Using public resources to ensure the availability of economic services that are important to citizens

Services of general economic interest (SGEI)

If the market is not functioning properly but the authorities want to ensure that a service that is important to citizens is available in all circumstances, State aid rules concerning services of general economic interest (SGEI) may be applied under certain conditions.

Not all services can be safeguarded under SGEI legislation as it only applies to services that are important to citizens or the functioning of the society.

In practice, the availability of services is ensured by assigning a company a mandate to provide a specific service. The public service obligation imposed on a company is often compensated by financing the production of services through public resources.

What to take into account?

When considering the possibility of applying SGEI legislation, authorities must take into account, for example, the following matters:

a) Analysing the market situation – are there market failures?

How is the functioning of the market analysed in practice? Is the market able to provide the service in question at a reasonable price and with good quality while also ensuring the regional availability and continuity of the service?

b) Choosing the procedure for selecting a service provider: If the arrangement is a public contract or concession within the meaning of the Act on Public Contracts, the service provider must be selected in accordance with the provisions of the Act. If the arrangement meets the criteria of a subsidy, the procedure for selecting a service provider does not have to comply with the Act on Public Contracts.

c) Taking the EU State aid legislation into account in drafting a written mandate, determining the compensation as well as in control and monitoring activities

The EU State aid rules concerning SGEI are presented on the website of the European Commission’s Directorate-General for Competition.

d) Complying with transparency obligations

When applying the Commission Decision on SGEI, the related transparency obligations, i.e. requirements concerning the separation of accounts, must also be met. In other SGEI situations, the provisions of the Act on the Obligation Concerning the Transparency and Information Dissemination of Economic Activities Binding on Certain Undertakings (19/2003) must be taken into account.

Further information