EFTA Surveillance Authority Decision No 318/05/COL of 14 December 2005 to close 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 in connection with the establishment of Entra Eiendom AS (Norway)
Date: 2005-12-14
Institutions: EFTA Surveillance Authority
Subjects: Norway, State aid, business start-up, control of State aid, excise duty, registration tax, tax exemption

16.10.2008

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Official Journal of the European Union

L 275/45

IV

(Other acts)

EUROPEAN ECONOMIC AREA

THE EEA JOINT COMMITTEE

EFTA SURVEILLANCE AUTHORITY DECISION

No 318/05/COL

of 14 December 2005

to close 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 in connection with the establishment of Entra Eiendom AS (Norway)

THE EFTA SURVEILLANCE AUTHORITY,

WHEREAS:

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 appli­
cation and interpretation of Articles 61 and 62 of the EEA
Agreement,

HAVING CALLED ON interested parties to submit their comments
pursuant to the provisions cited above (4) and having regard to
their comments,

(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.
The State aid guidelines are available on the Authority’s website:
www.eftasurv.int

(4) Dec. No: 132/04/COL. The decision to open the formal investigation
procedure was published in OJ C 319, 23.12.2004, p. 17, and in the
EEA Supplement No 64, on the same date, p. 46. The decision can
also be found at the Authority’s homepage: http://www.eftasurv.int/
fieldsofwork/fieldstateaid/stateaidregistry/sadecinor04/132_04_
entra.DOC

I. FACTS

1. Procedure and correspondence

the
By letter dated 22 May 2002 (Doc. No: 02-3856 D),
to submit
Authority requested the Norwegian Government
information regarding the establishment of Entra
relevant
Eiendom AS (hereinafter ‘Entra’)
to enable the Authority to
assess whether the founding of the enterprise was in accordance
with the State aid rules. The Norwegian authorities responded
by letter from the Mission of Norway to the European Union
dated 25 June 2002, forwarding a letter dated 20 June 2002
from the Ministry of Labour and Government Administration,
both received and registered by the Authority on 26 June 2002
(Doc. No: 02-4850 A).

The

requested

additional

information.

By letter dated 10 October 2002 (Doc. No: 02-7036 D) the
Authority
letter
addressed, as point 1, the exemption from document duties
and registration fees connected with the change of ownership
of real estate, and as point 2, the deduction in the assessed
value on the basis of special
termination conditions. The
Norwegian authorities submitted the additional information by
letter from the Mission of Norway to the European Union dated
14 November 2002, forwarding a letter from the Ministry of
Trade and Industry dated 7 November 2002, both received and
registered by the Authority on 14 November 2002 (Doc. No:
02-8219 A).

L 275/46

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Official Journal of the European Union

16.10.2008

same day

By telefax from the Ministry of Trade and Industry dated
9 December 2002, received and registered by the Authority
the
the Norwegian
(Doc. No: 02-8912 A),
Government requested that the Authority provide its conclusion
in the case regarding the establishment of Entra. By letter dated
17 December 2002 (Doc. No: 02-9062 D) to the Mission of
Norway to the European Union, the Authority informed the
Norwegian authorities
the Authority might be in a
position to close the part of the case as regards deduction in
the assessed value on the basis of special termination conditions
depending upon the submission of additional specified and
detailed documentation concerning this issue.

that

Such detailed documentation was submitted by a telefax from
the Ministry of Trade and Industry dated 23 January 2003,
received and registered by the Authority on 23 January 2003
(Doc. No: 03-424 A). By letter to the Mission of Norway to the
European Union dated 31 January 2003 (Doc. No: 03-588 D),
the Authority informed the Norwegian authorities that — since
no aid seemed to be involved — it ‘will not raise objections to the
value assessment made in the opening balance of the properties trans­
ferred from the Norwegian State to Entra Eiendom AS’. However,
the Authority stressed that this statement was without prejudice
to the issue on document duties and registration fees.

and

excise

By letter dated 2 April 2003 (Doc. No: 03-1827 D),
the
Authority once more addressed the issue of exemption from
registration fees
the
Norwegian authorities to provide additional and clarifying infor­
mation. By letter from the Mission of Norway to the European
Mission dated 5 June 2003,
forwarding a letter from the
Ministry of Trade and Industry dated 4 June 2003, both
received and registered by the Authority on 10 June 2003
(Doc. No: 03-3631 A), additional information was submitted.

requested

duties

and

On 16 June 2004, the Authority decided to open the formal
investigation procedure (Dec. No: 132/04/COL). The decision to
open the formal
investigation procedure was published on
23 December 2004.

By telefax dated 13 August 2004 (Event No: 290206) and letter
from the Norwegian Mission to the European Union dated
17 August 2004, received and registered by the Authority on
18 August 2004 (Event No: 290456), the Norwegian auth-
orities requested a one month extension of the deadline for
submitting comments.

By letter dated 17 August 2004 (Event No: 290305),
Authority agreed to extend the deadline by one month.

the

By telefax dated 16 September 2004 (Event No: 292867) and
letter
EU dated
20 September 2004, forwarding a letter from the Ministry of

from the Norwegian Mission to the

Trade and Industry dated 16 September 2004, received and
registered by the Authority on 21 September 2004 (Event
No: 293392), the Norwegian authorities submitted comments
to the opening decision. The Norwegian authorities concluded
that the exemption from document duties and registration fees
provided for in the establishment of Entra does not constitute
State aid within the meaning of Article 61(1) of
the EEA
Agreement.

The Authority did not receive any comments to the opening
decision from other interested parties within the deadline of one
month after publication in the Official Journal of the European
Union.

By letter dated 4 May 2005, received and registered by the
Authority on 9 May 2005 (Event No: 318691), the law Firm
to the
Selmer,
Authority’s
investigation
open
decision
procedure (see point 3.4 below).

submitted comments

representing Entra,

formal

the

to

The case was discussed at a meeting in Oslo on 19 May 2005
with representatives from different Norwegian Ministries and
representatives from the Authority present.

By telefax from the Ministry of Modernisation dated 26 July
2005 (Event No: 327938), and letter from the Mission of
Norway to the EU dated 1 August 2005, received and registered
on 3 August 2005 (Event No: 329110), forwarding a letter
dated 30 June 2005 from the Ministry of Trade and Industry,
the Norwegian authorities
information
concerning whether the exemption constituted an economic
advantage for Entra. The conclusion of the Ministry of Trade
and Industry was that the exemption was no advantage for
Entra.

submitted further

2. The establishment of Entra

2.1. Proposal to establish a new limited liability company

The Norwegian Government presented the reorganisation of the
public body,
the Directorate of Public Construction and
Property (‘Statsbygg’), and the establishment of Entra, on
4 June 1999 (1). On the same date, the Government presented
a special Act on the conversion of parts of the real estate
activity of Statsbygg to a limited liability company to resolve
some transitional questions concerning the transformation and
establishment of Entra (2). Paragraph 3 of this Act (hereinafter

(1) ‘St prp nr 84 (1998-99) Om ny strategi for Statsbygg og etablering
av Statens utleiebygg AS’. The original name of the company was
‘Statens utleiebygg AS’. Hereinafter ‘Entra’ is used for Entra Eiendom
AS and Statens utleiebygg AS.

(2) ‘Ot prp nr 83 (1998-99) Om lov om omdanning av deler av
Law of

eiendomsvirksomhet

aksjeselskap’.

til

Statsbyggs
18 February 2000, No 11.

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L 275/47

‘the contested Act’) states that re-registration in the real estate
registry and other public registries are to be done as a change
of name. As a consequence of this, Entra was not obliged to pay
document duties and registration fees, but still became the title
holder in the Real Estate Register.

In the period from 4 June 1999 and until the final valuation
was settled by Royal Decree 22.6.2000, the value of the assets
to be transferred was subject to extensive scrutiny. The aim was
to determine the correct transaction value in accordance with
the
the principles from Proposition No 84 (1998-99)
transfer of the assets. Several methods and assumptions for
arriving at this price were considered.

for

is

body

an administrative

in construction and property affairs

(‘Forvaltningsbedrift’),
Statsbygg
responsible to the Ministry of Modernisation. Statsbygg acts
the Norwegian Government as manager and
on behalf of
advisor
and offers
premises to governmental organisations. Statsbygg continued
operations and management of the property stock that was
not transferred to Entra. Statsbygg currently manages around
2,2 million m2 of floor space,
in Norway and abroad. The
property portfolio consists of office buildings, schools, accom­
the country,
modation and specialised buildings throughout
embassies and residences outside Norway. The annual building
budget
is approximately NOK 2,3 billion (some EUR 288
million). Statsbygg has 669 employees (October 2005) (1).

In St.prp. nr. 84 (1998-1999) it is i.a. stated that the purpose of
the reorganisation is to clarify the different roles of Statsbygg
and to achieve a more efficient use of buildings owned by the
State. To ensure better framework conditions for the part of
Statsbygg being in competition with other private undertakings,
buildings operated in a competitive market (‘konkuranseutsatte
bygg’) were to be diverged from the special purpose buildings
and become part of a new portfolio of real estate owned by
Entra. The Government indicated that at a later stage, an alter­
native could be to sell part of the company to private interests.

‘The main
Entra has the following object clause in its bylaws:
the company is to provide state agencies with
purpose of
premises. The company may own, purchase, sell, operate and
administer
in
connection with this. The company may also own shares or
interests in and participate in other companies that conduct
activities such as those mentioned in the previous sentence’
(unofficial translation by the Authority).

and conduct other businesses

estate

real

2.2. Entra’s opening balance

In the proposal presented to Parliament,
the Norwegian
Government laid out the basic principles behind the transfer
of assets to the new undertaking. No conclusions were drawn
with regards to the actual value of the assets to be transferred.
Rather, it is stated that this question was to be dealt with at a
later stage, as it is written that: ‘the final opening balance for the
company will be presented in the budget for year 2000’ (2). Nor was
there established any specific methodology for determining this
value.

(1) Source: http://www.statsbygg.no/english/
(2) Unofficial translation by the Authority.

Firstly, Statsbygg requested the independent consultant Catella
Eiendom Consult AS (CEC) to perform a valuation of the prop­
erties to be transferred. This valuation was done according to
the Norwegian Valuers
and Surveyors Association (NTF)
framework for valuation, by evaluating each property and
then adding up the individual properties to arrive at the total
portfolio value. The result arrived at was NOK 3 852 110 000.
This valuation was later audited by the Norwegian Valuers’ and
Surveyors’Association (NTF), who concluded that
the value
arrived at was acceptable, but cautiously assessed.

Secondly, Statsbygg performed its own valuation of the assets.
This was done according to another methodology. Statsbygg
used the discounted cash flows for the total portfolio as a
basis
considering each
property as a separate calculation to be added to the total.
The result arrived at was NOK 3 137 500 000.

calculations,

instead of

their

for

Thirdly,
the Ministry of Administration also performed a
valuation, based on the same principles as Statsbygg, but with
different
was
NOK 3 337 500 000.

assumptions.

arrived

result

The

at

The band between the highest and lowest valuations at this
point was NOK 714 610 000, or a difference of 22 % relative
to the lowest assumed price. Without going into further details,
it should be mentioned that the methods used differ signifi­
cantly. This observation was also made in an independent
audit carried out by PricewaterhouseCoopers (PWC), where
the three above values were assessed.

