PPPs are not defined directly by EU legislation and regulation. However, in the context of the Treaty of Functioning of European Union (TFEU), PPPs qualify either as public contracts or public concessions (EC, 2005a). While public contracts and partly public work concessions were long regulated by secondary community legislation, until recently the public service concessions were only subject to TFEU rules and principles of transparency, equality of treatment, proportionality and mutual recognition. The “Commission interpretative communication on concessions under Community law” (EC, 2000) provided some clarity of the concept and guidance for public authorities in selecting a concessionaire but did not disperse the legal uncertainty. In 2004, the EC carried out a public consultation on whether a concerted action was needed to uniformize the rules governing PPPs (EC, 2004). Based on the feedback and comments received, the EC decided, among other things, to (i) not pursue a new piece of legislation addressing all contractual PPPs; (ii) explore the scope of a policy filling the regulatory gap with respect to the public service concession (later materialized through Directive 2014/23/EU, see below); and (iii) develop an interpretative communication on IPPPs (EC, 2005a). Directive 2014/23/EU (OJ, 2014b) and the revised rules for public procurement (directives 2014/24/EU and 2014/25/EU) (OJ, 2014c, d) provide greater legal certainty for the participation of private enterprises in PPPs through service concessions. The set of rules rely on the “competitive dialogue” scheme introduced in 2004 (OJ, 2004a). The competitive dialogue enables public authorities to negotiate alternative means of fulfilling its needs and identifies the most appropriate solutions. The major development introduced in the reform is the concept of “innovation partnership”, which grants similar flexibility for the development of innovative products, services or labor not already available on the market (OJ, 2014c).

Contractual PPPs embrace the “concessive model” (OJ, 2014b). The public service concession means that a contracting entity (public partner) entrusts a provision of public service to a contractor (private partner) according to predetermined terms of reference, whereas the remuneration of the service is covered by charges levied on the users of that service, sometimes supplemented by public subsidies. The public work concession, however, implies that the contractor is chosen to carry out and administer an infrastructure (e.g., water supply network) and is remunerated by users of that infrastructure, which may be supplemented by payments from the contracting entity. This specific means of remuneration – that is, the right to exploit the work or service – is essentially what distinguishes classic public service or work contracts (in which the pecuniary compensation to the contractor is borne directly by the contracting entity) from a public service or work concession. This right, however, also implies that the operational risk of not being able to recover the investment costs is borne essentially by the contractor and only to some extent by the contracting entity.

Institutionalized public–private partnerships (IPPPs) are entities established for delivering public works or services that are “held jointly” by public and private partners (EC, 2004). The joint entity is responsible for delivering the work or service for the benefit of the public. This is close to the French NatCat and the Spanish Insurance Compensation Consortium (ICC) systems. In both cases, insurance against natural hazards is mandatory (linked with a base policy) and funded via a flat rate surcharge on the insurance premium collected by private companies. Under NatCat, the French state co-manages the insurance fund (setting additional premiums, establishing deductibles and declaring the state of natural catastrophe), offers reinsurance (through the state owned Caisse Centrale de Réassurance) and channels part of the resources into a state-managed fund for the development of prevention and protection instruments. Under the Spanish system the ICC provides direct insurance against natural hazards on a subsidiary basis if the coverage is not explicitly assumed by a private company or the company cannot meet its indemnification obligations. As a result, premium surcharges vary widely, from 0.008 to 0.021 % of the insurance premium in Spain and from 6 to 12 % in France (Maccaferri et al., 2012).

Regular financial support by the public sector is supplied through ex ante (e.g., subsidies on risk premiums) and/or ex post (e.g., public reinsurance or recovery aid) subsidization, in compliance with national and EU regulations (Maccaferri et al., 2012). State aid on a selective basis that distorts (or threatens to distort) free-market competition is, according to Article 107 of the TFEU, incompatible with the EU's internal (single) market (EC, 2014a). Clause 2(b) of the same Article made reference to “aid to make good the damage caused by natural disasters” that was admissible, provided that any intention to grant similar aid is (i) promptly notified to the EC (Article 108 TFEU) and (ii) the EC raises no objection (Article 4 of the Council regulation 659/1999) (OJ, 1999). Without prior notification, any aid not otherwise exempted (see further ahead for the exemptions from the notification requirement) is not permitted, and any aid that has already been provided unlawfully may be revoked. The regulation applies solely to state aid granted to economic undertakings, and any compensation of disaster damage to individuals (citizens) not associated with the pursuit of any economic activity does not constitute state aid in the sense of Article 107 of the TFEU.

