II. The State as the provider of public healthcare

The principal actor in the market for the provision of public healthcare services remains the State rather than the individual.Footnote ⁵ The reason for this is that the State assumes the task of financing, organizing and delivering a universal public healthcare service. Public healthcare is philosophically based upon a desire for social cohesion which Article 16 EC acknowledges as a value inherent in services of general economic interest. The Lisbon Treaty acknowledges the importance of public services and amends Article 16 EC. A new Article 14 TFEUFootnote ⁶ together with an attached Protocol on Services of General Interest is included in the consolidated Treaty. Article 14 TFEU states:

The Protocol acknowledges that while Member States pursue goals of social cohesion through the provision of services of general interest, they do so through different policy and financial mechanisms. Article 1 of the Protocol accepts this diversity by affording wide discretion to national, regional and local authorities in providing, commissioning and organizing services of general economic interest to ensure that they meet the needs of the end user. Article 1 further states that the diversity between various services of general economic interest and the differences in the needs and preferences of users may result from different geographical, social or cultural situations. In the context of public healthcare, one issue that arises is whether organizational matters will include, for example, the use of waiting lists by Member States as a mechanism to manage the delivery of public healthcare.

To promote social cohesion the Court has hitherto consistently applied Article 86(2) EC to act as a buffer in cases where EC competition rules have been employed to challenge the State's activities in the secondary upstream market for the acquisition of ancillary goods and services. The justification given by the Court is the need to guarantee the social objectives and redistributive principles of public healthcare. This social solidarity is the defining feature of a universal service and, in the context of healthcare, arises not from a guaranteed right of individual access to healthcare, but from the State having the regulatory freedom, acknowledged within Article 152(5) EC, to organize and deliver a universal service.Footnote ⁷

To deliver patient services the State participates in, and arguably dominates, a secondary upstream market for the acquisition of goods and ancillary services that are necessary to deliver patient care. The Court's application of the competition rules has recognised the regulatory autonomy of Member States when participating in such markets, but this is not without criticism. The State maintains an enduring position as the monopoly provider of public healthcare, yet Member States are simultaneously deregulating and privatizing an increasing number of activities. For example, how, if at all, has the contracting out of ancillary services such as ambulance cover altered the Court's view of whether public healthcare remains a service of general interest?

While the Court has afforded the State latitude in the delivery of ancillary services, the Court has simultaneously acknowledged the importance of individual economic rights and patient mobility. Despite the presence of both Articles 16 and 152(5) EC, judicial developments have laid challenges to the extent of Member State autonomy in the delivery of public healthcare. The Court of Justice has developed a line of case law in which it has held that patients who obtain medical treatment in another Member State may seek reimbursement for such treatment from their home State.Footnote ⁸ Most recently in the Watts judgment,Footnote ⁹ the Court confirmed that remuneration, the prerequisite for Article 49 EC, was provided by the State when it funded healthcare received abroad. It would therefore appear that individuals who exercise free movement rights to access healthcare services in another Member State should not be distinguished from persons who pay for such services from their own resources.Footnote ¹⁰ Yet the judgment in Watts, by appearing to favour the exercise of individual economic rights, has been identified by some commentators as undermining the values of social solidarity and cohesion that are defining features of universal public health services.Footnote ¹¹

III. Organization of public healthcare in the Member States: competition and free movement issues

Member States are collectively facing the challenge of providing healthcare to over 470 million citizens. Delivering healthcare is further complicated by an increasingly mobile population exercising free movement and citizenship rights granted under the Treaty.Footnote ¹² Inevitably the concern for Member States is how, in the context of this mobility, expectations for public healthcare can be fulfilled. In Watts the Court considered the scope of Article 152(5) EC and sought to clarify the responsibilities of Member States towards citizens who exercise free movement rights to obtain medical services because access to treatment in their home State is delayed. In many Member States, including the United Kingdom, access to healthcare is managed through rationing measures, such as waiting lists, which seek to guarantee universal access while simultaneously controlling resources. Controversially, the Court in Watts held that meeting waiting list targets for treatment cannot be used as an organizational justification by a Member State to restrict rights under Article 49 EC.Footnote ¹³

The method of funding public health services varies across the Member States, ranging from an insurance-based system in Germany and the Netherlands, to the National Health Service (NHS) in the United Kingdom, the defining feature of which is that services are provided free at the point of consumption. The common characteristic of all healthcare systems is that the State assumes the responsibility for financing the services. Article 152(5) EC recognizes that Member States retain competence for the delivery and organization of public health services, but the Court has held that the Member States must adhere to the principles of fair competition and free movement when delivering healthcare.Footnote ¹⁴ This reasoning requires Member States to refrain from operating procedures which may breach EC competition rules or restrict the fundamental freedoms provided by the Treaty. Furthermore, Member States are required to amend their practices, when necessary, to ensure that fundamental rights, such as the freedom to receive services under Article 49 EC, are fully available.Footnote ¹⁵

Through deregulation and privatization of healthcare services, the State has become an active participant in competitive markets. This development necessitates consideration of when, and to what extent, the State behaves as an undertaking for the purposes of EC competition law. Deregulation has led the Court to review the activities of State bodies within the scope of Article 82 EC, for example when procuring medical products for use in public hospitalsFootnote ¹⁶ or in the provision of ancillary services such as ambulance cover.Footnote ¹⁷ The procuring of goods and services by the State from private markets is important for two identifiable reasons. First, Member States have consistently argued that these procurement activities come within the exemption of Article 86(2) EC. Member States maintain, and the Court has generally acknowledged, that the overall delivery of public healthcare is a service of general interest. One criticism of this interpretation is that the Court has not been prepared to distinguish between two arguably distinct markets: the upstream market for ancillary goods and services, where the State may behave as an undertaking; and the downstream market for patient care with its distinct social objectives.

In competition law disputes the Court has chosen to look at the overall purpose of public healthcare, which it considers as displaying social and redistributive objectives, as rationale for applying Article 86(2) EC to the upstream activities.Footnote ¹⁸ Consequently, Member States are afforded room for manoeuvre when spending public funds to purchase ancillary goods and services. Secondly, and arising from the procurement activities, the State has exclusive control over how such public funds are utilized. These guaranteed financial resources afford the State considerable leverage in the market as a high volume purchaser of goods and services. Prima facie this situates the State in a dominant position within Article 82 EC.