In their assessment PWC concluded that given the large meth­
odological differences, a detailed comparison between the three
assessments would be both a complex task to assemble and,
more importantly, of little relevance. They concluded that ‘In our
view, all the three values are all within a reasonable band’. Further,
PWC stressed the point that it was impossible to arrive at any
specific number that should be regarded as the ‘correct’ value.
Rather, this price would be the subject of negotiations between
the parties,
according to the
assumptions made.

and might

fluctuate

thus

L 275/48

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Official Journal of the European Union

16.10.2008

Fourthly, the Ministry decided to reassess the value once again.
After an extensive discussion on whether or not the fact that
the government agencies were able to terminate their leases on
12 month’s notice should affect the market value of the prop­
to
erties,
NOK 2 837 550 000. This value was submitted to Stortinget (1)
in connection with the State budget for 1999-2000. However,
the proposal reserved the right for the Government to make
final adjustments.

the properties was now set

value of

the

Fifthly, this right to adjust the final balance was exercised by the
Ministry, who after adjusting, inter alia, some of Entra’s rental
contracts, and thereby changing the assumptions of the model
again, arrived at a higher value. By Royal Decree the value in the
final opening balance was set at NOK 3 222 871 000.

has

that

The process is summarised below. As can be seen, the band of
values
from
NOK 3 852 110 000 to NOK 2 837 550 000. This difference
of NOK 1 014 560 000, or 35,8 % relative to the lowest price,
can be explained both by differences in the methodology
applied, and the assumptions made in the different models.

suggested

ranges

been

Valuation by Catella
(CEC) (1)

Eiendoms Consult

NOK 3 852 110 000

Statsbygg’s recommendation

Ministry’s valuation

Ministry’s reassessed value due to termination
conditions (2)

NOK 3 137 500 000

NOK 3 337 500 000

NOK 2 837 550 000

Final opening balance (3)

NOK 3 222 871 000

(1) ‘Porteføljevurdering konkurransebyggene Statsbygg’ Letter to Statsbygg dated

10.8.1999 containing CEC’s valuations.

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

(3) ‘Statens utleiebygg AS – Fastsettelse av åpningsbalanse og endelige bevilgninger

til egenkapital og lån’. Kongelig resolusjon av 22.6.2000.

AS’.

The final opening balance was based on the discounted cash
flow of the total portfolio, as used in Statsbygg’s original recom­
mendation, but based on certain changes in assumptions.

property,

Subsequently,

contributions.

Entra was originally founded as a ‘minimum’ company based on
and
cash
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. On the basis of the Act estab­
lishing Entra, no document duties and registration fees were

capital

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

utleiebygg AS’.

paid. The company is a limited liability company 100 per cent
owned by the Norwegian State.

company

(group (2)) had an operating

income of
The
NOK 1 072 million (some EUR 128 million (3)) in 2004, and
a profit before tax of NOK 134 million (some EUR 16 million).
The group’s consolidated equity (book value) as of 31.12.2004
was NOK 1 288 million (some EUR 154 million). At year-end,
the group’s property portfolio (book value) was NOK 8 768
million (some EUR 1 047 million). As of 31.12.2004, Entra
had 133 employees. The total property portfolio consists of
some 110 properties, amounting to approximately 900 000
m2 (4).

According to the Norwegian authorities, simulated accumulated
document duty is estimated to NOK 80 571 775, and accrued
registration fee is estimated to an amount of NOK 147 300
(150 properties * NOK 982), in total NOK 80 719 075 (some
EUR 9,87 million) (5).

3. 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

3.1. The Government’s assessment presented in connection with the

establishment of Entra

An assessment by the Norwegian Government as to whether
the exemption from stamp duty and registration fees is in
compliance with the State
the EEA
Agreement is given in Proposition no 84 (1998-99), chapter
7.6.1. The text reads as follows (unofficial translation by the
Authority):

aid provisions of

‘The next question raised is whether the company can be
absolved from the duty to register the transfer of title from
Statsbygg to Statens utleiebygg AS and thereby not pay the
registration fee and excise duty. According to the Act on
Court Charges Chapter 6 and Article 7 of
the Act on
Document Duty, duties in connection with registration of
documents transferring rights to property shall be paid to the
Treasury. The duty to pay costs therefore only becomes due
when the transfer of
title is registered in the real estate
registry. Payment of excise duty is not required for a change
of name in the register.

(2) The Group consists of,

in addition to Entra eiendom AS, Entra
Service AS, Universitetsgaten 2 AS, Biskop Gunnerus gate 14 AS,
Instituttveien 24 AS, Entra Kultur 1 AS, Langkaia 1 AS, Kr
Augustgate 23 AS, Nonnen utbygging AS and Krambugt 3 AS.
Source: Annual Report 2004. See http://www.entraeiendom.no/
files/Entra_Eiendom_Arsrapport_2004.pdf

(3) Average exchange rate for 2004: EUR 1 = NOK 8,3715.
(4) Source: Entra Annual Report 2004.
(5) Exchange rate 30 June 2000: EUR 1 = NOK 8,1815.

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L 275/49

The Ministry finds it highly uncertain whether the division of
property between the State and Statens utleiebygg AS will imply
a transfer of title that should be entered into the real estate
register. It seems more natural to regard the situation as an
organisational change in the State’s property portfolio where
the State will retain the registered rights to the properties. It
is not a question of transfer of title, but merely a change of
name in the register. A consequence of this is that the situation
does not require the payment of excise duty. The company is
therefore not required to pay registration fees and excise duty.
The Ministry, however, further suggests, in a separate proposal
to the Odelsting, that re-registering in connection with organ-
isational changes is carried only as a name change. In relation
to the Real Estate Register this will imply that there will be no
need for a transfer of title. The provision entails that there, with
certainty, will be no need for a transfer of title. The proposal
corresponds to rules given in connection with other transfor­
mations to State-owned undertakings, cf. e.g. Act of 24 June
1994 No 45 on the establishment of Televerket as a limited
liability company, and Act of 22 November 1996 No 65 on the
establishment of the State-owned Post company article 73. The
question is whether this practice leads to a different competition
situation for the State limited liability companies than that of
private entities who separate parts of their property activity into
their wholly owned limited liability company.

the use of State aid rules in Article 61 of

The EFTA Surveillance Authority (ESA) has published guidelines
for
the EEA
Agreement in connection with financial transactions between
public undertakings and the authorities, cf. State Aid Guidelines
Chapters 19 and 20. The central assessment criteria of whether
or not State aid exists is, according to these guidelines, the
‘market investor principle’. This means that the State in its
economic dispositions is required to act as a private investor
would have done in the same situation towards a similar or
comparable private company.

The starting point within Norwegian law is that transfer of
rights to property from one legal subject to another shall be
registered in order for it to be valid in relation to a third
subject. Private investors will
the outset, be
obliged to register the transfer of
title and to pay stamp
duties. A similar starting point entails that a limited liability
company owned by the State has a similar duty to register
transfer of title from the State.

therefore, at

imagine that a rational investor would choose such a solution. It
would be more likely that one chooses a solution where the
payment of fees is avoided, for example by keeping the title
with the mother company, or to create a holding company.
These options are not available for the State. When the State
chooses to become a player in the market, it is more convenient
to separate this part of the business and organise it in a separate
the State is in a situation where it must
company. Hence,
transfer
legal entity. This argues
strongly for the registration of transfer of rights not being in
conflict with the State aid rules.

its properties to another

The Ministry therefore must assume that the exception from the
requirement to register transfer of rights will not place Statens
utleiebygg AS in a different competitive situation than that
pertaining to a private investor on the market. The exception
is not seen as being in conflict with the EEA Agreement.

Further, it is a general assumption that the value assessment of
the properties to be transferred to Statens utleiebygg AS is put
at market value, and that any possible later transfer of capital
from the State takes place in the same manner as a private
investor providing contributions to the undertaking.’

3.2. Arguments presented by the Norwegian authorities before the
Authority decided to open the formal investigation procedure

By letter of 20 June 2002,
the Ministry of Labour and
Government Administration provided information concerning
the framework conditions for Entra and the establishment of
its opening balance. The Ministry described the cash flow
the total value of
method used to assess
the property
this method was used ‘because it
portfolio and stated that
would better satisfy the requirements of Propostion No 84 to
the Storting (1998-99) to provide the company with framework
conditions on equal footing with other players in the same
sector’. The letter did not describe whether, and if so how
and to what extent, the lack of payment of the excise duty
influenced the opening balance. Nor did it discuss whether
paragraph 3 of the contested Act required that the exception
from the excise duty should be met with an increase in the
portfolio assessment corresponding to the amount that would
have been paid had the registration in the real estate register
been treated as a change of title and not as a change of name.

On the other hand, it is unlikely that a rational investor would
have chosen a solution whereby he in connection with
separation of
the undertaking dealing with real
estate would have registered a transfer of title with the effect
of being imposed the excise duty. As such a transfer of title
it hardly seems likely to
would cost

the company dearly,

the part of

By letter dated 7 November 2002, the Ministry of Trade and
its
Industry developed in more detail
already
that private investors
presented in the preparatory works
the
might choose solutions that avoid a formal

transfer of

argument

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Official Journal of the European Union

16.10.2008

towards a third party. However,

deed and thus avoid having to pay document duties and regis­
tration fees. As the registration of the transfer of title was not
mandatory, enterprises could, regardless of whether they were
privately or publicly owned, lawfully avoid document duties and
registering any transfer of
registration fees by simply not
ownership. To let
the title remain with the original owner
constituted a risk for the new owner for ‘holder of good
faith’
it was possible to
eliminate that risk by the registration of a ‘restriction of the
right of ownership’. The registration of declaration on the
restriction of the right to ownership did not exclude the risk
execution proceedings/creditor’s or bankruptcy estate’s
of
extinction of the rights of a legal successor to the debtor’s
property. According
that
method was widely used by privately owned enterprises, es-
pecially between related parties.

to the Norwegian authorities,

In the view of the Ministry, a private owner of Statsbygg would,
most probably, have demerged Statsbygg without releasing the
obligation to pay registration fee or excise duty. This method
was not a realistic option in the case of the establishment of
Entra. That is i.a. due to obstacles arising from the fact that
Statsbygg is subject to public and political control. Methods like
keeping the title to the properties with Statsbygg would imply
that Entra would be dependent on the approval from a public
body for transactions concerning the properties. If the title to
the properties remained in Statsbygg, that would imply that the
State was both the renter and the formal title holder of the
properties. To use such methods for Statsbygg/Entra would
blur the distinction between the two entities’ different roles.
Statsbygg is entrusted with the task of owning and operating
non-commercial public buildings, while Entra operates on a
commercial basis.

