i.s.s.a.e.r.e. 2009 torino, italy september 16 th · ©dario casalini 2009 1. water resources and...

1

I.S.S.A.E.R.E. 2009Torino, Italy

September 16 th, 2009

WATER RESOURCES AND INFRASTRUCTURES PROPERTY MODELS FOR WATER SUPPLY

PUBLIC SERVICE PROVISION: A LEGAL PERSPECTIVE

Dario CASALINI*

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

© Dario Casalini 2009

1. Water resources and rights to water: essential legal framework

2. Legal models for water supplyservice provision

3. Property regime applicable to water supply infrastructures




2


Civil law approach (Continental Europe, South America)

Water resources (non-marine) in situ are vested in the State, subject to public ownership .The use of water must be permitted by means of licence, permit or concession issued by a public authority which precisely defines the content of the right (quantity, purpose).

Water enters the market on public authority’s decision (=administrative system of water rights).

concession

concession



Common law approach (UK, USA, Commonwealth)

Water 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 water (right to water coincides with the extent of its effective and actual use):

natural flow theory (UK)reasonable use theory (UK and then USA)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)



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

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

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


3


3. The use of water must comply with the conditions laid down by the permit or licence ;

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

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



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



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

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


4

2. Legal models for water supplyservice provision


2. Legal models for water supply service provision

Extremely high fixed costs (infrastructure)

very low marginal costs + ► natural monopoly

No unique network but several monopolies

COMPETITIONonly: For the market in related market



Two basic alternatives for providing water supply services are available:

Self-Organization Market

P.A. Tenderingprocedure

Concession

Public-PrivatePartnership

ProcurementIn houseprovider

COMPETITION LAW


5


Two 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 in-house provider which is similar to that which it exercises over its own departments and, at the same time ii) the in-house provider must carry out the essential part of its activities with the controlling public authority or authorities

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



Privatization of water supplier does not mean

competition

Privatization is distinguished from

outsourcing or contracting out

MARKETWater supply service can be provided by private (Concession, procurement) or mixed public-private capital companies (PPP) to be chosen by means of public tendering procedure (art. 87 s., 295 EC Treaty).



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

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

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

4. ensure risky investment in infrastructureof uncertain economic return

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

SELF-ORGANIZATION MARKETVs.1. inefficiency (political

interference) of in-house provision

2. financial burdens

3. others (labour law; liability; organization; regulation/control)


6

3. Property regime applicable to water supply infrastructures


3. Property regime applicable to water supply infrastru ctures

NATIONALIZATION

PRIVATISATION

Mid-XIX century

Late XIX century

1980-…

PPP

Projectfinancing

Privatecompanies

Privatecompanies

P.A.Public owned

companies



Water infrastructure can belong to:Public local

authorities

Totally owned public company

whose share are inalienable

Private(water supply)

companies

water supply companies under public control

PublicWater

authorities

PU

BLI

C E

NT

ITIE

S

PRIVATE ENTITIES


7


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

• Public financing (work public procurement)

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

• Private financing

infrastructure in public ownership

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 supplyinfrastructures in private hands (essential facilities doctrine):

ANTITRUSTAUTHORITY

PrivateOWNER

PROVIDER 2

PROVIDER 3

PROVIDER 4

compel the owner to allowthird parties toaccess its owninfrastructure



Granting third providers access to water supplyinfrastructures in public hands

the separation between 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


i.s.s.a.e.r.e. 2009 torino, italy september 16 th · ©dario casalini 2009 1. water resources and...

Documents