The identification of two distinct markets in public healthcare has created regulatory inconsistency. As already noted, Member States are afforded greater flexibility by the Court in relation to the application of competition rules where the Court is prepared to consider the upstream and downstream markets collectively. It is the social objectives of the downstream market that justify the application of Article 86(2) EC. By contrast, in free movement disputes the Court upholds individual economic rights, even though Member States have contended that this may undermine the delivery of a universal service.Footnote ¹⁹ This disparity is unfortunate within the framework of Article 152(5) EC which expressly limits EU competence in relation to the organization and delivery of health services and medical care. The irony of the Court's policy is that while judgments such as Watts guarantee individual free movement rights of the few under Article 49 EC, it questions the autonomy of Member States to organize and deliver a universal healthcare service for all.Footnote ²⁰

IV. The boundaries of Community competition rules

Though the exact boundaries of EU competence in health matters remain unclear,Footnote ²¹ it is not appropriate to speak of a distinct EU public health policy.Footnote ²² Despite this uncertainty, the Court has subjected the organization of healthcare services in the Member States to review on competition grounds. One reason for applying the competition rules is that throughout the Member States the provision and delivery of healthcare services has, to varying degrees, been ‘privatized’. It is now commonplace for commercial operators to undertake the delivery of what had hitherto been considered as public service tasks.Footnote ²³ This development has generated competitive markets within Member States for the delivery of, in particular, ancillary services with ‘value for money’ being a principal consideration. Superficially, such arrangements appear to fall within the scope of Article 152(5) EC because they relate to the organization and delivery of healthcare services. The issue remains whether such arrangements should be subjected to EC competition law and, if so, whether there is scope for any possible exemption.

This issue was examined by the Court of Justice in FENIN Footnote ²⁴ on appeal from the judgment of the Court of First Instance (CFI).Footnote ²⁵ FENIN is an association representing firms who market medical goods and equipment used in Spanish hospitals. In December 1997, it complained to the European Commission alleging that the public bodies managing the Spanish national health system (SNS) were in a dominant position in the Spanish market for medical goods and equipment and that they had abused that position by delaying payment of their debts contrary to Article 82 EC.

In August 1999, the Commission rejected FENIN's complaint. It found that the bodies managing the SNS were not ‘undertakings’ subject to the EC competition law rules and, in particular, Article 82 EC. The Commission reached this view on the ground that the purchasing activities of those bodies were not economic activities, but rather activities carried out for the purpose of providing non-economic health services. FENIN appealed to the CFI against the rejection of the complaint. In March 2003, the CFI ruled that the Commission had been correct to hold that the SNS entities were not ‘undertakings’ for the purposes of the competition rules and dismissed the appeal.

FENIN appealed the CFI's judgment to the ECJ, arguing that the CFI was wrong to hold that the SNS entities were not ‘undertakings’. In particular, it argued that public bodies, including health organizations, of whatever legal nature, must be considered to be ‘undertakings’ in relation to their suppliers and must be subject to competition law. According to FENIN, this was the case either (a) because the activity of purchasing medical products or services is an economic activity (and all entities engaging in economic activities are ‘undertakings’) which is distinct from the subsequent non-economic use of these products or services; or (b) even if the activity of purchasing is not distinct from the subsequent supply, the provision of health services is, itself, economic and subject to the competition rules.

In his Opinion, Advocate General Maduro stated that healthcare services are subject to internal market principles. The Advocate General agreed with the judgment of the CFI and stated that by making the provision of healthcare services subject to competition rules, this does not necessarily undermine the social objective of public healthcare. The Advocate General analysed the activity of the Spanish healthcare provider, the SNS, and whether it had abused a dominant position in the Spanish market for medical goods by delaying payment of its debts to the suppliers who were represented collectively by FENIN. Specifically, this considered the purchasing activity of SNS and whether, on the facts, it had behaved as an undertaking within Article 82 EC. The Advocate General stated:Footnote ²⁶

The criticism of this analysis is that while SNS is charged with the exclusive delivery of a service of general interest, it does exhibit the behaviour of an economic entity. Is it therefore open, in the manner suggested by Advocate General Maduro, to distinguish between the activities which an organization such as SNS performs? On the one hand, there are the purchasing activities, where SNS fulfils the requirements of Höfner and Elser Footnote ²⁷ as an undertaking for the purposes of Article 82 EC. Additionally, SNS also fulfils the function of the State agency responsible for delivering public healthcare services to Spanish citizens, which is not of an economic character. In relation to these different tasks the CFI addressed the question of whether it is desirable to distinguish between the two separate markets which SNS engaged in. First, there exists an upstream market in which SNS uses public funds to procure medical products from private undertakings. Secondly, there is the downstream market in which SNS, again using public funds, delivers point of access patient services. Finally, the CFI, along with the Advocate General and the Court, considered whether the activities of the SNS are to be considered in their entirety.

Contrary to the view taken by both the CFI and the Court, Advocate General Maduro stated that it is possible to decouple the activities of an organization such as SNS.Footnote ²⁸ A public body can simultaneously engage in activities which are both economic and non-economic. The Advocate General qualified this view and stated that even if, in the present circumstances, the conclusion was that all aspects of SNS activity were economic in nature, the outcome would nevertheless be the same; that is, SNS was pursuing primarily social objectives and Article 82 EC would not apply. This reasoning is controversial because, though the Advocate General has recognized the existence of distinct markets, the reasoning argument would appear not to take in to account the de facto organization and control of healthcare services in Spain and in particular the application of public resources. The explanation given for this view was that the entire activities of SNS came within the scope of Article 86(2) EC. Advocate General Maduro argues that though EC competition law will apply to the purchasing activities, these activities form part of a wider social function of providing universal public healthcare services, the purpose of which is to promote social cohesion.Footnote ²⁹

The reasoning of Advocate General Maduro is interesting because it focuses on the role and objectives of the State as a provider of healthcare services and not on the State as a participant in competitive markets. The Advocate General argues that public healthcare services can simultaneously be within the scope of Article 49 EC, but remain outside the reach of competition law. Approving the judgment of the CFI in Smits and Peerbooms,Footnote ³⁰ Advocate General Maduro concluded that healthcare services provided free at the point of consumption by the State or through an insurance-based scheme of remuneration satisfy the definition of economic activity under Article 49 EC.Footnote ³¹ This view confirms the existence of a different interpretation for both provisions of what constitutes an economic activity. In relation to Article 49 EC the question has centred upon the requirement for remuneration, whether by an individual or the State, to satisfy the prerequisite.

By contrast, the economic activities of the State for the purposes of EC competition law are considered differently. For the Advocate General the focus shifts from the question of remuneration to reflection upon the purpose of the activity. Advocate General Maduro acknowledged that the State may engage in activities which are economic in character and potentially within the scope of Article 82 EC, but chose to focus on the role of the State as the provider of universal public healthcare on a not-for-profit basis. The Advocate General concluded that when the State provides point-of-access healthcare services, it does not intend to operate in a competitive market.Footnote ³²

The Advocate General highlighted that this interpretation was consistent with the Court's established view that services of general interest, which are social in character, are outside the scope of EC competition law. In Poucet and Pistre Footnote ³³ and Cisal Footnote ³⁴ the Court held that the principle of solidarity, the defining feature of a service of general interest, is present when the State retains control and the service provided exhibits redistributive characteristics and objectives. In Albany Footnote ³⁵ the Court explored this issue more closely to determine where the boundary for a service of general interest lies.Footnote ³⁶ The issue in Albany was whether a Netherlands sectoral pension fund offered a universal service within the meaning of Article 16 EC. Despite operating on a non-profit basis, the Court held that the solidarity of the scheme was undermined through the non-compulsory membership of the fund and that the benefits were only payable to actual members of the fund. On this reasoning the absence of the redistributive objective justified the non-application of Article 86(2) EC. Thus, in the context of welfare services the redistributive element will only be present when benefits of the service can be accessed universally by all citizens without the need for some prior contribution.

