2006/746/EC: Commission Decision of 4 April 2006 on State Aid No C 33/2005 (ex N 277/2004) which the Netherlands is planning to implement under the Marktpassageplan project in Haaksbergen (notified under document number C(2006) 1184)   (Text with EEA relevance)
Date: 2006-04-04
Institutions: European Commission
Subjects: Netherlands, State aid, control of State aid, property development

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Official Journal of the European Union

L 307/207

COMMISSION DECISION

of 4 April 2006

on State Aid No C 33/2005 (ex N 277/2004) which the Netherlands is planning to implement under
the Marktpassageplan project in Haaksbergen

(notified under document number C(2006) 1184)

(Only the Dutch text is authentic)

(Text with EEA relevance)

(2006/746/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Commu-
nity, and in particular the first subparagraph of Article 88(2)
thereof,

dated 29 December 2005,
5 January 2006.

registered as

received on

2.

DESCRIPTION

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

2.1. The project

Having called on interested parties to submit their comments
pursuant to the provisions cited above,

(6)

Whereas:

(1)

(2)

(3)

(4)

1.

PROCEDURE

By letter dated 23 January 2004, registered as received on
23 February, a complaint was sent to the Commission
about possible aid concerning a building project
in
Haaksbergen in the Netherlands. By letter dated 15 April
2004, the Commission asked the Dutch authorities to
provide clarification of the measure. By letter dated 18 May
2004, registered as received on 25 May, the Netherlands
the measure would be
informed the Commission that
notified shortly.

By letter dated 25 June 2004, registered as received on 30
June, the Netherlands notified the Commission that the
Haaksbergen municipal authorities were planning to grant
aid to the construction companies
involved in the
Marktpassageplan project. By letter dated 12 July 2004,
the Commission requested further information, which was
provided at a meeting on 8 October 2004 and by letter
received on
dated 30 December 2004,
10 January 2005. The Netherlands submitted additional
information by letter dated 11 May 2005, registered as
received on 18 May.

registered as

By letter dated 21 September 2005,
the Commission
informed the Netherlands that it had decided to initiate the
procedure laid down in Article 88(2) of the EC Treaty in
respect of the aid.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Union (1) .
The Commission invited interested parties to submit their
comments on the aid.
It received no comments from
interested parties.

(5)

The response of the Netherlands to the initiation of the
investigation procedure was submitted by letter
formal

(1) OJ C 333, 29.12.2005, p. 2.

The municipal council of Haaksbergen, a municipality with
24 000 inhabitants located in the province of Overijssel
close to the German border, had been hoping to regenerate
its neglected centre since the beginning of the nineties.
With the help of consultants, different construction plans
were studied in order to provide quality housing and
commercial premises. However, neither an initial construc-
tion company with which the municipality intended to
carry out the project nor the municipality itself was able to
acquire the necessary plots of land.

(7) At the end of the nineties, six construction companies
acquired the plots of
land concerned and then joined
forces. They drew up a building project consisting in the
building of 58 apartments and 11 commercial premises.
The project did not involve the construction companies in
any public works, such as infrastructure,
that would
subsequently be handed over to the municipality. The
project was for the construction of apartments and shops
that were to be sold or leased to private investors. However,
the calculations showed that the project would not be
profitable.

2.2. Support from the public authorities

(8) Given the great

importance it attached to the project
presented by the six construction companies for regenerat-
ing the centre of the municipality, the local authority, in the
knowledge that it could count on receiving a financial
contribution from the province, agreed to support the
project, mainly by covering the expected losses. The
municipality has already signed the cooperation agreement
with the construction companies, but the aid provided for
in the agreement has not yet been granted.

(9)

The public support will mainly take the form of a grant of
€2,98 million from the municipality to the construction
companies (Measure 1). This amount includes the financial
support of €453 780 (NLG 1 000 000) granted by the
province for this project and represents the expected project
losses calculated on the basis of the anticipated costs and
revenues.

