Regulatory Framework
The regulatory framework that governs a public monopoly differs from country to country and even from one municipality to another. It’s not possible in this toolkit to review the regulatory framework governing a public monopoly as it exists in any particular country or municipality. However, it’s possible to identify the following key regulatory elements common to most countries and municipalities.
Granting a monopoly to a municipal government
A state will enact a law for the purpose of creating a municipal government and, in the same or in a different law, will grant the municipal government control over urban bus transport within its territory. When in addition to such control, a monopoly over the actual provision of urban bus transport services is also granted, that grant may be mandatory or discretionary. A mandatory grant could take, for example, the following form:
No person other than the municipal government shall operate urban bus transport services within the municipality. A person who contravenes this provision is guilty of an offence.
A grant that gives the municipal government some discretion as to the exercise of the monopoly granted to it by the state could read as follows.
The Municipal Government may:
- through a by-law provide that no person except the municipal government shall operate urban bus transport services within all of the municipality or that area of the municipality designated in the by-law;
- despite any by-law under clause (a), enter into an agreement granting a person, under such conditions as the municipal government provides, the exclusive or non-exclusive right to operate all or any part of an urban bus transport services system within all of the municipality or that area of the municipality designated in the agreement.
Granting a monopoly to a public transport authority
A state will enact a law to create a public transport authority and, in the same or in a different law, will grant the authority control over urban bus transport within a designated area.
Public transport authorities are by their very nature much more specialized bodies than municipal governments. They are usually created expressly for the purpose of regulating public transport in a specific urban area, including urban bus transport services, and to either promote the provision of urban bus transport services by others or to provide themselves the services, either in conjunction with others or on an exclusive basis. When a monopoly over the actual provision of urban bus transport services is granted to them, that grant, as is the case with monopoly grants to municipal governments, may be mandatory or discretionary.
The management contract
A contract serves, in effect, as the private law of the parties on whatever subject it covers. The management contract, as a binding agreement between a municipal government or a public transport authority and a management company is not only a constituent part of the regulatory framework governing such type of contract, but possibly the most important element in it.
Whether a municipal government or a public transport authority can enter into such an agreement will depend on whether or not the state implicitly authorizes these public bodies to delegate some of their functions to a third party.
When the grant of monopoly is of the discretionary kind this should not be a problem. However, it may be difficult for the municipal government or the public transport authority to delegate to a third party the management and operational control of their bus transport enterprise when the grant is of the mandatory kind.
Much will depend on the exact wording of the enabling laws, the actual role of the management company under the management contract and how these texts are interpreted by the relevant state or judicial authorities under national law and past precedents.
