EN Official Journal of the European Union C 319/17

Invitation to submit comments pursuant to Article 1(2) in Part I of Protocol 3 to the Surveillance and Court Agreement with regard to State aid in the form of exemptions from document duties and registration fees provided for in the establishment of the Norwegian company Entra Eiendom AS (hereinafter Entra)

(2004/C 319/07)

By means of Decision 132/04/COL of 16 June 2004, reproduced in the authentic language on the pages following this summary, the EFTA Surveillance Authority initiated proceedings pursuant to Article 1(2) in Part I of Protocol 3 of the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice (Surveillance and Court Agreement). The Norwegian Government has been informed by means of a copy of the decision.

The EFTA Surveillance Authority hereby gives the EFTA States, EU Member States and interested parties notice to submit their comments on the measure in question within one month from the publication of this notice to:

EFTA Surveillance Authority 74, Rue de Trèves/Trierstraat 74 B-1040 Brussels

The comments will be communicated to the Government of Norway. Confidential treatment of the identity of the interested party submitting the comments may be requested in writing, stating the reasons for the request.

SUMMARY

Procedure

On 22 May 2002, the EFTA Surveillance Authority (ESA) requested the Norwegian Government to submit information concerning alleged State aid in favour of the real estate company Entra Eiendom A/S. Further correspondence followed between the Norwegian Government and the Authority.

Description of the aid measure

On 4 June 1999, the Norwegian Government presented to Parliament the reorganisation of the public body, the Directorate of Public Construction and Property (‘Statsbygg’), and the establishment of the limited liability company Entra.

Property, capital and personnel (assets and liabilities) were transferred from the State to Entra in exchange for the issue of shares, with effect from 1 July 2000. Ownership and title of the properties in question were transferred from the Norwegian State to Entra and registered in Entra's name. The company is 100 per cent owned by the Norwegian State. The total property portfolio consists of some 120 properties, amounting to 880 000 m2.

All real estate in Norway is identified in the real estate registry, established pursuant to the Registration Act of 7 June 1935 No 2. Pursuant to Section 7(1) of the Excise Tax Act 1975 No 59, the registration of transfer of ownership title to real property triggers an obligation to pay document duties. The registration of transfer of title in the real estate registry is subject to a registration fee pursuant to the Court fee Act 1982 No 86.

The Act presented to Parliament on 4 June 1999 states that re-registration in the real estate registry and other public registries is to be done as a change of name. As a consequence of this, Entra was not obliged to pay document duties and registration fees. The Government considers this procedure to be in accordance with previous reorganizations of state entities.

According to the submitted information, payable duties/fees for the transfer of title of the real estate received by Entra would amount to approximately NOK 80,6 million (some EUR 10,4 million).

Assessment

By the adoption of special statutory provisions, Entra is relieved of the cost of document duties and registration fees. The Authority is of the opinion that this constitutes a financial advantage. No other provision in Norwegian law prescribes that such a transaction is exempted from the general rule that registration of change of ownership triggers document duty and registration fees.

The Norwegian Government argues that the measure does not confer an advantage on Entra compared to private undertakings in a similar situation. Under a particular statutory scheme, a state measure is defined as favoring certain undertakings in comparison to others, which, in light of the objective pursued, are in a comparable legal and factual situation. The Authority remains unconvinced that Article 61(1) EEA has no relevance for the exemption from document duty and registration fees following comparison with private undertakings.

Furthermore, the Norwegian Government argues that the exemption from or the non-payment of, document duty and registration fees do not confer an advantage, as the capital structure, the solidity and the total value of the company, according to the opening balance sheet, would remain unchanged. It is however, the Authority's preliminary view that the obligation to pay document duty and registration fees is a liability for the undertaking, and that a relief of such a liability is an advantage granted to the undertaking in the meaning of Article 61(1) of the EEA Agreement. This advantage cannot be considered to be non-existent because of the way the opening balance is established.

The Authority is further of the opinion that loss of tax revenue is equivalent to consumption of State resources in the form of fiscal expenditure.

According to the Norwegian authorities, the measure in question is a general measure that falls outside the scope of Article 61(1). In this context the Authority would like to point out that tax measures open to all undertakings operating within an EFTA State, are, in principle, general measures. The differential nature of some measures does not necessarily mean that they must be considered to be State aid. This is the case with measures whose economic rationale makes them necessary to the smooth functioning and effectiveness of the tax system. In the view of the Authority it cannot be derived from the general logic of the current legislation and practice on excise duties that Entra for document duty and registration fee purposes should be considered as continuing (parts of) Statsbygg. Therefore, the measure must be considered to be selective in the sense of Article 61(1).

