Burke, Jarleth
(2015)
A market and government failure critique of services of
general economic interest: testing the centrality and
strictness of article 106(2) TFEU.
PhD thesis, London School of Economics and Political Science.
Abstract
This thesis proposes a new understanding of Article 106(2) TFEU using composite legal and economic interrogative frameworks. Article 106(2) provides that under specified conditions, any Treaty rule may be disapplied with respect to services of general economic interest (‘SGEIs’). The underlying research tests two principal claims concerning Article 106(2). The first is that it is the central Treaty provision for reconciling EU and Member State interests concerning SGEIs, and the second, is that it is a strict exception. The purely legal component of the analysis comprises internal and external accounts of Article 106(2). The former concerns its operation on a standalone basis, with the latter dissecting its interaction with other TFEU derogation mechanisms. The internal analysis reveals the seeming volatility of the manifest error standard and considers the effects of enduring
difficulties concerning proportionality review. The external account discloses the ubiquitous contingency of Article 106(2), resulting in it being side-lined in a variety of ways. In overall terms, Article 106(2) is shown not to be the central Treaty mediating mechanism for SGEIs that it may be capable of being. The combined legal and economic component of the thesis is based on deploying the theory of market failure and its analogue, government failure, in order to test whether Article 106(2) is a strict exception. Market failure is used to assess SGEI verification. Government failure is used to assess the disapplication of other Treaty provisions under Article 106(2). The market
failure analysis reveals that manifest error control is strict for efficiency related market failures, for EU circumscribed distributional objectives, and occasionally, elsewhere. The government failure analysis discloses significant but avoidable weaknesses in disapplication review, but with pronounced change over time, including a relative recent partial revival of its strictness following Altmark. In the aggregate, the combination of legal and economic analysis shows Article 106(2) not to be a strict exception, except in limited circumstances. In the light of the findings on centrality and strictness, proposals for the reorientation of Article 106(2) are made.
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