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Liberalisation of local public services

Liberalisation of local public services

The Italian Government recently confirmed and strengthened the process of liberalisation of local public services (the LPS) of economic interest (article 4 of the Law Decree no. 138/2011 and article 25 of the Law Decree no. 1/2012, as converted into Law no. 27/2012, referred to as the Liberalisation Decree).

The new rules will apply to all the LPS with the exception of those services not having an economic relevance and/or pertaining to the following sectors: water, gas distribution, energy distribution and chemistries’.

The relevant provisions are also applicable to regional railway transport services (with the exception of services awarded prior to the entry into force of the decree which remain valid for other 6 years) as well as to all regional and local public transport services in general.

The general principle to be strengthened by the new provisions of law is that regional and local entities must liberalise and open up to competition all the LPS of economic interest, provided that  regularity, accessibility and quality of the LPS are ensured.

The minimum LPS requirements will be identified by Regional and local entities. Furthermore, if the operator is required to possess specific characteristics in order to manage the LPS,  permission or registration in registers or lists for specific sectors may be required.

On the other hand, if a market analysis evidences that the free private economic initiative is not sufficient and appropriate to ensure the community’s needs, the local entity may award exclusive rights (“diritti di esclusiva”) to provide the LPS.

Such liberalisation is based on (i) granting and managing LPS through an efficient procedure to promote competition and freedom of establishment and provision of services, and (ii) limitation of the in-house procedures to contracts with annual value below € 200,000.

The Italian Competition Authority will assess, on the basis of inquiries carried out by the applying local entity, the suitability and sufficiency of the reasons for awarding any exclusive rights and, if appropriate, for awarding several LPS by means of a single public tender; the opinion has to be delivered within 60 days of the date of the request.

The local entities are required to send the first draft of the framework resolution to the Competition Authority within 12 months from the entry into force of Law Decree 138/2011 (i.e. by 13 August 2012), and thereafter periodically in accordance with the statutes applicable to the local entities.

The existing service contracts that are not in compliance with the Liberalisation Decree will be subject to early termination; however, in case of direct awards of LPS granted as of 1 October 2003 to a company controlled by local entities and listed on a stock exchange since that date, they will continue until the original termination date if the stake owned by the local entities – as of 13 August 2011- is reduced to below 40%  by 30 June 2013, and below 30% by 31 December 2015. This is causing a trend of privatization and concentration of LPS companies controlled by local entities.

Paolo Esposito

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