The rise of inter-municipal cooperation in the technology sector: easy activity update or noiseless nesting of a virus?

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Technology creates many legal challenges and opportunities. Reflections on these have been brought together in a recent book. In this post Marie DeCock shines a light on inter-municipal cooperation in the technology sector. In these as in other sectors, cities collaborate to provide services to their citizens. For example, nowadays some inter-municipal associations focus on setting up and maintaining wi-fi networks. Yet, is the exercise of such technological activities by inter-municipal associations – in competition with private companies – still compatible with the municipal interest at the heart of local government?

Governments adjust their activities according to the society we live in. This is also the case when cities collaborate to offer services to their citizens. In the Middle Ages, cities created commercial alliances with a focus on international trade. During the first World War, municipalities set up illegal inter-municipal associations (e.g. l’Assistance Agricole) to provide food for their inhabitants. Nowadays, cities and municipalities work together not only to provide ‘classic’ utilities for their citizens, they are also expanding their areas of operation to meet the impact of technology on society. Providing good wi-fi, presenting data of energy consumption, advising on digitisation, developing software, implementing hardware, automating libraries and selling laptops and iPads, are just a few examples of activities that these ‘tech inter-municipal companies’ engage in these days.

It is understandable that local governments do not want to dwell in the past, but is this exercise of technological activities, in competition with private companies, still compatible with the municipal interest requirement that makes up a core aspect of local governance? Or are inter-municipal associations going a step too far, turning their activities into illegal – and even unconstitutional – actions?

The changing economic role of the inter-municipal association

Two case studies (of Fluvius and Cipal DV) indicate that some inter-municipal companies use and adapt their existing utility activities to provide tech services (e.g. using the existing underground network to implement ‘Fibre To The Home’ technology), while others have been specially created to only carry out technological activities. This performance of tech activities can be placed in a larger evolution in the range of tasks of (local) governments. Over the past century, the government – and thus also the inter-municipal association – evolved from an entity that abstained from economic interventionism (e.g. providing unprofitable utilities from a social point of view) into a market player (i.a. due to liberalisation initiatives on European Union level). It seems that this adaptation of activities is accepted by the municipalities themselves, by administrative supervisors, by administrative courts, by citizens, … without too much questioning or scrutinizing.

‘The municipal interest’: undetermined but not unlimited

This trend does raise the question of whether the performance of tech activities in competition with private companies is still compatible with the municipal interest, the latter being a core condition for setting up an inter-municipal association. This is a crucial question since an inter-municipal association is acting illegally and unconstitutionally if it does not pursue the municipal interest. At the same time, this question is difficult to answer, as the municipal interest is an undefined notion. Even though the municipal interest is undetermined and is primarily a political notion defined by the municipalities themselves (cf. municipal autonomy), it is certainly not unlimited. The municipal interest has been delineated ratione personae, ratione loci and ratione materiae.

Some (tech) activities of inter-municipal associations seem to exceed the municipal interest ratione personae when the focus of the goal or activity is no longer in the interest of the residents, the municipal interest ratione loci when the task is carried out outside the territory of the participating municipalities, and/or the municipal interest ratione materiae when the activity is mainly or exclusively commercial or industrial, or when a primarily or exclusively private interest is pursued. With those limitations in mind, some (tech) activities seem to transcend the municipal interest – see e.g. the ‘Publifin Report‘ of the Parliamentary Committee of Inquiry inter alia considering that the exercise of inter-municipal activities in Congo, Kenya, the Provence, and in former Yugoslavia is “toujours plus éloignée de l’intérêt communal qui fonde l’action des pouvoirs locaux.“. Various politicians asked whether automating libraries in South Africa and investing in a gas pipeline in Brazil truly constitute a core task for an inter-municipal association and its subsidiaries and, more generally, for the local level.

(Unforeseen?) consequences of a functional approach

The exercise of certain (tech) activities also has far-reaching (and unforeseen?) consequences, since the pursuit of certain economic, commercial or industrial activities may entail the application of (European) legislation (e.g. the obligation to pay taxes, the subjection to competition law provisions). However, despite the trend of increasing economic interventionism, there has not yet been a thorough redrawing of the Belgian organic legislation on inter-municipal cooperation to meet the legal and social developments of the last century. The existing provisions on inter-municipal cooperation have their roots in 1922 and – despite adjustments – the fundamental principles (e.g. being ‘an extended local government’) have not been reconsidered by the legislator. Meanwhile, the organic legal framework – more or less – applies a ‘one size fits all approach’ to all inter-municipal associations, regardless of the commercial, economic, and even competitive activities they perform.

Towards a functional differentiation in the legal framework?

In this regard, one could raise the question whether the current organic framework, based on a ‘one size fits all approach’, should be adapted to the performance of economic/commercial (tech) activities. Indeed, other regulations have adopted a functional approach that does differentiate in treatment of the inter-municipal associations according to whether they carry out economic activities or not (see also Const. Court no. 66/2017 where the Court decides the same with regard to a tax exemption). One could therefore hypothesise that the legal framework should be functionally differentiated according to the activities carried out. It would in any case be advisable for the legislator to emphasise the limitations (ratione personae, loci and materiae) of the municipal interest-requirement, since the concept’s open nature currently seems to create doubt. A political debate on core tasks could bring salvation here, combined with the strengthening of the (non-existing) supervision of the (subsidiaries of) inter-municipal associations.

Territorially and functionally decentralised governments as an extension of municipalities

In the meantime, we must be attentive to tech activities – and more broadly also other economic and commercial activities – pursued by local authorities in competition with private companies. In the assessment of whether an inter-municipal association is still promoting the municipal interest, the cooperating municipalities themselves, the supervisory authorities and the judiciary must take responsibility to respect the barriers of this notion. They all play a major role in assessing whether or not e.g. developing software or selling iPads are tasks of municipal interest. The organic legislator has been trying for years to emphasise and safeguard through various legislative interventions (e.g. recently in 2018) that the inter-municipal association is an extension of the municipality. Yet, it is difficult to get rid of the impression that some activities undertaken by local authorities are nevertheless no longer public services that the municipality should provide for its residents. What seems to be an easy activity update to keep up with the Information Age could potentially be – strongly expressed – the noiseless nesting of a virus.

Marie DeCock is a final year PhD Researcher Administrative Law at the Centre for Government and Law (Hasselt University) and a Research Assistant at the Department of European, Public and International law (Ghent University).

Marie DECOCK, "The rise of inter-municipal cooperation in the technology sector: easy activity update or noiseless nesting of a virus?", Leuven Blog for Public Law, 12 October 2021, (geraadpleegd op 25 October 2021)

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