Waste companies file EU complaint

Seven regional waste management companies have filed a complaint with the European Commission. Jouni Alanen of Roihu Attorneys, one of the Finland’s leading experts on EU and public procurement law, prepared the complaint together with waste companies.

Petteri Orpo´s Government is proposing an amendment to the Finnish Act on Public Procurement (1397/2016). The proposed amendment would introduce a categorical minimum ownership requirement of 10 % for determining whether the contracting authority can take advantage of the in-house exception in accordance with Art.12 of Directive 2014/24/EU. A categorical minimum ownership requirement of 10 % infringes EU law based on the established CJEU case-law (Teckal, Asemfo etc.).

The requirement would cause very harmful effects on the Finnish regional and local economy and on the valuable cooperation between public bodies. Not even national impact assessment has been carried out. The proposal, if adopted, would infringe the core principles of primary EU law, particularly principles of equal treatment and proportionality and the supremacy of EU law, as well as the efficient enforcement of EU procurement rules by extending the national margin of discretion to the core area of the notion of control.

Indeed, 607 statements on the proposed amendment were given, of which 452 were against the proposal. Eight Finnish Ministries of nine altogether were against the proposal and even the Finnish Competition Authority – whose primary task is to enhance competition – opposes the proposal. The reasons for the vast number of opposing statements were, i.e., the total lack of effect assessment and, more importantly, that the amendment would have multiple serious harmful consequences, but no anticipated positive effects on competition in various markets in question. Furthermore, the travaux préparatoires do not give out any reasoning for the selection of the proposed figure, 10 %. The selected figure is not based on any data, studies or any other assessment.
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The requirement would jeopardize and even terminate regional cooperation in the organization of public services. It would cause an extensive administrative burden across Finland, and the availability of currently well-functioning services would be seriously compromised. The legislative proposal would force the dismantling of approximately 200 functioning and legally compliant companies across the country.

As regards waste management sector, there are currently 26 regionally operating municipal in-house waste companies in Finland. They cover practically the entire country. As a result of ownership requirement, 24 of these entities would be forced to reorganize, as they include ownership shares of less than 10 percent. Following such reorganizations, many of these entities would become very small and geographically fragmented. In small municipalities the availability of waste management services could be completely jeopardized.

According to Finnish Waste Act, municipal waste companies carry out statutory service responsibilities of municipalities. The provision of these services is mandated not only as a duty but also as an exclusive right. As these companies procure goods and services from the market following their duties under public procurement legislation, introducing a 10 percent minimum ownership requirement would not increase competition in the waste management sector but would solely impose disadvantages on municipalities and their in-house entities.

Finnish national waste management legislation stems from the European Union legislation mostly. The Ownership requirement would hinder the achievement of nationally binding recycling targets set under EU waste legislation. The requirement would also create obstacles to national measures supporting the green transition.

Despite the opposing statements, the Government has announced that the proposal of 10 % requirement will be included in the upcoming Government proposal next autumn. The amendment is intended to come into force at the beginning of the year 2026.

The proposed requirement sets a national additional requirement that overrides the requirements set in Art. 12 and dismisses the case law of the CJEU. The case-law shows that the size of the shareholding of an individual public body does not act as the relevant yardstick as regards the possibility of control. According to the case-law, holding only 0.25 % of the capital in a public undertaking can be plainly decisive in determining control. The planned additional conditions are far stricter than the conditions laid down in the procurement directive.

Stricter national conditions are not permitted without restriction. The control test is satisfied if the contracting authority or authorities can use decisive influence over both strategic objectives and significant decisions of the contracting unit.

The appellants require the Commission to take prompt action against the planned infringement of EU law.