In the letter dated 7 November 2002, the Ministry also brought
forward an argument against the application of Article 61 of
the EEA Agreement that was not mentioned in the preparatory
works cited above. The Ministry reiterated that the value of the
real estate portfolio was based on the method of ‘net capitalis­
ation’. In short this method implied that the property’s future
cash flow (net rent from existing contracts plus assessment of
future net rent after the expiry of existing contracts) was
discounted to present value by a factor observing a relevant
rate of return requirement. This rate was set at 9,5 % as it
reflected a benchmarking with similar private operators in the
trade. According to the Ministry, if document duties and regis­
the costs would have been
tration fees had been payable,
activated as an asset, while the value of the properties would
have been reduced correspondingly. Thus, this would not have
reduced Entra’s total balance sheet or the total asset valuation.
if the excise duty would have been introduced
In contrast,
without adjusting the value of the properties, this would have
resulted in ‘a higher value of total assets, resulting in a rate of
return of only 9,1 %, which is well below Entra Eiendom AS
required level. This would give Entra Eiendom AS a considerable
disadvantage compared to private operators’.

By letter dated 4 June 2003, the Ministry of Trade and Industry
submitted additional information and arguments concerning i.a.
the measures used by private undertakings. The Ministry,
letter dated
moreover,
the non-
7 November 2002 as
the company’s capital
payment of
structure, solidity and total value.

to why it believed that

the duty did not affect

reiterated the

arguments

in the

It stated that

the transferring company. The purpose of

As an additional third argument for not viewing the exemption
the Ministry referred to the
from the excise duty as aid,
‘continuity principle’
this
in Norwegian law.
principle is an umbrella term for a number of rules that
presuppose that the acquiring undertaking takes over the legal
position of
the
continuity principle is to facilitate mergers and demergers.
When the continuity principle applies, the transferring under­
taking’s legal situation is deemed to continue in the acquiring
company. According to the Ministry, continuity with regard to
tax and duty positions was an important aspect of the principle.
Indeed, the Registration Act construed in light of the company
legislation implied that reorganisation of private activities in
numerous cases could occur without triggering demands for
registration fees and document duties. On this basis,
the
Ministry argued that the exemption was a general measure,
which did 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, demergers and
is
restructurings, which
socio-economically
desirable. The special
legislation and the reimbursement of
accrued document duty resulting from the reorganisation of
the same
hydropower/electricity companies are a result of
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.’

regarded

as

3.3. Arguments presented by the Norwegian authorities after

the

Authority opened the formal investigation procedure

In the letter from the Ministry of Trade and Industry dated
16 September 2004,
the Norwegian authorities commented
upon the Authority’s decision to open the formal investigation
procedure. The view of the Norwegian Government was that
none of the conditions of Article 61(1) of the EEA Agreement
were fulfilled. Hence, the non-payment for Entra of excise duty
did not constitute State aid within the meaning of Article 61(1)
of the EEA Agreement.

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The Ministry reiterated, firstly, its previously presented argument
that the measure did not constitute an advantage for Entra. It
did not change the capital structure, the solidity and the total
value of the company. If document duties and registration fees
were accrued in the opening balance sheet, there would have
It stated that it is the
been an alternative opening balance.
Norwegian Government’s opinion that
the tax measure in
question should not be distinctly separated from the opening
balance of the company. Moreover, the purpose of the main
rule on document duties and registration fees is to tax real
transfers between different
the
transfer is in appearance only and the entities transferring and
acquiring are substantially the same,
the main principle in
Norwegian law, according to the Ministry, would be to let the
acquiring undertaking keep the legal position of the transferring
undertaking (continuity principle). The Ministry considers that
the continuity principle is not restricted to specific transfers, but
is regarded as the main rule where the transferring entity and
the acquiring entity are substantially the same. Entra was conse­
quently not relieved from a charge normally borne from their
budgets, according to the Norwegian authorities.

entities. Where

economic

Finally, the Ministry referred to Commission decision C 27/99
of 5 June 2002 (1) regarding exemptions from transfer taxes in
the case of restructuring of certain public undertakings into
joint stock companies in Italy. According to the Ministry, the
factual situation in the Italian case was similar to the case in
hand and that the same considerations could be made. The
Ministry concluded that
the exemption was justified by the
nature or general scheme of the system and did not constitute
State aid within the meaning of Article 61(1) of
the EEA
Agreement.

as

further

to why

submitted

arguments

the Ministry of Trade and
By letter dated 30 June 2005,
Industry
the
exemption from document duties and registration fees did not
constitute an economic advantage for Entra. The Ministry
referred to the fact that the opening balance for Entra was
prepared by using the Net Present Value method (NPV). The
future expected cash flow from each building was estimated and
discounted with a required rate of return. The rate of return was
fixed by using the Capital Asset Pricing Model after having
compared other competing real estate companies. The equity
was fixed at approximately 40 %, which was comparable to
other similar companies.

Secondly, the Ministry referred to the fact that the transfer of
title in the case at hand by paragraph 3 of the contested Act
was done as a change of name and not by transfer of title. Thus,
the obligation on Entra to pay document duty was never
released and there was, according to the Norwegian authorities,
no loss of tax revenue and hence, no consumption of State
resources.

Thirdly, the Norwegian authorities argued that the measure in
question did not affect trade between the Contracting Parties.
The Ministry considered that a market survey can show whether
the real estate market for urban business premises in Norway
was of a purely national character and not subject to cross-
border competition. The Ministry considered that except for
foreign investments in financial
institutions, non-Norwegian
investors have not operated in the Norwegian real estate market.

The Ministry considered that the calculated value of the prop­
‘not having to
erties was the best estimate of what an investor,
pay the document duties and registration fees’, would have been
willing to pay for the portfolio. If the buyer of the portfolio
(in this case Entra) would have to pay the document duties and
registration fees, the price the investor would be willing to pay
would be reduced by the same amount as the document duties
and registration fees. The fixed asset value of the properties in
the balance sheet would have been reduced by the same
amount, while
fixed assets would have been
increased by the same amount, so that the total value of the
assets would have been the same. On the liability side, equity
and total debt would not have changed although short-term
debt would have increased corresponding to the value of the
document duties and registration fees. The Ministry concluded
that the financial position of Entra had not changed as a conse­
quence of
the exemption from the document duties and
registration fees.

financial

the Ministry argued that

Fourthly,
the exemption from the
document duties and registration fees was not a selective
measure. The Ministry referred to the fact
that a main
criterion in applying Article 61(1) of the EEA Agreement to a
tax measure is that the measure provides an exception to the
application of the tax system in favour of certain undertakings
in the EFTA State. The common system applicable should thus
first be determined.
If a tax measure derogates from the
common system, it must be examined whether the derogation
is justified by the nature or general scheme of the tax system.
The Ministry considered that the practice with name changes as
a procedure for transferring property title did not constitute a
derogation from the tax system. In case the Authority would
find that the practice constituted a derogation from the tax
system, the Ministry considered the derogation to be justified
by the nature or general scheme of the tax system.

The Ministry acknowledged that one cannot draw a general
conclusion that it will always be the seller of a property who
de facto bears the burden of an excise duty, since this result is
dependent on particular circumstances. However, in the case at
hand,
it would be the seller that carried the burden, as the
method for the assessment of the real estate that was used in
relation to Entra in the opening balance implied that (unofficial
‘In such a case, and when the
translation by the Authority):
NPV-method is used, all types of costs in connection to the
purchase will be deducted from the purchase price, since all
elements are a part of the value assessment method itself, as
the buyer otherwise does not obtain the required rate of return
… .).’

(1) OJ L 77, 24.3.2003, p. 21.

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3.4. Comments from interested parties

By letter dated 4 May 2005, the law Firm Selmer, representing
Entra, submitted comments to the Authority’s decision to open
the formal
the
exemption from document duties and registration fees did not
constitute an advantage for Entra and that the exemption was
within the nature and general logic of the Norwegian system.

investigation procedure. Selmer argued that

that

this,

it was decided to
Firstly, Selmer referred to the fact
the total
establish the company with equity of 40 % of
capital. As a consequence of
if Entra had to pay the
document duties and registration fees, the value of the prop­
erties would have been reduced by the same amount as the
document duties and registration fees and the Norwegian
into the
to inject
State would have
company,
to keep the equity at 40 %. Selmer
in order
considered that this did not change the economic situation of
the company and that Entra did not receive any economic
advantage.

same amount

the

Secondly, Selmer stated that all state reorganisations have taken
place in a consistent manner based on the continuity principle,
and referred to the reorganisations of the Norwegian Broad­
casting Corporation
the National Rail
(NRK), Telenor,
Company (NSB), Posten Norge, Avinor, Mesta and Statkraft.
Selmer therefore considered that the exemption of document
duties and registration fees was within the nature and general
logic of the Norwegian system.

4. The Norwegian legislation concerning document duty
and registration fee on the registration of transfer of real
estate

4.1. What

triggers
registration fee?

the obligation to pay document duty and

All real estate in Norway is identified in the Real Estate Registry
(‘Eiendomsregisteret’), which, from 1995, onwards contains infor­
mation from ‘Tinglysingsregisteret/Grunnboken’ and ‘GAB-registeret
(Grunneiendommer, Adresser og Bygninger)’ (1).

Tinglysingsregisteret was established pursuant to the Registration
Act 1935 No 2 (‘Lov om tinglysing’). Every property is identified
by registry identification under which information about the
ownership, title and encumbrances etc. may be entered. The
inter alia, information on various rights and
registry contains,
obligations to the property in question. Interested parties acting

(1) Source: Statens Kartverk — Tinglysingen, see: http://www.statkart.
no/IPS/tinglysing/?module=Articles;action=ArticleFolder.publicOpen
Folder;ID=2207

in good faith are entitled to rely on the information contained
in the Real Estate Registry.

Pursuant to Section 7(1) of the Act on Document Duty 1975
No 59 (‘Lov om dokumentavgift’), the registration of transfer of
ownership title (‘hjemmelsoverføring’)
to real estate property
releases an obligation to pay document duties (‘dokumentavgift’).
The tax rate is 2,5 % based on the sales value of the property.
The new title holder is responsible for paying the duty, cf.
Section 2-6 of Regulation on Document Duty, Ministry of
Finance, 16 September 1975 and later amendments.

subject

to a registration fee

In addition, the registration of transfer of title in the Real Estate
(‘tinglysingsgebyr’)
Registry is
pursuant to the Court Fee Act 1982 No 86 (‘Rettsgebyrloven’).
When Entra was established, this fee was fixed at NOK 982
(some EUR 123) per document
registered. The provisions
concerning the conditions for levying the document duty and
registration fee are identical.

As mentioned above, the excise duty is released by the regis­
tration of the transfer of title to another legal entity (‘hjemmel­
soverføring’). Consequently,
title to
another legal entity, but only a change of name of the same
legal entity in the registry (‘grunnboken’), no excise duty will be
payable.

there is no transfer of

if

There is no legal obligation to register (‘tinglyse’) rights related to
real estate (ownership etc.) in the registry. It is not necessary to
register
the transfer of
ownership. The holder of the rights may however choose to
register his rights in order to protect his rights against third
parties.

title in order to affect

transfer of

4.2. When can the designation of the title holder be changed without

inferring excise duty?

