casalini issaere 2011 [modalit compatibilit ]

I.S.S.A.E.R.E. 2011I.S.S.A.E.R.E. 2011Torino, ItalyTorino, Italy

September 7September 7 thth , 2011, 2011

WATER RESOURCES AND INFRASTRUCTURES WATER RESOURCES AND INFRASTRUCTURES PROPERTY MODELS FOR WATER SUPPLY PROPERTY MODELS FOR WATER SUPPLY

PROVISION: A LEGAL PERSPECTIVEPROVISION: A LEGAL PERSPECTIVE

Dario CASALINI*

*Assistant Professor of Public Law, University of Torino – Italy [email protected]

© Dario Casalini 2009

1.1. Water resources and rights to water: Water resources and rights to water: essential legal frameworkessential legal framework

2.2. Legal models for water supply Legal models for water supply 2.2. Legal models for water supply Legal models for water supply service provisionservice provision

3.3. Property regime applicable to water Property regime applicable to water supply infrastructuressupply infrastructures


1.1. Water resources and rights to water: Water resources and rights to water: essential legal frameworkessential legal framework


1. Water resources and rights to water: essential l egal framework1. Water resources and rights to water: essential l egal framework

Human right to waterHuman right to waterWater is a natural resources vested in public domain or incapable of exclusive appropriation closely connected closely connected to fundamental individual rightsto fundamental individual rights : as a means of the effectiveness of the right to life, access to water is itself access to water is itself effectiveness of the right to life, access to water is itself access to water is itself a fundamental human righta fundamental human right inherent to human being.

According to UN “the human rights to water entitles everyone to sufficient, safe, acceptable, physically accessible and affordable water for personal and domestic uses” [1.1 billion persons have no access to basic water supply yet]


UN General UN General Assembly n. Assembly n. GA/10967 of GA/10967 of

July 28July 28thth, 2010, 2010


Environmental right to waterEnvironmental right to waterAny environment is entitled to have at least the Any environment is entitled to have at least the minimum amount of waterminimum amount of water it needs as far as water is an essential part of any ecosystem (environmental law; sustainable development).

Water as a good essential to the existence ofindividuals and communities must be (1) vested in territorial sovereignty territorial sovereignty hence (2) subject to an administrative systemadministrative system of licence, permit or concession in order to define the content of the right to define the content of the right to water (quantity, purpose, conditions of use).to water (quantity, purpose, conditions of use).

law; sustainable development).



Civil law approachCivil law approach (Continental Europe, South America, China)

Water resources (non-marine) in situ are vested in the State, are vested in the State, subject to public ownershipsubject to public ownership .The use of wateruse of water must be permitted by means of licence, licence, permit or concessionpermit or concession issued by a public authority which permit or concessionpermit or concession issued by a public authority which precisely defines the content of the right (quantity, purpose, condition of use). Water enters the market on public authority’s Water enters the market on public authority’s decisiondecision (=administrative system of water rights).(=administrative system of water rights).

Concession, License, Permit



Common law traditional approachCommon law traditional approach (UK, USA, Commonwealth)Water resources are incapable of exclusive appropri ationWater resources are incapable of exclusive appropri ation(like a res nullius or extra commercium,) but rights of use water resources are subject to different doctrines none of which proved to be able to quantify or exactly define the content of the right to to be able to quantify or exactly define the content of the right to water (right to water coincides with the extent of its effective and actual use):

1) Riparian doctrine: 1a) natural flow theory1) Riparian doctrine: 1a) natural flow theory (UK)1b) reasonable use theory1b) reasonable use theory (UK, USA)2) Prior appropriation doctrine2) Prior appropriation doctrine (Western States – USA to legitimate the diversion and transport of water for miles to serve mining and farming in the Far West)



Common law approach updatedCommon law approach updated

UK ►Water Resources Act Water Resources Act 19631963, art. 23: “no person shall abstract water from any source of supply in a river authority area except in pursuance of a licence river authority area except in pursuance of a licence under this Act granted by the river authority and in accordance with the provisions of that licence”.


= = recognition of existent water rights according to recognition of existent water rights according to traditional theoriestraditional theories + + introduction of introduction of administrative system for new water rightsadministrative system for new water rights


Common law approach updatedCommon law approach updatedDifferent national water systems in USA: i) i) Riparian systems (29)Riparian systems (29):: Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachussetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Wisconsin;Vermont, Virginia, West Virginia, Wisconsin;

ii) ii) Prior appropriation systems (9)Prior appropriation systems (9):: Alaska, Arizona, Colorado, Idaho,

Montana, Nevada, New Mexico, Utah, Wyoming

iii) iii) Mixed or hybrid systems (10)Mixed or hybrid systems (10):: California, Kansas, Mississippi, Nebraska, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Washington


= = recognition of existent water rights according to recognition of existent water rights according to traditional theoriestraditional theories + + introduction of introduction of administrative system for new water rightsadministrative system for new water rights


1. Water resources are part of the public Water resources are part of the public

Administrative system of water rightsAdministrative system of water rights were then introduced even in previous common law water systems. Its main characteristics are:

1. Water resources are part of the public Water resources are part of the public domaindomain or subject to State administration;

2. The holding of a permit or licence is a permit or licence is a precondition of accessprecondition of access and use of water (with few exemptions);



3. The use of water must comply with the use of water must comply with the conditions laid down by the permit or conditions laid down by the permit or licence (= environmental concerns)licence (= environmental concerns) ;

