Inter-municipal Companies and Their Subsidiaries in Comparative Law Perspective: The Need for Public Law Applicability and Democratic Control

Abstract

This paper explores the increasing trend whereby local governments create private legal entities to deliver public services or purely commercial activities. This phenomenon is known as ‘corporatization’. In relation specifically to inter-municipal cooperation, this tendency to resort to subsidiaries and participation in legal entities under private law results in an opaque tangle of subsidiaries and participations whose legal position is unclear. The study examines the challenges arising from these complex inter-municipal structures in relation to transparency, applicability of public law mechanisms, and democratic control, particularly in Belgium and the Netherlands. The paper parallels broader corporatization trends in the UK and France, where public authorities utilize private law instruments and contracts, leading to potential issues of democratic accountability and of balancing profit-making with the public interest. The paper argues that in a state governed by the rule of law, public law mechanisms are crucial for democratic oversight, even when legal entities created by private law are involved in public service provision. Using the private contractual route cannot exclude, therefore, the application of public law principles, given that both the ‘nature of the power’ and the ‘public function’ of the private legal entity can trigger the application of administrative law, administrative law principles, and judicial review.