EFTA SURVEILLANCE AUTHORITY DECISION of 25 November 2009 on the sale of Slaktehustomten [property 168/321] in Bergen municipality.

Transcription

1 Case No: Event No: Dec. No: 470/09/COL EFTA SURVEILLANCE AUTHORITY DECISION of 25 November 2009 on the sale of Slaktehustomten [property 168/321] in Bergen municipality (Norway) THE EFTA SURVEILLANCE AUTHORITY 1, HAVING REGARD to the Agreement on the European Economic Area 2, in particular to Articles 61 to 63 and Protocol 26 thereof, HAVING REGARD to the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice 3, in particular to Article 24 thereof, HAVING REGARD to Article 1(3) of Part I and Article 4(2) of Part II of Protocol 3 to the Surveillance and Court Agreement 4, HAVING REGARD to the Authority s Guidelines on the application and interpretation of Articles 61 and 62 of the EEA Agreement 5, Whereas: I. FACTS 1. Procedure By letter dated 5 October 2007, the Society for the Protection of the Cultural Heritage in the Sandviken Bay Area, Bergen (Sandviken Kulturhistoriske Forening) 6 filed a complaint against the municipality of Bergen concerning alleged state aid granted in connection with the sale of a plot of land commonly referred to as Slaktehustomten [property 168/321] in 1 Hereinafter referred to as the Authority. 2 Hereinafter referred to as the EEA Agreement. 3 Hereinafter referred to as the Surveillance and Court Agreement. 4 Hereinafter referred to as Protocol 3. 5 Guidelines on the application and interpretation of Articles 61 and 62 of the EEA Agreement and Article 1 of Protocol 3 to the Surveillance and Court Agreement, adopted and issued by the Authority on 19 January 1994, published in the Official Journal of the European Union (hereinafter referred to as OJ) L 231 of p. 1 and EEA Supplement No 32 of p. 1. Hereinafter referred to as the State Aid Guidelines. The updated version of the State Aid Guidelines is published on the Authority s website: 6 Hereinafter referred to as the Complainant. Rue Belliard 35, B-1040 Brussels, tel: (+32)(0) , fax: (+32)(0) ,

2 Page 2 Bergen 7. The letter was received and registered by the Authority on 18 October 2007 (Event No ). By letter dated 14 January 2009 (Event No ), the Authority invited the Norwegian authorities to submit their comments on the complaint. By letters dated 17 and 19 March 2009 (Events No and ), the Norwegian authorities submitted comments to the complaint. The Authority and the Norwegian Authorities exchanged further correspondence via . By letters dated 10 August 2009 (Events No and ), and 7 September 2009 (Event No ) the Norwegian authorities submitted further information. 2. Description of the alleged state aid 2.1. The complaint The Complaint concerns the sale by Bergen municipality, of Slaktehustomten, a waterfront property located north of the centre of the city of Bergen in an area called Sandviken. The property was sold to a limited liability company under establishment at the time of the sale, by the name of Westfal-Larsen Gruppen/Scandinavian Electric AS. The Complainant claims that the sale of Slaktehustomten involved state aid as it was sold below market value. Furthermore, the Complainant holds that alterations to the conditions of the sales agreement and applicable zoning regulations involves state aid, as these changes entailed that the value of Slaktehustomten has increased without the municipality being compensated accordingly The initial sales procedure the work of the Project Group The Project Group On 5 May 1998, Bergen Municipality, represented by the Department of Technical Development and its Head Committee of Technical Development decided to establish a Project Group to assist the municipality with the sale of Slaktehustomten. The final decision to sell the property would be made by the City Council. The Project Group inspected the property and consulted the Cultural Heritage Management Office in Bergen. On the basis of these preparations, the Project Group composed a prospectus providing information about Slaktehustomten and the municipality s criteria for the preservation and use of the property. On 16 June 1998, the Project Group initiated an open bidding procedure with the aim of finding suitable bidders with whom the municipality could negotiate the terms under which Slaktehustomten would be sold. On the same day, the municipality of Bergen had ads published in the national newspaper Dagens Næringsliv and the local newspaper Bergens Tidende The criteria for selecting the successful bidder Bergen municipality intended to preserve the historical character of Slaktehustomten by conserving existing buildings while at the same time allowing for the undeveloped parts of Slaktehustomten to be developed. As indicated by the name Slaktehustomten, which literally means the slaughterhouse lot, slaughterhouse facilities have been located there since At the time of the sale, these 7 Hereinafter referred to as Slaktehustomten or the property.

