Historically, European institutions have approached the regulation of the water sector solely from a public health perspective, setting environmental standards for drinking water quality. The Water Framework Directive, approved in 2000, still follows this trend, since its key objective is to ensure "good ecological status" of European waters by 2015. Nevertheless, to meet this objective, the Water Framework Directive also includes norms and guidelines as regards governance (such as integrated basin management) and economical and financial aspects (such as full cost recovery). Should these developments be seen as a prelude to a liberalisation policy in the water sector?
Although the Treaty of Rome in 1957 did not take environmental questions into consideration, the Paris summit in October 1972 initiated the fight against pollution at Community level. Water protection represented an important theme, and this is how Europe began working on questions related to the water sector. The initial approach concentrated on water used by Humankind: there were European Directives on the quality of tap water, on the quality of water used for bathing, on the pollution of groundwater by toxic substances etc. Protection of the environment was legally introduced in the Single European Act in 1986. The Treaty of Maastricht later states the objective of “achieving balanced and sustainable development”.
Although the Union has no direct prerogative in terms of the management of the water sector, it has taken measures for the protection of the environment, and public health for the last thirty years. European directives have established the norms concerning the quality of water and the prevention of pollution, such as those directives relative to urban wastewater or the reduction of pollution by nitrates in agriculture. It is therefore through the environmental question, followed by that of public health, that the community policy has developed as regards the water sector. (C.f. the European Union’s site dedicated to water is also part of the “environment” section).
On the 23rd October 2000, a Framework Directive on water was adopted by the Council and the European Parliament. Still with the objective of reducing pollution and encouraging the sustainable use of water in mind, the European Union organised the management of inland surface waters, groundwater, transitional (estuary) and coastal waters. The Directive establishes norms for the Member States in terms of identification and water analysis for the respective water basins. It requires Member States to adopt management measures within a given timeframe, relative to the protection and the pricing of water. After identifying all the basins that feed into a given point, (a river or a lake, for example), the Member States are invited to adopt an integrated management system of the water reserves, taking all activities, both natural and human, into account. This will be the framework that will be used for the impact studies of human activities on water, as well as an economic analysis of their use. The main objective of the Directive is to have a “good state” of both surface and groundwater for the fifteen years following the implementation of the Directive in 2015.
As one consideration in the Framework Directive underlines, “water supplies are a service of general interest, as defined in the communication of the Commission entitled “Services of General Interest in Europe””. The distinction between economic and non-economic services is increasingly vague however, on the basis of current definitions, water and sanitation fall into the SGIE category. The first consideration of the same Directive states that “Water is not a commodity like any other, but an heritage to be protected, defended and treated as such”. Paradoxically, the same Directive establishes the objective of the various users covering all the costs of the service (article 9 on tariffs).
The European Charter on water resources, adopted by the Committee of Ministers of the Council of Europe in 2001 recognised the “right of all people to a sufficient quantity of water to satisfy their essential needs”. There are many other initiatives, institutional (the UN in particular), as well as from civil society (the Alternative Water Forum, for example) that are also moving in this direction. In spite of the notion of joint heritage or essential public good, in spite of the scarcity of the resource and its vital aspect, there is still no guarantee of a genuine European right to water, any more than at a global level.
Unlike other sectors, such as communications, transport, energy, postal services, the European Union has so far not introduced a policy of liberalisation of water distribution. This can be explained, essentially by the specific nature of the service, the responsibility of local authorities in most European countries (apart from Great Britain) and the fact that there is no need to transport water over long distances, and therefore no stakes involving the interconnection of networks. But while remaining careful, certain declarations that have been made in recent years tend to show that the Commission would like to evaluate the different legal and administrative situations relative to the management of water in the countries of the Union, particularly concerning the aspects of competitiveness. The results of an evaluation of the water sector, that was announced by the European Commission in the White Paper on Services of General Interest in 2004 is running very late in terms of publication date. This is no doubt due to the many discussions and the stakes involved in this very specific good, water. Many stakeholders are attached to respecting the principle of subsidiarity and the big multinational groups are not clamouring for general liberalisation, unlike other sectors, and prefer to operate on a case-by-case basis. Furthermore the virtues of competition for this specific resource have caused more than one actor to have doubts, and the fact that purely economic and financial aspects are being taken into account has been decried by most of them. Nevertheless a deep paradox remains: water is a vital and rare resource. Yet it is also a source of huge profits for some. Although the European Union has not begun to liberalise the water sector, it is not impossible to exclude a shift towards a more liberal policy in the water sector.
Post-scriptum (Olivier Petitjean, 2009)
In 2009, the first drafts of all European water basin management plans, made mandatory by the Water Framework Directive, were supposed to be released. The drafts which have been actually released so far have attracted intense criticism both from ecologists and some legal experts. They have been found incomplete, inconsistent or lacking serious measures regarding issues such as water conservation. In several countries, ground and surface waters are still very far from the "good ecological status" required in 2015. The Framework Directive provides a lot of possibilities for exemptions, a possibility that has been a source of abuse. Nevertheless, it is fair to say that the ambitious objectives set by the Water Framework Directive have been a strong incentive, in many countries, to update their infrastructures and prevent pollution.
The European Commission still has not initiated, so far, any global liberalisation policy in the water sector, but it has not remained entirely passive either. For instance, it tried to prevent several Italian cities to regroup their water and sanitation services on the grounds that, as soon as those services did not remain restricted to a single city, their operation should be subject to a competitive tendering process.