|PHASE 1: Initiating cooperation|
|PHASE 2: Establishing cooperation|
|PHASE 3: Implementing IMC|
|PHASE 4: Evaluating IMC|
There are many possible legal forms for IMC that the task force should review in order to select the one that best suits the objectives of the partner municipalities. As already indicated, the most suitable legal form depends to some extent on the area of IMC. It is also shaped by the provisions of national legislation as well as the potential to mobilize subsidies and grants from the central government. One can distinguish six broad IMC legal forms in Western Europe; Box 17 provides a brief description of each of them.
Informal cooperation through a handshake agreement is always an option, of course, and is very common in practice. But it is appropriate only when the cooperation does not result in binding decisions and does not involve the joint management of resources. This restricts the cooperation mostly to ad hoc events such music festivals, arts exhibition or sport competitions. Informal cooperation has the advantage of being easy to initiate and to stop if things do not work out as expected. It is often a preliminary step for more formal IMC.
Box 17: The legal forms of IMC (based on the Western European experience)
| IMC based on a contract (private or public law)
IMC based on a contract is very common practice. Contracts between municipalities for IMC must usually be approved by the respective municipal councils. This is a very flexible form of IMC since it is up to the municipalities to negotiate its provisions, including the duration of the contract. It is probably best adapted for a smaller number of partners. This modality is suitable for the buying and selling of services between municipalities.
IMC through private law municipal associations
Associations and other forms of NGOs ruled by private law are very common. The founders and members of the association are the municipalities themselves. Unless there are legal provisions that state differently, the general legislation on associations should apply. This provides real advantages in terms of management flexibility and the ability to hire qualified professionals by paying attractive salaries. Associations are funded with the contributions of the members as well as any fees they charge. The associations often benefit from various grants provided by the municipalities themselves, sectoral ministries or donors. Associations can be single- or multi-purpose. In the latter case, the budget may have several separate divisions according to the resources dedicated to each function: services paid by user fees and activities paid by contributions of each member municipality.
IMC through private law commercial companies
IMC through private law commercial companies involves several municipalities creating an enterprise and becoming its shareholders. This must be allowed – or not prohibited – both by private law and public law. The operations of such companies are subject to the provisions of private law. If the law does not prohibit it, several municipalities can establish a “mixed company” with a private firm for the delivery of one or several public services. Such public-private partnerships are not uncommon in Western Europe. The advantages of these private management forms are those associated with commercial activity: flexibility, efficient management, qualified staff, introduction of advanced technologies, etc.
IMC through specialized legal entity
This possibility of establishing IMC through a specialized legal entity depends on national legislation. Where such legislation exists, it outlines the statutes of the legal entity whose exact shape and content are specific to each country. The municipalities transfer one or some of their functions to this entity for which they no longer have authority because they are managed under the full responsibility of the new legal person. Municipal control is still possible because the respective municipal councils elect representatives to the council of the IMC body. The president and vice president of the legal entity are elected by the IMC council. Depending on the legal provisions of the country, these roles may be filled by mayors. The resources of IMC through specialized legal entities depend on the services they run. They include fees, grants, contributions from members as well as state transfers and loans. Such entities can be a single- or multi-purpose. They often have technical competences mainly for public utilities services, but this greatly varies between countries
IMC through territorial public law institution
This IMC modality corresponds to the French communautés (Box 4). It differs from public law associations since it encompasses not only technical competences, but also strategic ones. It is the most institutionalized form of IMC and involves strong permanent links among municipalities in all their main areas of competence. The objective is to enhance the competitiveness of the geographical area covered by the IMC entity at the national and international levels. This form of IMC allows more solidarity between the municipalities and coherent economic development planning.. National legislation often gives a minimum list of mandatory competences and allows the municipalities to transfer additional ones. The IMC council’s members are elected by the respective municipal councils. Each municipality has a number of representatives that corresponds to the share of its population. The president and vice presidents are elected by the IMC council. The budget and finances of territorial public law institutions have the same regime as municipal ones. The resources available must guarantee autonomy to the institution. They include general local taxes, user fees, business taxes, grants and other transfers from the state, including the right to borrow.
It must be noted that the countries of CEE are characterized by communal and public utility enterprises for the delivery of public services inherited from the previous system. The trend in the development of IMC in these countries is for the enterprises of the neighbouring municipalities to merge into one.
Table 6 summarizes the key features of each of the six legal forms in Western Europe as regards statutes and organs, human resources, financing and control. It also indicates the most relevant service areas for each legal form.
Table 6: Summary of the key features of each legal form for IMC
|Contract (private or public law)||Selling and buying of services among local governments: Road maintenance, rescue services, etc.