Council regulation 994/98 (OJ, 1998), amended in 2013 (OJ, 2013b), empowered the EC to declare some categories or levels of aid compatible with the internal market and hence exempt from the notification requirement. These provisions are known as group exemptions and de minimis aid. As part of the State Aid Modernisation initiative (EC, 2012b), the EC revised and simplified both de minimis aid regulation and the General Block Exemption Regulation. The categories for which block exemptions can be applied were substantially extended in 2013 to include, among others, aid for making good damage caused by natural disasters and aid making good damage caused by certain adverse weather conditions in fisheries (OJ, 2013b). The reform of de minimis aid (OJ, 2013a) maintained a ceiling of EUR 200 000 (EUR 100 000 for the road freight transport sector) for a single undertaking over a period of 3 fiscal years, irrespective of the form of aid and expressed as net present value if granted through periodic instalments. If granted in other than a direct grant, such as a soft loan or a guarantee, the gross grant equivalent of the aid needs to be estimated. A subsidized loan of up to EUR 1 000 000 over a period of 5 years is possible under the revised de minimis aid rules if the loan is secured by collateral covering up to at least 50 % of the loan.

As for making good damage caused by natural disasters, Commission Regulation 651/2014 (OJ, 2014a) exempted aid from the obligation to notify the state for aid, pursuant to the following conditions. First, the regulation declared “earthquakes, landslides, floods (in particular floods brought about by the overflow of riverbanks or lake shores), avalanches, tornadoes, hurricanes, volcanic eruptions and wildfires of natural origin” (OJ, 2014a) as events constituting a natural disaster, while excluding damage arising from adverse weather conditions (frost, hail, ice, rain or drought). Second, the damaging event must be recognized by competent authorities as a natural disaster; a clear causal link needs to be established between the disaster and damage suffered; and the total payments for making good the damage, including the payments under insurance policy, may not exceed 100 % of eligible damage costs. Third, the aid scheme must be introduced within 3 years, and any aid must be granted within 4 years after the disaster. Fourth, the eligible damage costs include material damage incurred as a result of disaster and loss of income resulting from suspension of activity for a period of 6 months after the disaster event occurred (the damage assessment based on repair cost or economic value of the affected asset before the disaster should be certified by accredited experts or insurance undertaking).

The only case on record in which the EC decided to initiate a formal investigation refers to non-notified aid schemes granted by the Italian government in the aftermath of the 1990 Sicily earthquake, the 1994 floods in Northern Italy, and the 2009 Abruzzi earthquake (SA.33083/SA.35083) (EC, 2012a, c). The form of aid included suspension, deferral or payment in instalments of taxes and compulsory social security and occupational insurance contributions by undertakings located in the disaster affected municipalities. Following the Eastern Sicily earthquake on 13–16 December 1990, the payment of taxes and contributions for years 1990–1992 was deferred until the 2000s and subsequently reduced to 10 % of the amount due. Similar aid was granted in the aftermath of the November 1994 flood in Northern Italy for the years 1995–1997 and the April 2009 Abruzzo earthquake for the years 2009–2010. In 2007 and 2010 the Italian Supreme Court of Cassation ruled that the reduction of taxes and contributions granted ought to be applied to all undertakings who could have claimed the same right, to avoid unjust disparity of treatment. The EC enjoined Italy to suspend any aid under these schemes and opened a formal investigation.

