State aid — SAM 020.500.040 — Norway
Date: 2003-12-04
Institutions: EFTA Surveillance Authority
Subjects: Norway, State aid, control of State aid, real property, sale

4.12.2003

EN

Official Journal of the European Union

C 294/13

EFTA SURVEILLANCE AUTHORITY

STATE AID

SAM 020.500.040 — Norway

(2003/C 294/08)

EFTA Surveillance Authority notice pursuant to Article 1(2) of Protocol 3 of the Surveillance and Court
Agreement, to other EFTA States, EU Member States and interested parties regarding proposed aid with
regard to the sale of 1 744 rental apartments in Oslo (State aid SAM 020.500.040).

By means of Decision No 113/03/COL of 11 July 2003, the EFTA Surveillance Authority initiated
the Surveillance and Court Agreement. The
to Article 1(2) of Protocol 3 of
proceedings pursuant
Norwegian Government has been informed by means of a copy of the decision.

I. FACTS

1. Notification

By letter from the Mission of Norway to the European Union
dated 10 February 2003 (Document No 03-829-A), forwarding
a letter from the Ministry of Trade and Industry dated 7
February 2003 and a letter without date from the Municipality
of Oslo (including 31 annexes), all received and registered by
the Authority on 11 February 2003, the Norwegian authorities
submitted a notification pursuant
the
the Municipality of
Surveillance and Court Agreement of
Oslo's decision to sell 1 744 municipal rental apartments in
Oslo.

to Article 1(3) of

By letter dated 9 April 2003 (Document No 03-2133-D), the
Authority requested further information.
the
Competition and State Aid Directorate also expressed doubts
about the compatibility of the sale with the State aid provisions
of the EEA Agreement.

In this letter,

By telefax from the Ministry of Trade and Industry dated 14
May 2003 (Document No 03-3127-A),
forwarding a letter
dated 14 May 2003 from the Municipality of Oslo (Office of
the City Advocate), both received by the Authority on 14 May
2003,
additional
information. The same documents were received by letter
from the Norwegian Mission to the European Union dated 5
June 2003, received and registered by the Authority on 10
June 2003 (Document No 03-3630-A).

the Norwegian

authorities

submitted

2. Background

By letter dated 18 May 2001 (Document No 01-3792-D), the
Authority requested that the Norwegian authorities submit all
relevant information regarding the sale of 1 744 apartments to

‘Fredensborg Boligutleie ANS’ so that
the Authority could
assess whether the sale was in accordance with Article 61 of
the EEA Agreement and Chapter 18(B), ‘State aid elements in
sales of
the
Authority's State Aid Guidelines.

land and buildings by public Authorities’, of

By letter of 31 May 2001 (Document No 01-4004-D), the
Authority reminded the Norwegian authorities of the ‘standstill-
in Article 1(3) of Protocol 3 to the Surveillance and
clause’
Court Agreement and the injunction provisions
(‘interim
‘Specificities regarding aid
measures’) contained in Chapter 6,
unlawful on procedural grounds’, of the State Aid Guidelines.

By letter dated 26 June 2001 from the Mission of Norway to
the European Union, received and registered by the Authority
on the same day (Document No 01-5730-A), the Norwegian
authorities submitted the documents they, in agreement with
the Municipality of Oslo, regarded as containing the most
relevant available information in order to assess whether the
sale was in accordance with Article 61 of the EEA Agreement.
The information submitted on 26 June 2001 contains a letter
from the Ministry of Trade and Industry to the Authority dated
the
15 June 2001. The Ministry states in this letter ‘that
Ministry does not want
any view on the
considerations presented in the submitted documents’.

to express

The information submitted on 26 June 2001 also contains a
letter dated 5 June 2001 from the Municipality of Oslo to the
Ministry of Trade and Industry. In this letter the Municipality of
Oslo argues that the sale is in accordance with the Authority's
State Aid Guidelines. The Municipality claims that an inde-
pendent expert evaluation was carried out in accordance with
Chapter 18(B), point 2(2) of the State Aid Guidelines and that
the divergence of 3,4 % between the sales price and the value
assessment is in line with market conditions as described in
Chapter 18(B), point 2(2)(b) of the State Aid Guidelines.

