Introduction

In French law, the Bolkestein Directive was transposed by Order 2017-562 of April 19^th 2017. The debate surrounding the Directive did not focus on the direct effect of the Directive as the French judges had already given precedence to the letter of the European text over the text of the transposition law. But it recently set on the meaning of what is a public authorisation restricting access to the exercise of an activity. In a decision of December 2^nd 2022, the French Council of State (CoS) adopted a strict reading of Article 12 of the Bolkestein Directive, notwithstanding the broad interpretation that had been provided in the Order of April 19^th 2017. It ruled that the public authorisation to operate a building owned by a public body does not affect “the access to, or the exercise of, a service activity” within the meaning of the Directive. This interpretation of the Directive authorises public authorities to freely enter into leasing contracts with economic operators without a mandatory prior competition tendering, in contrast to the conclusion of concessions (I). Besides, French law is more flexible regarding adjustments to the reopening of certain concessions to competition. On this point, it is doubtful that French law, as Italian law, is fully in compliance with European Union law (II).

I. The strict interpretation of the concept of authorisation contained in the Bolkestein Directive in French law: the example of State leases

Article L. 2122-1-1 of the General Code on Public Property, resulting from the transposition of the Bolskestein Directive in French law, states that “when the occupation or use authorised is of short duration or when the number of authorisations available for the exercise of the planned economic activity is not limited, the competent authority is only required to advertise prior to the issue of the title, in order to allow the expression of relevant interest and to inform potential applicants of the general conditions for the award”. The French CoS has ruled that such obligations do not apply to public bodies prior to the conclusion of leases on property belonging to their private domain (CoS, 2 December 2022, Commune de Biarritz et Société Socomix, 460100, pt 6; on this interpretation, H. Hoepffner, “La notion d’autorisation au sens de la directive Services : coup de frein à l’envahissement de la mise en concurrence”, Contrats et Marchés publics, February 2023, No. 2), because the conclusion of these contracts is not a necessary step for Socomix to carry out a hotel business, or even to continue operating the hotel business. Moreover, this contract does not authorize the society to exercise such an activity or to operate the hotel (CAA Bordeaux, 2 November 2021, 19BX03590, pt 11).

The French court’s assessment of the conditions for competitive tendering – the cross-border nature of the interest in the concession and scarcity within the meaning of the Services Directive – does not differ from the Court of Justice’s response in the Italian case C-348/22. As regards to the first condition, it is settled case law that EU law applies to purely domestic situations, all the relevant elements of which are confined to the territory of a single Member State (see, for example, recently in relation to concessions, CJEU, 22 September 2020, Cali Apartments, C-724/18 and C-727/18, pt 56). As regards to the second condition, the assessment of scarcity is a matter for the national court, which has a wide margin of discretion in this area (CJEU, C-348/22, pt 46). The question of the geographical scope required to assess this scarcity may depend on the appreciation of the granting authority. The French CoS favours a case-by-case approach to ascertain whether authorisations are limited in practice (CoS, 2 December 2022, Société Paris Tennis, 455033). As a result, the French courts have excluded from the scope of the Bolkestein Directive some of the public service contracts granted by public authorities to economic operators.

II. Arrangements for reopening concessions to competition in French law: the example of hydroelectric concessions

Nevertheless, in France, reopening concessions to competition faced the same issues as the renewal of maritime concessions in Italy. In addition to the possible applicability of the Bolkestein Directive, Article 18 of Directive 2014/23/EU laid down that the duration of concession contracts must be limited and “shall not exceed the time that a concessionaire could reasonably be expected to take to recoup the investments made in operating the works or services together with a return on invested capital taking into account the investments required to achieve the specific contractual objectives”. Article 40 of the French Sapin Law of 29 January 1993 had already defined the concept of “reasonable time” as going beyond the simple accounting depreciation period for investments, i.e. including the economic depreciation period, which takes into account the amount of investments made throughout the performance of the contract (CoS, 11 August 2009, Société Maison Comba, 303517). Article 43 of the same Directive also provides for the possibility of amending a concession during its term without a new award being made, provided that the amendments are not substantial (CJEU, 2 September 2021, Sisal SpA et al, aff. C-721/19 and C-722/19, pt 49).