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(10) One provision of the cooperation agreement stipulates that,
the project, an independent expert will
at the end of
calculate actual costs and revenues. If the actual
losses
calculated ex post by the expert turn out to be smaller than
the expected losses on the basis of which the grant will be
made available, only 50 % of the part of the grant in excess
of the actual losses has to be paid back to the municipality.
In other words, the project developers can keep 50 % of the
part of the grant which does not cover actual losses. This
provision will be referred to below as ‘the partial repayment
provision’. If the actual losses are greater than the expected
losses,
from the municipality will not be
increased.

the grant

some plots of

(11) Besides support in the form of a grant (Measure 1), the
Commission has also initiated proceedings in respect of
three other measures which may include aid. The second
measure is the transfer free of charge to the construction
companies of
land belonging to the
municipality (1) (Measure 2). According to the notification
by the Dutch authorities, the plots of land were worth
€233 295, but
receive any
valuation report. In addition, the municipality will be liable
for 35 % of the costs that could result from claims for
damages under Article 49 of the Regional Planning Law
(Wet op de Ruimtelijke Ordening) after completion of the
project (Measure 3). Liability for the remaining 65 % will
rest with the construction companies. Finally, it was not
clear whether the municipality will sell a plot of land and a
building to the project developers at their book value or at
their market value (Measure 4).

the Commission did not

(12) On completion of the project, the municipality will receive
free of charge a number of plots of land that, according to
the building permit, will be developed as public spaces. The
notification did not provide a precise valuation of the plots
concerned (Measure 2a).

2.3. The beneficiaries

(13) The beneficiaries of the aforementioned measures are the

construction companies involved in the project.

(14) The first direct beneficiary, Rabo Vastgoed B.V., belongs to a
large group which is active at international level, mainly in
the financial sector. It is responsible for 25 % of the project.

(15) On the basis of the cooperation agreement, the second
direct beneficiary is Centrum Haaksbergen B.V., which is
the undertaking set up by five construction companies to
carry out this project. These five companies will perform all
the construction operations entrusted to Centrum Haaks-
bergen B.V, which is therefore mainly an ad hoc legal vehicle
without any ‘real’ economic activities of its own. Accord-
ingly, it can be concluded that the aid granted to Centrum
Haaksbergen will be transferred to these five companies.

(1) The six construction companies have now acquired about 90 % of

the necessary plots from the previous private owners.

According to the Dutch authorities, each of the companies
is responsible for 15 % of the project. The Netherlands has
also indicated that RoTij Bouwontwikkeling Oost B.V. is
active at national level, whereas the other four companies
(Besathij B.V., Bouwbedrijf Assink Eibergen B.V., Bouwbe-
drijf Deeterink B.V. and Bouwburo Jan Scharenborg B.V.)
are regional or local players.

(16) Even if the beneficiaries are referred to as ‘construction’
companies in this decision, their activities are not limited to
mere construction work. They cover the entire range of real
estate project development.

2.4. The relevant markets

(17) The relevant markets concerned are the markets for the
construction and sale of residential housing and the market
for the construction and renting of commercial premises.
As Haaksbergen is located close to the German border, it is
likely that certain Dutch and German suppliers and
customers active on these markets also operate in the
neighbouring country.

3.

REASONS FOR INITIATING THE FORMAL

INVESTIGATION PROCEDURE

(18) The Commission initiated the formal

investigation pro-
cedure as it had doubts as to whether some measures that
the municipal council was planning to implement did not
constitute state aid and whether the aid could be considered
compatible with the common market.

(19) Regarding the classification of the public measures as aid,
the Commission indicated in particular that the ‘partial
repayment provision’ conferred an advantage on the
construction companies.

(20) Regarding possible exemptions from the general prohibi-
tion on state aid in Article 87(1), the Commission first
noted that
the automatic exemptions provided for in
Article 87(2)(b) and (c) were not applicable to the present
aid measures. Nor could the aid be deemed under Article 87
(2)(a) to support a project having a social character, among
other things because the purchase of
the newly built
apartments is not reserved for disadvantaged persons.

(21) As regards the exemptions in Article 87(3), the Commis-
sion noted that the municipality of Haaksbergen is not
located in an assisted area and does not therefore qualify for
regional aid on the basis of Article 87(3)(a) and (c). The
derogation in Article 87(3)(b) is obviously not applicable.
The Commission has laid down various guidelines and
frameworks setting out rules for aid that may be covered by
the exemption provided for in Article 87(3)(c). None of
these guidelines appear to apply in the present case. The

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exemption for deprived urban areas (1) was also considered.
However, the project is not eligible for that exemption
because, among other things, Haaksbergen is not an urban
area within the meaning of
the Commission notice.
Logically, the area is not covered either by the European
URBAN II programme. Finally, the cultural exemption in
Article 87(3)(d) does not apply as this project consists in
the construction of new buildings and not
in the
renovation of existing buildings or some other cultural
purpose.