V. Monopsony Situations and Article 86 EC

The view of the Advocate General and the Court in FENIN that public healthcare is a service of general interest is undoubtedly welcomed by the Member States. The possibility that Member States, who are struggling to meet ever-increasing social challenges, would be subject to an additional regulatory burden in the provision of public healthcare is unattractive. That said, the judgment of the CFI, the ECJ and the Opinion of the Advocate General are not beyond criticism. In FENIN the Court, following the judgment of the CFI, chose not to distinguish between the upstream and downstream markets, despite the view of the Advocate General that this was possible.Footnote ³⁷ The criticism of this reasoning is that the Court failed to examine closely the impact of the activities of SNS as a monopsony body which was procuring medical goods from a competitive market.

The analysis of Advocate General Maduro can be considered as preferable as it has, at the very minimum, subjected the State measure to EC competition law. This reasoning recognized that the State's activities may distort competition, particularly in circumstances where the purchase of products by SNS used a guaranteed source of revenue from the Spanish taxpayer.Footnote ³⁸ The ability to spend taxpayer's money to bulk-purchase products, which it would seek to acquire at a favourable price, made the State the dominant actor in the market. On this view it is possible to conclude that while the State was pursuing a social objective, in doing so it did abuse its dominant position through late payment of debts to FENIN members.

This interpretation is consistent with that of Advocate General Jacobs in Cisal and is arguably a preferable application of Article 82 EC. In Cisal the Advocate General stated that ‘the underlying question is whether that entity is in a position to generate the effects which the competition rules seek to prevent’.Footnote ³⁹ This approach is both objective and focused exclusively on the activities of the entity and whether these actions are responsible for a distortion of competition. Advocate General Maduro was correct in FENIN to identify the existence of two distinct markets; the upstream and downstream markets. The criticism of this Opinion lies in the view that the abuse at [in???] the upstream market can be justified by the downstream social objective.Footnote ⁴⁰ The risk that this interpretation creates is that all associated activities, which may breach Article 82 EC, will be subsumed within the service of general interest. That said, the reasoning of Advocate General Maduro can be categorized as pro-competition by comparison to that of the Court. It encourages the Court to first apply Article 82 EC to the Member State's activities prior to considering Article 86(2) EC. On this reasoning it is not inconceivable that, on some future occasion, the Court will not be prepared to apply Article 86(2) EC because of the magnitude of the abuse by the State.Footnote ⁴¹ Furthermore, the benefit of Advocate General Maduro's reasoning is that it promotes uniformity in the understanding and application of both Articles 82 and 86(2) EC across different State sectors. Ultimately the Court in FENIN, without providing clear reasons, rejected this view and concluded that no distinction need be drawn between upstream and downstream markets.Footnote ⁴²

FENIN is a clear example of a monopsony situation, in which the State engages in commercial transactions with private undertakings. This dominance as a purchaser may restrict not only competition between suppliers, but may also deter new suppliers from entering the market. Despite this, an immediate uncertainty arising from FENIN lies in relation to the procurement policy and practices of Member States, and if and when such activities infringe EC competition law. Rather surprisingly, although Advocate General Maduro adopted the view that it was possible to separate the economic and non-economic activities of the undertaking for competition law purposes, it appears from the Opinion that there is some inconsistency with how this distinction will operate in practice.

The Advocate General, following the analysis of the CFI, states that when purchases are made at the upstream market, which are intended for use for a non-economic purpose at the downstream market, they will not be subject to competition law.Footnote ⁴³ Consequently, the purchase would only be caught by the competition rules when it forms part of an economic activity at both the upstream and downstream market. This would appear to render the earlier distinction made by the Advocate General, between the upstream and downstream market, somewhat redundant. Any purchase made from FENIN by SNS would de facto be outside competition rules because the end usage was for the provision of public healthcare. Despite the pro-competition intentions of the Advocate General, it is difficult to see how this reasoning promotes, in practice, competition in the award of public contracts. FENIN consists of a majority of private undertakings who market medical goods and equipment used in Spanish hospitals. Sales to SNS amount to over 80 per cent of the turnover of FENIN members.Footnote ⁴⁴ The failure by SNS to promptly pay its debts has, at the very least, the potential to discourage competition between the members of FENIN for SNS contracts, with undertakings likely to be unenthusiastic about trading with SNS. Yet given the volume of trade between SNS and FENIN, it would appear that FENIN members are caught between a rock and a hard place. If they did not sell to SNS they would lose out on a guaranteed share of the market. But if they chose to trade, the practice of late payment would cause financial imbalances. Such behaviour on the part of SNS is not only capable of discouraging competition for public contracts, but also amounts to an abuse of its dominant position of SNS.Footnote ⁴⁵

VI. Deregulation and healthcare services

Deregulation has led to an increased role for private actors in the delivery of public healthcare. Despite this organizational realignment, the State has sought to retain overall strategic control. Deregulation will include, inter alia, the allocation of resources to private contractors, the granting of licences to provide services and the sub-contracting of ancillary services. States are seeking to create domestic competitive markets in the delivery of health services. The purpose of deregulation is to make the public funds more elastic and meet the rising demands and expectations for public healthcare. Inevitably, deregulation is matched by an ever-increasing readiness for private litigants to employ EC competition law to challenge decisions and policies of Member States which concern the allocation of contracts to provide healthcare services.

This dilemma can be seen in Ambulanz Glöckner Footnote ⁴⁶ which concerned the provision of emergency and non-emergency ambulance services by non-State bodies. The Court sought to reconcile the need to ensure that a universal emergency ambulance service is provided with considering the criteria upon which a private non-emergency service may also operate. Specifically, the Court examined how public and private ambulance services can be adequately and fairly resourced from a single State budget. On this point Advocate General Jacobs identified a fundamental issue faced by Member States, namely that the provision of an emergency service is financially draining. By contrast, the privatized and more profitable non-emergency patient transport services place profits in hands of private undertakings. This highlights questions of how such contracts are allocated and whether they should be subject to EC competition rules.Footnote ⁴⁷ It is not unnoticed in this Opinion that the source of the profits generated emanates from public funds paid by the State to private operators to provide the service on behalf of the State.Footnote ⁴⁸ Advocate General Jacobs recognized the real risk of ‘cherry picking’ the profitable services by private operators. Inevitably, it is left to the State to provide the financially unattractive universal service, namely the emergency ambulance cover.Footnote ⁴⁹Ambulanz Glöckner draws out the issue, subsequently discussed at length by Advocate General Maduro in FENIN, of what criteria are to be used to determine a service of general interest and whether the involvement of both public and private actors undermines the principle of solidarity.