The practise with regard to the payment of excise duties from
1990 to 1 July 2005 — and thus at the time Entra was estab­
lished — is described in two sets of circulars, namely Circular
G-37/90 from 25 May 1990 from the Norwegian Ministry of
Justice and the yearly circulars from the Norwegian Customs
and Excise (NCE) (‘Toll- og Avgiftsdirektoratet’) (2). According to
point 1.1 in the latter circulars, an exemption from stamp duty
will not be granted unless there is a direct legal basis in the Act
on Document Duty or by Parliamentary decisions (3).

(2) f.

inter alia Dokumentavgift 2000 — S12-DOK-2001 and Rundskriv
to which reference is made below. See also

nr. 12/2005 S,
http://www.toll.no/upload/dokumentavgift1_1.pdf

(3) The text reads as follows in Norwegian: ‘Det gis ikke fritak for doku­
mentavgift med mindre det er direkte hjemmel i loven eller stortingsvedtak’.

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Official Journal of the European Union

L 275/53

(i) Mergers

In the cases of mergers, there exists, according to the Norwegian
Ministry of Justice, no transfer of title for the purpose of the Act
on Document Duty. It is therefore sufficient that the merger be
registered in the Real Estate Registry by confirming that the
company has been merged with another. Such a confirmation
can be issued by the Company Registry and does not trigger the
payment of registration fee and excise duty. This applies to
companies within the
mergers between limited liability
meaning of Section 14(7) of Law No 59 of 4 June 1976 (the
‘limited liability Company Act’) (1), and also to other mergers
undertaken on the basis of Chapter 14 in the same law and
mergers between saving banks (Chapter 8 of Law No 1 of
24 May 1961; the ‘Saving Bank Act’) (2).

(ii) Demergers under the Limited Liability Company Act of

1976

Where, in the case of demergers, the ownership of real estate
was transferred from the original company (‘A’) to the company
which has been separated out (‘B’), both Circular G-37/90 and
point 1.4 in the yearly circulars from Norwegian Customs and
Excise Directorate provided that both registration fee and
document duty must be paid (3).

In contrast, in case the real estate remained with the original
company (A) from which a part (B) was separated out, there
was no obligation to pay registration fee and document duty (4).
The reason for this is that in this case the real estate is not
transferred to a new legal subject (which would have been the
case if the real estate had been transferred to the company
which had been separated out).

(iii) Transfer of ownership from joint ownership to a form of

partnership

In the relevant period, transfer of ownership of real estate from
joint ownership to a general partnership or limited partnership
implied a transfer from one legal subject to
(or vice versa)
another legal subject. Thus, both Circular G-37/90 and point

(1) Reference is also made to law No 44 and law No 45 of 13 June
1997 on limited liability companies and public limited liability
companies, respectively.

(3) The Authority takes note of

(2) Reference is made to In Circular G-37/90, page 1, to point 1.3. in
Dokumentavgift 2000 and to point 1.3 in Rundskriv nr. 12/2005 S.
the remark by the Norwegian
Government in point 4.3 in its letter of 4 June 2003 that it could
be discussed ‘whether registration of a document should still be required as
an expression of transfer of title. The question is under consideration in the
remains that consecutive
Ministry of
circulars of the Government maintained that position until
June
2005 and only changed the registration practice with regard to
registrations after that date.

Justice’. However,

the fact

(4) This is so even if the company which has been separated out (B)
takes over the name of the original company (A) since the reality is
that the owner of the real estate remains to be the same, namely the
original company (A). This will be considered as a mere name
change. See also opinion of
Justice
published in U87-4.

the Norwegian Ministry of

1.5 in the yearly circulars from the Norwegian Customs and
Excise Directorate stated that this will therefore trigger payment
of excise duty.

(iv) Conversion from one corporate form to another

A situation which is not mentioned in the Circular is the
situation where an undertaking is transformed from one form
In the Norwegian Government’s
of corporation to another.
letter of 4 June 2002 it is stated, that the main rule in such
situations was that ‘there must be a transfer of title. Accordingly,
registration fee and document duty are payable. This is how the
legislation has been practised.’ The Norwegian Government,
however, argues
to consider
exemptions to this rule based on considerations linked to the
continuity principle (5).

should be possible

that

it

from the Ministry of

To this, the Authority notes that the Court of Appeal (Frostating
Lagmannsrett) in an order of 1997-10-09 published in LF-1997-
671 held that a conversion from a ‘kommandittselskap’
to a
‘aksjeselskap’
(‘North West Terminalen AS’) did trigger excise
duty. In this respect, the Lagmannsrett referred to the above
Justice and the
mentioned circulars
follows
it
Customs and Excise Directorate and stated that
from the Act on Document Duty that duty should be paid
unless directly stated in the act
itself or provisions made
pursuant thereto. As the new company was a different legal
entity than the original one, it did not matter that it was the
same owners who continued in the new company and thus that
the only change in reality was the form under which the
company was operated.

In addition, reference can be made to a case mentioned in
the Norwegian Government’s letter of 4 June
Annex 1 of
2002 in which the Norwegian authorities refused to exempt
from duty a conversion from a ‘selveiende institusjon’ to a ‘allme­
naksjeselskap’.

(v) Transfer of ownership from a municipality to a separate

legal entity wholly owned by the municipality

it was most

likely that under

At the meeting between the Norwegian Authorities and the
the Norwegian Authorities
Authority on 19 May 2005,
indicated that
the circulars
applicable at the time of the establishment of Entra, stamp
duty would have incurred in connection to a reorganisation
in which the ownership of a building was transferred from a
municipality to a limited liability company owned by that
it had for some time been the
municipality.
practice that no stamp duty would incur
in relation to
transfer of titles in connection with reorganisations pursuant
to the Norwegian act of 29 January 1999 on inter-municipal
companies (6).

In contrast,

(5) Cf. Point 7h) of the letter.
(6) Cf. e.g. point 3.9 in Rundskriv nr. 12/2005 S.

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(vi) The practice after 1 July 2005

transformation of

As the registration of
the name change in the Real Estate
Registry took place in connection with the establishment of
Entra, the rules described above form the relevant comparison
with provision in paragraph 3 of the contested Act. It should,
however, be mentioned that on 21 June 2005, The Ministry of
Justice adopted a new Circular (G-6/05) on the procedure of
transfer of real estate in connection with mergers, de mergers
companies (1). The new circular
and
introduced, with effect from 1 July 2005, a new practice with
regard to situations where the designation of the title holder can
be changed without
title.
According to the new Circular, registration in connection with
de mergers based on the continuity principle will now be
treated in the same way as mergers in relation to the rules
on excise duties and thus no longer be subject to stamp duty.
The same applies to conversions carried out on the basis of the
rules in Chapters 13, 14 and 15 of
the Limited Liability
Company Act and the Public Limited Liability Company Act.

it being considered a transfer of

In contrast, according to the new Circular, excise duty will still
be payable when real estate is transferred according to a set of
rules not based on continuity (for example a merger of general
partnerships (‘ansvarlige selskaper’)). A transfer from one form of
company to another, for example from a general partnership to
a limited liability company, will also continue to be liable to
excise duty.

5. Other reorganisations of public undertakings

As stated in the letter dated 4 June 2003 from the Norwegian
authorities, other
reorganisations have contained provisions
similar to the contested Act (Posten AS, NSB AS, Mesta AS,
Avinor AS, Telenor AS and health enterprises) (2).

The Authority notes that other reorganisations have also taken
place where a provision similar to the one contained in the
contested Act was not adopted. The reorganisations that the
Authority has become aware of, where such a provision has
not been adopted include the establishment of BaneTele AS,
Secora AS and Statkraft AS.

(1) ‘Rundskriv G-6/05: Den tinglysingsmessige

fast
eiendom blir overført i forbindelse med fusjon, fisjon og omdanning’. The
Circular can be found at the homepage of the Ministry of Justice:
http://odin.dep.no/jd/norsk/dok/regelverk/rundskriv/012081-
250018/dok-bn.html

fremgangsmåten når

(2) For some of the reorganisations no reasons for the exemptions are
given in the preparatory works. For others, the provision is seen as a
deviation from the normal rules pertaining to excise duties. It is
stated, moreover,
to similar
provision in relation to the other transformations of state enterprises
to public limited companies. Finally,
the
is often said that
provision concerned corresponds
to the approach concerning
transfer of
real estate in case of mergers of public limited
companies and banks.

the provision corresponds

that

it

BaneTele AS is a provider of a nationwide fibre broadband
network. The limited liability company was established on
1 July 2001. Before this date, the activities carried out were a
the National Rail Administration (‘Jernbaneverket’).
part of
BaneTele is a limited liability company 100 % owned by the
Norwegian State, represented by the Ministry of Trade and
Industry. The National Rail Administration is responsible for
the management of the national railway network, on behalf
of
and Communication. The
proposal to establish the limited liability company BaneTele
was presented to the Parliament
in St.prp. nr. 80 (2000-
2001) Omdanning av BaneTele til aksjeselskap (3) and Ot.prp. nr.
93 (2000-2001) Om lov om omdanning av
Jernbaneverkets
til aksjeselskap (4). Ot.prp. nr. 93
kommersielle
(2000-2001) and the subsequent law (Law of 15 June 2001)
do not contain any provision similar to paragraph 3 in the
contested Act.

the Ministry of Transport

televirksomhet

Secora AS is a specialised contractor in the development of safe
and efficient harbours and coastal waterways. The limited
liability company was established on 1 January 2005. The
activities were previously carried out by the production unit
of the Norwegian Coastal Administration (‘Kystverket’). Secora
AS is 100 % owned by the Norwegian State represented by
the Ministry of Fisheries and Coastal Affairs. The Norwegian
Coastal Administration is the Norwegian national agency for
coastal management, marine safety and communication. The
proposal to establish Secora AS was presented in St.prp. nr. 1
(2004-2005) Om omdanning av Kystverkets produksjonsvirksomhet
til statlig aksjeselskap m.m (5). and in Ot.prp. nr. 20 (2004-2005)
Om lov om omdanning av Kystverkets produksjonsvirksomhet til stat­
saksjeselskap (6). Ot.prp. nr. 20 (2004-2005) and the subsequent
law (Law of 17 December 2004) do not contain any provision
similar to paragraph 3 in the contested Act.

