of requirements that deviations from rules are necessary for achieving monopoly and public service. Lack of litigation can mean that the law was complied with cases where there was no need for any intervention by the courts in the European Union. Many view the EC competition law as making little allowance for intervention by the State especially when it comes to public services and its rules push public services to competition, self-financing, and commercialization. Altmark case shows the legitimacy of intervention by the State through purchasing. This means that such purchasing must be of activities that are efficient where the law deals wih afew restrictions on decisions by the state program regarding appropriate guidelines where the purchase must be from a market purchaser. This means that when a public service is designed by a concision contract then the law is not allowed to give favors to other suppliers. This causes restrictions where their core EU guidelines, where all members state that are signatories, must adders those that have a membership that is continuous When the public service are not established by a agreement made by a contract from a state who act as the purchase marketer then article 86(2) allows aid if it meets objectives that review the manifest errors and are carried out by the EU institutions. Article 86 requirements are strict and demanding where they also restrict state action using the proportionality principle. This creates an onerous restriction in intervention by the State where requires its rules to be properly established and its obligations must be properly defined. Article 86 has acts that can violate Article 81 and 82 if made necessary to meet the public service. UK completion authorities that are guided by OFT which has various guidelines in evaluating competition law that they enforce and their process of implementation and enforcement. The OFT SGEIs exclusion document in law of competition. This statute directs the EC competition law that deals with prohibitions, however; the Competition Act applies a different and relates to the UK Competition Act 1998. The Competition Act section 60 outlines that Article 86 can be interpreted as EC law Schedule 3 of the Competition Act 1998 creates a problem when it comes to the exclusion language and moves beyond the title in the context of OFT guidelines. The OFT has two main approaches where it analyzes that competition law isn’t allowed to display in infringements or where there is an abuse of agreement where some pass and other failed tests. When it comes to following the tests of OFT, it may be economically not allowed in its conditions and practices. Such undertakings are required to establish that enable breaches to occur in such guidelines of orders to assist them in operating before establishing prohibitions are inapplicable. The OFT guidelines that deal with fiscal monopolies highlights the problems with exclusion in interpretations. The guideline shows that for any befit to occur undertakings must establish objectivity in raising revenue for purposes of the State. The Altmark case give the test that illustrate aid from the Ste in Article 87(1) where state aid exists and conditions are not fulfilled then it is considered to be prt of it i where notice is required. Article 86, therefore, can or otherwise cannot provide justification for such aid from the state. Sometimes the application is not of importance when it comes to the law of competition where article 81, article 82 prohibitions, and Article 86 justification become guidelines. This creates a problem of how the Altmark case should be applied and interpreted. If this guideline of the draft if unchanged it would seem that eth completion authorities would apply the law without any consideration to article 86 justifications unless another party makes a complaint about the issue. Scope of Application SGEIs are used to sustain and fulfill the society’s daily needs. The quality of people’s lives depends on such SGEIs for purposes of development economically and promoting regional and social cohesion in the country and across Europe. The EUTC views universal access to such services as a right and support of the European Social Model. ETUC establishes that such services require proper guidelines that promote fair access to the society. Such services are required to be of the highest standard meaning that everyone can access them and are at an affordable price that id democratically controlled where its accountability is checked by customers and workers. There is always a difference between SGI and SGEIs that is interpreted by the ECJ.SGIs are services issued by the public authorities like compulsory educations and security. On the other hand, as previously stated SGEIs are economic services that have a supplier and customer relationship. By 1980s, the European Commission had a policy of market opening that opened a way for a competition from transport and telecommunication. Liberalization has effected by replacing public monopolies with other private monopolies. Such outsourcing and liberalization have had an impact on the reduction of quality of public services that has in turn has had a negative impact for the customers since they don’t always benefit from such services. The Treaty that establishes the EC recognizes that SGEIs must have a public duty to other SGEIs in the market. Article 16 outlines that services of such nature of the Union and their duty in enhancing cohesion both territorially and socially the member’s states where the Commission using this law are required to prioritize SGEIs and work in situations that enable them to accomplish their duties and mission. Article 36 of the Treaty states that viability to such SGEI that are