Decision No 052/19/COL of 10 July 2019 to open a formal investigation into Farsund Vekst (Case 83835)

Invitation to submit comments pursuant to Article 1(2) of Part I of Protocol 3 to the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice on state aid issues

(2019/C 284/04)

By means of the above referenced Decision, reproduced in the authentic language on the pages following this summary, the EFTA Surveillance Authority notified the Norwegian authorities of its decision to initiate proceedings pursuant to Article 1(2) of Part I of Protocol 3 to the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice concerning the abovementioned measure.

Interested parties may submit comments on the measure in question within one month of the date of publication to:

EFTA Surveillance Authority Registry Rue Belliard 35 1040 Bruxelles/Brussel BELGIQUE/BELGIË

The comments will be communicated to the Norwegian authorities. The identity of the interested party submitting the comments may be withheld following a request in writing stating the reasons for the request.

Summary

Procedure

1) The Authority received a complaint on 16 April 2018.

2) Following requests, the Authority received information from the Norwegian authorities by letters dated 21 June 2018, 6 December 2018 and 6 March 2019 and by a videoconference on 10 January 2019.

Description of the measure(s)

3) The alleged aid beneficiary is Glastad Farsund AS (‘Glastad’) acting through Farsund Vekst AS and other fully owned subsidiaries.

4) In 2010, Farsund Municipality (the ‘Municipality’) and Glastad planned the development of housing and commercial real estate in Farsund, Norway. The Municipality and Glastad decided to develop certain areas in Farsund Municipality; (i) Nordkapp gnr. 1 bnr. 199 m. fl (the ‘Nordkapp area’) and (ii) Farøy gnr. 3, bnr. 80 & 49 and part of gnr. 3 bnr. 23 (the ‘Farøy area’).

5) In 2011, a shareholders' agreement was entered into between the Municipality and Glastad, establishing Farsund Vekst AS. The two parties each owned 50 % of the shares of Farsund Vekst AS. On the same day, the Municipality granted Farsund Vekst AS option agreements for the Nordkapp and the Farøy areas. The prices in the options for acquiring the Nordkapp and Farøy areas were set according to a valuation from 2010.

6) The option agreement for the Nordkapp area provided Farsund Vekst AS with the exclusive right to start immediately the construction of a shopping mall in the Nordkapp area and then buy the land later for NOK 25 million. Early 2015, it was clear that Farsund Vekst AS could not afford to make use of the entire Nordkapp option at a total price of NOK 25 million all at once. At that time, Farsund Vekst AS had already started to build the shopping centre. The Municipality therefore agreed to allow Farsund Vekst AS to informally exercise the Nordkapp option by paying NOK 8,5 million for the area already covered by the shopping centre. In October 2015, the Nordkapp option was formally divided into 3 parts and the price for each part was based on the 2010 valuation for the whole Nordkapp area. Farsund Vekst AS has not exercised the 2 remaining parts of the Nordkapp option.

7) The Farøy option provides Farsund Vekst AS with the exclusive right to work on the development and rezoning of the Farøy area and to buy it for NOK 10,5 million within a period of 18 months, starting on the day the area is rezoned. In 2015, the Municipality agreed to amend the Farøy option by adding 500 m 2 of land to develop a recreational park for the public and providing Farsund Vekst AS with a right to require a reduced price if utilisation will be below 2 400 m 2 . There is no corresponding right for the Municipality to require higher price for a higher utilisation. A new zoning plan was adopted by the Municipality in September 2018, but has been appealed to the County Governor of Agder, who still considers the case. Farsund Vekst AS has not yet exercised the Farøy option. Based on the information available to the Authority, it is not clear whether the appeal has any implications for the date of expiry of the option.

8) In 2015, the Municipality decided to sell all its shares (50 %) in Farsund Vekst AS to Glastad. The price was set to NOK 21 million, based on the total equity capital of Farsund Vekst AS. Glastad never transferred the funds to the Municipality. Instead, the parties agreed that the rights to build a third and a fourth floor on the rooftop of the shopping centre (a right held by Farsund Vekst AS, the company that the Municipality was in the process of selling to Glastad) should be sold to the Municipality. The Municipality and Glastad agreed to a purchase price of NOK 23,5 million. Hence, the Municipality agreed to pay the difference of NOK 2,5 million (NOK 23,5 million minus NOK 21 million equals NOK 2,5 million) to Glastad.

Assessment of the measure(s)

9) The Authority doubts that the foregoing measures are in line with the market economy operator principle (‘MEOP’). The conclusion of option agreements can qualify as state aid if the eventual sale of the underlying property is below market price. The Authority notes that the options enable Farsund Vekst AS to observe the development of property prices over the years. The agreed prices are based on a valuation of the areas made in 2010. Even if the prices represent the market price in 2011, the Authority questions whether the market value only corresponds to the value of the underlying properties. In the Authority’s view, that would entail that Farsund Vekst AS got the options for free.