Statkraft AS is the biggest producer of electricity in Norway.
The limited liability company was established on 1 October
2004. The company was previously a state undertaking (‘Stats­
foretak (SF)’), and the state undertaking Statkraft SF still exists as
the formal owner of Statkraft AS. The first proposal to establish
the limited liability company was presented to the Parliament in
St.meld. nr. 22 (2001-2002) Et mindre og bedre statlig eierskap (7)
and thereafter in St.prp. nr. 53 (2003-2004) Statens eierskap i
Statkraft SF (8) and in Ot.prp. nr. 63 (2003-2004) Om lov om
omorganisering av Statkraft SF (9). In St. prp. nr. 53 (2003-2004)
the reorganisation would entail
the Government stated that

(3) See http://www.odin.dep.no/repub/00-01/stprp/80
(4) See http://www.odin.dep.no/repub/00-01/otprp/93
(5) See http://www.odin.dep.no/filarkiv/226433/STP0405001-T06-

TS.pdf

(6) See http://www.odin.dep.no/repub/04-05/otprp/20
(7) See http://odin.dep.no/nhd/norsk/dok/regpubl/stmeld/024001-

040006/dok-bn.html

(8) See http://www.odin.dep.no/filarkiv/208116/STP0304053-TS.pdf
(9) See http://odin.dep.no/filarkiv/207892/OTP0304063-TS.pdf

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Official Journal of the European Union

L 275/55

that Statkraft AS would have to pay excise duties (unofficial
translation by the Authority) ‘in accordance with the normal rules
of the act’ on excise duties and that the costs would reduce the
surplus
for
dividends. The excise duties were estimated to be NOK 1 500
million (approximately EUR 188 million) (1).

the undertaking and thus also the basis

for

II. APPRECIATION

1. The existence of State aid

Article 61(1) of the EEA Agreement reads as follows:

Whereas the Authority, in its decision to open formal investi­
gations, made the preliminary conclusion that all
the said
the Norwegian Government have
conditions were fulfilled,
the conditions were fulfilled (2). The
argued that none of
therefore examine the exemption of excise
Authority must
duty in light of relevant case law to see whether it constitutes
State aid within the meaning of Article 61(1) of
the EEA
Agreement.

1.1. The aid must be granted by the state or through state resources

With regard to the first condition mentioned above, it is estab­
lished case law (3) that this condition is fulfilled when a measure
directly or indirectly entails some form of financial burden on
public funds.

‘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
the
insofar as it affects trade
production of certain goods shall,
between Contracting Parties, be incompatible with the func­
tioning of this Agreement.’

undertakings

favouring

certain

by

or

To be considered as State aid under Article 61(1) of the EEA
Agreement, a measure must fulfil all the following four criteria:

1. The aid must be granted by the State or through State

resources;

2.

the aid must confer an advantage to the recipients that
reduces the costs they normally bear in the course of the
business;

3.

the advantage must be specific or selective in that it favours
certain undertakings or the production of certain goods;

4.

the aid must distort or threaten to distort competition and
affect trade between the Contracting Parties.

In its decision to open the formal investigation procedure, the
Authority made the preliminary conclusion that the provision in
paragraph 3 in the contested Act entailed that an excise duty
otherwise payable was not paid. This exemption from paying
excise duty entailed a direct
the
Norwegian State which was equivalent to the consumption of
State resources. Therefore, the Authority drew the preliminary
conclusion that the first condition was fulfilled.

tax revenue for

loss of

In their comments to the opening decision,
the Norwegian
authorities, however, argued (2) that as the obligation on Entra
to pay the document duty was never released (because ‘the
transfer of title in the case at hand was done as a name change
tax
and not by transfer of
revenue and hence, no consumption of State resources.

there had been no loss of

title’),

the national

legal system,

The Authority cannot agree with that argument. A benefit in
the form of a tax exemption covered by Article 61(1)
is
typically made by way of an express exemption. However, as
Article 61(1) focuses on the effect of, and not the formality
behind,
it also covers situations
where a tax relief is brought about indirectly by reference to
a particular legal notion (in casu ‘name change’) the result of
which is that no tax should be paid. In both situations, and with
reference to the case at hand, the effect is that a registration in
the real estate register could take place without triggering excise
duties only because of the particular legislative provision. No
such tax-free registration could have taken place had it not been
for the special provision.

(1) The text reads as follows in Norwegian:

‘Den foreslåtte omorgani­
seringen av Statkraft vil medføre at det påløper dokumentavgift til staten,
jf Stortingets vedtak om dokumentavgift § 1 første ledd. Utgiften vil være i
størrelsesorden 1,5 milliarder kroner. Departementet legger til grunn at
tråd med lovens normalordning.
Statkraft betaler dokumentavgift
i
Utgifter
selskapet og
vil
dermed også utbyttegrunnlaget’.

redusere overskuddet

til dokumentavgift

til

(2) Letter dated 16 September 2004 from the Ministry of Trade and

Industry.

(3) Cf. Joined Cases 67/85, 68/85 and 70/85 Van der Kooy v Commission
[1988] ECR 219; Case C-290/83, Commission v France [1985] ECR
439; Case C-482/99 French Republic v Commission [2002] ECR I-
4397; Case C-379/98 Preussen Elektra AG v Schleswag AG [2001]
ECR-I 2099.

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Official Journal of the European Union

16.10.2008

to the

Parliament (1),

the Norwegian
In the proposal
Government stated that it was highly uncertain if the transfer
of the properties from Statsbygg to Entra would trigger the
excise duty. However, as demonstrated below under point 1.2,
the Norwegian Government has not convincingly shown that
the registration of the transfer of properties from the State to
Entra could have been exempted from excise duty in the
absence of the particular provision in paragraph 3 of the Act
of 18 February 2000. No other provision in Norwegian law
explicitly prescribed that such a transaction was exempted
from the general rule that registration of change of ownership
triggers excise duty. Moreover, the Authority cannot see how
the reorganisation of Statsbygg — in the absence of Paragraph
3 in the Act of 18 February 2000 — could have been exempted
under the Registration Act as it was then interpreted.

The Authority therefore maintains that the first condition is
fulfilled.

1.2. The measure must be specific or selective in that

it
‘certain undertakings or the production of certain goods’

favours

1.2.1. M a t e r i a l s e l e c t i v i t y

In its decision to open formal
made the preliminary conclusion that
special
company only (Entra)),
measure.

the Authority
the adoption of a
from paying excise duty,
(for one
should be classified as a selective

law exempting it

investigations,

In contrast, with reference to its above presented arguments
concerning the continuity principle, the Norwegian authorities
have argued that the practice with name changes as a procedure
for transferring property title did not constitute a de facto dero­
gation from the common tax system. It was, therefore, a general
measure.

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:

companies have been established (see Part I above). However,
the fact that similar rules have been introduced in relation to a
range of other state privatisations does not entail that the lex
specialis at hand becomes non-selective.

Firstly,
it should not be overlooked, that in other state reor-
ganisations, similar provisions to the contested Act were not
adopted. For example, when BaneTele AS (2) was established,
the new limited liability company was not exempted from
paying excise duties. The same applies when Secora AS (3)
was established. In the case of the reorganisation of Statkraft,
the Norwegian Government stated that the company should pay
excise duties in accordance with the normal rules (4).

July 2005, both the 1990-circular

Secondly, it would in any event be the case that tax legislation
that treats reorganisations of state undertakings more favourably
than those concerning restructurings of private undertakings
would be selective within the meaning of Article 61(1).
However, under the Act on Document Duty the starting point
was that all transfer of titles between different entities release
excise duty regardless of whether or not
the new owner
continues the same activity as the previous one. As shown
above, until
from the
Ministry of Justice and a range of consecutive circulars from
the Customs and Excise Directorate only contained one relevant
exception to this rule. Both sets of circulars unequivocally stated
that it was only where ownership was transferred in the context
of mergers between limited liability companies that continuity
considerations implied that a registration with the new title
holder could be done by a name change and not a change of
title triggering excise duty. In contrast, excise duty was triggered
as a result of the registration or the transfer or ownership of
title in the Real Estate Registry for demergers, conversions from
one corporate form to another, transfers of ownership from
joint ownership to a form of partnership and transfer of
ownership from a municipality to a separate legal entity
wholly owned by the municipality (5). This was also made
from Frostating lagmannsrett, cited
clear
above, which held that excise duties should be paid where an
unlimited liability type of company (‘kommandittselskap’) was
converted to a limited liability company even if
the same
owners continued in the new company and the only real
change was the form under which the company operated.

in the judgment

‘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.’

The Authority finds that the establishment of Entra cannot be
said to be analogous with a merger. It is much more similar to
either a demerger, a conversion of one legal entity to another,
or to a municipality’s separation of a given activity into a
separate legal subject. Thus, exemptions from excise duties
similar to the one found in paragraph 3 of the contested Act
were not, at the time of the establishment of Entra, open to the
most comparable transactions.

The contested Act applies only to a particular transaction
between Statsbygg and Entra. It is true that similar acts have
state owned limited liability
been adopted when other

(1) St.prp.nr.84 (1998-99) ‘Om ny strategi for Statsbygg og etablering av

Statens utleiebygg AS’. Presented on 4 June 1999.

(2) Lov av 15.6.2001 ‘Om omdanning av Jernbaneverkets kommersielle tele­

virksomhet til aksjeselskap’.

somhet til statsaksjeselskap’.

(3) Lov av 17.12.2004 ‘Om omdanning av Kystverkets produksjonsvirk­

(4) The text reads as follows in Norwegian: ‘Departementet legger til grunn
at Statkraft betaler dokumentavgift i tråd med lovens normalordning’.

(5) See point I.4 above.

16.10.2008

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Official Journal of the European Union

L 275/57

Therefore, paragraph 3 in the contested Act cannot be said to
be an expansion of an already general
(non-selective) rule
regarding non-payment in relation to certain types of transfer
of title in the Real Estate Registry. Consequently, the measure
was materially selective.

relevant Norwegian legislation. In their view, the contested Act
reflected the continuity principle and was in line with the
general rules governing restructurings.

1.2.2. I s

t h e

e x c i s e
e x e m p t i o n f r o m p a y i n g
d u t y j u s t i f i e d b y t h e n a t u r e o r g e n e r a l
s c h e m e o f

t h e t a x s y s t e m ?

According to the case law of the ECJ (1), it is possible to draw a
distinction between:

— differentiated treatment that results from the application, to
those
the

same principles

specific
underlying the ordinary rules (no aid);

situations, of

as

— differentiated treatment, which,

takings, departs from the internal
rules (aid) (2).

favouring certain under­
the ordinary

logic of

To this argument the Authority notes that, in the case at hand,
the question is the scope of the continuity principle in relation
to the obligation to pay document duties and not the scope of
the continuity principle as such, hereunder its application in
company law.

Based on the analysis of the rules pertaining to excise duties
given above under point I.4, the Authority takes the view that
while the continuity principle might have had a fundamental
place in Norwegian law at the time of the establishment of
Entra,
it was not, at that time, an inherent and general part
of the rules and practice on excise duties in connection with
other types of reorganisations of companies.

This distinction is also described in Chapter 17B.3.4(1) of the
Authority’s State Aid Guidelines on direct business taxation
concerning the justification of a derogation by ‘the nature or
general scheme of the system’: ‘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
them necessary to the
whose economic rationale makes
the tax system.
smooth functioning and effectiveness of
However,
it is up to the EFTA State to provide such justifi­
cation.’ This latter rule of proof has been confirmed by the
ECJ (3).

As already stated, until July 2005, it was only where ownership
was transferred,
in the context of mergers between limited
liability companies, that continuity considerations implied that
a registration with the new title holder could be done as a
change of name and not a change of title, triggering excise
duty. In contrast, excise duty was triggered as a result of the
registration or the transfer or ownership of title in the Real
Estate Registry for demergers, conversions from one corporate
form to another, transfers of ownership from joint ownership
to a form of partnership, and transfer of ownership from a
municipality to a separate legal entity wholly owned by the
municipality (4).