Furthermore, the Authority notes that the company operates all over Norway in a market open to economic agents from any other EEA State. Consequently, the measure affects or threatens to affect, competition and trade between the Contracting Parties.

Conclusion

In light of the foregoing considerations, the Authority doubts the compatibility of the exemption from document duty and registration fees adopted in connection with the establishment of Entra Eiendom AS, with the functioning of the EEA Agreement. Consequently, the Authority is obliged to initiate the formal investigation procedure provided for in Article 1(2) in Part I of Protocol 3 of the Surveillance and Court Agreement.

EFTA SURVEILLANCE AUTHORITY DECISION No 132/04/COL of 16 June 2004 to initiate the procedure provided for in Article 1(2) in Part I of Protocol 3 to the Surveillance and Court Agreement with regard to the exemptions from document duties and registration fees provided for in the establishment of Entra Eiendom AS (NORWAY) THE EFTA SURVEILLANCE AUTHORITY, Having regard to the Agreement on the European Economic Area (1), 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 (2), in particular to Article 24 and Article 1 in Part I of Protocol 3 thereof, Having regard to the Authority's Guidelines (3) on the application and interpretation of Articles 61 and 62 of the EEA Agreement, Whereas: I. FACTS 1. PROCEDURES AND CORRESPONDENCE 2. THE ESTABLISHMENT OF ENTRA 3. THE NORWEGIAN LEGISLATION AND PRACTICE CONCERNING DOCUMENT DUTIES AND REGISTRATION FEES ON THE REGISTRATION OF TRANSFER OF REAL ESTATE PROPERTY IN CONNECTION WITH REORGANISATION OF UNDERTAKINGS 3.1. Introduction 3.2. Exemptions based on the Registration Act construed in the light of the company legislation 3.3. Exemptions based on special legislation 3.4. Methods used to avoid excise duties 4. THE NORWEGIAN GOVERNMENT'S ASSESSMENT OF WHETHER THE EXEMPTION OF DOCUMENT DUTIES AND REGISTRATION FEES IS IN COMPLIANCE WITH THE STATE AID PROVISIONS OF THE EEA AGREEMENT 4.1. Assessment in connection with the establishment of Entra 4.2. Arguments in the correspondence with the Authority By letter dated 4 June 2003, the Ministry of Trade and Industry submitted additional information and arguments concerning i.a. the so called continuity principle, clarification concerning the measures used by private undertakings, why the non-payment does not constitute an advantage, information on the current law with regard to mergers and de-mergers and on exemption from the duty to pay registration fees. The Ministry reiterates the arguments in the letter dated 7 November 2002 as to why the non-payment does not constitute an advantage for Entra. In addition, the Ministry argues that the exemption is a general measure, which does not constitute State aid within the meaning of Article 61(1) of the EEA Agreement. Point 9, Conclusion, of the letter dated 4 June 2003, reads: ‘The common system regarding registration fee and document duty is that the continuity principle determines if conversion processes, both public and private, may be done as a name change in relation to inter alia the rules on registration fee and document duty. The purpose of the continuity principle is to facilitate the implementation of mergers, de-mergers and restructurings, which is regarded as socio-economically desirable. The special legislation and the reimbursement of accrued document duty resulting from the reorganisation of hydropower/electricity companies are a result of the same considerations. Thus, the practice is a general measure, which according to well-established case law does not constitute State aid within the meaning of Article 61 of the EEA Agreement.’ II. APPRECIATION 1. The existence 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.’ To be considered as State aid under Article 61(1) of the EEA Agreement, a tax measure must fulfil the following four criteria: 1. The measure must confer the beneficiaries an advantage that reduces the costs they normally bear in the course of the business. 2. The advantage must be granted by the State or through State resources. 3. The measure must be specific or selective in that it favours ‘certain undertakings or the production of certain goods’. 4. The measure must affect competition and trade between the Contracting Parties. Condition 1: The measure must confer on the beneficiaries an advantage that reduces the costs they normally bear in the course of the business. Condition 2: The advantage must be granted by the State or through State resources. Condition 3: The measure must be specific or selective in that it favours ‘certain undertakings or the production of certain goods’. Firstly, the Authority makes reference to Chapter 17B.3.1 of the Authority's State Aid Guidelines on direct business taxation concerning the specificity or selectivity of tax measures, which reads: ‘Tax measures, which are open to all economic agents operating within the EFTA State, are in principle general measures. They must be effectively open to all firms on an equal access basis, and they may not de facto be reduced in scope through, for example, the discretional power of the State to grant them or through other factors that restrict their practical effect.’ According to the case law of the Court of Justice, it is possible to draw a distinction between: — differentiated treatment that results from the application, to specific situations, of the same principles as those underlying the ordinary rules (no aid) — differentiated treatment, which, favouring certain undertakings, departs from the internal logic of the ordinary rules (aid) (20). Condition 4: The measure must affect or threaten to affect competition and trade between the Contracting Parties. 2. Compatibility of the aid 3. The character of the aid 4. Conclusion HAS ADOPTED THIS DECISION: 1. The Authority has decided to open the formal investigation procedure provided for in Article 1(2) in Part I of Protocol 3 to the Surveillance and Court Agreement with regard to the exemptions from document duties and registration fees provided for in the establishment of Entra Eiendom AS. 2. The Norwegian Government is invited, pursuant to Article 6 in Part II of Protocol 3 to the Surveillance and Court Agreement, to submit its comments on the opening of the formal investigation procedure within two months from notification of this decision. 3. The Norwegian Government shall be informed by means of a letter containing a copy of this decision. 4. The EC Commission shall be informed, in accordance with Protocol 27(d) of the EEA Agreement, by means of a copy of this decision. 5. Other EFTA States, EC Member States, and interested parties shall be informed by the publishing of this decision in its authentic language version, accompanied by a meaningful summary in languages other than the authentic language version, in the EEA Section of the Official Journal of the European Communities and the EEA Supplement thereto, inviting them to submit comments within one month from the date of the publication. 6. This decision is authentic in the English language. Done at Brussels, 16 June 2004. For the EFTA Surveillance Authority Hannes HAFSTEIN President Einar M. BULL College Member