10) In the Authority’s preliminary view, the option agreements themselves, independent of whether they were exercised or not, had a value in 2011, when the agreements were concluded. From the documentation and explanations the Authority has received so far, there is no information that Farsund Vekst AS paid for the options.

11) The sale of the shares in Farsund Vekst AS, the sale of part 1 of the Nordkapp area, the valuation of the rooftop of the shopping mall and the renewal of the option agreements were all done between March-October 2015. Among other factors, this closeness in time indicates that the transactions are all intra-connected and together form the Municipality’s exit from the whole project. However, even though the sale of the shares in Farsund Vekst AS involved an obligation for the Municipality to later buy the roof area for NOK 23,5 million (which was subject to a new valuation around the same time), no independent valuation of the shares in Farsund Vekst AS was obtained. The agreed purchase price only reflected half of Farsund Vekst AS equity at the time of the sale, but no value was placed on the option agreements, the half-finished shopping mall and the roof area. For these reasons, the Authority doubts that a market economy operator would have entered into such an agreement on similar conditions as the Municipality.

12) Finally, it would appear that the market for developing real estate is in principle and in practice open to intra-EEA trade. The shopping centre in the Nordkapp area has already attracted international operators like Intersport, Cubus, Clas Ohlson and Burger King. On this basis, the Authority cannot exclude that the measures are liable to distort competition and have an effect on intra-EEA trade.

13) If the measures constitute state aid, the obligation, contained in Article 1(3) of Part I of Protocol 3 to the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice, to notify the aid to the Authority before putting it into effect has not been respected. Such state aid would therefore be unlawful.

14) The Norwegian authorities have not provided arguments substantiating that the measures, to the extent that they constitute state aid, could be considered compatible with the functioning of the EEA Agreement. The Authority has doubts as to the compatibility of the measures.

(1) Reference is made to Article 4(4) of Part II of Protocol 3 to the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice.

(2) Document No 909653.

(3) Document No 909644.

(4) Document No 1045487.

(5) Document No 932210.

(6) Document No 1042409.

(7) Document No 1040145.

(8) Document No 1040147.

(9) Document No 1057576.

(10) Document No 1057574.

(11) Document No 1070527.

(12) Gnr. is an abbreviation for Gårdsnummer (English translation: Cadastral unit number)

(13) Bnr. is an abbreviation for Bruksnummer (English translation: Property unit number)

(14) M.fl. is an abbreviation for Med flere (English translation: With others)

(15) Document No 1045487 (attachment 1).

(16) Document No 1057574 (attachment 23).

(17) Document No 1045487 (attachment 2).

(18) Document No 909656.

(19) Document No 1042409 (attachments 6–7).

(20) Document No 1057574 (attachment 14).

(21) Documents No 909658 &1042409.

(22) Document No 1057574 (attachment 14).

(23) Document No 1042409 (attachment 4).

(24) Document No 909657.

(25) Documents No 909661 and 1042409 (attachments 1 and 2).

(26) Document No 909659.

(27) Document No 1045487 (attachments 4–7).

(28) Document No 909660.

(29) Lister District Court ruling No 11-061831SKJ-LIST [2011].

(30) Document No 1040143 (attachment 3).

(31) Document No 1040143 (attachments 4–5).

(32) https://www.finn.no/boat/dock/available/ad.html?finnkode=142829167.

(33) Document No 1057574 (attachment 6).

(34) The Norwegian term used in the supporting documents for usable floor area is bruksareal (BRA).

(35) Document No 1057574 (attachments 25–26).

(36) OJ L 342, 21.12.2017, p. 35 and EEA Supplement No 82, 21.12.2017, p. 1, para. 48.

(37) NoA, para. 51.

(38) NoA, para. 66.

(39) NoA, para. 68.

(40) NoA, para. 76.

(41) Case E-12/11 Asker Brygge [2012] EFTA Ct. Rep. 536, para. 64.

(42) Document No 1042409 (attachments 6–7).

(43) Document No 1057574 (attachment 14).

(44) Document No 1042409.

(45) Asker Brygge, paras. 12, 50 and 59.

(46) Document No 1057574 (attachment 14).

(47) NoA, para. 83.

(48) NoA, para. 84.

(49) NoA, para. 97.

(50) NoA, para. 187.

(51) NoA, para. 189.

(52) See Glastad’s investment portfolio: https://www.glastad.no/investment-portfolio/.

(53) See stores located in the shopping centre: https://amfi.no/kjopesentre/amfi-farsund/butikker/.

(54) See further information about the Olav Thon Group here: http://www.olavthon.no/English/.

(55) See further information about Klepierre here: http://www.klepierre.com/en/portfolio/scandinavia/norway/.

(56) See section 1.4 of the Authority’s Decision No 232/11/COL on the notification of the sale of land at Nesøyveien 8, gnr. 32 bnr. 17 in the municipality of Asker (OJ L 323, 22.11.2012, p. 32, and EEA Supplement No 65, 22.11.2012, p. 56).

(57) Judgment in Eventech, C-518/13, EU:C:2015:9, para. 66.