Land Sale

July 17th, 2015 by James Goudie KC

In Case C39/14, BVVG v Erbs, Judgment on 16 July 2015, the ECJ has again considered when land disposals by public bodies amount to State Aid within TFEU Article 107(1), in accordance with which save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings is, in so far as it affects trade between Member States, incompatible with the internal market. 

The ECJ reiterated that in order for a measure to be categorised as ‘aid’ for the purposes of Article 107(1) TFEU, all the conditions set out in that provision must be fulfilled.  For a measure to be classified as State Aid for the purposes of Article 107(1) TFEU, first, there must be an intervention by the State or through State resources; second, the intervention must be liable to affect trade between Member States; third, it must confer an advantage on the recipient; and fourth, it must distort or threaten to distort competition. The concept of aid may include not only positive benefits such as subsidies, loans or direct investment in the capital of undertakings, but also interventions which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which therefore, without being subsidies in the strict sense of the word, are of the same character and have the same effect. To that end, for the purposes of establishing the existence of State Aid, a sufficiently direct link must be established between, on the one hand, the advantage given to the recipient and, on the other, a reduction of the State budget or a sufficiently concrete economic risk of burdens on that budget.

It cannot therefore, as a rule, be precluded that a sale of public land at a price lower than the market value might constitute State Aid.  Such a sale may confer on the purchaser, as a recipient, an advantage which, in essence, leads to a reduction of the State budget consisting in the State forgoing the difference between the market value of the land and the lower price paid by that purchaser.

In particular, in relation to the sale by public authorities of land or buildings to an undertaking or to an individual involved in an economic activity, such a sale may include elements of State Aid, in particular where it is not made at market value, that is to say, where it is not sold at the price which a private investor, operating in normal competitive conditions, would have been able to fix.

It follows that the application of rules must, in order to comply with Article 107 TFEU, result in all cases in a price as close as possible to the market value.  A number of methods are capable of providing prices corresponding to the market value. Those methods include sales to the highest bidder or an expert report. Likewise, it cannot be ruled out that other methods may also achieve the same result.

In a case concerning the sale by a public authority of an undertaking belonging to it, that, where that authority undertakes an open, transparent and unconditional bidding procedure, it can be presumed that the market price corresponds to the highest offer, provided that it is established, first, that that offer is binding and credible and, secondly, that the consideration of economic factors other than the price is not justified.  In such circumstances, it is not necessary to resort to other methods in order to check the market price, such as independent expert reports.

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