3 Page 3 facilities had not been in use for a long time, and were in a state of disrepair. Although the prospectus made it clear that the municipality intended for the buildings to be preserved, the municipality did not require the purchaser to re-establish facilities for slaughter. The prospectus indicated that the selection of the successful bid would be made on the basis of a political decision, taking into account the recommendations made in the applicable development plans. The municipal plan had a general goal of establishing more residential and industrial areas. The municipality s strategic plan for the development of industry and the harbour plan mainly focused on the fishing and maritime industries. The preparatory works of the municipal sector plan for the Sandviken area that was being drafted at the time of the sale, stated that Slaktehustomten should be developed for maritime industry adapted to the existing facilities. On the basis of this, the bidders were invited to submit a unified concept for the development of Slaktehustomten, providing information on how the existing buildings were intended to be renovated, preserved and utilised. They were also asked to submit plans for the undeveloped parts of Slaktehustomten, taking into account the goal of preserving the character of the property and its special location. Furthermore, the bidders were invited to account for how the general public was intended to access the waterfront and to submit plans for traffic and parking management. The other criteria under which the bids were to be considered was price and the bidders expected ability to implement the proposed plan in light of the bidders professional qualifications, experience and financial capability. The successful bidder would have to submit a new proposal for an area development plan for Slaktehustomten to the Municipal Planning and Building Service The seven bids Interested parties had to submit offers before the 15 September The following seven interested parties submitted offers: Name of bidder Monetary offer in million NOK UON-Auto AS Eiendom 8 15 Prosjektutvikling 10.7 Scandinavian Electric AS No specific offer, but indicated that they were willing to pay between 8 and 10. Vern og Bruk AS 7 Westfal-Larsen Gruppen 6.8 NCC EEG-Henriksen 6 Statsbygg No specific monetary offer. 9 8 This offer was later upheld by another limited liability company by the name of HE Gruppen AS. For the sake of simplicity, this bid will only be referred to as UON-Auto AS Eiendom s bid in the following. 9 Statsbygg did not submit a definite monetary offer, but stated that they were willing to pay what they referred to as the market price.

4 Page 4 The interested parties got the opportunity to present their offers before the Project Group. Additionally, the Project Group requested further information from the bidders where necessary Recommendations from other public entities Several public entities were invited to submit their assessment of the bids. The Municipal Management of the District of Sandviken favoured Prosjektutvikling s proposal because of, among other things, its appealing architectural qualities, and rated the offers from Vern og Bruk and Scandinavian Electric AS second and third. Bergen Municipality s Department for Industry and Enterprise and the Board of Industry preferred the offers from Westfal-Larsen Gruppen and Scandinavian Electric AS because of their focus on the intended use of the property for the benefit of the maritime industry The three bids recommended by the Project Group On 12 November 1998, the Project Group issued its recommendations. It was not able to make a unanimous decision, and divided into two fractions. The majority of the members of the Project Group recommended selling Slaktehustomten to Prosjektutvikling, who put forward the second highest bid (NOK 10.7 million). The majority emphasised the exiting architectural qualities of the proposal, and the fine balance struck with the proposed functional industrial area that also made room for general public access. Furthermore, it represented the highest monetary offer of the most eligible bids. The minority recommended the two bids from Scandinavian Electric AS (who did not provide a specific monetary offer but indicated that they were willing to pay between NOK 8 and 10 million) and Westfal-Larsen Gruppen (who bid NOK 6.8 million), emphasising the fact that these two bids were the ones that most clearly focused on developing Slaktehustomten for the use of the maritime industry, which was the principal prioritised field of activity in the municipal sector plan for the Sandviken area that was being drafted at the time The four remaining bids UON-Auto AS Eiendom s proposal which represented the highest monetary bid (NOK 15 million), involved building what was referred to as a massive office building. The Project Group deemed the proposal to be less than well-prepared and to not constitute a viable alternative. The Project Group had many of the same objections to the offer from NCC EEG-Henriksen, who at the same time put forth the lowest bid (NOK 6 million). Vern og Bruk AS offered NOK 7 million for Slaktehustomten. They proposed to preserve all the remaining buildings, and to establish two new buildings on the undeveloped parts of the lot. Among other factors, the Project Group stated that the proposal did not seem too closely considered and remained doubtful as to whether the concept was economically viable. Statsbygg submitted a plan to establish an art college on, not only Slaktehustomten itself, but also adjacent properties. The Project Group found the scope of the offer to be of such a magnitude that it could not assess the offer within the framework of the procedure.