Questions of how, and to what extent, the use of public/private arrangements in healthcare services undermines their continued status as a service of general interest are not easy to answer with any certainty. This is in part due to the different roles assigned to private actors in the provision of healthcare and ancillary services across the Member States. Within this context, how far should EC competition law interfere with the organization and delivery of healthcare services which Article 152(5) EC acknowledges is a matter for the Member States? Through recognition of the social characteristics of healthcare services, the Court accepts the existence of a public expectation that point of access services will be freely available. To achieve this, some degree of State intervention is inevitable. Yet deregulation of, in particular, ancillary services which continue to be financed from public funds, should call into question the Court's rather generous interpretation that all aspects of public healthcare come within the definition of a service of general interest.Footnote ⁵⁰ As the State's participation decreases and shifts from being one of sole provider to assuming the role of organizer of multiple tiers of public/private actors, can the derogation of Article 86(2) EC maintain the same relevance?Footnote ⁵¹

In Ambulanz Glöckner the Court accepted that non-State bodies can provide emergency transport and patient services, both of which had at various times been solely provided by the State.Footnote ⁵² Under German law, the provision of ambulance services is a matter for each Land, which may assign the delivery of such public ambulance services to recognized medical aid organizations such as the Red Cross. These organizations may provide emergency ambulance services on behalf of and under the control of the State. Control would be both financial and organizational, which would suggest that following the Court's judgment in Foster v British Gas,Footnote ⁵³ such bodies would be considered as an ‘emanation of the State’. Crucially, if they are emanations of the State, would it be possible to view the activities of such non-State bodies as providing a service of general interest?

Ambulanz Glöckner was awarded a licence in 1991 to provide non-emergency patient transport services, but was refused a renewal of this licence in 1994. The reason was that the medical aid organizations, which were responsible for operating emergency services, operated at only 26 per cent capacity. This spare capacity would enable them to simultaneously provide non-emergency patient transport services and make more efficient use of limited resources. The justification for the Land's decision was based on Länder legislation which governed the organization of all ambulance services for the Land of Rheinland-Pfalz.Footnote ⁵⁴ In addition to the criteria of safety and efficiency in the delivery of this service, authorization of a licence could be refused if ‘… it would be likely to have an adverse effect on the general interest in the operation of an effective public ambulance service …’Footnote ⁵⁵

This provision prima facie breaches Article 86(1) EC, but it may be justified under Article 86(2) EC. It must be shown that, without the State's action, the public service would not survive financially. In Ambulanz Glöckner the decision of the Land not to renew the licence and transfer responsibility for the provision of non-emergency patient services was based on the need to ensure the efficient use of resources. The effect of the decision was to create a monopoly in the provision of ambulance services, but one which intended to guarantee that the full range of ambulance services was maintained.

The decision not to renew the licence raises the question of whether the medical aid organizations acquired a dominant position in a substantial part of the common market. For the purposes of Article 82 EC, the monopoly was in a defined geographical area, the Land of Rheinland-Pfalz, which the Court noted contained a population larger than several Member States.Footnote ⁵⁶ The issue to be determined was whether for the purposes of Article 82 EC the decision had an impact on trade between Member States and constituted an abuse of that dominant position by the medical aid organizations who had acquired, by default, the licence to operate the more lucrative non-emergency service.

The Court accepted that there were two distinct markets for ambulance services, namely emergency services and non-emergency patient transport services.Footnote ⁵⁷ Though these markets displayed similar characteristics and both could be operated by the same provider, the Court held that they were neither interchangeable nor substitutable.Footnote ⁵⁸ A decisive factor for this view is that the provision of emergency services was both more costly and required specifically trained personnel. The Court assessed that the Land's decision not to renew the licence could amount to an abuse of a dominant position. But, given the nature of the activity in question, is there scope for a justification under Article 86(2) EC? Before this can answered it is necessary to consider whether the abuse had an effect on trade between Member States.

The facts of Ambulanz Glöckner suggest there was no evidence that the ambulance services were being provided, or would at some future stage be provided, by operators established in other Member States. The nature of ambulance services and health services generally, necessitates that the provider maintains a physical presence within the region or State that the service covers. The Court was non-committal on the issue of whether there was an effect on trade between Member States and left the matter for the national court. It is possible, however, to envisage a scenario whereby an operator from another Member State establishes their business in the Land with the intention of competing for the award of a licence for non-emergency services. In such circumstances it is indeed possible to envisage that paragraph 18(3) of the RettDG 91 could breach Article 86(1) EC by not offering the service out to competition. Another possible situation would be for regions within Member States which are located in border areas to have non-emergency ambulance services provided by an operator based in the neighbouring State. It is difficult to visualize this as a satisfactory arrangement which fulfils the overall objective of the State to provide a universal service. By their very nature, ambulance services, whether emergency or otherwise, are unlikely to be efficiently provided and meet public expectation other than by an operator located in the region in question. This would appear to leave only the establishment rights under Article 43 EC as being a relevant consideration.

VII. Do free movement rights undermine a universal healthcare service?

Cross-border healthcare has emerged as an important political issue in the EU. Yet cross-border health services have often encountered problems due to incompatible rules between Member States and the lack of a clear framework and European structure for cooperation. In the absence of a comprehensive EU legal framework for healthcare, the Court of Justice has regulated EU healthcare policy through applying the rules of internal market law. The Court's judgments demonstrate a tension between Member State autonomy in the control of healthcare provision and the EU's objective of creating a European internal market in goods and services.

The EC Treaty has long recognized that medical services paid for privately by a patient and obtained within another Member State come within the scope of Article 49 EC.Footnote ⁵⁹ More controversial, particularly for the Member States, is the question of whether treatment funded by the home State, but provided to the patient in another Member State, fulfils the requirements of Article 49 EC. It would appear settled case law that following, for example, Smits and Peerbooms, State-funded healthcare is within the scope of Article 49 EC. The Court stated that it is not relevant for the purpose of Article 49 EC that the service is not paid for by its residents since ‘… payments made by sickness insurance funds … are … indeed the consideration for the hospital services and undoubtedly represent remuneration’.Footnote ⁶⁰

This analysis does not necessarily provide a satisfactory universal formula by which State-operated healthcare across 27 Member States is brought within the scope of Article 49 EC. While the State ultimately funds the provision of healthcare within the Member States, the method and degree to which this occurs varies, with Germany, the Netherlands and Belgium operating an insurance-based system where payments are made by the insurer to the provider. Luxembourg uses a reimbursement insurance system which exhibits commercial characteristics often associated with the provision of private healthcare services. Citizens of Luxembourg participate in a compulsory insurance scheme and are reimbursed for their treatment after meeting the initial responsibility to pay for their treatment directly to the medical provider.Footnote ⁶¹ Outwardly, this arrangement fulfils the requirement of remuneration more readily than the United Kingdom NHS where no direct payments are made by patients and medical services have no distinct value.Footnote ⁶²