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Official Journal of the European Union

4.12.2003

to (1).

the Municipality was subject

The Municipality of Oslo points out that the sales process must
be seen in light of the time constraints. The Government,
implementing a hospital reform, caused the time constraint
In the letter of 5
that
June 2001 it is stated that the time constraint might have
resulted in a smaller number of bidders than desirable, and
that the buyers submitted lower bids than those they would
their
have submitted in a situation with more time at
disposal (2). The Municipality
a
potentially lower price caused by the time constraint does
not amount to State aid as long as the Municipality, in such
a situation (under time constraints), has behaved as a private
investor would have behaved in such circumstances.

however,

argues,

that

By letter dated 20 July 2001 (Document No 01-5673-D), the
Authority stated that it had strong doubts regarding whether
the procedure provided for in Chapter 18(B), point 2(2) of the
State Aid Guidelines was followed. The Authority expressed
doubts whether the evaluation was carried out prior to the
sales negotiations, whether the evaluation was carried out on
the basis of generally accepted market indicators and valuation
standards and whether a sales price 3,4 % below the evaluation
was in accordance with the State Aid Guidelines. The Authority
invited the Norwegian authorities to comment on this matter,
which the Authority would take into consideration before
taking a decision on whether to open a formal investigation
procedure (Article 1(2) of Protocol 3 to the Surveillance and
Court Agreement).

The Ministry of Trade and Industry submitted its comments by
telefax on 27 July 2001 (Document No 01-6026-A), received
and registered by the Authority the same day, where the
Ministry stated that further proceedings ‘will be carried out
with the purpose to ensure that Norway's obligations under
Article 61 of the EEA Agreement are respected’. The Ministry
informed the Authority that on 25 July 2001 the County
Governor of Oslo and Akershus decided that the Municipality
of Oslo cannot lawfully transfer the right of ownership before
the County Governor has made his final decision. A new
expert evaluation of the value of the buildings would also be
the new value assessment was
carried out.
contained in the
from the Municipality of Oslo
letter
received on 11 February 2003, see point I(3)).

(The results of

By letter dated 31 July 2001 (Document No 03-829-A), the
Authority informed the Norwegian authorities that
it had
decided not to open a formal investigation procedure at this
stage. The Authority stated that it was awaiting a formal notifi-
cation of the sale in accordance with its State Aid Guidelines.

3. Description of the proposed sale

In March 2001, the Municipality of Oslo decided to sell a
portfolio of 1 744 rental apartments before the end of May
2001. These apartments were mainly rented out to employees

(1) Ot.prp. nr 66 (2000-2001) Om lov om helseforetak m.m. (helse-

foretaksloven).

(2) The passage reads as follows in Norwegian: ‘Dette tidspresset kan ha
ført til at kretsen av interesserte ble mindre enn ønskelig, og/eller at
kjøperne la inn lavere bud enn de ville gjort i en situasjon med
bedre tid’.

in municipal hospitals. On 16 March 2001 the independent
real estate agency, Akershus Eiendom AS, was given the task of
selling the apartments en bloc on behalf of the Municipality of
Oslo. On 30 March 2001 an independent consultancy firm,
Catella Eiendoms-Consult AS, submitted a report on and
appraisal of
the apartments. A second appraisal was later
ordered from an independent appraiser, OPAK AS, and
submitted on 26 April 2001. Akershus Eiendom launched
the sale on 2 April 2001 with the report from Catella. The
sale of the apartments was made public by a press release dated
19 April 2001. A prospectus covering the apartments was
distributed on 23 April 2001. The appraisal done by OPAK
proved to be more modest than Catella's; NOK 795 million
versus NOK 1 143 million. OPAK's
also
distributed to potential investors.

