Since 1989 state owned operators in the utilities sector (eg, telecommunications, water, gas and electricity companies) have been organized as regies autonomes (a type of state owned company), created by and subordinated to local administrative authorities or to the relevant ministries,(1) depending on whether the interest in the public services which they provide is local or national.
While in many cases the main assets necessary for the provision of utilities services (eg, telecommunications, water, electric and thermal power networks, and wastewater infrastructure) are the public property of either the state or the local administrative authorities, the regies autonomes have been granted the right to manage such assets(2) and thus to use them in carrying out their respective activities.
In preparation for privatization, the regies autonomes are to be restructured as joint stock companies. In order to ensure the continuous provision of services following the restructuring, and since the reorganized companies could only continue to act as public utilities operators if their right to use the relevant public property assets survived, a strategic economic decision was made to grant these companies the right to use the respective assets pursuant to a direct concession.(3)
In order to achieve this, the Concession Law provided that, pursuant to a concession agreement, concessions over public property assets as well as over national or local public services and activities would be granted directly to the entities that resulted from the reorganization of the regies autonomes which were previously responsible for those assets, services and/or activities.
However, in its Decision 136/2001 the Romanian Constitutional Court established that this rule is unconstitutional, thus excluding any future application thereof in relation to local public property assets, or services and activities of local interest. In other words, the local public administrative authorities(4) will no longer have the power(5) to assign concessions directly for the utilities infrastructure, or for the public utility activities or services themselves, to the joint stock companies that are created through the restructuring of the regies autonomes.
However, the continuity and security of the provision of public utilities services depends upon the operator's ability to benefit simultaneously from (i) the right to provide such services and (ii) the combined use of local public assets and private assets belonging to the current utilities providers.
While the transfer of control over public services of national interest to a private investor may be effected through a straightforward sale of shares in the current utilities provider, such a private investor will be unable to take over the operation of local public utilities in the absence of a sophisticated arrangement combining concessioning procedures and shares/assets sale rules and requirements. Until such arrangements are put in place, the privatization of Romania's local public utilities remains on hold.
For further information on this topic please contact Adriana Gaspar at Nestor Nestor Diculescu Kingston Petersen by telephone (+40 1 201 1200) or by fax (+40 1 201 1210) or by email ([email protected]).
Endnotes
(1) The Ministry of Industry and Resources, Ministry of Communications and Information Technology and so on.
(2) The right to manage assets which are public property, free of charge, is specific to legal entities organized as regies autonomes.
(3) Therefore, the assignment of the concession right was not subject to tender.
(4) The Constitutional Court's decision does not restrict the application of the direct concession rule in the case of assets, activities or services of national interest, most likely since the unconstitutionality objection was raised by and from the perspective of a local public administrative authority.
(5) Since the Constitutional Court's decisions have the power of laws passed by the Parliament.