The Norwegian authorities have argued that ‘even if the Authority
deems the practice (with name changes as a procedure for trans­
ferring property title without releasing the obligation to pay the
excise duty) to constitute an exemption from the main rule,
it is
In
justified by the nature or general scheme of
the Norwegian authorities claimed
support of
for
that
considerations
inter alia, for excise duty
applying this principle with effect,
purposes in the case at
the exemption
from the excise duty fell within the logic and nature of the

continuity principle

issue entailed that

the tax system’.

this position,

and the

the

(1) See in this context: Case 173/73 Italy v Commission [1974] ECR 709
(paragraph 33) and Case C-75/97 Kingdom of Belgium v Commission
[1999] ECR Page I-3671.

(2) Cf., inter alia, Joined Cases E-5/04, E-6/04 and E-7/04 Fesil, Pil and
the Kingdom of Norway v the EFTA Surveillance Authority, judgment of
21 July 2005 (paragraphs 82-85); Case 173/73 Italy v Commission,
[1974] ECR 709 (paragrap 33), Case C-143/99 Adria Wien Pipeline
[2001] ECR I-8365 (paragraph 42); Case C-157/01 Kingdom of the
Netherlands v Commission, cited above (paragraph 42), and Case
C-308/01 GIL Insurance Ltd, cited above.

(3) Cf. e.g. Case C-157/01 Kingdom of the Netherlands v Commission, cited

above, paragraph 43.

The Norwegian authorities have explained that the logic behind
the exemptions to the general rule on excise duty can be found
in the continuity principle. However, the authorities have not
explained the logic behind the different treatment of the above
listed types of
the Norwegian
transfers. On the contrary,
Government has merely stated that it would in fact be more
logical to treat mergers and certain other reorganisations alike.
Yet, only with effect from July 2005, approximately five years
after the establishment of Entra, has the interpretation of the
Act on Document Duty been changed so that the treatment of
certain different situations has been aligned. On this basis, the
Authority finds it difficult to establish any other logic behind
the interpretation of the Act on Document Duty that prevailed
at the time of the establishment of Entra than what follows
from the quoted Circulars, namely that only mergers between
limited liability companies would escape excise duties otherwise
payable. The application of the continuity principle in relation
to the Act on Document Duty was limited to such cases and
not to other cases as mentioned above.

(4) See point I.4 above.

L 275/58

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Official Journal of the European Union

16.10.2008

As stated above under point 1.2.1, the Authority, in any event,
finds the establishment of Entra much more similar to these
situations where a registration in the Real Estate Register at the
relevant time would have entailed excise duties than those in
which it did not. On that basis, the Authority cannot see that
the exemption in the contested Act can be justified by the
nature and logic of the Norwegian rules pertaining to excise
duty at the time the exemption was applied. It does not change
the assessment that similar reorganisations of public commercial
activities also have been exempted from excise duty. The
pursuance of
the continuity
the underlying objectives of
principle cannot justify that an exemption to the general rule
on excise duties should be applicable to specific reorganisations
if the most comparable private reorganisations are not subject
to similar exemptions.

1.2.3. T h e ‘ I t a l i a n c a s e ’

The Norwegian Authorities have referred to a decision from the
European Commission and argued that the factual situation of
this case is the same as in the Entra case.

into joint

In the Commission Decision of 5 June 2002 (1),
the
Commission examined the Italian law which provided for a
special tax regime for joint stock companies with a majority
public shareholding set up under a specific law. In this regard
the Italian law specifically provided for an exemption from all
transfer taxes related to the conversion of special and municipal
undertakings
tax
exemption’). In the Italian legal system transfer taxes normally
applied to the creation of a new economic entity or to the
transfer
entities.
between different
However, the Italian authorities had explained that Italian law
generally reflected the principle of tax neutrality (which means
that no tax is applied) in the context of the conversion of the
‘when the legal status of a firm
legal status of a company (i.e.
changes but
from an economic
the
firm remains
the
viewpoint’) (2).

stock companies

(‘the transfer

economic

assets

same

of

The Commission found that although it appeared as if the
winding up of the municipal undertaking and the setting up
of a ‘new’ joint stock company would be equivalent to creating
a new economic entity, this was in appearance only due to legal
technicalities. In reality the new joint stock company was the
same economic entity as the municipal undertaking operating
under a different
the
Commission accepted that the general principle of tax neutrality
in Italian law was similarly applied with regard to the situations
falling within the special tax regime. Hence, no transfer tax had
to be paid (3).

light of

In the

status.

legal

this

(1) Case C 27/99 published in OJ L 77, 24.3.2003, p. 21.
(2) Cf. paragraph 37 of the Decision.
(3) Cf. paragraphs 76-81 of the Decision.

The Authority understands the reasoning of the Commission to
be that where the national law pertaining to stamp duties in
connection with conversions made by private undertakings
builds upon a general principle of tax neutrality — so that
the focus is on the continuation of the same economic entity
rather than on whether the legal subject used thereto is the
same — it will be within the logic of such a tax regime to
extend that principle also to cover situations whereby the State
or a municipality separates an economic entity that has hitherto
been driven as a part of the State or municipality into a separate
legal entity.

The Authority fully agrees with such an approach. However, the
logic of each tax system must be assessed on its own merits.
The Commission Decision relied on the fact that the Italian legal
system provided for a possibility of exempting transfer tax in
the context of the conversion from one corporate form to
another. In contrast, Norwegian legislation, as interpreted and
applied by the tax authorities, did not provide for such a possi­
In fact, as already stated, comparable cases to Entra
bility.
concerning private reorganisations
(regarding demergers or
conversion from one corporate form to another) were not
exempted from paying the excise duties. In the view of the
Authority, the factual situations of the two cases are therefore
different. That the continuity principle might have existed in
other
including most notably
company law and the legislation pertaining to direct taxation
in the
of
assessment of
the similarity between the Italian and the
Norwegian situations.

the entity concerned, cannot be given weight

areas of Norwegian law,

1.2.4. C o n c l u s i o n o n s e l e c t i v i t y

In conclusion, the measure must be considered to be selective in
the sense of Article 61(1) of the EEA Agreement and cannot
escape that classification by reference to the nature and logic of
the Norwegian rules on excise duties.

1.3. The measure must confer an advantage to the recipients that
reduces the costs they normally bear in the course of the business

‘the measure must

According to the case law of the European Court of Justice
(ECJ) (4) and Chapter 17B.3.1(2) of the Authority’s State Aid
Guidelines
an
advantage, which relieves them of charges that are normally
borne from their budgets. The advantage may be provided
through a reduction in the firm’s tax burden in various ways,
including:’ (…) ‘a total or partial reduction in the amount of tax
(such as exemption or a tax credit)’.

confer on recipients

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

16.10.2008

EN

Official Journal of the European Union

L 275/59

By the adoption of the statutory provision in paragraph 3 of the
contested Act, Entra was relieved of the cost of excise duties for
approximately NOK 81 million (close to EUR 10 million). As
demonstrated above under point 1.1 and 1.2,
these duties
would otherwise have been payable from its budgets. On that
basis, the Authority, in its decision to open formal investigation,
drew the preliminary conclusion that Entra did receive an
advantage in the sense of Article 61(1) of the EEA Agreement.

connection with state privatisations. The structural disadvantage
that the Norwegian authorities claim to have faced was not of a
legal kind. Norwegian law would not have precluded the estab­
lishment of and transfer of the properties to Entra without
registering this in the Real Estate Register. Moreover, Entra
and the Norwegian authorities could have taken the same
precautions as a private operator. The reason for not using
these methods in relation to Statsbygg and Entra was merely
that
the political,
inconveniencies connected to such
managerial and practical
methods were so negative that Entra should become the new
title holder.

the Norwegian authorities

found that

In contrast, the Norwegian Authorities have argued that the
the
fulfilled for two reasons:
condition is not
that
competitive
exemption did not place Entra
the
position compared to a private investor. Secondly,
that
capital
in the
the solidity and the total values
company would have been unchanged if the excise duty had
been paid. In the following, the Authority will discuss these
arguments in turn.

in a better

structure,

firstly,

1.3.1. T h e c o m p a r i s o n w i t h p r i v a t e f i r m s

As referred to above under point I.3.1, in the proposal to the
Parliament, the Norwegian Government stated that a private
owner could choose not to transfer the title, but, for example,
keep the title in a holding company, when a new company is
established. The State, according to the Norwegian authorities,
the properties to a new legal entity. Thus,
must
according to the Norwegian authorities, there is no distortion
of competition when Entra is exempted from the document
duty.

transfer

According to the European Court of First Instance, an advantage
in the sense of Article 87(1) EC (corresponding to Article 61(1)
EEA) does not necessarily exist in all situations where a measure
to free a public company from a
is introduced in order
structural disadvantage that
it has in relation to its private
sector competitors (1). Article 61(1) of the EEA Agreement is
aimed merely at prohibiting advantages for certain undertakings,
and the concept of aid covers only benefits or release of
burdens normally assumed in an undertaking’s budget and
which are to be regarded as an economic advantage, which
the recipient undertaking would not have obtained under
normal market conditions. However, the Authority does not
agree with the Norwegian authorities
the arguments
advanced by Norway can lead to the conclusion that a
comparison with private operators shows that Entra did not
receive an advantage by being exempt from excise duties.

that

The methods that a private owner can use to avoid paying
excise duty are equally open to undertakings established in

(1) Cf. Case T-157/01 Danske Busvognmænd v Commission, judgment of

16 March 2004, para. 57.

In the opinion of the Authority, such considerations cannot lead
to a conclusion that Entra was not granted an advantage by the
exemption to pay the excise duty. This follows already from the
fact that the methods that can be used to avoid excise duties all
transfer of ownership
are based on the non-registration of
(retaining of the title).
is not
transferred, no excise duty is payable. But
the protection
offered by the registration is not available to private operators
not
transferring the title, whereas Entra did obtain this
protection. Such methods are therefore not equivalent to the
procedure that
took place in the present case where Entra
became the new title holder.