5 Page The further sales procedure After its completion on 12 November 1998, the bidders received a copy of the report issued by the Project Group, thereby informing the bidders about the identities of the other bidders and the Project Group s recommendations. By a letter dated 17 November 1998, Scandinavian Electric AS and Westfal-Larsen Gruppen, informed Bergen Municipality that after becoming aware of each other s similar bids, they had decided to combine their efforts. The letter roughly detailed how the offers were to be combined. Westfal-Larsen Gruppen s offer was maintained, but the price level was increased to the level of NOK 8 to 10 million indicated in Scandinavian Electric AS offer. On 29 January 1999, after receiving further information from Prosjektutvikling and Westfal-Larsen Gruppen/Scandinavian Electric AS, the Department of Technical Development proposed that Bergen Municipality should enter into negotiations with Prosjektutvikling. The Department considered the proposal the best overall offer, emphasising its modern and exiting architectural qualities, and the fact that it represented the highest monetary offer of the bids considered as most eligible. However, the Department noted that Scandinavian Electric AS and Westfal-Larsen Gruppen s combined offer represented the best proposal for the industrial development of Slaktehustomten The City Council s decision On 22 March 1999, the City Council gave the municipality s administration the authority to enter into negotiations with Scandinavian Electric AS and Westfal-Larsen Gruppen. At the same time, the City Council decided that Slaktehustomten should be sold at market price The terms of the sale After a period of negotiations, the parties reached an agreement and signed a contract on 15 February Slaktehustomten was sold to Scandinavian Electric AS and Westfal- Larsen Gruppen for NOK 10,7 million under the condition that they would conserve and develop Slaktehustomten in line with the main points of their offer. The contract set out a certain standard for how much of the land that could be developed or utilised for the different purposes. According to Article 5 of the contract, the buyer would have to compensate the municipality in case certain deviations from the established standard occurred After the sale Lease of land to undertakings involved in non-maritime industries By letter dated 18 September 2003, an undertaking by the name of Sandviksboder 1 AS informed Bergen Municipality that the title to Slaktehustomten had been transferred to it. Sandviksboder 1 AS informed the municipality that they wished to lease property to a greater share of undertakings not involved in the maritime industry. Sandviksboder 1 AS was bound by the conditions of use of the contract of 15 February 2000 regulating the sale of Slaktehustomten. On 27 February 2004, the City Council decided that the municipality could enter into negotiations with Sandviksboder 1 AS about whom to lease the property to. The parties did not reach an agreement and no changes to the terms of the contract of 15 February 2000 were made.

