Whether certain services, like education, energy or water supplies, are public or run by private companies, is decided by States. Unlike the US and Canada, in Europe public services have a strong tradition. They have already been damaged by the European Commission’s liberalisation policy in recent decades. Will the CETA commercial agreement be a further threat?

• 1. Does CETA protect public utilities?
• 2. What about utilities already liberalised?
• 3. Will (re)nationalisation become impossible?

1. Does CETA protect public utilities?

The problem

This long-standing fear of civil society organisations is perpetuated by a very technical detail in the CETA – which may have considerable repercussions: the introduction of negative lists.

Traditionally, in its past commercial deals, the EU was usually committed to liberalising a closed list of sectors, thus promising:

• Not to maintain public monopolies ;

• Even in a competitive market (like rail transport), not to encourage the public operator (like the SNCF in France) through subsidies or privileges;

• Not to discriminate against market operators on the grounds of their nationality.

With these so-called « positive lists », it was easy to determine what had been committed to – and to protect public utilities.

For the first time in Europe, CETA introduces « negative lists », a system referred to as the « list it or lose it » principle. This is a much more unpredictable process whereby the EU commits to liberalise all sectors except those listed on its « negative list ». What is at stake is therefore the wording of this list. European public utilities will be protected from the liberalisation requirement if they are properly listed. If any are forgotten, nothing will be able to save them.

Mostly protected

The problem is that there is no unified definition of public services in Europe – apart from a very restrictive list of services « supplied in the exercise of governmental authority » i.e. justice, police or currency. For example, the postal service is listed as a public utility in France, but not by the European Commission in Brussels; therefore, on the grounds that it has it has a commercial dimension (the parcel services, for example), Brussels has demanded its partial liberalisation.

To ensure wide-ranging protection, the EU has asked for a CETA clause safeguarding all « services considered as public utilities at a national or local level »; this is a rather comforting measure, granting national governments and local authorities the power to define what is a public utility.

This clause will allow European countries to maintain monopolies or exclusive concessions to private operators. For example, the SNCF Réseau will be authorised to maintain its monopoly on the French rail network, and Enedis (ex-ErDF) its quasi-monopoly on electricity distribution. Municipal companies will also be able to continue to supply water to their citizens.

2. What about utilities already liberalised?

The problem

The European competition rules have also dismantled many public utilities, forcing the governments to open rail transport, gambling, postal services or electricity distribution to private operators, along with their incumbent operator.

What will CETA change

Most of these sectors will now be open to Canadian companies, which will be able to compete with European actors. Critics like Amélie Canonne, an expert from the French association Aitec, fear that this competition may « financially entail the incumbent operator, forcing it to act like a private actor », thus relinquishing its universal service duties. Indeed, the European liberalisation requirements already forbid state aids to the incumbent operator and demand that it be profitable.

The European Commission states that « governments will remain free to introduce or maintain universal services duties ». This will apply both to incumbent and private operators (e.g. covering the whole territory or being open 5 working days a week). Governments will also remain free to introduce a quota of operators on a single market.

3. Will (re)nationalisation become impossible?

The problem

What if a State decides one day to return a market to the public sector or a government decides that Internet access or adult education, currently liberalised, should become public utilities? What if a local government decided to take back control of water distribution? Many fear that CETA may freeze the liberalisation of the economy at its current level, thus preventing any reversal and disabling governments for decades.

Why it is more complicated

Such provisions exist in commercial deals: they are called ratchet clauses. But would the EU safeguard on public utilities be sufficient to prevent such scenarios? To address the concerns of Wallonia and of civil society at large, Brussels and Ottawa have written an interpretative declaration of the CETA stating that the deal « will not prevent governments from providing public services previously supplied by private service suppliers or from bringing back under public control services that governments had chosen to privatise ». This declaration has been challenged by the European public services union; as yet there is no legal consensus on this question.

However, (re)nationalisation would probably be contrary to European rules rather than to the CETA. The only difference lies in the remedies that the Canadian companies could seek if renationalisation led to their expropriation: they could ask for financial compensation under CETA’s arbitration mechanism - while European companies could only resort to national jurisdictions.

A final question remains: what would happen if France decided to create a public service for teleportation or cryonics in a few decades? Indeed, these services are not on the list of European protections under CETA, since they do not as yet exist. The European Commission claims that the public utilities clause is sufficiently wide-ranging to include such cases. Time will tell.