If the title (‘grunnbokshjemmel’)

in some respects, pose greater

Moreover, even if that had been the case, the Authority cannot
see that the claimed structural problem for the Norwegian State
is of a fundamentally different character than the one faced by
private operators. It might be correct that a non-transfer of title
in practice might,
incon-
veniencies to a publicly owned entity than to a privately
in the Authority’s opinion,
owned company. However,
questions concerning the inter partes relationship between the
previous and the present owner of real estate should be viewed
apart from the discussions relating to registration in the Real
Estate Registry. This registration will normally not affect the
inter partes relation between the two legal subjects but only
have importance in relation to third parties. Thus, registration
might be important in order for the buyer to avoid that a third
party, who in good faith,
later buys the property from the
previous owner, would have a stronger title to the real estate.
It also has important bearing on the protection against the
creditors of the previous owner,
just as it can influence the
ability of the buyer to obtain mortgage and other loans. In all
these situations, the disadvantages of not registering in the Real
Estate Registry is fundamentally the same for privately and
publicly owned undertakings.
the
methods described may be less favourable for private under­
takings 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 bank­
ruptcy estate’s extinction of the rights of a legal successor to the
debtor’s property.

in some aspects,

In fact,

L 275/60

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Official Journal of the European Union

16.10.2008

Finally, the Authority emphasises that the Norwegian authorities
have not demonstrated that a private party would choose with
certainty not to transfer the title. Norway has merely argued
that it was more likely than not that a private operator in
similar circumstances would have decided not to transfer the
title in the Real Estate Registry.

when determining whether
advantage or not.

the company has

received an

1.3.2. T h e

a r g u m e n t

c o n c e r n i n g t h e o p e n i n g

b a l a n c e

As already mentioned, the Norwegian authorities have argued (1)
that the exemption from excise duty should not be viewed
separately from the opening balance sheet of the company.
They argue that the measure in question did not change the
capital
the
company. Theoretically, if excise duties were to be accrued in
the opening balance sheet, there would have been an alternative
opening balance where the value of the properties would have
been reduced with the same amount as the excise duty.

the solidity and the total value of

structure,

that

the Norwegian authorities

The argument of
the tax
exemption should be seen in conjunction with an otherwise
different price on the real estate, builds on the reasoning that
the aid flowing from the tax exemption led Entra to have a net
loss in the form of a higher price setting of the transferred real
estate. However, to take account of an all ensuing more or less
direct possible economic consequences of an aid measure for
the particular aid beneficiary would, in the Authority’s opinion,
be contrary to the approach generally applied in State aid cases.
In the same vein,
it can normally not be admitted that the
ensuing economic effects of the aid measure in contractual
relations between the aid beneficiary and other legal subject
should be taken into account when assessing whether, and to
what extent, the aid measure qualifies as an advantage in the
sense of Article 61(1) of the EEA Agreement. In this respect, the
Authority emphasises
the Norwegian State as a tax
collector and as a seller of real estate should be viewed as
two distinct entities for the purpose of the State aid regime.

that

As demonstrated above in point 1.2, according to the normal
rules of the Norwegian tax system, Entra was obliged to pay the
irrespective of how the opening
excise duty. Consequently,
balance was established,
is the transaction value between
it
the seller and the buyer which constitutes the tax base for the
excise duty. Whatever considerations the buyer (Entra) or the
seller (the State) would have in relation to the agreed price, it is
that price and nothing else that the tax authorities will apply
when they calculate the excise duty to be paid.

The Authority cannot
therefore agree with the Norwegian
Government that Entra did not receive an advantage in the
the EEA Agreement by being
sense of Article 61(1) of
exempt
from excise duty, and still receiving the protection
afforded by being in the Real Estate Register.

in the

constitute

an advantage

the existence of

influenced the settingup of

the Authority disagrees with the
As a matter of principle,
this tax relief
Norwegian Authorities that
would not
of
sense
Article 61(1) of the EEA Agreement if the exemption from
excise duty has
the opening
balance sheet of Entra in a way that, allegedly, has neutralised
the advantage flowing from the tax exemption. According to
Norwegian legislation, Entra would, in the absence of paragraph
3 in the contested Act, have been obliged to pay to the tax
authorities the excise duty on the agreed transaction price for
the registration that
it being relevant
whether the transaction price might have looked different.
The tax has never been paid and it
is this missing tax
payment which is under consideration in the present case.
The appearance of Entra’s opening balance sheet
influenced
by other circumstances, in particular whether the seller would
have accepted a lower value on the buildings if Entra had paid
the excise duty, are factors which cannot be taken into account

took place, without

(1) Letters dated 4 June 2003, 16 September 2004 and 30 June 2005

from the Ministry of Trade and Industry.

‘Theoretically,

In the letter dated 4 June 2003 from the Ministry of Trade and
if document
Industry, the Ministry states that:
duty and registration fee were to be accrued in the opening
balance sheet,
the adjusted and alternative opening balance
would have been as described in attachment 2’). Attachment
2 describes an alternative opening balance sheet where total
assets and liabilities/equity are the same, but where i.a the
value of the properties is reduced with the same amount as
the excise duty. The Ministry concludes that Entra has not
received any economic advantages as a consequence of
the
exemption from excise duties.

The hypothetical opening balance sheet described by the
Norwegian authorities is based on the assumptions that the
buyer (Entra) would not reduce its demanded rate of return
(9,5 %) and equity ratio (40 %) if the excise duty had to be
paid. This implies that the hypothetical opening balance sheet
is based on the assumption that
the seller will always pay
100 % of the excise duty and that the value of the buildings
in an alternative opening balance would be reduced by exactly
the same amount as the excise duty.

16.10.2008

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Official Journal of the European Union

L 275/61

The Authority has no reason to question the legitimacy of the
Net Present Value method used when the opening balance of
Entra was established. However, as the Norwegian Government’s
own attempts to find the correct value of the real estate shows
(see point I 2.2 above and the considerable differences between
the alternative values), other methods could have been used.
Other assumptions could also have been used, and those
other methods and assumptions could very well have resulted
in a situation where the burden of the tax would not have been
born 100 % by the seller. In a normal market situation with
several bidders, it is more likely that the extra burden of the
excise duty through the agreed transaction price would have
been split between the seller and the buyer.

that

The Authority does not find it possible to establish a general
rule according to which the market price of a building will
always rise with exactly the amount
the buyer should
normally pay in indirect taxes for registering that building in
situations where those taxes have either already been paid or
shall not be incurred due to a legislative exemption. Indeed, in
the letter dated 30 June 2005 from the Ministry of Trade and
Industry, the Ministry acknowledges that one cannot make such
a sweeping conclusion and that the Government’s argument
about the net effect on the non-payment on the excise duty
is based purely on the use of the specific method for value
assessment that the Government chose to apply to Entra.

In the present case, Norway chose not to levy the excise duty
on Entra and did specify that the later assessment of the value
of the real estate depended on this premise. Norway, therefore,
basically argues that in the hypothetical situation it had decided
that Entra should be subject to normal excise duty, it would still
have chosen the net-present-value method and used the same
assumptions for calculating the sales price. To admit such an
argument would be to let the scope of Article 61(1) of the EEA
Agreement depend on an EEA State’s ability to persuade the
Authority and the EFTA Court
it would have taken
imaginary steps in hypothetical situations.

that

Finally, the Authority emphasises that in the very few cases
where the Court of Justice — in different kinds of situations
— has accepted a quid pro quo argument, it has always been a
precondition that the countervailing mechanism was decided
beforehand (and not
in a clearly defined,
objective and transparent manner (1). However, nowhere in
the preparatory works to the relevant legislation is it specified
that it was a precondition for granting the advantage ensuing
from the exemption to pay excise duty, that this advantage be

ex post

facto)

met by a higher assessment of the value of the relevant real
estate than a private party would have paid for the building in
open sale. On the contrary, the Norwegian authorities’ argument
that Entra did not receive an advantage compared to a situation
in which it would have paid the excise duty, seems to run
counter to the explicitly stated aim behind relieving Entra
from paying excise duty. As cited above in point I.3.1, in the
Government’s proposal to the Stortinget, it was explained that
the purpose of the exemption clause was that Entra should not
bear the economic burden of the excise duty, since private
competing undertakings could, to a large extent, escape that
burden by other means. In other words,
in the proposal to
the Parliament,
an underlying assumption that
there
payment of the excise duty would indeed put Entra in a less
economically advantageous position than if Entra did not pay
the duties. Furthermore, it was the intention of the Parliament
that Entra should not be put in this non-advantageous position.

is

1.3.3. C o n c l u s i o n o n a d v a n t a g e

In conclusion, the Authority maintains that paragraph 3 of the
contested Act did confer Entra an advantage in the meaning of
Article 61(1) of the EEA Agreement.

1.4. The measure must distort or threaten to distort competition and

it must affect trade between the Contracting Parties

In the opening decision, the Authority came to the preliminary
conclusion that the measure did threaten to distort competition
and affected intra EEA-trade within the meaning of Article 61
(1) of the EEA Agreement. In contrast, The Norwegian authori­
ties argue that the measure in question ‘will not affect
trade
between the Contracting Parties’ and that
the Authority must
assess the relevant market. Furthermore, the Norwegian auth­
orities claim that ‘non-Norwegian investors have not operated in the
Norwegian real estate market’ (2).

The ECJ has held (3) that competition is distorted from the
moment that the state’s financial aid strengthens the position
of an undertaking compared with other competing under­
takings. The granting of aid reduces costs and thereby gives
beneficiaries a competitive advantage over those who have to
bear all costs at their own expense. On that basis, the Authority
finds that the aid granted to Entra in the form of no excise duty
distorted competition within the meaning of Article 61(1) of
the EEA Agreement. Indeed, the Norwegian authorities have not
argued that competition is not distorted (but only that trade is
not affected).

(1) Cf. for a corresponding approach within a related field of State aid,
Case C-280/00 Altmark Trans GmbH [2003] ECR I-7747 (paragraphs
83-95). See also Advocate General Jacobs points 117-129 in Case
C-126/01 GEMO [2003] ECR I-13769.

(2) See letter dated 16 September 2004 from the Ministry of Trade and

Industry.

(3) Case 730/79 Philip Morris Holland BV v Commission [1980] ECR

2671, paragraph 11.

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the

aid in question is

Turning to the question concerning effect on trade, it must be
examined whether
capable of
strengthening the position of an undertaking compared with
that of undertakings competing in EEA trade (1). As held by
the Authority is not required to establish
the EFTA Court,
that the aid has an appreciable effect on trade between the
Contracting Parties, but only to examine whether the aid was
liable to have such an effect (2). Hence, the criterion of the effect
on trade has been traditionally interpreted in a non-restrictive
way to the effect that, in general terms, a measure is considered
to be State aid if it is capable of affecting trade between the EEA
States (3).

for

‘[u]nder

settled case-law,

the purposes of

According to Chapter 17B.3(2) of the Authority’s State Aid
Guidelines,
this
provision, the criterion of trade being affected is met if the recipient
firm carries on an economic activity
involving trade between
Contracting Parties’. However, aid may affect trade within the
EEA even if the recipient undertaking does not itself participate
in cross-border activities (4). This is because the granting of state
support to an undertaking may lead to the internal supply being
maintained or increased, with the consequence that the oppor­
tunities for undertakings established in other EEA States to offer
their services to the market of that State are reduced (5).

According to Entra’s own Annual Accounts for 2001, Entra is
engaged in ‘developing,
letting, management, operation, sale, and
purchase of real estate in Norway’.