In France, hydroelectric concessions have been the subject of a long-running dispute with the European Commission (see the Note of the French Court of Accounts on the budgetary implementation of the trade account 914 “Renewal of hydroelectric concessions”, 2020, appendix 3). For the purpose of expediency, Article 13 of the French law of 16 October 1919 on the use of hydraulic energy provided for the competitive tendering of these concessions. Now codified in Article L. 521-16 of the Energy Code, it provides that “no later than three years before the concession expires, the administrative authority shall take the decision either to terminate the concession definitively on the normal date of its expiry, or to establish a new concession with effect from the expiry date. […] If, three years before the concession’s expiry date, the administrative authority fails to notify the concessionaire of the decision taken in application of the second paragraph, the current concession is extended under the previous conditions, but for a period equivalent to the excess”. At the end of 2022, 10% of hydroelectric concessions were in this situation, requiring the implementation of a “sliding deadline” procedure, i.e. automatic renewal of the concession (Note of the French Court of Accounts, annex 2).

While a reopening of competition is justified by the visibility it provides to the new operators selected to make major investments over a defined and secure amortisation period, the French government has put forward various arguments against the reopening of the concessions. First, the fact that the profitability of these contracts is difficult and uncertain for economic operators and second, the fact that the implementation of selection procedure itself is costly and time-consuming. On the one hand, the compatibility of the rolling deadline with EU law is unclear (Order of the Court on Accounts, 2 December 2022, 2022-1979) and, under French law, its implementation constitutes a culpable failure by the State to act, but it does not entitle the French departments that receive a part of the royalties linked to the income from the sale of electricity produced by the hydroelectric works to compensation in the absence of demonstrable harm (CAA Bordeaux, 6 December 2021, Département Hautes-Pyrénées, 19BX01202). On the other hand, their renewal may be authorised by the Commission on the basis of State aid law, which is not addressed in the Italian case (for French motorway concessions, see Commission Decision Plan de relance de l’économie – volet autoroutier, 17 August 2009, 362/2009 and Commission Decision Plan de relance autoroutier, 28 October 2014, SA 2014/N 38271, C(2014) 7850 final). This is because extending the contract without reopening it to competition cannot be contrary to the meaning of Article 107 TFEU. As the Italian legislator argued for maritime concessions in Law No. 145/2019, the law can provide for the extension of current concessions, “in order to guarantee the protection and conservation of the Italian coasts awarded under concession, as fundamental tourist resources of the country, and to protect the employment and income of businesses that are going through a crisis due to the damage caused by climate change and the extraordinary disasters that have resulted from it”. These general interest justifications will have to be strictly assessed by the national court (ECJ, 23 October 1997, Commission v. France, case C-159/94). Therefore, the “service of general economic interest” argument may prevail to make the aid compatible with the internal market on the basis of an in concreto assessment (F. Picod, “Vers une meilleure conciliation des services d’intérêt économique général avec la concurrence et le marché intérieur”, in L’identité du droit de l’Union européenne, Bruylant, 2015, p. 767-782) if the EU Commission accepts it.

Conclusion

According to the same reasoning, national authorities should be able to terminate concessions of excessive duration unilaterally to put an end to a concession’s excessive profitability. This ground associated with an excessive duration was examined in a recent non-public opinion (CoS, 6 February 2020, 399132). The CoS considered that the concession term could be reduced by terminating the concession for reasons of public interest “in the event that the economic trend observed has the effect of significantly accelerating the depreciation of the works and the reasonable remuneration of the concessionaire, to the point where the term initially agreed is no longer justified” (Inspectorate-General of Finances and the General Council for the Environment and Sustainable Development, Le modèle économique des sociétés concessionnaires d’autoroutes, February 2021, p. 58). In this case, the concessionaire should be compensated for the loss it suffers because of the early return of the investments made in the assets of the public authority, when these investments could not be fully amortised, but should not be compensated for its loss of profit, as the termination would be pointless (B. Dacosta, opinion on CoS, 7 May 2013, SAPP, 365043).

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Posted by Dr Marie Cirotteau, Associate professor in public law at the Faculty of Law of Paris Nanterre University

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Suggested citation: Marie Cirotteau, “The granting and renewal of concessions in the internal market: French approach to Case C-348/22 AGCM v. Comune di Ginosa, April 20th 2023”, REALaw.blog, available at https://realaw.blog/?p=3049.