4.

COMMENTS FROM INTERESTED PARTIES

(22) The Commission has received no comments from inter-

ested parties.

5.

COMMENTS FROM THE NETHERLANDS

(23)

In its response to the initiation of the formal investigation
procedure, the Netherlands provided additional information
on the transfer of plots of land free of charge by and to the
municipality (Measure 2 and Measure 2a) respectively. The
transfer of plots of land free of charge to the construction
companies (Measure 2) will represent a surface area of
674m2.
In turn, the municipality will receive 1 077m2
(Measure 2a). The Dutch authorities have provided an
expert report according to which the value of the land
concerned was €135 per m2.

(24) Regarding the sale to the construction companies of
land and a building belonging to the
another plot of
the Dutch authorities have
municipality (Measure 4),
provided information showing that the transaction price
was significantly above the price paid by the municipality
for these properties a few years earlier.

6.

ASSESSMENT OF THE AID

6.1. Existence of aid within the meaning of Article 87

(1) of the EC Treaty

State resources

(25) The five measures examined clearly involve state resources.
The grant (Measure 1) is a direct transfer of municipal
resources. The transfer of ownership of plots of land and
buildings modifies the total value of the assets owned by
the municipality (Measures 2, 2a and 4). Lastly, by granting
a guarantee which involves a payment in the future and by
not requesting the payment of an appropriate guarantee
premium, Measure 3 also involves municipal resources.

Benefit

(26) The grant from the municipality (Measure 1) confers a
benefit on the companies since they receive funds which
they would not have received on market conditions.

(27) The transfer free of charge of land by the municipality
(Measure 2)
is compensated for by the transfer in the
opposite direction of a larger surface area (Measure 2a), as

stipulated in the same agreement. On the basis of the expert
valuation submitted by the Netherlands, the municipality
will receive in net terms land worth €54 405 (2). Accord-
ingly, these two measures, taken together, do not confer a
benefit on the construction companies.

should normally be

(28) The municipality will also be responsible for 35 % of the
costs that could result from claims for damages consecutive
to the project (Measure 3). Point 2.1.2 of the Commission
Notice on the application of Articles 87 and 88 of the EC
Treaty to State aid in the form of guarantees (3) states that:
‘The benefit of a State guarantee is that the risk associated with
the guarantee is carried by the State. This carrying of a risk by the
remunerated by an appropriate
State
premium. Where the State forgoes such a premium, there is both
a benefit for the undertaking and a drain on the resources of the
State. Thus, even if no payments are ever made by the State under
there may nevertheless be a State aid under
a guarantee,
Article 87(1). The aid is granted at the moment when the
guarantee is given, not the moment at which the guarantee is
invoked or the moment at which payments are made under the
terms of the guarantee. Whether or not a guarantee constitutes
State aid, and, if so, what the amount of that State aid may be,
must be assessed at the moment the guarantee is given.’ In the
present case,
the risk of
the Commission notes that
compensation payments resulting from claims for damage
is carried in part by the State and that the municipality does
not receive any premium for this partial guarantee. This
measure therefore relieves the companies of costs they
would normally incur in the case of a construction project,
either in the form of a guarantee/insurance premium or, if
they do not take out insurance, in the form of provisions
for possible payments to compensate for damage. Conse-
quently, it confers a benefit.

(29) Regarding the sale of plots of land and property by the
municipality to the construction companies (Measure 4),
the additional information provided by the Dutch author-
ities on the price paid by the municipality to acquire these
assets is sufficient to dismiss the doubts raised in the
decision to initiate proceedings regarding the possible sale
at
the additional documents
demonstrate that the municipality has made a significant
capital gain over a short period of time. Consequently, it
revenues. The transaction
has not
therefore confers no benefit on the construction compa-
nies.

forgone potential

the book value.

Indeed,

(30)

In conclusion,
two measures confer a benefit on the
construction companies (Measures 1 and 3), whereas the
others do not (Measures 2, 2a and 4). The latter therefore
do not constitute state aid and will not be further examined.

