The La Scala judgment and its consequencesfor the Swedish land development process

Abstract:

The municipalities in Sweden can use the PBL-legislation to request a land developer to fund new

public infrastructure in the dwelling area where the developer are active. The municipality have

had two options to choose between. To purchase a contract with an entrepreneur that build the

infrastructure paid by the developer, or let the developer both build and pay the infrastructure.

The La Scala-judgment came 2001 from the EG-tribunal. This judgment have by many people

been interpreted as that as public infrastructure in Sweden should be purchased by the

municipalities through LOU.

Therefore, the purpose of this report is to discuss how the land development process has

changed and which problems that have arisen since 2010, when it became customary that the

municipality should procure public streets and sewage facilities under the Swedish Public

Procurement Act (“LOU”). The purpose is also to discuss if this way to proceed satisfies the

purpose of LOU and also discuss if their can be any alternative interpretations of the La Scalajudgment

than have been done so far for Swedish conditions.

The questions that became a consequence of the purpose where answered as follow in the report:

Changes

Today, the general rule is that the municipality is to purchase all public streets itself in the land

development process. This rule has replaced the freedom of choosing whether to do so, that

previously existed. Necessary land transfers take place today at an early stage of the process, often

when the zoning plan becomes valid, as compared to before when it took place late in the land

development process.

Problems

Some problems have arisen in cases when the municipality procures. This leads to the conclusion

that the land development process today has become more risky, significantly more expensive,

and that it takes longer time before the houses are ready for occupants to move in to, than

previously was the case.

To what extent does this new procedure implement LOU’s purpose?

LOU's purpose, to get an effectively use of tax money, is not fulfilled by this procedure because

the municipalities do not have any expenditures, which means that there are no funds which can

be considered “effectively used”. As the municipality has no cost, it is questionable whether it

really is to the municipality that an entrepreneur sells his services, rather than to the land

developer paying for the services. Overall, this means that the purpose is probably not fulfilled by

this new procedure.

In what situations can the LOU procedure be questioned?

The consequences of LOU can be questioned where it leads to major problems that would not

occur if the legislation was more flexible. An example of this is when there is a lone land

developer, who builds on his own property. If the municipality procures this, as happens today,

problems arise in terms of money, time and coordination problems. This because it is more

efficient if the developer that are already active in the area build all necessary infrastructure.

Can any other interpretations of the La Scala-judgment and it´s relationship to the

Swedish development process be found?

One alternative interpret is that the municipal should use LOU on this kind of contracts when

there is a risk that the municipal lose financial resources if they don´t do it. In the Italian

development process there is always a risk that the municipal lose financial resources if they

don´t purchase the contracts. The Swedish land development legislation are structured so the

municipality never take a risk to lose financial recourses if they let the developer build everything

in the area and therefore the municipality never can lose financial recourses in these cases. The

Swedish municipalities don’t get any advantages if they use LOU here because the developer pays

the real cost for all parts of the contract. Therefore, LOU is irrelevant in this part of the

development process.