Consistent with the rationale for state ownership, the legal, regulatory and policy framework for SOEs should ensure a level playing field and fair competition in the marketplace when SOEs engage in economic activities.
III.A. There should be a clear separation between the state’s ownership function and other state functions that may influence the market conditions for state-owned enterprises, particularly with regard to market regulation and policy-making.
III.B. Stakeholders and other interested parties, including competitors, should have access to efficient redress through unbiased legal, mediation or arbitration processes when they consider that their rights have been violated. SOEs’ legal form should allow SOEs to initiate insolvency procedures and for creditors to press their claims.
III.C. Where SOEs carry out public service obligations, they should be transparently and specifically identified, allowing for an accurate attribution of costs and revenue. In particular:
III.C.1. High standards of transparency and disclosure regarding their costs and revenue must be maintained.
III.C.2. Net costs related to carrying out public service obligations should be separately funded, proportionate and disclosed, ensuring that compensation is not used for cross-subsidisation.
III.D. As a general rule, state-owned enterprises should not be used to subsidise or grant advantages to other commercial undertakings. If SOEs are used to allocate support measures in line with their public policy objectives, care should be taken to ensure that: (i) support measures are consistent with applicable competition and trade rules; (ii) support measures and their funding are clearly defined and publicly disclosed; and (iii) support measures do not cause unfair disadvantages to other commercial undertakings.
III.E. The state should not exempt SOEs, when engaging in economic activities, from the application and enforcement of laws, regulations and market-based mechanisms, and should ensure tax, debt and regulatory neutrality to prevent undue discrimination between SOEs and their competitors.
III.F. SOEs’ economic activities should face market consistent conditions including with regard to debt and equity finance. In particular:
III.F.1. All business relations of SOEs, including with financial institutions, should be based on purely commercial grounds.
III.F.2. SOEs’ economic activities should not benefit from or provide any direct or indirect financial support, that confers an advantage over private competitors, such as preferential debt or equity financing, guarantees, lenient tax treatment or preferential trade credits.
III.F.3. SOEs’ economic activities should not receive or provide in-kind inputs such as goods, energy, water, real estate, data access, land or labour or arrangements (such as rights-of-way, or concessions) at prices or conditions more favourable than those available to privately owned competitors.
III.F.4. SOEs’ economic activities should be required to earn sustainable rates of return that are comparable to those obtained by competing private enterprises operating under similar conditions, except with respect to the carrying out of public service obligations.
III.G. When SOEs engage in public procurement, whether as bidder or procurer, the procedures involved should be open, competitive, based on fair and objective selection criteria, promote supplier diversity and be safeguarded by appropriate standards of integrity and transparency, ensuring that SOEs and their potential suppliers or competitors are not subject to undue advantages or disadvantages.
III.H. When SOEs’ economic activities affect trade, investment or competition they should conduct all business, other than carrying out public service obligations, in accordance with commercial considerations. They should conduct all business according to responsible business conduct and high standards of integrity.