EU efforts to define a common framework that regulates the ability of insurance companies to meet their liabilities go back to the 1970s. Substantial modifications were adopted through the new generation of insurance directives in the 1990s, first giving ground to the Solvency I Directive (OJ, 2002b), and later Solvency II. The Solvency II Directive 2009/138/EC (OJ, 2009) codified and uniformized insurance regulations across the EU, primarily focusing on margin requirements to limit the risk of insolvency, and replaced 13 previous EU directives. The newly added regulations included authorization, corporate governance, supervisory reporting, public disclosure, risk assessment and management, as well as other aspects of solvency and reserving. The implementation of the Solvency II directive was overseen by the European Insurance and Occupational Pensions Authority (EIOPA). Directive 2014/51/EU (Omnibus II), approved on 11 March 2014, complemented Solvency II by operationalizing EIOPA's scope, which included (i) defining the role of EIOPA in uniformizing technical approaches for calculating technical provisions and capital requirements; (ii) defining the areas in which EIOPA can propose technical standards; and (iii) defining the role of EIOPA in settling disagreements between national authorities (OJ, 2014e). The implementing rules for Solvency II were adopted by the EC on 10 October 2014 (OJ, 2015a). The first set of Implementing Regulations was adopted in March 2015 and deployed technical standards on supervisory approval procedures for undertaking specific parameters (OJ, 2015e), ancillary own funds (OJ, 2015f), matching adjustment (OJ, 2015g), special purpose vehicles (OJ, 2015d), internal models (OJ, 2015b), and joint decision on internal group models (OJ, 2015c). The Solvency II project is divided into three areas or “pillars” (OJ, 2009, 2015a): quantitative basis (Pillar 1), qualitative requirements (Pillar 2) and enhanced reporting and disclosure (Pillar 3).

Pillar 1 focuses on quantitative solvency in two ways: (i) it addresses how insurers value their liabilities and assets and (ii) it specifies the amount of resources insurers need to have on hand to make sure they are solvent and able to pay eventual claims by policyholders. For the former, Solvency II introduces EU-wide uniformized valuation standards. In the latter case, two thresholds are established: Solvency Capital Requirement (SCR) and Minimum Capital Requirement (MCR). The SCR is the capital that guarantees that the insurance company will be capable of meeting its obligations during a 12-month period with a probability higher or equal to 99.5 %. It is calculated by means of a standard formula or (only under regulatory approval) an internal model. The MCR represents the capital threshold below which the regulator has the insurance company intervene. It is calculated as a linear function of specified variables and cannot fall below 25 %, or exceed 45 % of an insurer's SCR. Regulatory capital requirements for the assets of some categories of insurance and reinsurance companies were amended on 30 September 2015 (OJ, 2016).

Pillar 2 addresses how the structure and management of insurance businesses are governed, enabling insurers to identify, measure, monitor, manage and report risks to which they are exposed. In particular, it comprises (i) the Own Risk and Solvency Assessment (ORSA), a decision-making tool that continually assesses the solvency needs related to the specific risk profile of the insurance company; (ii) a risk management system that quantifies and models risks, not limited to a contribution to the ORSA and also including involvement in asset-liability management, risk mitigation arrangements, etc; and (iii) a supervisory review and intervention, including an independent internal audit function.

Pillar 3 specifies what information insurers report on their business and how it is reported. Some reports are public and anyone can see them, while others are privately reported to the financial regulator. Insurers are required to publish details of the risks facing them, capital adequacy and risk management. Enhanced reporting and disclosure provides transparency and open information that help to assist market forces in imposing discipline on the industry.

Solvency II sets a broad, unique and transparent regulatory framework for insurance provision and solvency assessment. Predefined solvency thresholds (Pillar 1), homogeneous assessment methods (Pillar 2) and consistent reporting (Pillar 3) offer a sound basis to accurately identify and address the need for public support in the provision of insurance against low probability–high impact risks. However, Solvency II introduces additional restrictions to insurers as compared to previous regulations (e.g., increasing the cost of long-term investments). Some of these restrictions affect the ability of insurers to extract returns from collected premiums, increasing the opportunity cost of the insurance activity (OJ, 2009). This may result in higher premiums and demand further public support to keep affordability constant (or otherwise result in higher losses), thus transferring part of the solvency burden from the private to the public sector.

The Treaty on European Union (TEU) considers solidarity among the essential values on which the EU is based, values that include respect for human dignity, freedom, democracy, equality, rule of law and respect for human rights (Article 2) (OJ, 2012). Chapter IV (Articles 27–38) of the EU's Charter of Fundamental Rights is entirely dedicated to solidarity (social and economic) rights and justiciable civil and political rights (O'Leary, 2005). The former include, among others, social and territorial cohesion (Article 36) and environmental protection, as well as improved environmental quality (Article 38). The TFEU substantiates the solidarity principles through Articles 174–175, 196 and 222. Article 174 recognizes (actions meant to strengthen) economic, social and territorial cohesion as vital for harmonious development. Article 196 stipulates cooperation between MS to improve risk prevention, protection and response to natural and manmade disasters.