[ 4. Licence and permit may be transferredLicence and permit may be transferred(water rights market)]

5. Private ownership in physical waterPrivate ownership in physical water exists only afteronly after water has been abstracted by abstracted by individualsindividuals according to the permit or licence


2. Legal models for water supply 2. Legal models for water supply service provisionservice provisionservice provisionservice provision


2. Legal models for water supply service provision2. Legal models for water supply service provision

Extremely high fixed costs (infrastructure)

very low marginal costs + ► natural monopoly

No unique network but several monopolies

COMPETITIONCOMPETITIONonly: For For the marketthe market in relatedin related marketmarket



Two basic alternatives for providing water supply services are available:

Self-Organization MarketCOMPETITION LAW

Self-Organization

P.A. Tendering procedure

Concession

Public-PrivatePartnership

ProcurementIn houseprovider



SELF-ORGANIZATION“InIn--house providinghouse providing ” defined by EU law as the external external limit of common market and competition lawlimit of common market and competition law .

Two requirements must be metTwo requirements must be met by a public authority to provide the water supply service within its own organization: P.A. musti) exercise control over the incontrol over the in--house providerhouse provider which is similar to that which it exercises over its own departments and, at the same time ii) the inin--house provider must carry out the essential p art of house provider must carry out the essential part of its activitiesits activities with the controlling public authority or authorities



MARKETWater supply service can be provided by private (Concession, private (Concession, procurement)procurement) or mixed publicmixed public--private capital companies private capital companies (PPP)(PPP) to be chosen by means of public tendering procedure (art. 107 s., 315 TFUE).

Privatization of water supplier does not mean

competition

Privatization is distinguished from

outsourcing or contracting out

107 s., 315 TFUE).



1.1. achieving social goalsachieving social goals (e.g. avoid cream-skimming practices; non cost-effective rates)

SELF-ORGANIZATION MARKETVs.1. inefficiencyinefficiency (political

interference) of inof in--house provisionhouse provision

2. response to market failure market failure (e.g. private monopoly)

3. direct control on informational informational asymmetriesasymmetries (ensuring compliance with quality standards)

4. ensure risky investment in infrastructureinvestment in infrastructureof uncertain economic return

5. avoid avoid market incentive to raise raise consumption of waterconsumption of water (=private profit)

house provisionhouse provision

2. financial burdensfinancial burdens

3.3. technological knowtechnological know --howhow

4. others (labour law; liability; management; regulation/control)



UKWater Act, 1989 ►privatisation of RWAs (sold on the market)

►regulation authority (OFWAT)= private regulated monopolies

FRANCE


FRANCE►►►►PPPs PPPs or public (in-house) providers since 1900= flourishing of the biggest water companies in the world(e.g. Veolia, Lyonnaise des Eaux…)

GERMANY, ITALY►►►►mixed solutions: i) PPPs

ii) public (in-house) providersiii) market providers (water companies)


Price per m3:Copenaghen € 6.50Berlin € 4.85Glasgow € 4.80Nice (F) € 3.19

Rome € 0.95Rio de Janeiro € 0.64Moscow € 0.63Beijing € 0.39


Nice (F) € 3.19San Diego € 3.17Newcastle € 2.81Calgary € 2.53Philadelphia € 2.37New York € 1.53Tokyo € 1.42Sao Paulo € 1.26Singapore € 1,17

Beijing € 0.39Johannesburg € 0.34Caracas € 0.15Algeri € 0.08Damasco € 0.05L’Avana € 0.03New Delhi € 0.03Karachi € 0.02Riyadh € 0.02

3. Property regime applicable to water 3. Property regime applicable to water supply infrastructuressupply infrastructures


3. Property regime applicable to water supply infra structures3. Property regime applicable to water supply infra structures

NATIONALIZATION

Late XIX century

Projectfinancing

P.A.Public owned

companies

PRIVATISATION

Mid-XIX century

1980-…

PPP

Privatecompanies

Privatecompanies



Water infrastructure can belong to:Public Public local local

authoritiesauthorities

PublicPublicWater Water

authoritiesauthorities

PU

BLI

C E

NT

ITIE

S

PRIVATE ENTITIES

Totally owned Totally owned public companypublic company

whose share are inalienable

PrivatePrivate(water supply) (water supply)

companies companies

water supply companies water supply companies under public controlunder public control

PU

BLI

C E

NT

ITIE

S



The legal framework of water infrastructures ownership mainly depends on the financial constraints and the relevant economic concerns:

• Public financingPublic financing (work public procurement)

infrastructure in public ownership

public procurement)

• PublicPublic--private private financing financing (PPP, project financing + concession)

• Private financingPrivate financing

infrastructure in private ownershipwhose destination to water supply might be modified only on public authority agreement.

infrastructure in public ownership but run and managed by the privatefinancer/builder on the ground of a long term concession to recover investments



Granting third providers access to water supply infrastructures in in private handsprivate hands (essential facilities (essential facilities doctrine):doctrine):

ANTITRUSTPROVIDER 2 ANTITRUSTAUTHORITY

PrivateOWNER

PROVIDER 2

PROVIDER 3

PROVIDER 4

compels the owner to allow third parties’ access to its own infrastructure



Granting third providers access to water supply infrastructures in in public handspublic hands

the separation between PROVIDER 2between infrastructure and service provision is directly imposed by the public owner and does not require antitrust decision Public

OWNER

PROVIDER 3

PROVIDER 2

PROVIDER 4


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