In Watts the issue before the Court required a value judgment to be made in relation to the organization and delivery of patient services in the United Kingdom. The Court did not accept the United Kingdom Government's argument that Article 49 EC did not apply because of the lack of direct payments made for hospital medical services. While such an approach is consistent with the need to guarantee the rights within Article 49 EC, it does question the ability of the NHS to organize and deliver universal patient care which is free at the point of consumption. Watts further illustrates the conflict that exists in guaranteeing patient mobility under Article 49 EC while simultaneously respecting Article 152(5) EC. The Court's resolution of this conflict is by no means satisfactory for Member States because it has not embraced the principle of solidarity in relation to the provision of patient services in the same way it has in the delivery of ancillary services. By contrast, the Watts judgment strengthens the position of European patients. Not only have they been granted rights beyond their national borders, but they have also been provided with a structure and judicial procedures through which to bypass the national system or challenge its decisions.Footnote ⁶³

Watts highlights the pressure faced by Member States delivering a universal healthcare service which is free at the point of consumption. Demand inevitably surpasses the ability to supply immediate treatment in all cases and waiting lists are employed as a means of managing the delivery of patient services.Footnote ⁶⁴ A feature of waiting lists is that certain treatments will inevitably be considered a priority. Additionally, within each list patients will be prioritized where necessitated by their medical condition. The objective is to balance the need for priority healthcare with that to ensure availability of treatment for conditions which are less serious.Footnote ⁶⁵ Article 22 of Regulation 1408/71 complicates matters as it enables patients to apply for treatment to be received abroad when there is an ‘undue delay’. Such a request necessitates close consideration of what actually constitutes an undue delay. Furthermore, should this decision be based upon a medical practitioner's opinion or should, as would appear from Watts, the Court's concern that an undue delay may undermine Article 49 EC be the dominant factor? In Watts, the Court did not accept the United Kingdom's argument that a patient on a waiting list, who is treated within a prescribed time, should not receive reimbursement when exercising their rights under Article 49 EC to obtain treatment more quickly in another Member State.

VIII. Is patient mobility a reality?

One question that arises from the Watts line of cases is whether mobility is a realistic proposition for patients.Footnote ⁶⁶ The Court suggests that, when ‘necessary’, a patient in the situation of Mrs Watts should be able to exercise rights under Article 49 EC and receive treatment abroad which is funded by the State. Watts turned on whether being placed upon the waiting list constituted an ‘undue delay’ under Article 22 of Regulation 1408/71. The difficulty with the Court's interpretation is that the judgment would appear to ignore the purpose of waiting lists, which is to manage the delivery of finite resources in a public healthcare service.Footnote ⁶⁷ It can be argued that the use of waiting lists by Member States is within the scope of Article 152(5) EC. In circumstances such as those of Mrs Watts, the initial wait of 12 months,Footnote ⁶⁸ though lengthy, was based upon a clinical judgment which categorized her treatment as ‘routine’. It could be said that the underlying philosophy of the doctor's decision reflected the need to ensure equal access to a universal healthcare service which is based on need, while recognizing that prioritization is inevitable within a framework of limited resources. The Court's judgment suggests that the clinical opinion of a medical practitioner may be superseded by a legal argument of what constitutes an undue delay.

This leaves the Court no option other than to consider priorities in the application of the diametrically opposed objectives within Articles 49 and 152(5) EC. The Court, without hesitation, has opted to protect individual economic rights. The effect of this is that while free movement rights for the relatively few are guaranteed, the delivery of a universal healthcare service to the majority, within strict resource criteria, is put into question.Footnote ⁶⁹ The judgment would appear to remove flexibility for the NHS to manage the efficient allocation of patient care resources in a health service that is based upon the principle of being free at the point of consumption. More generally, it is unclear whether the Watts judgment has contributed significantly to either improving efficient delivery of healthcare or to controlling the spiralling cost increases faced by Member States in the provision of healthcare. It is important to recognize that not all patients will be able to exercise rights of free movement, nor will all patients wish to travel to another Member State. Treatments which require intensive and/or long-term aftercare are not necessarily suitable to be delivered in another Member State. In Watts the treatment was split between two Member States, with the operation taking place in France, but responsibility for the long-term aftercare, such as the necessary physiotherapy, being ongoing when Mrs Watts returned to the United Kingdom. At all times Mrs Watts remained an NHS patient. Post-Watts a patient in a similar situation would presumably slot into the NHS administrative system and should be assigned follow-up appointments at intervals which are commensurate with their post-operative condition. This ‘move up’ the waiting list may have the effect to ‘bump down’ the list a patient who has not exercised rights under Article 49 EC and who waits the prescribed period for their treatment. Such a scenario is arguably not consistent with the principle of social cohesion referred to in Article 16 EC and Article 14 TFEU.

The above analysis raises questions of whether the judgment in Watts contributes to, let alone improves, the provision of public health services in the Member States. From the perspective of the Member State, Watts enables Article 49 EC to be used to challenge democratically approved policies in relation to the allocation of resources for prioritizing treatment. This is, prima facie, contrary to Article 152(5) EC. One temporal effect of the judgment is the Court's recognition that Article 49 EC will only be available in circumstances when the health of the person ‘necessitates’ the treatment.Footnote ⁷⁰ But this requirement cannot be considered as effective as the Treaty-based justification of Article 86(2) EC. In the case of patient mobility, the decision whether to send the patient for treatment and use Article 49 EC should remain a clinical judgment made by the medical practitioner based upon all the circumstances, including the availability of resources.

On one interpretation of Watts it may be suggested that the decision is neutral in terms of its impact upon resources and regulatory autonomy. Mrs Watts received her treatment abroad, which was paid for by the State, and she remained an NHS patient throughout.Footnote ⁷¹ There are, however, two criticisms which can be made of the Watts judgment. First, the circumstances of Mrs Watts can be viewed as a cause célèbre, whereby a ‘mean’ State was not prepared to fund her treatment abroad. This type of case will inevitably attract a significant degree of public and media sympathy. Hervey and McHaleFootnote ⁷² consider the issue of free movement rights and access to patient services. They argue that Community law rights will only be accessed by the wealthy and so exclude a significant part of the population.Footnote ⁷³ The answer to this problem for Hervey and McHale is a rights-based approach whereby Member States are under an obligation, constitutionally protected or otherwise, to provide healthcare. In such circumstances, where the State has a positive and legally binding duty, free movement rights would not necessarily be of such importance as the home State would have the legal responsibility to provide the treatment. That said, while the expectation of patients is to receive ‘state of the art’ healthcare, this is not a realistic proposition in all Member States. Indeed patient mobility may be the only way in which such treatment can be received without undue delay. It could be argued that in Member States such as the Netherlands, where healthcare is funded through an insurance system, the case law of the Court could have a positive effect in improving patient services. Healthcare insurers may be prepared to offer treatment abroad in their policies when it is faster and corresponds to the state of the art, but the public may also begin to ask questions of why such state of the art healthcare is not available, without undue delay, within their own State.