appraisal was

Investors were asked to submit their bids by 2 May, and the
bidding contest was brought to an end on 3 May. On 8 May,
Sundal Collier & Co ASA, Fredensborg Boligutleie ANS being
its successor, undertook to purchase the apartments. The
Municipality of Oslo considered this binding offer for three
more weeks. An adjustment of
the OPAK appraisal was
requested by the Municipality of Oslo in order to reflect a
correction of the value of certain leases due to factual circum-
stances not considered in the original appraisal. These factual
corrections lead OPAK to reduce the value of the assets to
NOK 740 million. The adjustments were presented to the
Municipality of Oslo on 14 May. By signing the contract on
31 May, the Municipality of Oslo sold the 1 744 apartments en
bloc at a price of NOK 715 million to Fredensborg Boligutleie
ANS.

In 2001 the Authority received information concerning the
sales process and the value assessments from Catella and
OPAK described in brief above. In the letter from the Munici-
pality of Oslo attached to the letter dated 7 February 2003
from the Ministry of Trade and Industry,
the Municipality
submitted comprehensive information concerning the sale,
including information already submitted to the Authority in
the Authority has summarised in
2001.
particular the new information and arguments submitted.

In the following,

The conclusion of the new appraisal carried out by FIGA/
Nortakst (in June 2002) was that the value of the apartments
was NOK 1 055 million. In the letter from the Municipality of
Oslo attached to the letter dated 7 February 2003 from the
the Municipality contests
Ministry of Trade and Industry,
whether this appraisal reflects the value of the apartments
and concludes that the appraisal from OPAK best reflects the
market value.

The Municipality furthermore argues that the sale falls outside
the scope of Article 61(1) EEA. The first reason is that the
Municipality considers that
the price obtained reflects the
market value of the assets. In the view of the Municipality,
the sale was made after a well publicized open auction with
several participants, all having equal access to the relevant
information, and the bidder with the highest bid was chosen.
and
Thus,
‘is by definition at market value
is,
consequently does not contain State aid’. Given this,

sale

the

it

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Official Journal of the European Union

C 294/15

‘if a different
according to the Municipality, also irrelevant
valuation of the assets existed prior to the bidding procedure’.
In the present case the Municipality considers that there was,
even at the time of the sale, an independent appraisal of the
assets that confirms that market value was obtained.

Chapter 3, point 2(1)(5) of the State Aid Guidelines also states
‘When an EFTA State has doubts whether or not a
that:
planned measure contains State aid elements,
the EFTA
Surveillance Authority should be informed of
it before the
measure is put into effect’.

i.e.

Fredensborg

Boligutleie ANS

there is no indication that

Secondly, the Municipality considers that even if one should
find that there is an element of aid in the transaction, and that
competition has been distorted as a consequence of certain
undertakings,
being
favoured,
intra-EEA trade is
affected. In this context, the Municipality considers that the
relevant market is the market for rental homes. As Fredensborg
Boligutleie ANS, in its capacity as provider of rental homes in
competitive
Oslo and surrounding areas,
relationship with providers of
in other
EEA-countries, the Municipality argues that the exchange of
services between EEA countries is not affected. Also,
is
highly unlikely that an aid to Fredensborg would affect cross-
border trade in other markets. The Municipality therefore
concludes that the sale of the apartments does not involve
any State aid within the meaning of Article 61 EEA.

rental homes

is not

in a

it

In the letter from the Municipality of Oslo dated 14 May 2003,
the Municipality of Oslo submits firstly that it will not argue
that the apartments were sold in full compliance with the
procedure described in Chapter 18(B), point 2(1) of the State
Aid Guidelines, but that the price achieved nonetheless reflects
market value. Secondly, the Municipality argues that the sale
was conducted in accordance with Chapter 18(B), point 2(2) of
the State Aid Guidelines and that the valuation carried out by
OPAK (NOK 740 million) expressed the market value. Thirdly,
considering the cross-border impact, the Municipality argues
that the Authority has not done an assessment of the market
as called for.