(1) Hereinafter referred to as the EEA Agreement.

(2) Hereinafter referred to as the Surveillance and Court Agreement.

(3) Procedural and Substantive Rules in the Field of State Aid (State Aid Guidelines), adopted and issued by the EFTA Surveillance Authority on 19 January 1994, published in Official Journal L 231, 3.9.1994, as amended by Decision No: 90/04/COL, 23 April 2004 (not yet published). The State aid guidelines are available on the Authority's website: www.eftasurv.int.

(4) In particular in ‘Dagens Næringsliv’ on 9 April 2002.

(5) ‘St prp nr 84 (1998-99) Om ny strategi for Statsbygg og etablering av Statens utleiebygg AS’.

(6) The original name of the company was ‘Statens utleiebygg AS’. Hereinafter Entra is used for Entra and Statens utleiebygg AS.

(7) ‘Ot prp nr 83 (1998-99) Om lov om omdanning av deler av Statsbyggs eiendomsvirksomhet til aksjeselskap’. Law of 18 February 2000, No 11.

(8) ‘St.prp. nr. 1 Tillegg nr. 10 (1999-2000) Om etablering av Statens utleiebygg AS’.

(9) The group consists, in addition to Entra Eiendom AS, of Entra Eiendom Drift AS, Universitetsgaten 2 AS, Biskop Gunnerus gate 14 AS, Instituttveien 24 AS and Tollpakkhuset AS. Source: Annual report 2002. See

http://www.entraeiendom.no/files/pdf/aarsrapport_2002.pdf

(10) Preliminary accounts for 2003 presented on 19 February 2004. See

http://www.entraeiendom.no/files/Entra_Eiendom_AS_Preliminary_results_2003.pdf

(11) The registration fee (‘tinglysingsgebyret’) is two times the basic court fee (‘rettsgebyret’), see § 21 of the Court fee Act 1982 No 86 (‘Rettsgebyrloven’).

(12) Chapter 7.6.1.

(13) Chapter 19: Public authorities' holdings. Chapter 20: Application of State aid provisions to public enterprises in the manufacturing sector.

(14) Value per 2000.

(15) Cf. Case 173/73 Italy v. Commission [1974] ECR 709.

(16) Cf. Case T-157/01 Danske Busvognmænd v Commission, judgment of 16 March 2004, para. 57.

(17) Cf. Case C-308/01 GIL Insurance Ltd, judgment of 29 April 2004.

(18) Indeed, in some aspects, the methods described may in fact be less favourable for private undertakings compared to public ones since the registration of declaration on the restriction of the right to ownership does not exclude the risk of execution proceedings/creditor's or bankruptcy estate's extinction of the rights of a legal successor to the debtor's property.

(19) Cf., inter alia, Case C-157/01 Kingdom of the Netherlands v. Commission, judgment of 29 April 2004.

(20) Cf., inter alia, Case 173/73 Italy v. Commission, cited above, Case C-75/97 Kingdom of Belgium v. Commission [1999] ECR I-3671, Case C-157/01 Kingdom of the Netherlands v. Commission, cited above, and Case C-308/01 GIL Insurance Ltd, cited above.

(21) Cf. inter alia, Case C-126/01 Gemo, judgement of 20 November 2003.