Secondly, Watts would appear to undermine the solidarity principle which the Court considers central in both FENIN and Ambulanz Glöckner. Watts is a case which concerns the very downstream market of patient services which Advocate General Maduro identified in FENIN as giving publicly financed healthcare services their distinct social character.Footnote ⁷⁴ Though the Advocate General accepted, by contrast to the Court, that the upstream and downstream markets may be separated, the presence of a social objective justifies the application of Article 86(2) EC to the upstream market.

In reaching its conclusion in Watts, the Court's judgment embraced one aspect of the reasoning of the Advocate General which the Court had previously rejected in FENIN, namely to examine a specific aspect of the market in healthcare services. In Watts the Court considered the operation of the downstream market for the provision of patient services, but ignored the overall aims and objectives of a wholly publicly funded healthcare service. This inconsistency of understanding and application of the solidarity principle in competition and free movement cases is not helpful to Member States.

Litigation concerning patient mobility has heralded a response from the political institutions. In its 2005 Report on Patient Mobility and Healthcare Developments in the EU,Footnote ⁷⁵ the European Parliament called on the Commission to create an infrastructure to facilitate patient mobility. The Commission Communication Regarding Community Action on Health ServicesFootnote ⁷⁶ in September 2006 recognized that clarity of application of EC law is crucial for both patients and national health systems. In addition to defining the boundaries of Article 49 EC, the Communication recognizes practical problems of sustainability and that, for example, due to finite resources Member States ration healthcare through mechanisms such as waiting lists. While confirming that waiting lists cannot act as barriers to free movement, the Commission nevertheless acknowledges that practical problems exist before free movement of healthcare services between 27 Member States can be a reality.

While the Court has not considered directly the economic, social and health impacts of patient mobility, the Commission Communication identifies these as important points which will require further discussion. Through this the Commission recognizes that solidarity is the key principle of public healthcare systems and that patient mobility has the potential to bring about a disproportionate impact upon some Member States, which may become net importers of patients to the overall detriment of healthcare provision. To examine the issues in more detail the Commission has established a number of High Level GroupsFootnote ⁷⁷ to consider the questions surrounding patient mobility and healthcare development in the EU. Through this consultation exercise the Commission's strategy is to promote policy coordination, information exchange and peer review between Member States, rather than searching for legislative solutions. One such group, the High Level Group on health services and medical care, examined how practical cooperation could be better developed to facilitate patient mobility. This group recognised that patient mobility faces more than just physical barriers; for example, other problems which need to be overcome include the establishment of rules that will permit the transfer of personal data on patients between Member States and some degree of consensus on ethical issues.Footnote ⁷⁸

The sensitive nature of public health services is evidenced by their absence from the final text of the Services Directive.Footnote ⁷⁹ According to the text, the Directive will not apply to ‘healthcare, whether or not it is provided via healthcare facilities, and regardless of the ways in which it is organised and financed at national level or whether it is public or private’.Footnote ⁸⁰ Throughout the deliberations on the Directive there was little appetite within the European Parliament for public health services to be considered only in relation to questions of freedom of movement within the EU. In particular the country of origin principle in Article 16 of the Directive was identified as providing an obstacle to the free movement of healthcare professionals. A high degree of mutual trust would be required to enable sufficient supervision over the practice of a visiting doctor because of Article 16 of the Services Directive. Despite the presence of harmonizing legislation which covers the medical profession,Footnote ⁸¹ practical problems remain if doctors are to offer medical services in another Member State. In particular, there are important questions of clinical governance, professional registration and medical malpractice cover. While these practical problems are not insurmountable, they do require careful responses.

In the aftermath of the agreement of the final text of the Services Directive, the Internal Market and Consumer Protection Committee of the European Parliament produced a self-initiated reportFootnote ⁸² on the impact and consequences of the exclusion of health services from the Directive. The Committee was of the opinion that if freedom of movement is to apply to health services, they cannot be considered as ordinary commercial services. The Committee's view was that the creation of an internal market of health services is not desirable as it could lead to a medical demographic imbalance in the Member States and a two-speed system in which only the well-off and best informed patients would benefit. The Committee concluded that the EU should ensure a high level of health protection and equal access to healthcare services in order to avoid medical tourism. On the question of cross-border mobility of patients and health professionals, the Committee was sceptical and felt that this should not be pursued at the expense of a guaranteed right of access for all European citizens to equal and affordable healthcare which is based on the principles of universality, quality, safety, continuity and solidarity. These principles were considered as crucial to the maintenance of social and territorial cohesion in the EU, an objective within Article 16 EC and Article 14 TFEU, and to the financial sustainability of national healthcare systems. Despite this, the Plenary of the European Parliament in May 2007 adopted a resolution that emphasized patient rights and mobility and that an EU-wide regulatory framework was necessary to improve access to better quality healthcare.Footnote ⁸³

A lack of information is considered to be one of the main obstacles to the mobility of both patients and professionals. The establishment of a single point of contact could facilitate access to objective and independent information for patients, health professionals, health-care institutions and the competent authorities. For the EU to bring added value, it must develop and promote further cooperation between Member States. Closer cooperation, such as that witnessed through the High Level Groups, could make it easier to obtain appropriate treatment in other Member States, improve the quality of services and thus increase citizens' confidence, but it is unclear whether this will be sufficient to promote a fully functioning market in patient services.

The judgments of the Court on the question of cross-border mobility of patients are insufficient to ensure that the expectations of citizens are met. There are several reasons for this, including that the Court's judgments are on a case-by-case basis and that the requirement of prior authorization under Regulation 1408/71 for a patient to be reimbursed is inconsistently applied across the Member States. Rather surprisingly, and in a volte-face, the report by the Internal Market and Consumer Protection Committee adopted Amendment 172, which ‘Invites the Commission to submit, to Parliament, a proposal to reintroduce health services into Directive 2006/123/EC, and a proposal to codify the European Court of Justice judgments on European patients' rights.’ While this will not happen, the adoption of this amendment demonstrates an acceptance that policy coordination and judicial regulation may not be sufficient and that some form of legislation which regulates patient mobility will ultimately be required.

In response to the case law on patient mobility, the Commission planned to publish a draft Directive setting out patients' rights to receive medical treatment in another EU Member State. In addition to clarifying the rules on patient mobility, the draft Directive is intended to provide clarity in relation to where responsibility for covering the costs of treatment in another Member States lies. Furthermore, the draft Directive will also include provisions which are designed to secure the quality of medical treatment provided to patients in a Member State other than their own.

Having initially planned to publish the proposals on 19 December 2007 and then again in January 2008, the Commission took the decision on 7 February 2008 to withdraw the proposal for further analysis and consultation.Footnote ⁸⁴ It would appear that the reason for the delay arises from the lack of support from all the Commissioners for the draft Directive and in particular the high costs and negative impact the proposals would have on some health systems. The Commission remains committed to introducing the Directive at some future date, but the delay is further evidence that the patient mobility and financing of public health services remains a controversial issue within the Member States.