Finally, the Municipality refers to a letter dated 18 February
2003 from Fredensborg Boligutleie ANS (the buyer) to the
Authority, where the buyer argues that one must be able to
apply ‘the private investor test’ to the sale and that the time
constraint caused by the hospital reform is relevant when
assessing whether the price obtained is below market value.

The transfer of ownership of the apartments is still subject to
the final decision of
the County Governor of Oslo and
Akershus. In light of these circumstances, the Authority takes
note of the notification submitted by the Norwegian authorities
by letter from the Mission of Norway to the European Union
dated 10 February 2003,
received and registered by the
Authority on 11 February 2003 (Document No 03-829-A),
telefax from the Ministry of Trade and Industry dated 14
May 2003, received and registered by the Authority on 14
May 2003 (Document No 03-3127-A), and letter from the
Mission of Norway to the European Union dated 5 June
2003, received and registered on 10 June 2003 (Document
No 03-3630-A).

2. The existence of State aid and compatibility of the 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
the
production of certain goods shall, in so far as it affects trade
between Contracting Parties, be incompatible with the func-
tioning of this Agreement.’

certain undertakings or

favouring

Aid falling within this provision is incompatible with the EEA
Agreement and hence prohibited, provided that the following
four conditions are fulfilled:

1. the aid is granted by ‘EC Member States, EFTA States or

through State resources in any form whatsoever’;

2. the aid ‘distorts or threatens to distort competition’;

II. APPRECIATION

1. Notification requirement and standstill-obligation

certain goods’; and

3. the aid favours ‘certain undertakings or the production of

in sufficient

Article 1(3) of Protocol 3 to the Surveillance and Court
‘The EFTA Surveillance Authority shall be
Agreement states:
informed,
its
comments, of any plans to grant or alter aid’. Aid provided
without notification or aid that is notified late, i.e. notified after
being ‘put into effect’ is considered unlawful aid, see Chapter
3.2.2(1) of the State Aid Guidelines.

time to enable it

to submit

Chapter 18(B), point 2(3) of the State Aid Guidelines states inter
alia that the EFTA States should notify any sale of land and
buildings by public authorities that was not concluded on the
basis of an open and unconditional bidding procedure and any
sale that was, in the absence of such procedure, conducted at
less than market value.

4. the aid ‘affects trade between the Contracting Parties’.

‘State aid elements on sales of

Chapter 18(B),
land and
buildings by public Authorities’, of the State Aid Guidelines,
gives further information on how the Authority interprets and
applies the provisions of the EEA Agreement governing State
aid when it comes to assessing sales of land and buildings.
Chapter 18(B), point 2(1) describes a sale through an uncon-
ditional bidding procedure, while Chapter 18(B), point 2(2)
describes a sale without an unconditional bidding procedure
(independent expert evaluation). These two procedures allow
EFTA States to handle sales of land and buildings in a way
that precludes the existence of State aid.

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Official Journal of the European Union

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C o n d i t i o n 1 o f A r t i c l e 6 1 ( 1 ) E E A

Condition 1 above is directed at all aid financed from public
resources, including aid granted by regional or local bodies. It
is thus clear that aid from the Municipality of Oslo falls within
the notion of State resources. Sale of publicly owned land and
buildings below market value implies an involvement of State
resources.

I(3))

(see point

In the letter dated 14 May 2003, the Municipality of Oslo
states
the
compliance with the
procedure
in Chapter 18(B), point 2(1) of
requirements set out
the
the objectives behind these provisions
that
Guidelines, but
were obtained (i.e. market value).

it will not argue

followed was

in full

that

that

In Chapter 18(B), point 2(1)(1)(a) of the State Aid Guidelines it
is stated that: ‘An offer is “sufficiently well-publicized” when it
is repeatedly advertised over a reasonably long period (two
months or more)
in the national press, estate gazettes or
other appropriate publications and through real-estate agents
addressing a broad range of potential buyers, so that it can
come to the notice of all potential buyers.

