PUBLIC UNDERTAKINGS AND SERVICES IN THE EUROPEAN UNION
ECONOMIC SERIES W-21
SUMMARY

PART I: THE SITUATION OF PUBLIC UNDERTAKINGS
IN THE EUROPEAN UNION

CHAPTER I: CONCEPT AND ORGANISATION OF PUBLIC UNDERTAKINGS

The concept of public undertaking covers very different situations, primarily because of the many different reasons that have justified, for more than a century, the creation of public undertakings in European countries.

I. Definition

A. Various attempts have been made to define public undertakings; we have taken the definition used by the European Commission in Directive 80/723 of 25 June 1980 concerning the transparency of financial relations between Member States and public undertakings, since it is now the reference point for all Community legislation applicable to public undertakings. This text defines a public undertaking as 'any undertaking over which the public authorities may exercise directly or indirectly a dominant influence by virtue of their ownership of it, their financial participation therein, or the rules which govern it'.

B. It follows from this definition that dominant influence of a public authority and not public ownership is now considered to be the main criterion of the public undertaking, influence being exerted, irrespective of ownership, through the power to appoint top decision-makers in the undertaking or the ability to control major decisions through special rights for public authority representatives.

C. At the same time, a public undertaking must have:

(1) a degree of autonomy vis-à-vis the public authorities;

(2) an economic purpose: i.e. to produce and sell goods or services;

(3) operating methods similar to those of private undertakings.

II. Legal forms

The main legal distinction among public undertakings is between:

A. Those governed mainly by special law, whether it be 'public law' or at least specific legislation. Whatever they are called (public corporation, national undertaking, state enterprise ...), they have the following features in common:

  1. they generally belong to public authorities;
  2. they are limited by law to a specific activity;
  3. they are unable to go to arbitration or file for bankruptcy;
  4. they are subject to stringent regulation by a public authority;
  5. their staff are often governed by a specific legal regime as opposed to ordinary employment law.

B. Those essentially governed by ordinary commercial law.

Usually called State or national companies, they:

III.Relations with the public authorities

A. Intervention by public authorities in public undertakings

(1) The main instruments of intervention are the control exercised over the governing bodies of the undertaking, its financial operations, such as capital increases and subsidies, and control over decisions.

(2) The organs responsible for using these instruments are administrative, legislative or judicial bodies.

(3) The public authorities' influence is all the greater when they own the undertaking, or at least have a majority shareholding.

B. Objectives of intervention by public authorities

Public undertakings are deemed to have objectives which make them different from ordinary firms. Even those which operate in areas where they are in competition with the private sector, in manufacturing industry for instance, have some sort of public mission such as contributing to the government's industrial or social policy. But this is obviously much more true for those which have a genuine 'public service' mission, i.e. which produce goods or services of a general interest.

CHAPTER II: POSITION OF PUBLIC UNDERTAKINGS IN THE ECONOMY

Given the absence of a workable definition of public undertakings, the reliability of statistics in this area must be seen in perspective. Nevertheless, the figures published every three years by the CEEP (European Centre of Enterprises with Public Participation) are a good basis. These are the figures for 1997 with 1995 as the reference year.

I. Global position

The following table gives the percentage of public undertakings in the overall economy (excluding agriculture), by Member State, obtained from the average of three parameters: workforce, added value, gross fixed capital formation.

Finland

17.6

Greece

15.4

France

14.7

Italy

14.2

Austria

13.3

Sweden

12.9

Portugal

12.3

Ireland

11.8

Belgium

10.9

Germany (excluding former GDR)

10.7

Denmark

9.7

Spain

8

Luxembourg

6.4

Netherlands

5.7

United Kingdom

2.7

European Union

10.4

It can be seen from this table that in the Union as a whole public undertakings account for roughly 10% of the economy, but that there are marked national differences, with a figure of less than 3% in the United Kingdom, around 6% in the Netherlands and Luxembourg and about 15% in Finland Greece, France and Italy, while the others are around the average.

II. Development

Over the past twenty years (more precisely between 1973 and 1993) the percentage of public undertakings in the economy went up, from roughly 14% to nearly 17%, in the first half of the period and subsequently declined to the present 10%. With the current trend towards privatisation, the figure is likely to fall further and stabilize around the 8 to 9% mark.

III. Situation in various sectors

Subject to national differences, public undertakings can be said to account for the following percentage of the workforce:

CONCLUSION

Accounting for about 10% of the Union's economy and falling, public undertakings are organisations with various names and of a diverse legal nature, governed by ordinary law as well as special legislation. However, they are always created by public authorities which have a dominant influence on them and very often own them, although they retain a substantial degree of autonomy which is usually reflected in their having legal personality. They generally have a special mission which is fairly often a genuine public service role.


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