IX. The scope of Article 86(2) EC in Healthcare Services

The purpose of Article 86(2) EC is to provide undertakings with a degree of immunity from the Treaty rules on competition where the application would prevent the performance of their tasks. The ECJ has tended to interpret the exception restrictively, but that does not mean that the Court has not been prepared to permit exclusivity in circumstances where the objective is to guarantee the delivery of a universal social welfare service.

We have already seen how in Ambulanz Glöckner the Court held that the provision of ambulance services constituted an economic activity for the purposes of EC competition law. An immediate reaction to this is to ask: how is the role of the State to be perceived when it operates in a market where private undertakings are also active? The exclusive rights for the State are only permitted under Article 86(2) EC to ensure the integrity and provision of the service. It would appear from this judgment that the Court extended this provision to situations where medical aid organizations, defined as emanations of the State, provide the service on behalf of the State. Consequently, if the State, in whatever form, is not in a position to deliver the services exclusively, then it may not rely on the justification in Article 86(2) EC.

In Ambulanz Glöckner the domestic provision concerned the question of State authorization for the provision of patient transport services by private actors. In addition to the criteria of safety and efficiency in the delivery of this service, authorization could also be refused under paragraph 18(3) of the RettDG 91.Footnote ⁸⁵ The Court considered whether this provision could be justified under Article 86(2) EC. It is important to note that despite ambulance services being provided on behalf of the State by medical aid organizations, this did not, in the Court's view, rule out the possibility that this activity still amounted to a service of general interest.Footnote ⁸⁶ The licence provided the necessary control by the State and the restriction of competition was justified to ensure the universal service. The question to be determined is whether the restriction of competition could be justified in circumstances where the medical aid organizations were operating under full capacity.

The Ambulanz Glöckner decision was based upon economic arguments that both emergency and non-emergency patient services would be compromised in circumstances where the emergency transport services were operating below capacity. Accordingly, both services could be more efficiently delivered if operated by one provider. Approval of this kind of arrangement is not a new departure for the Court, which has previously accepted the necessity for cross-subsidization as a means of financing a monopoly to provide services of general economic interest.Footnote ⁸⁷

The Court acknowledged economic viability as a justification for the Länder decision under Article 86(2) EC and, on the facts, concluded that paragraph 18(3) of the RettDG 91 was acceptable. By extending exclusive rights to the delivery of non-emergency patient services to the medical aid organizations, the Länder sought to guarantee the delivery of emergency services. An acceptance by the Court of an argument rooted in the need to maintain the economic equilibrium must be welcomed by the Member States, and in particular that the Court will take an overall view of the services being provided. This analysis resembles the Court's reasoning in FENIN when it considered that the upstream and downstream markets were to be analysed in their entirety.

The principal effect of the Ambulanz Glöckner judgment is that it gives Member States much-needed flexibility in relation to how they organize the delivery of services which have been contracted out to private operators. It would also suggest that in the light of the willingness of the Court to apply Article 86(2) EC in such circumstances the Member States would appear to be in a win-win position. When economic conditions and demand justify, emergency and non-emergency services may be operated independently. In the framework of a competitive domestic market to provide patient services, this could be tendered out for an amount which generated significant income for the State. In such cases this would presumably include awarding contracts to operators who were prepared to establish themselves in the Member State in question. By contrast, in circumstances where the economic equilibrium was at stake the State could invoke Article 86(2) EC and bring the delivery of both services under one provider as a way of ensuring value for money and efficient allocation of resources.Footnote ⁸⁸

The criticism of this approach is that the Court has not considered the effect that the State's decision brings to bear on competition in the market for non-emergency patient transport services. The Court states that the two services were not interchangeable or substitutable,Footnote ⁸⁹ suggesting that the Court accepts that free competition is an important element in the delivery of non-emergency services. Yet in what appears a contradictory analysis the Court also states that, in the context of the delivery of a service of general interest, the emergency and non-emergency services are closely linked and have shared characteristics that justify their delivery by the operator of the emergency service.Footnote ⁹⁰ Both FENIN and Ambulanz Glöckner highlight how the organization and delivery of ancillary healthcare services has, at the very minimum, the potential to distort competition. Both judgments also demonstrate that the Court is unwilling to antagonize Member States in matters concerning the delivery of healthcare services. Perhaps the reasoning is based on a desire by the Court not to upset political sensitivities in the Member States by subjecting the delivery of such services to full competition.

The residual problem is that both judgments create a less than perfect compromise. EC competition law is undoubtedly relevant in both the FENIN and Ambulanz Glöckner cases. Article 152(5) EC is acknowledged but sidestepped by the Court to apply Article 82 EC, but with a justification being permitted under Article 86(2) EC. This is unsatisfactory as in neither case does the Court engage in a comprehensive analysis of the effect of the State's measure. This is so despite the presence of a real distortion of competition. The social cohesion argument which underpins Article 86(2) EC is powerful and the Court has applied it because it concluded that the State's role as a provider of healthcare to its citizens may be undermined. While the sensitivity of the Court will be welcomed by the Member States, the judgments have reinforced the State's dominant position in the market for the delivery of certain healthcare services. This is unfortunate in the light of the deregulation which has taken place which has afforded private actors an increased role in public healthcare services. To this end the Court's understanding of the service of general interest requires clarification and, in particular, on the issue of how much competition is permitted before social solidarity is undermined?

At the beginning of this article the question was posed whether the principles of the internal market may aid in the delivery of healthcare services provided by the Member States. From the above analysis it can be said that the Court's judgments in relation to the application of the competition rules are not beyond criticism. Rather than using EC competition law as a mechanism for promoting competitive markets in the delivery of ancillary healthcare services, the Court has used Article 86(2) EC to maintain the status quo. Consequently, States have retained a dominant position despite organizational changes to the delivery of ancillary services.

In the light of FENIN and Ambulanz Glöckner it is therefore rather surprising that the Court has permitted challenges to the State's powers in the organization and delivery of patient services. The Court's strategy has been to review the delivery of individual patient care and the need to guarantee free movement rights under Article 49 EC. In Watts the Court's reasoning pursues a different objective to that seen in the competition law cases and confronts directly Article 152(5) EC. A feature of cases such as FENIN and Ambulanz Glöckner has been the Court's willingness to accept the service of general interest justification under Article 86(2) EC. By contrast, in Watts, the Court's application of Article 49 EC favours individual free movement rights at the expense of the Member State's attempt to deliver a universal service which the Court acknowledged as a legitimate value in both FENIN and Ambulanz Glöckner. The distinguishing feature of Watts is that free movement rights of the individual are guaranteed at the expense of the Member State's attempt to deliver to patients, fairly and efficiently, a universal service within a framework of finite resources. The Watts judgment would therefore appear to lack the same neutral effect on the ability of Member States to finance and organize patient services.