The intended sale of land and buildings, which in view of their
high value or other features may attract investors operating on
a Europe-wide or international scale, should be announced in
publications which have a regular international circulation.
Such offers should also be made known through agents
addressing clients on a Europe-wide or international scale’.

As far as the Authority understands the sales process described
in the notification, the sale was not advertised in accordance
with the above quoted provisions of the State Aid Guidelines.
The Authority has therefore strong doubts as to whether the
Municipality of Oslo obtained the objectives behind the
provisions of Chapter 18(B), point 2(1) of the Guidelines.

In the letter dated 14 May 2003, the Municipality of Oslo
furthermore
sale was
conducted in compliance with Chapter 18(B), point 2(2) (inde-
pendent expert evaluation) of the State Aid Guidelines.

(see point

argues

I(3))

that

the

generally

Chapter 18(B), point 2(2)(a) of the State Aid Guidelines states
inter alia that: ‘an independent evaluation should be carried out
by one or more independent asset valuers prior to the sales
negotiations in order to establish the market value on the basis
of
and valuation
in Chapter 18(B), point 2(2)(b) it is
standards’. Furthermore,
the land and
to sell
stated:
buildings at the market value, it is clear that the value set by
the valuer cannot be obtained, a divergence of up to 5 % from
that value can be deemed to be in line with market conditions’.

‘If, after a reasonable effort

accepted market

indicators

the basis of generally accepted market indicators and valuation
standards and, taking into account the time constraint, whether
a reasonable effort to sell the apartments at market value took
place.

the

sales price
the

agreed (and notified) was
Furthermore,
the new value
result of
NOK 715 million, while
appraisal
from FIGA/Nortakst was NOK 1 055 million (see
point I(3)). The Municipality of Oslo argues that the appraisal
from OPAK (NOK 740 million) should be chosen as reflecting
market value. Taking into account
the huge discrepancy
between the two appraisals, the Authority has strong doubts
as to whether the agreed sales price (NOK 715 million) reflects
the market value.

C o n d i t i o n s 2 a n d 4 o f A r t i c l e 6 1 ( 1 ) E E A

Conditions 2 and 4 entail that the measure must distort or
threaten to distort competition and affect trade between the
contracting parties. Under settled case law for the purposes of
these provisions, the mere fact that an aid strengthens a firm's
firms, which are
position compared with that of other
competitors
is enough to allow the
conclusion to be drawn that intra-EEA trade is affected. It is
irrelevant that the aided enterprises do not export its produce.

in intra-EEA trade,

The Municipality of Oslo argues (see point I(3)) that even if the
price obtained were found to be below market value the sale of
the apartments would not constitute aid within the meaning of
Article 61(1) EEA because the market in which the buyer is
involved does not contain elements of cross-border trade. The
Municipality also argues that the market for rental homes in
south-eastern Norway has a local character.

The Authority considers that the real estate market in Oslo is
not limited to local undertakings. Fredensborg Boligutleie ANS
is actually or potentially in competition with similar under-
takings in Norway and other EEA States. A sales price below
market value favouring Fredensborg Boligutleie ANS would
distort or threaten to distort competition and affect
trade
between Contracting Parties. Consequently, conditions 2 and
4 are, in the Authority's view, fulfilled.

C o n d i t i o n 3 o f A r t i c l e 6 1 ( 1 ) E E A

Condition 3 means that
the measure must be specific or
selective, i.e. that it affects the balance between the beneficiary
and its competitors. In the case at hand, the beneficiary would
be Fredensborg Boligutleie ANS. The Authority understands
that it is not disputed that this condition is fulfilled.

Based on the information submitted, the Authority has strong
doubts as to whether the evaluation by OPAK (the evaluation
used by the Norwegian authorities) was carried out prior to the
sales negotiations, whether the evaluation was carried out on

C o n c l u s i o n c o n c e r n i n g A r t i c l e 6 1 ( 1 ) E E A

In view of the considerations above, it appears to the Authority
that the sale of the concerned apartments may constitute State
aid in the meaning of Article 61(1) of the EEA Agreement.