6 Page Construction of more housing units On the 20 August 2005, Sandviksboder 1 AS submitted a proposal for a new zoning plan for Slaktehustomten, that indicated that the number of housing units would increase from 35 as intended in the contract of 15 February 2000 to 45. The City Council approved the zoning plan the 22 May However, a final authorisation enabling Sandviksboder 1 AS to start building has not been issued as of yet. On the 17 June 2009, the municipality of Bergen received an application for a final authorisation increasing the number of housing units to 46. This application is currently being processed by the municipality. According to Article 5 of the contract of 15 February 2000 the Sandviksboder 1 AS shall compensate the municipality of Bergen if authorised to build more than 38 housing units on Slaktehustomten according to the following equation (where X equals the divergence from 35 of housing units allowed): NOK 3.56 million x (X 3)/35. In case Sandviksboder 1 AS obtains a definite authorisation to build 46 housing units it would have to pay an additional NOK to the municipality. 10 As no definite authorisation has been issued to date, no payment has been made as of yet. II. ASSESSMENT 1. The presence of state aid Article 61(1) of the EEA Agreement reads as follows: Save as otherwise provided in this Agreement, any aid granted by EC Member States, EFTA States or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Contracting Parties, be incompatible with the functioning of this Agreement The price of the property The Authority has issued Guidelines on state aid elements in sales of land and buildings by public Authorities, 11 wherein the Authority states that when receiving a complaint alleging that there was a state aid element in an agreement for the sale of land and buildings by public authorities, it will assume that no state aid is involved if the information supplied by the EFTA State concerned shows that the principles of the Guidelines on the sale of land were observed. 12 Chapter 2 of the Guidelines on sale of land sets out two procedures that allow EFTA States to handle sales of land and buildings in a way that precludes the existence of state aid within the meaning of Article 61 of the EEA Agreement. The first method is a sale through an unconditional bidding procedure (Chapter 2.1), the other method is sale, without an unconditional bidding procedure, by way of an independent expert evaluation (Chapter 2.2). 10 NOK 3.56 million x (11 3)/35 = NOK Hereinafter referred to as the Guidelines on the sale of land. The Guidelines on the sale of land were adopted by the Authority s Decision 275/99/COL. Published in OJ L p. 28 and EEA Supplement No p Chapter 2.4 of the Guidelines on the sale of land.

7 Page 7 However, the fact that none of these methods are complied with, does not automatically entail that the sale involved state aid within the meaning of Article 61 of the EEA Agreement. 13 Slaktehustomten was sold after the municipality of Bergen conducted an open bidding procedure. The question is whether this procedure represented a unconditional procedure within the meaning of the Guidelines on sale of land: A sale of land and buildings following a sufficiently well-publicized, open and unconditional bidding procedure, comparable to an auction, accepting the best or only bid, is by definition at market value and consequently does not contain state aid. 14 Although Slaktehustomten was sold after an open bidding procedure, it was not comparable to an auction. This purpose of the procedure initiated for the sale of Slaktehustomten was not solely to sell the property at the highest possible price. The purpose was to find suitable bidders with whom the municipality could negotiate the terms under which Slaktehustomten would be sold. The bidders were not required to give a specific monetary offer. Consequently, the Authority cannot exclude that state aid within the meaning of Article 61 of the EEA Agreement was involved on the basis of the Guidelines on sale of land. It remains for the Authority to assess whether the sale of Slaktehustomten, although not executed in accordance with the procedure established in the Guidelines on sale of land, involves state aid within the meaning of Article 61 of the EEA Agreement. The sale of Slaktehustomten was organised as an open competition. The municipality set certain criteria under which the successful bidder would be selected as explained under chapter I of this decision. When assessing the market value of a property, one has to pay due attention to the conditions under which the property is sold. Restrictions on the use of a property will often decrease its value on the market. 15 Price was just one of several criteria for the selection of the winning bid. Taking the all the relevant criteria into consideration, the Project Group did not recommend the offer put forth by UON-Auto AS Eiendom that represented the highest monetary bid (NOK 15 million), as the proposal, among other things, involved the construction of what was referred to as a massive office building. In other words, the highest monetary offer did not pay sufficient attention to the criteria set out by the municipality and was consequently not considered as an eligible offer. The monetary offer was based on the condition that a so-called massive office building could be constructed on Slaktehustomten. Such plans ran contrary to the municipality s plans. Taking the criteria formulated by the municipality into consideration, the monetary offer from UON-Auto AS Eiendom did not seem to represent the market price of Slaktehustomten. 13 See the Authority s decisions 304/09/COL of 8 July 2009 (Not yet published in the OJ and the EEA Supplement, but available online at: ) and 16/04/COL of (OJ C p. 6 and EEA Supplement No p. 1). 14 Chapter 2.1(1) of the Guidelines on sale of land. 15 See the Authority s decision 304/09/COL chapter II for a similar line of reasoning.