Joint administration: Human resources management, procurement and internal audit. Comments: Particularly suitable for joint administration (sharing staff and delegation of functions).
||Budget of contracting municipalities||Ordinary legal control on the contract and subsequent acts of municipalities|
| Association - NGO
"single purpose"or "multi purpose"
|Joint planning and development: Economic development, tourism development, environment protection, etc.
Joint funding: Business centres, tourist offices, kindergartens, homes for the elderly, music festivals, cultural events, etc. Comments: Wide range of possible activities mostly of a non- administrative nature.
||Employees with ordinary labour law contract||User charges, fees, contributions from municipalities, grants from other public budgets and donors, accounting as per relevant legislation||Ordinary legal control of the members;
Citizens have the possibility to sue
| Commercial company
"single purpose" or "multi purpose"
|Joint service production: Water and sewage, public transport, ports and airports, waste management, collective heating plants, management of commercial or industrial districts, ski-lifts, etc.
Comments: Possible only for specific commercial activities that charge prices or fees to consumers and need only marginal grant money from the municipalities
||Employees with ordinary labour law contract||User charges or fees, commercial accounting||Legal control on the decision to create the firm and to take shares, control on the firm as per commercial law.|
| Specialized legal entity
"single purpose" or "multi purpose"
| Transfer of all competences possible.
Comments: Often focused on technical public utility services but not only, depending on the country. Possibility for mandatory transfer of some competences; the law may prohibit the transfer of some competences
||Employees with public or private status depending on the nature of the service||Different sources of funding and accounting depending on the nature of the service: user charges or fees, contributions from municipalities, grants from other public budgets|| Control by the municipalities who elect representatives in the IMC council;
general control by the state administration on acts and budgets: legal and financial control.
|Territorial public law entity|| Transfer of all competences possible
Comments: Possibility for mandatory transfer of some competences; the law may prohibit the transfer of some competences. Strong territorial dimension. Often minimum number of competencies.
|As a public law association of municipalities||As a public law association of municipalities||As a public law association of municipalities|
There are considerable variations between countries as to which legal form is used more often. As indicated earlier, the public law entity model dominates in France and Spain; the private law approach is preferred in Sweden and Norway. For instance, in Switzerland, according to a municipal survey reported in Reto Steiner (2001), the single-purpose public law municipal association is the most frequent legal form of IMC. It is used most often in the areas of sewage, welfare, waste disposal or civil defense (Table 7). The second most common form is the public or private law contractual form for the municipal police, the fire brigade or information technology. The private law institution legal form is less frequently used in Switzerland.
Table 7: Switzerland - Legal forms and service areas
|Legal form/service area|| % of IMC under each legal form
per service area
|Public law single purpose association|
|Human resources management||35.6|
|Private law institution|
The selection of the most appropriate legal form involves looking at a number of criteria. Each legal form has advantages and disadvantages that the task force must carefully weigh in order to take the optimal decision. Certain advantages are mutually exclusive. For instance, it is usually difficult to combine rapid decision- making and flexibility with strong democratic control. What is considered an advantage in a given context may be considered a drawback in another. Strong democratic control may result in slow decision-making and less flexibility, which can be a serious drawback in a highly dynamic environment. Short-term costs must also be weighed against medium- to long-term benefits. For instance, the process of establishing an IMC public law institution providing a complex public utility can be costly in the short term. However, in the long term, such an IMC may mobilize grant funding from the state, which is far greater than the cost of its establishment.
The commercial company legal form for IMC generally offers the possibility to establish a partnership between several municipalities and a private company. This is common practice in Western Europe. Box 18 provides a self-explanatory illustration of such a case from Portugal.
The Urban Community of Leziria do Tejo, a sub-region of the Alentejo Region includes all the municipalities of the Association of Municipalities of Leziria do Tejo – 11 municipalities and 240,000 inhabitants. The Urban Community of Leziria do Tejo decided to set up a company with a private group selected through an international tender process. The public shareholders of the new company are nine local governments and the Urban Community itself. They hold 51 percent of the capital of the new company, which runs the entire water supply and sewage systems of Leziria do Tejo – i.e. bulk and local systems, including equipment for water intake, water treatment plants and pipes – in an integrated manner.
Rather than creating their own commercial company or public law institution for the delivery of certain public services (those that can generate commercial revenue) several municipalities can opt for their outsourcing to a private company. This may not have been an option for the municipalities taken individually due to their small size. By joining forces to contract a private firm, the municipalities create a sufficient market size for a private company to envisage profitable activity and even perhaps invest in new technology to improve service quality. Typically, this kind of cooperation in outsourcing takes place in sectors where large-scale production yields efficiencies, such as electricity provision, water provision and public transport. This modality is frequently used in Western Europe and can avoid some of the legal inconveniences of setting up new legal entities.