Exclusive Right (Utilities)

The concept of an exclusive right (or special right) is the mechanism by which Directive 2014/25/EU extends procurement obligations beyond the traditional public sector to cover private companies. The logic is straightforward: if a state grants a private company a protected position in a market (sheltering it from normal competitive pressures), that company must at minimum compete fairly for its own supply contracts, so that its market protection does not cascade into uncompetitive procurement practices.

What is an Exclusive Right (Utilities)?

Article 4(2) of Directive 2014/25/EU defines contracting entities to include undertakings to which a competent authority of a member state has granted a special or exclusive right. A special or exclusive right is a right resulting from any provision published in law, regulation, or administrative action, the effect of which is to limit the exercise of activities covered by the Directive to one or more entities, and which substantially affects the ability of other entities to carry out such activity.

The key characteristics are: the right must be granted by a public authority (a law, a licence, a concession, a ministerial decree, or a similar instrument); and the right must have the practical effect of limiting market access for other operators. A statutory electricity distribution licence that restricts distribution in a defined region to a single licensed operator is a classic exclusive right. A port concession that grants a single operator exclusive terminal management rights is another example. A franchise to operate a rail service on specific infrastructure, where no other operator can access the same track independently, is a further example.

A special right is a broader cousin: it covers rights granted to a limited number of entities (not just one) where the effect is still to limit competition substantially. Licensing two or three operators in a defined market, rather than one, may still constitute granting special rights if the total number is restricted by the authority rather than by market forces.

The practical consequence is that any private company holding such a right, and operating in one of the four covered sectors (water, energy, transport, postal services), is a contracting entity and subject to the Utilities Directive's procurement obligations for contracts above the relevant financial thresholds.

It is worth distinguishing exclusive rights from ordinary commercial licences that any qualified operator can obtain on meeting objective criteria. If a licence to operate a water supply network is genuinely open to any company that meets safety and technical standards, with no cap on the number of licences, the licence may not constitute an exclusive right, because market access is not substantially restricted. This distinction matters for the directly exposed to competition exemption, which rests on the same analysis of genuine market openness.

Why it matters for bidders

Identifying whether a buyer holds an exclusive right tells you whether the buyer is a contracting entity under the Utilities Directive and therefore whether regulated procurement obligations apply. In practice, most major European water companies, electricity and gas network operators, large port authorities, and rail infrastructure managers hold exclusive rights of one kind or another. Suppliers targeting these buyers can expect regulated procedures, transparency obligations, and access to remedies if the procedure is conducted incorrectly.

Example

A Spanish regional authority grants a single private company an exclusive 25-year concession to operate and maintain a metropolitan bus network. The company is a private commercial entity, but it holds an exclusive right granted by a public authority in the transport sector. It is therefore a contracting entity under 2014/25/EU for the procurement of buses, maintenance services, ticketing systems, and any other supplies or services it needs to operate the concession. Suppliers to the bus company benefit from the transparency and procedural rights that the Utilities Directive provides.

Frequently Asked Questions

What is the difference between a special right and an exclusive right?

An exclusive right is granted to a single entity, while a special right is granted to a limited number of entities, with the effect of restricting access for others. For procurement law purposes, the distinction does not change the outcome: both types of right make the holder a contracting entity subject to 2014/25/EU.

Can a company lose its status as a contracting entity if the exclusive right expires?

Yes. If the exclusive right expires and is not renewed, and the company now operates in a freely competitive market, it may no longer be a contracting entity under the Utilities Directive for that activity. The directly exposed to competition exemption addresses the analogous situation where market liberalisation effectively ends the practical effect of the exclusive right.

Does holding an exclusive right in one sector make a company a contracting entity for all of its procurement?

Only for contracts that relate to the covered activity in which the exclusive right is held. If the company also carries out unrelated commercial activities, procurement for those activities may not be regulated under 2014/25/EU, or may fall under the Classic Directive if the company is also a contracting authority.