1.1. EU PPP institutional and legislative framework

At the time of writing, the EU did not have either an agreed, uniform definition of PPPs or an overall, EU-wide policy regarding private sector involvement in public sector activities. However, there are some common characteristics that are often associated with PPPs. These include contracting between the public and private sectors for infrastructure development and management where risks are shared between the parties. Risks are allocated to the party that is best able to manage, and therefore minimize, the cost of those risks. The need to utilize private sector management and experience, not only the private sector's ability to raise finance, is another common characteristic.

As of 2005, European Community law6 had not laid down any specific regulations concerning PPPs. However, any act whereby a public entity entrusts the provision of economic activity to a third party must be examined against rules and principles of the EC Treaty, in particular, the freedom of establishment and the freedom to provide services.7 These principles also include transparency, equality of treatment, proportionality and mutual recognition.

A number of EU directives regulate the detailed provisions of cases in which public contracts are awarded. Directives 92/50/EEC, 93/36/EEC, 93/37/EEC and 93/38/EEC relate to the co-ordination of procedures for the award of public service contracts, public supply contracts, public works contracts and contracts in the water, energy, transport and telecommunications sectors respectively. These directives were replaced by Directive 2004/18/EC of the European Parliament and Council (adopted 31 March 2004), which relates to the co-ordination of procedures for the award of public works, supply and services contracts, and Directive 2004/17/EC of the European Parliament and Council (adopted 31 March 2004), which relates to the co-ordination of procedures for the award of contracts in the water, energy, transport and postal services sectors.8 Few important changes in legislation may be expected following the PPP Green Paper and the subsequent Report on Public Consultation on the Green Paper (issued in May 2005).

In A European Initiative for Growth, the Commission states that it 'combines action needed to create the right regulatory, financial and administrative conditions to boost private investment and the mobilization of Community funding with an invitation to Member States, in line with the 2003 Broad Economic Policy Guidelines, to continue refocusing public expenditure towards growth enhancing areas without increasing public budgets.'9 In reviewing the various EU outputs on PPPs, the following themes tend to recur:10

❖ The need for an appropriate and consistent legislative framework;

❖ The need to clarify the public procurement rules for PPPs;

❖ The interaction of PPPs with competition policy;

❖ The need to develop new financing instruments;

❖ The need to identify ways of providing support at the EU level;

❖ The need for identification of appropriate PPP projects; and

❖ The need for development of institutional capacity in the public sector.

Figure 1 outlines some of the major actions or initiatives that the EU has taken in the area of PPPs.

Figure 1. Major EU actions and initiatives in area of PPPs

Source: Price Waterhouse Coopers plc. (PwC) ( 2004).

Although there is an ongoing and increasing interest on the part of all member states in developing PPPs, experience in this respect remains limited. The United Kingdom (UK) stands out as having the longest and most substantial experience of PPPs.14

Figure 2 evaluates the degree of institutional and legislative progress in the area of PPPs in the EU and accession countries. This figure, which provides a relative assessment of the PPP experience in focus countries, allows the authors to conclude on the correlation between a country's striving for PPP legislative development and actual PPP progress. However, this conclusion is based on a trend, not precise data and thus should be considered as the observation results.

Figure 2. PPP institutional development

Key

Source: Adapted from PwC Report (2004)