Article 222 of TFEU (the “solidarity clause”) invokes solidarity, in the most explicit way (Myrdal and Rhinard, 2010), in cases of a terrorist attack or a natural or manmade disaster. The scope of the solidarity clause includes the land, sea and air of the EU territory, ships in international waters and airplanes in international airspace, as well as critical infrastructure such as off-shore oil and gas installations under the jurisdiction of a member state (Myrdal and Rhinard, 2010). When requested by a member state, victim of a disaster or a terrorist attack, the EU is bound to “mobilize all the instruments at its disposal, including its military resources” (emphasis added). The declaration (37) on Article 222 of the TFEU, however, leaves the choice of the “most appropriate means” to comply with the solidarity obligation to the MS. The solidarity clause complements, or offers alternatives to, the mutual defence clause (Article 42(7) of TEU) which compels aid and assistance in the case of armed aggression.

The European Union Solidarity Fund (EUSF), created in 2002 (OJ, 2002a) and amended in June 2014 (OJ, 2014g), translates solidarity into the form of financial aid to EU member and candidate countries experiencing “serious repercussions on living conditions, the natural environment or the economy” following a natural disaster (OJ, 2014g). Attempts to extend the scope of the fund to manmade disasters (EC, 2005b) have so far been unsuccessful. According to the newly revised rules, the EUSF can be mobilized in cases in which the direct damage exceeds EUR 3 billion (in 2011 prices) or 0.6 % of the country's gross national income (GNI), whichever is lower, or if the damage at the regional (NUTS2) level exceeds 1.5 % of that region's gross domestic product (GDP) (1 % for outermost regions). A neighboring member state or accession country that is affected by the same disaster can also receive aid, even if the amount of damage does not reach the threshold. The EUSF has an annual budget of EUR 500 million, down from a billion under the previous regulation (OJ, 2002a). The aid is limited to non-insurable damages and essential emergency and recovery operations, including infrastructure restoration in the fields of energy, water and waste water, telecommunications, transport, health and education; temporary accommodation and rescue services; preventive infrastructure and measures of protection of cultural heritage; and cleaning up disaster-stricken areas, including natural zones. The recent EUSF reform responds to some weaknesses identified previously in EC (2009b, 2011, 2013c) with respect to the rapidity of the aid and the transparency of the criteria allowing mobilization of the fund.

The EUSF is not the only instrument available. The EU Internal Security Fund (OJ, 2014f), established in April 2014, and the resources endowed to the new EU Civil Protection Mechanism (CPM; OJ, 2013c) provide additional resources that can be mobilized for extended cooperation across the MS in the field of prevention, protection and response to natural hazard risk. Furthermore, Article 122 of the TFEU empowers the Council to grant additional financial assistance, in a spirit of solidarity, to MS “threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control”.

Coordination of EU solidarity instruments listed above, along with MS own security policies and strategies. is implemented through the EU's Internal Security Strategy (ISS) adopted in 2010 (EC, 2010b). The risks posed by natural and manmade hazards are targeted by the ISS along with organized crime, terrorism, cybercrime and management of the EU's external borders. Solidarity is exhibited between MS “in the face of challenges which cannot be met by MS acting alone or where concerted action is to the benefit of the EU as a whole” (EC, 2010c). The ISS sets to, among others, “increase Europe's resilience to crises and disasters”. This comprises crises and disasters including those associated with climate change, requiring “both solidarity in response, and responsibility in prevention and preparedness” (EC, 2010b). The ISS emphasizes multi-hazard risk assessment covering all natural and manmade disasters. In the pursuit of this goal, the EC elaborated its “Guidance on risk assessment and mapping” (EC, 2010a) and a “Synthesis cross-sectoral assessment of major natural and manmade risks” (EC, 2014b), the latter based on the National Risk Assessment (NRA) reports produced by 17 MS and Norway. The newly revised CPM regulation (OJ, 2013c) has introduced an obligation for all MS to report, starting from 2015 and every 3 years thereafter, on risk assessments at the national or appropriate subnational level and risk management capabilities (Article 6 of Decision 1313/2013/EU).