In disputes concerning the application of Article 49 EC, the Court has confirmed that Article 86(2) EC may be justified for services of general economic interest. However, it is important to draw a distinction with this line of cases which concern the organization and delivery of market services and those concerning healthcare services and patient mobility where the Court has hitherto not applied the derogation. In Corsica Ferries Footnote ⁹¹ the Court considered whether mooring services could be regarded as services of general economic interest within the meaning of Article 86(2) and, if so, whether performance of the particular task assigned to the undertaking concerned could be assured only through services for which the charge is higher than their actual cost. The Court held that the Italian measure was justified, not only on public service objectives under Article 86(2) EC, but also on the need to preserve public security which arises from Article 46 EC. The Court confirmed, beyond any doubt, that Article 86(2) EC may be used as a valid justification for an infringement of Article 49 EC but that any such derogation must be proportionate. Similarly, in Deutsche Post Footnote ⁹² the Court held that, in view of the public service task placed upon the service provider, an infringement of Article 49 and 82 EC could be justified under Article 86(2) EC. While these judgments provide confirmation that Article 86(2) EC may apply to the free movement provisions, it is important to acknowledge that the Court considered the application of both Articles 49 and 82 EC in Corsica Ferries and Deutsche Post. By contrast, in Watts and other cases where only free movement rights under Article 49 EC are at issue, the Court has declined to apply Article 86(2) EC.

Szyszczak highlights the existence of more limited justifications to the economic freedoms which are in the form of Treaty-based exemptions or Cassis-type derogations.Footnote ⁹³ Szyszczak points out that over time the Court has been prepared to accept a broad range of new public interest derogationsFootnote ⁹⁴ under Cassis as well as accepting new constitutional values such as human rights. Disputes such as Watts concern the conflict that exists between individual free movement rights and Member State autonomy to deliver a range of welfare services within a finite budget. The Court's resolution of this dispute can be viewed as unhelpful to Member States because by promoting individual economic rights and citizenship the judgment undermines arguments of social solidarity. The Court's judgments are based in large part on the reasoning that State measures which restrict patient mobility are economic justifications which it has consistently rejected. An alternative approach could be for the Court to revisit the case law concerning derogations and free movement and consider whether, at least in the context of disputes involving welfare services or the maintenance of financial balance in social security schemes, a generic public policy derogation could be applied. This would require Member States to demonstrate that there are specific non-economic interests which are under threat if the Treaty rules are applied.Footnote ⁹⁵ The Commission has already acknowledged environmental protection as a legitimate non-economic objectiveFootnote ⁹⁶ which can invoked against the competition rules and, according to van den Gronden, it is only ‘one more step’ to assess other non-economic objectives in this way.Footnote ⁹⁷

In Campus Oil Footnote ⁹⁸ the Court held that while public security justifications may be permitted, economic justifications on their own are not acceptable. In Campus Oil the Court accepted a national measure intended to guarantee petroleum supplies which required the purchase of petroleum products from the State-owned company. While this requirement had an economic impact, this was secondary to the non-economic measure of guaranteeing petroleum supplies.Footnote ⁹⁹ The Court was clear that a measure such as that in Campus Oil would be subject to the requirement of proportionality.

In Kohll Footnote ¹⁰⁰ the Court held, in a factually similar situation to Watts, that economic arguments cannot be used by a Member State as a justification for an infringement of Article 49 EC. However, in examining whether a justification for the application of Article 49 EC could ever exist in such factual circumstances, the Court acknowledged that ‘it cannot be excluded that the risk of seriously undermining the financial balance of the social security system may constitute an overriding reason in the general interest capable of justifying a barrier of that kind’.Footnote ¹⁰¹ This leaves the door ajar, albeit in very specific circumstances, that a justification to Article 49 EC may be permitted under Article 86(2) EC where the continued social objectives of the service are in danger.Footnote ¹⁰² While the Court remains silent as to when such a threat of financial imbalance may arise, it is clear from the recent judgment in Stamatelaki Footnote ¹⁰³ that the Court does not consider that payment by the State for medical services received abroad by its own national would come within this definition. Stamatelaki confirms the Court's view in Kohll that measures adopted by Member States must be proportionateFootnote ¹⁰⁴ and that a failure to pay for treatment received in another Member State would constitute an unjustifiable barrier to Article 49 EC.

X. Concluding Remarks

Krajewiski and Farley argueFootnote ¹⁰⁵ that in the healthcare cases any distinction in the concept of an ‘economic activity’ between competition and free movement arises from the ability of Member States to exclude, through the application of Article 86(2) EC, the application of competition law to public health services. The Watts judgment confirms that, while the Court acknowledges the existence of social solidarity as a legitimate criteria for the application of Article 86(2) EC, this will not apply to situations where Member States seek to restrict individual rights under Article 49 EC. In principle, public healthcare fulfils the objectives of a service of general interest, but the Court has not recognized a derogation in circumstances where Article 49 EC rights are at issue and where the derogation would amount to an economic justification.

In Watts, FENIN and Ambulanz Glöckner the position of the State was, in character, no different. It was operating in both the upstream and downstream market for healthcare services, yet the reasoning of the Court is different. The connection between the cases is the application of the principle of solidarity arising from the State being the provider of a service of general interest. In principle there is no difference in the State managing healthcare resources to guarantee access free at the point of consumption (Watts) or a monopsony situation where the State is seeking to purchase ancillary goods and services at the most advantageous price (FENIN, Ambulanz Glöckner). It is possible to reconcile these cases on the basis that in all situations the State is seeking to deliver a universal healthcare service within a limited budgetary framework. Yet the judgments would appear confused on the point of the social objective. It is suggested that there is a greater element of solidarity present in the NHS policy of managing finite resources through waiting lists, which the Court held was not a justification against Article 49 EC, than the behaviour of SNS in FENIN which was participating in a competitive market and abusing a monopsony position with public funds.

An increased role for private actors, together with the State's involvement in competitive markets, has undoubtedly altered the organization and delivery of public healthcare services. There is likely to come a time when the Court will view State activities as breaching competition rules and not permit a justification under Article 86(2) EC.Footnote ¹⁰⁶ The FENIN and Ambulanz Glöckner judgments are difficult to justify on competition grounds and afford the State too much leeway to participate in a competitive market and not be subject to adequate regulatory control. By contrast, patient mobility can, at the very minimum, undermine the social cohesion which the Court has acknowledged as the primary aim of public healthcare. Watts favours the individual over the State and the judgment provides an obstacle for Member States to organize and deliver patient services within finite resources. The Court needs to reconcile the contradictions in its case law and provide Member States with clearer parameters that define both the boundaries of a service of general interest and clarify what organizational autonomy Member States retain. Healthcare is being made to accommodate the European principles affecting the traditional means of governance and organization. Regulating the delivery of public healthcare services within a framework of trade rules and seeking to create an internal market in healthcare services is not an appealing prospect for many Member States who view healthcare as, first and foremost, a universal welfare service. In the light of legislative initiatives, for example, the delayed Directive on patient mobility and the new Article 14 TFEU, only time will tell if together these developments will create a new European healthcare model where patient mobility and universal provision within finite resources are a reality.