Privatization of Services of General Interest in Europe: Contract Law and the Protection of Citizens-Users

This Friday I will be presenting a paper at the workshop Contract as “Public Law” at the Intersection of Globalization and Privatization, at Emory University School of Law, Atlanta, Georgia. The paper is entitled Privatization of Services of General Interest in Europe: Contract Law and the Protection of Citizens-Users

Here is the abstract:

In the European Union the concept of Services of General Economic Interest (SGEI) refers to services of an economic nature which public authorities subject to specific public service obligations through an act of entrustment on the basis of a general-interest criterion. Most SGEI are entrusted to private entities by means of a concession contract: a partnership between the public sector and private companies, where the latter exclusively operate, maintain and carry out the development of infrastructure or provide SGEI (for instance, water supply), ensuring that the services are provided under conditions which are not necessarily the same as prevailing market conditions. On December 2011 the European Parliament and the Council published a Proposal for a Directive on the award of concession contracts. However, the Proposal does not put forward any rules on the protection of citizen-users, the third-party beneficiaries to such concession contracts. In fact, it is only concerned with “establishing a clear European legislative framework allowing for delivery of works and services under conditions of sound financial management and at best value for money”. For the coming years the protection of citizens-users will thus probably continue to derive from the application of general rules of Contract law and, where relevant, Consumer Law. Over the last decades the European Union has recognized the important role of consumer policy in shaping the internal market. The protection of consumers, their interests and their safety is an essential part of the European Union’s overall objective to improve the quality of life of all citizens. Consumer rights are considered as “third generation rights” – economic and social rights that where unthinkable as such in traditional societies, but are considered as indispensable in the “consumer society” we live in. SGEI are characterized by their universality and by the fact that, in most cases, they are provided under a regime of monopoly (local, regional or even national). This means that the provision of SGEI should be subject to compliance with certain fundamental principles: universality, equality, continuity, impartiality, adaption to the needs of users, etc.; and entails the recognition of special rights to the users of such services, imposition some restrictions to the parties’ freedom of contract. Of course that there are already some legal rules which one may apply to protect the users of these services. Clearly, the application of general principles and rules may be useful. Experience shows, however, that it is difficult to achieve the desired level of protection of the weaker party only through this strategy. It is necessary, in particular, to establish special rights and obligations of the parties and prevent abusive practices such as unfair standard contract terms. General rules of Contract Law, or even of Consumer Law, are inadequate to give adequate response to the problems raised by the provision of SGEI. These are contracts regulated by Private Law (despite the “Public” nature of the service) that require new answers from Contract Law. Despite the lack of European rules on this regard, some countries have enacted specific provisions applicable to SGEI, for instance, Portugal. In our paper we will analyze the Portuguese experience, discussing whether the Portuguese Law affords users of such services with the necessary tools and whether the European Union should deepen the protection of citizens-users of SGEI. Our aim is to discuss the limitations and strengths of existing Contract Law, the challenges brought about by privatization and the role of Good Faith as guiding light to assess the behavior of market actors that replace public entities.