8 Page 8 The Project Group essentially recommended two alternatives for the sale of Slaktehustomten. The majority proposed to enter into negotiations with Prosjektutvikling, emphasising the proposal s exiting architectural qualities that also allowed for the access of the general public to the property. Furthermore, it represented the highest monetary offer of the most eligible bids. The minority of the Project Group favoured the two offers put forth by Scandinavian Electric AS and Westfal-Larsen Gruppen, that focused on developing the property for maritime purposes. During the phase of negotiations, Scandinavian Electric AS and Westfal-Larsen Gruppen combined their efforts behind the proposal of Westfal-Larsen Gruppen but raised the price to the level of the offer from Scandinavian Electric AS. The City Council of Bergen favoured the joint proposal of Scandinavian Electric AS and Westfal-Larsen Gruppen because of its focus on the development of the property for maritime purposes and decided that the municipality should enter into negotiations for the sale of the property with Westfal-Larsen Gruppen/Scandinavian Electric AS. As a result of the negotiations, Westfal-Larsen Gruppen/Scandinavian Electric AS agreed to pay NOK 10,7 million for Slaktehustomten. A price which corresponded to the price offered by Prosjektutvikling. In order to establish that the price conferred an advantage on Westfal-Larsen Gruppen/Scandinavian Electric AS within the meaning of Article 61 of the EEA Agreement, the Authority must find that the price deviates from the market price. Slaktehustomten was eventually sold to the bidder with the proposal favoured by the City Council of Bergen, at a price that corresponded to the highest monetary offer of the bids considered as most eligible. Taking this into account, the Authority has no reason to believe that the price paid by Westfal-Larsen Gruppen/Scandinavian Electric AS deviated from the market price. In light of this, the Authority concludes that the sale of land to Westfal-Larsen Gruppen/Scandinavian Electric AS did not involve state aid within the meaning of Article 61 of the EEA Agreement Article 5 of the contract of 15 February 2000 When the municipality of Bergen and Westfal-Larsen Gruppen/Scandinavian Electric AS entered into negotiations for the sale of Slaktehustomten, they took into account the fact that a change in the zoning regulation applicable to the property could affect the value of the property and incorporated a price adjusting mechanism into Article 5 of the contract of 15 February Sandviksboder 1 AS intends to develop 46 housing units on Slaktehustomten, an amount exceeding the standard set out in the contract of 15 February The Norwegian authorities have confirmed that a final approval for the development of additional housing units will trigger the compensation clause of the contract of 15 February 2000 as described under chapter I of this decision. However, no definite approval triggering the compensation clause in Article 5 of the contract of 15 February 2000 has been granted as of yet See chapter I 2.6 of this decision.

9 Page 9 In light of this, the Authority has no reason to consider that state aid within the meaning of Article 61 of the EEA Agreement has been granted. 2. Conclusion On the basis of the foregoing assessment, the Authority considers that the sale of Slaktehustomten [property 168/321] by Bergen municipality did not involve state aid within the meaning of Article 61(1) of the EEA Agreement. HAS ADOPTED THIS DECISION: Article 1 The EFTA Surveillance Authority considers that the sale of Slaktehustomten [property 168/321] in Bergen municipality did not involve state aid within the meaning of Article 61 of the EEA Agreement. Article 2 This Decision is addressed to the Kingdom of Norway. Only the English version is authentic. Article 3 Done at Brussels, 25 November 2009 For the EFTA Surveillance Authority Per Sanderud President Kurt Jaeger College Member