recognized by the Union where access to such is provided in its national laws and practices for purposes of promoting cohesion territorially and socially of the Union. The ETUC scoured had a legal base for SGEIs in the EU Constitution that is established in Article 111 -112. It states that areas occupied by such services that attribute to value in the Union in promoting social and territorial cohesion. The parties involved must take care of such services, and European laws shall enforce such principles and layout conditions that don not have a bias to signatories and must comply with the Constitution. The White Paper of 2004 that deals with services of general interest (ICOM (2004) 374, 12.5, 2004) states that the Commission recognizes that fulfilling interest in the public must be first issue to be dealt with. It takes precedence over other matters like application of Competition guidelines of the Treaty and laws stipulate that personal nature of such service like health places an obligation that are different from other offered like those of commercial services. The Bolkestein Directive now known as the Service Directive was created for facilitation of services in a single market in the European Union where it removed unfair economic and administrative barriers that enabled the creation of equl operation arena for firms, markets, and firms in the country. It deals with commercial services that range from legal advisers and agents who deal with estates and travel, distributive traders . The movement of Europe Trade Union had a campaign that was aimed at amending the proposal ha that an effect on consumers and workers and exclusion of SGEIs due to their mission that is different like services that are commercial and it was seen that they could apply similar regulations. Its proposal for new rules from the EC excluded economic services of general interest where they were not too abstract performance. With the meaning, if TEC it excluded healthcare and other social services. Like housing and supporting children and people in need. ETUC preferred an exhaustive list like the ones that were proposed by the European Parliament that avoided the unintended inclusion of services that were outside the definition of public services. These services have therefore been in a legal limbo that needs to be addressed, and this led the EUTC to launch for a Directive Framework. Balancing of EU Law The Treaty provisions in article 106(2) states that issues of undertakings that deal with such services are regulate by the Treaty in usage of the regulations that don’t violate performance of tasks. It determines the extent of competition rules application and where they do not apply. This word implies that measure scan either attract an exception from the law stipulated in the Treaty that show the boundary between Member States competencies and the EU[30].Therefore, it would seem that competition can be superseded by non-competition values that are found in other regimes that apply to SGEIs. If this is the case, it fails to outline the differences between components found in Article 106(2) that regard value judgment and pragmatic judgment. This outlook is overlooked where what is considered is the SGEI case law that shows the test of proportionality. In misapplying competition rules, the measure must be restrictive. The question is the measure required and its required to be able to fulfill such objectives. The strict test is used as precedence in the law of SGEIs. Necessity law has, however, has gained currency. In the case of Corbeau the court and recognized the nature being universal it promised existent of an SGEI where it established the view of departure for determination of the necessity test that means that it would offsets less profitable sectors against others that were more profitable. In this case the SGEI justified itself in the restriction on competition .the court considered the extent how a restriction on competition is necessary and can be allowed for the undertaking to carry out its objective rather than assessing what is less detrimental to the internal market. The issue was not the necessity principle for protecting its industry, it dealt with SEGEI realization. In Almelo, it was accepted by the court the SGEI due its universality nature of supplying electricity where the court decides that the restrictions would be allowed where they are necessary. This shows that the necessity test is used as a pragmatic judgment that is used to reach a certain end. When the court recognizes the SGEI its non-market value requires an operation. Competition law restrictions cover the necessity test. Member’s state is not required to prove that any other conceivable measure that is hypothetical in its definition can enable such tasks to be performed under similar conditions. This indicates that Article 106(2) does not operate to mediate In the EU and other signatories and also member states and EU competences but it functions between values are for the EU. The two sets of interests that correspond where it has clear that the where SGEI exits the European Union has a duty to assist. This test is a mechanism that assists the EU tasks and objectives. When the value judgment is used for recognition of an SGEI, it totally changes the question to what actually qualifies as an SGEI in EU law. Uncertainty is, therefore, the question of objectivity and criteria used for SGEI where the Unions competence is delineated to that of Member States. Conclusion This essay looked at what laws apply to SGEI and completion law in the internal market in relation to SGEI. It defined what SGEI are and what constituted such services. It also discussed the State aid funding. 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