Services of General Economic Interest and the Swedish Railway Monopoly

Even though the Community is based upon the principle of an open market economy with free competition, there are certain exemptions to this notion. One of the exemptions is the fulfilment of services of general economic interest, an exemption that elucidates the delicate conflict of interest between Member States' prerogative to provide accessible and affordable public services, and the Community's interest to secure effective competition on the internal market. The conflict is inter alia regulated through Article 86 (1) EC, which contains an obligation for the state not to uphold or create measures that are contrary to the Treaty, closely connected to Article 10 EC and the principle of loyal co-operation. Due to the political conflict of restricting Member States to ensure certain public needs, Article 86 (2) on the other hand, provides a derogation eliminating competition restrictions on services of an economic nature, which are considered essential to the general public. After the general trend of liberalization in the early nineties in order to achieve the objective of the internal market by 1992, including the Corbeau ruling from the ECJ in 1993, which directly interfered with a Member State's right to organise its postal service without the Commission having to introduce any harmonisation measures, the Court has taken a more restrictive approach. The subsequent case law has resulted in a transposition from the general view of illegality for all exclusive rights by their very nature unless objectively justified towards a presumption of legality of all exclusive right unless it is evident that they are directly incompatible with the Treaty. Basically, when the financing of a service of general economic interest (SGEI) is threatened, there is very little to do in order to challenge the state measure. The current concept of SGEI is interpreted as the Member States' right to define what constitutes a SGEI as long as it clearly defines the objective of the service in advanced in order to ensure transparency. There has also been a regulatory reaction on the focus of economic objectives through Article 16 EC, introducing a principle of the need to balance economic goals with social needs, accentuating the importance of SGEI. This development does however bring about a certain risk of increased protectionism and a risk of rending competition ineffective. Furthermore allowing the Member States once again to foreclose competition is most likely to be at the expense of the citizens unless the market actually has failed to provide such services. The conclusion I have made, base o this review and on the case study of the Swedish Railway monopoly are the need of a more strict proportionality test of the ECJ, a more active role of the Commission and a further assessment by the Community institution to create uniform European concept of SGEI, including a auxiliary control of cross-subsidisation