The reparation of disaster losses caused or exacerbated intentionally or through negligence or omission that damage rights or protected interests of others can be granted through civil liability. Damages for which third parties are held liable are excluded from the eligible damage in the state aid regulation and the solidarity aid. The established liability systems across the EU MS differ substantially in taxonomy and structure (von Bar and Drobnig, 2004). The German civil code, for example, associates general liability for fault with cases where the wrongdoer has infringed a legal right of the victim (Wagner, 2009). Vice versa, the scope of English tort law is based on the duty of care. English and Irish Common Law distinguish some 70 torts, among which the most important ones for our purpose are trespass, negligence, breach of statutory duty and nuisance (von Bar and Drobnig, 2004). An example of nuisance is a use of land which causes damage or interference with another's use and enjoyment of his/her land. Under English and Irish Common Law's “common enemy doctrine” a landowner is empowered to defend his land from diffused surface waters, for example by improving the drainage system, while increasing the volume of discharged water on lower property. In contrary, the German “civil law doctrine” subjects landowners to flowage easements for natural drainage patterns. Hence the landowners cannot alter the drainage pattern of their own land in a way that increases the discharged water on the lower properties of others. The “reasonable use” doctrine is a compromise between the two, in the sense that while some alteration of natural drainage patterns is necessary, it is only lawful if conducted in a reasonable manner and the utility of drainage outweighs the gravity of resulting harm to others.

The EC backed the development of the Common Frame of Reference (CFR), primarily in the contract law, as a collection of common principles, terminology and model rules to be referred to by the EU legislator (EC, 2003). The Draft Common Frame of Reference (DCFR) (von Bar et al., 2009) was conceived as a legal experts' response to the EC quest – an attempt to uniformize European private law. Book VI of the almost 5000-page compilation addresses non-contractual liability arising from damage caused to another. The term “non-contractual liability” is neutral in language used in common law civil law systems, making reference to the incidence of damage being the only connection between the damaged party and the party held accountable. The European Group on Tort Law produced in 2005 an alternative compilation of guidelines aimed at uniformizing European tort law, the Principles of European Tort Law (PETL) (European Group on Tort Law, 2005). It defines damage as a “material or immaterial harm to a legally protected interest” (Art. 2:101), while the accountability for the damage is given either by a fault or by abnormally dangerous activity (Art. 1:101). The so-called Rome Regulations (OJ, 2007, 2008) specify rules on cross-border contractual, non-contractual and pre-contractual obligations in situations where there is a conflict of law.

An exception to the above is liability for damage caused to the environment, addressed by the Environmental Liability Directive (ELD; 2004/35/CE). The ELD (OJ, 2004b) was adopted in 2004 but applies only to activities that have caused environmental damage after the full transposition of the directive into national legislative frameworks (i.e., 30 April 2007). The ELD does not supplant civil liability, insofar as only damage caused to the environment (i.e., protected species and habitats, water and land) is comprised. Consequently, personal injuries, damage to property or economic losses incurred to third parties are not taken into consideration, as they are subject to of civil liability claims. Environmental damage caused by “a natural phenomenon of exceptional, inevitable and irresistible character” (Article 4) is exempted from the scope of the directive. The ELD holds liable both physical and natural, private and public persons. In line with Article 191(2) TFEU committing the environmental damage rectification “at source” and by polluter, the ELD obliges those who exercise or control occupational activities causing environmental damage (in the sense of Article 2) to (i) adopt preventive and remedial measures and (ii) inform competent authorities. The EC commissioned several reports analyzing the ELD transposition by MS, definition of biodiversity damage and possible revision of the Annex III activities (BIO Intelligence Service, 2013, 2014; BIO Intelligence Service, Stevens & Bolton LLP and Cardiff University, Naider and TME, 2013; Milieu Ltd. and IUCN, 2014; Stevens & Bolton LLP, 2013). The possible changes include imposing strict liability on activities currently under a fault-based liability regime, extending the scope of the environmental damage to the air; a stricter regulation of the financial security and guarantees; and establishment of an industrial fund.