Entra is a member of ‘Association of Commercial Real Estate’ (‘Fore­
ningen Næringseiendom’) (6), whose members wholly or partly
conduct the same kind of activities as Entra. The Association
of Commercial Real Estate has 74 members (in October 2005).
like ABB AS–Eiendom,
The members
companies
ICA Eiendom
Aberdeen Property Investors, Avantor AS,

include

(1) Cf. inter alia, Case C-126/01 Gemo, judgment of 20 November 2003;
Case E-6/98 The Government of Norway v EFTA Surveillance Authority
[1999] Report of the EFTA Court, page 76, paragraph 59; Case
730/79, Philip Morris v Commission [1980] ECR 2671, paragraph 11.
(2) Joined Cases E-5/04, E-6/04 and E-7/04 Fesil, Pil and the Kingdom of
Norway v the EFTA Surveillance Authority, judgment of 21 July 2005,
pr. 94.

(3) Joined Cases T-298/97 - T-312/97 e.a., Alzetta a.o. v Commission

[2000] ECR-2319, paragraphs 76-78.

(4) Case

T-55/99
paragraph 86.

CETM v

Commission

[2000]

ECR II-3207,

(5) Case C-303/88 Italy v Commission [1991] ECR I-1433, paragraph 27;
Joined Cases C-278/92 to C-280/92 Spain v Commission [1994] ECR
I-4103, paragraph 40.

(6) Association of Commercial Real Estate is a part of the Federation of
Norwegian Building Industries (‘Byggenæringens Landsforening (BNL)’).
BNL is a part of Confederation of Norwegian Enterprise (NHO).

Norge AS, KLP Eiendom AS, Linstow ASA, Mustad Eiendom
AS, NCC Property Development AS, Reitan Eiendom AS,
Skanska Eiendomsutvikling AS, Smedvig Eiendom AS, Steen &
Strøm ASA, Storebrand Eiendom AS, Umoe Sterkorder AS,
Veidekke Eiendom AS, Vesta Forsikring AS-Eiendom and Vital
Eiendomsforvaltning AS (7).

The biggest Norwegian owned real estate company (or group of
is the Olav Thon Gruppen. The Group was also
companies),
active in 2000 when Entra was established. Olav Thon Gruppen
currently owns 320 properties in Norway and 18 abroad
(mainly in Brussels). The first property in Brussels was bought
in 1988 (Thon Belgium SA). The Group employs about 3 400
the Group is also
people.
involved in hotels, restaurants and shopping centres (8).

In addition to letting of offices,

the owners of

One of the companies mentioned above, Linstow AS, owns and
develops real estate in Norway as well as in the Baltic States,
Portugal and Sweden. Linstow AS is wholly owned by the
Anders Wilhelmsen Group which purchased and delisted the
company from the Oslo Stock Exchange in 1999. The Anders
Wilhelmsen Group is one of
the shipping
company Royal Caribbean Cruise Line (RCCL). Linstow AS i.a.
manages the Norwegian portfolio (Nordea Portfolio) of prop­
erties owned by Curzon Global Partners. The portfolio consists
of 31 properties (by November 2005) spread all over Norway.
Curzon Global
investment
management company owned by IXIS AEW Europe (IAE). IAE
is a European real estate investment manager owned by Groupe
Caisse d'Epargne and Caisse des Dépôts
IAE is
responsible for approximately EUR 11 billion of assets under
management (9).

London-based

in France.

Partners

is

a

a

company of

ICA Fastigheter AB,

ICA Eiendom Norge AS,

is a
One of the other companies,
daughter
Swedish
company. ICA Fastigheter AB is a wholly owned subsidiary to
ICA AB. ICA Fastigheter AB builds, manages and sells real estate
in Scandinavia and the Baltic countries. The portfolio has a
book value of SEK 5,7 billion and consists mainly of store
facilities and warehouse facilities. Besides
ICA stores and
the company also offers real estate to external
companies,
clients. The ICA Group (ICA AB)
the Nordic
region's leading retail companies, with just over 2 600 of its
own and associated stores
in Scandinavia and the Baltic
countries (10).

is one of

(7) Source: http://www.foreningen-naringseiendom.no/medlemsbedriftene
(8) Source: http://www.olavthon.no/
(9) Source: http://www.ne.no/linstow
(10) Source: http://www.ica.no/FrontServlet?s=eiendom&state=eiendom_

dynamic&viewid=919&expand=1

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Official Journal of the European Union

L 275/63

Exchange. Currently, Aberdeen Property

At the same time as Entra was established (in 2000), Aberdeen
Property Investors Norway AS was established as a daughter
company of Aberdeen Property Investors. Aberdeen Property
Investors is a part of Aberdeen Asset Management PLC, an
fund management group listed on the London
independent
Stock
Investors
manages EUR 7,8 billion in property investments in Northern
Europe, of which NOK 9 billion (some EUR 1,1 billion) is in
Norway.
In 2001, Aberdeen Property Investors Norway AS
bought Norske Liv Eiendom, another real estate company on
the Norwegian market, and today the company manages the
real estate portfolios of i.a. NSB, Nordea Liv and API Eien­
domsfond. Aberdeen Property Investors has 200 employees in
Norway (1).

Of the companies mentioned above which are active in the
same market as Entra (the developing,
letting, management,
operation, sale and purchase of real estate in Norway), and which
were active in 2000 when Entra was established, it is thus clear
that several had non-Norwegian owners, several were active
both in Norway and outside Norway and several managed
real estate portfolios owned by foreign clients.

Entra

It follows from the description in point I above that the assets
and activities transferred to Entra were exposed to competition.
Accordingly,
of
competes with
buildings/properties. This applies to Entra as owner, purchaser,
seller, operator and administrator of real estate. Entra operates
all over Norway in a market where economic agents from other
EEA States are active. Consequently, condition 4 is also fulfilled
as the measure affects or threatens to affect competition and
trade between the Contracting Parties.

providers

other

having a social character granted to individual consumers or aid
to make good the damage caused by natural disasters or
exceptional occurrences.

Under Article 61(3)(a) aid may be considered compatible with
the EEA Agreement when it
is designed to promote the
economic development of areas where the standard of living
is abnormally low or where there is serious underemployment.
Since the measure in question is not limited to such areas, this
provision does not apply. Also the exemption laid down in
the
Article 61(3)(b)
exemption laid down in Article 61(3)(c), the Authority cannot
see that the aid can be considered to facilitate the development
of certain economic activities or of certain economic areas in
the meaning of this Article. Consequently, the aid does not
in
qualify
Article 61(3) of the EEA Agreement.

is not applicable. Lastly, as

exemptions

provided

regards

any

the

for

for

of

3. Procedural requirements and the character of the aid

3.1. The notification obligation

Article 1(3) in Part I 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
i.e. notified
without notification or aid that
after being ‘put into effect’ is considered unlawful aid.

is notified late,

in sufficient

to submit

to enable

time

it

The exemption from excise duties provided for in the estab­
lishment of Entra was not notified to the Authority and it was
put into effect.

2. Compatibility of the aid

Based on the foregoing considerations, the tax exemptions at
issue constitute aid within the meaning of Article 61(1) of the
EEA Agreement.

3.2. Recovery

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

such aid could be

the

draws

attention of

to Article 1 in Part

the Norwegian
The Authority
Government
II of Protocol 3 to the
Surveillance and Court Agreement. The exemption from excise
duties was introduced after the entry into force of the EEA
Agreement. Any aid in this case should therefore be qualified
as new aid. As stated above no notification of such aid has been
received. The aid is in this case to be considered unlawful as
defined in Article 1(f) of Part II to Protocol 3 to the Surveillance
and Court Agreement.

The application of the exceptions under Article 61(2) is not
appropriate. The establishment of Entra does not entail aid

(1) Source: http://www.aberdeenpropertyinvestors.no

II of Protocol 3 to the
According to Article 14 in Part
Surveillance and Court Agreement,
in cases of unlawful aid,
should it be found incompatible, the Authority orders, as a
rule,
the EFTA State concerned to reclaim aid from the
recipient.

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the opinion that no general principles
The Authority is of
preclude repayment in the present case. According to settled
case law, abolishing unlawful aid by means of recovery is the
logical consequence of a finding that it is unlawful. Conse­
quently, the recovery of State aid unlawfully granted, for the
purpose of restoring the previously existing situation, cannot in
principle be regarded as disproportionate to the objectives of
the EEA Agreement in regard to State aid. By repaying the aid,
the recipient forfeits the advantage which it had enjoyed over its
competitors on the market, and the situation prior to payment
of the aid is restored (1). It also follows from that function of
repayment of aid that, as a general rule, save in exceptional
circumstances, the Authority will not exceed the bounds of its
discretion, recognised by the case law of the Court, if it asks the
EFTA State concerned to recover the sums granted by way of
unlawful aid since it is only restoring the previous situation (2).
Moreover, in view of the mandatory nature of the supervision
of State aid by the Authority under Protocol 3 of
the
Surveillance and Court Agreement, undertakings to which aid
has been granted cannot,
in principle, entertain a legitimate
expectation that the aid is lawful unless it has been granted
in compliance with the procedure laid down in the provisions
of that Protocol (3).

4. Conclusion

In light of the foregoing considerations, the Authority finds that
the exemption from document duties and registration fees
adopted in connection with the establishment of Entra is
State aid which is not compatible with the functioning of the
EEA Agreement. Consequently,
the
procedure provided for in Article 1(2) in Part I of Protocol 3
the Surveillance and Court Agreement with a negative
of
decision and orders the Norwegian authorities to recover the
State aid plus accrued interest from Entra,

the Authority closes

vention to the procedural requirements of Article 1(3) in Part
1 of Protocol 3 to the Surveillance and Court Agreement,
and does not qualify for exemptions according to Articles
61(2) or 61(3) of the EEA Agreement.

2. The Norwegian Government shall recover from Entra the
foregone stamp duty and the foregone registration fees
plus accrued interest calculated on the basis of the relevant
reference rate of interest, beginning from the date on which
the excise duties were payable until the date of recovery.

3. The Norwegian Government shall be informed by means of

a letter containing a copy of this decision.

4. The Norwegian Government shall

inform the Authority
within two months of the date of the notification of this
Decision, of the measures taken to comply with it.

5. The EC Commission shall be informed, in accordance with
Protocol 27(d) of the EEA Agreement, by means of a copy of
this Decision.

6. Other EFTA States, EC Member States, and interested parties
shall be informed by the publishing of this decision in its
authentic language version in the EEA Section of the Official
the European Union and the EEA Supplement
Journal of
thereto.

7. This decision is authentic in the English language.

HAS ADOPTED THIS DECISION:

Done at Brussels, 14 December 2005.

1. The exemption of document duties and registration fees
provided for in the establishment of Entra Eiendom AS
(ref. Paragraph 3 of Law of 18 February 2000, No 11)
constitutes State aid within the meaning of Article 61(1)
of the EEA Agreement. The aid has been awarded in contra­

For the EFTA Surveillance Authority

Einar M. BULL
President

Kurt JÄGER
College Member

(1) Cf. Case C-350/93 Commission

v

Italy

[1995] ECR I-699,

paragraph 22.

(2) Cf. Case C-75/97 Belgium v Commission [1999] ECR I-3671,
paragraph 66, and Case C-310/99 Italy v Commission [2002] ECR
I-2289, paragraph 99.

(3) Cf. Case C-169/95 Spain v Commission [1997] ECR I-135,

paragraph 51.