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3. Private investor test

HAS ADOPTED THIS DECISION:

In the letter dated 14 May 2003, the Municipality of Oslo
refers to a letter to the Authority dated 18 February 2003
from the buyer of
the apartments (Fredensborg Boligutleie
ANS) where the buyer argues that one must be able to apply
‘the private investor test’ (see point I(3)).

As regards the position of the Municipality of Oslo as investor,
the argument that the transaction at issue was reasonable for
the Municipality taking into account the hospital reform and
the alleged time constraint, does not, in the Authority's view,
preclude the application of
the provisions on State aid
contained in the EEA Agreement. The hospital reform does
not obviate the need to ascertain whether the sale strengthens
the buyer's position by giving him an advantage that he would
not have obtained under normal market conditions.

The Authority has therefore doubts as to the arguments from
the Municipality of Oslo (and the buyer) also on this point.

4. Compatibility of the aid

The Norwegian authorities have argued that the notified sale
does not contain aid, and have not put forward any arguments
concerning compatibility. However, after assessing the likely
involvement of State aid in the sale of the apartments, it has
to be considered whether such aid could be compatible with
the EEA Agreement by virtue of Article 61(2) and (3) of the
Agreement.

The application of Article 61(2) does not appear to be appro-
priate. For example, the Authority cannot see that the sale
entails aid having a social character granted to individual
consumers.

received,

there
Given the information the Authority has
appears no reason to apply Article 61(3)(a)-(c) of the EEA
Agreement either.
In the view of the Authority, the sale is
not designed to promote the economic development of areas
where the standard of living is abnormally low or where there
is serious underemployment, to promote a project of common
European interest or to facilitate the development of certain
economic activities or of certain economic areas.

5. Conclusion

aid with the

In view of the above facts and considerations, the Authority
has doubts whether the sale of 1 744 apartments from the
Municipality of Oslo to ‘Fredensborg Boligutleie ANS’
contains State aid, and if it does, about the compatibility of
the EEA Agreement.
the
functioning of
Consequently, and in accordance with Chapter 5(2) of
the
State Aid Guidelines, the Authority is obliged to open the
procedure provided for in Article 1(2) of Protocol 3 to the
Surveillance and Court Agreement. The decision to open
proceedings is without prejudice to the final decision of the
Authority, which may conclude that the sale in question is
compatible with the functioning of the EEA Agreement.

1. The Procedure provided for in Article 1(2) of Protocol 3 to
the Surveillance and Court Agreement is opened with regard
to the notified sale of 1 744 apartments from the Munici-
pality of Oslo to ‘Fredensborg Boligutleie ANS’.

2. The Norwegian Government is invited, pursuant to point
the Authority's State Aid
5(3)(1)(1) of Chapter 5 of
Guidelines, to submit its comments on the opening of the
formal investigation procedure within two months from the
notification of this decision.

3. The Norwegian Government

is requested to submit all
information enabling the Authority to examine the compati-
bility of the sale in question with the EEA Agreement within
two months from the notification of this decision.

4. The Norwegian Government is requested to notify without
delay the potential recipient undertaking, ‘Fredensborg Boli-
gutleie ANS’, of the initiation of the proceedings and to
inform the undertaking that it may have to repay any aid
unduly received.

5. Other EFTA States, EC Member States and interested parties
shall be informed by the publishing of this decision in the
EEA Section of the Official Journal of the European Union and
the EEA Supplement
inviting them to submit
comments within one month from the date of publication.

thereto,

6. This decision is authentic in the English language.

Done at Brussels, 11 July 2003.

For the EFTA Surveillance Authority

Einar M. BULL

The President

Hannes HAFSTEIN

College Member

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

EFTA Surveillance Authority
74, rue de Trèves
B-1040 Brussels.

The Comments will be communicated to the Norwegian
Government. Confidential
the
interested party submitting the comments may be requested
in writing, stating the reasons for the request.

the identity of

treatment of