(31) The preceding paragraphs examine the potential benefit for
the construction companies. The Commission must also
investigate whether the benefit is not partially transferred to
the buyers or tenants of the apartments and commercial

(1) Commission notice on the expiry of the guidelines on State aid for
undertakings in deprived urban areas (OJ C 119, 22.5.2002, p. 21).

(2) Transfer to the construction companies: 674m2 × €135 = €90 990;

transfer to the municipality: 1 077m2 × €135 = €145 395.

(3) OJ C 71, 11.3.2000, p. 14.

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premises. This is because they can buy or rent apartments
or commercial premises that would otherwise probably not
have existed or at least would have been more expensive.
However, this benefit would be indirect and diffuse. In any
case, any benefit for the 58 households is not likely to fall
under the state aid rules for the indirect aid recipients
carrying out economic activities. For
economic
operators, such as the 11 retail shops, any benefit would
be very small and, in any case, below the level defined by
the de minimis rules. The Commission will therefore limit its
construction
analysis
companies.

state aid for

to potential

the

the

Selectivity

(32) The measure is clearly selective since it is restricted to the

companies involved in this project.

Distortion of competition

(33) Thanks to the state aid, the companies will undertake an
otherwise loss-making project consisting in the construc-
tion and sale or rental of apartments and commercial
premises. Consequently, the aid directly distorts competi-
tion since new apartments and commercial premises add to
the supply on the market.

(34) There may be an additional distortion if

the state aid
exceeds the losses incurred by the companies in connection
with the present project. With this ‘excess’ grant, they could,
for example, quote lower prices in future construction
projects and/or use it for other activities. The Commission
points out that this additional distortion would not exist if,
on the basis of the actual losses calculated by the expert at
the end of the project, the companies had to repay in full
the part of the grant in excess of the actual losses. It notes
that the ‘partial repayment provision’ allows the companies
to keep 50 % of the part of the grant exceeding the losses.
This additional distortion can therefore not be ruled out.

Effect on trade between Member States

(35) The Commission notes that Haaksbergen is located close to
the German border. Therefore, some German construction
companies are present on the market for the construction
and sale or rental of apartments and commercial premises.
However, it also notes that a number of the companies
concerned are active at international level. Consequently,
there is a potential effect on trade.

6.2. Compatibility with the common market

(37)

In its notification, the Netherlands did not refer to any
special exemption from the general prohibition on state aid
under Article 87(1) on the basis of which the aid could be
authorised.

(38) As previously indicated, the Commission expressed doubts
in the decision to initiate the formal investigation procedure
as to whether the aid can be found to be compatible in the
light of the exemptions in Articles 87(2) and (3)(a), (b), and
(d) or the guidelines and frameworks drawn up on the basis
of Article 87(3)(c). In their response to the decision, the
Netherlands made no comments on the compatibility of
the aid. Further analysis undertaken by the Commission has
not brought any new elements to light in this regard either.
Therefore, the Commission concludes that the aid cannot
be considered compatible with the common market by
virtue of the aforementioned legal basis.

(39) Regarding possible compatibility on the basis of Article 86
(2), the Commission considers that the economic activity
facilitated by the aid in question, namely the construction
and sale or
and
commercial premises access to which is not restricted to
any particular social category can certainly not be deemed
to constitute a service of general economic interest. Nor has
the Netherlands claimed that this is the case. Accordingly,
Article 86(2) is not applicable to the aid.

rental of high-quality apartments

(40)

In this connection, the Commission will examine whether
the aid contained in Measures 1 and 3 cannot be found to
be compatible directly on the basis of Article 87(3)(c),
which stipulates that ‘aid to facilitate the development of certain
economic activities or of certain economic areas, where such aid
does not adversely affect trading conditions to an extent contrary
to the common interest’ may be considered to be compatible
with the common market.

(41) When examining whether aid is compatible directly under
Article 87(3)(c), the Commission, firstly, takes into account
the Community's objectives
analyses
whether the proposed aid measure is appropriate and
proportionate to its intended objectives and does not have
disproportionate effects on competition and trade.

secondly,

and,

(36) The grant (Measure 1) and the partial guarantee (Measure 3)
thus qualify as state aid pursuant to Article 87(1) of the EC
Treaty. The net transfer of plots of
land free of charge
(Measures 2 and 2a taken together) as well as the sale of a
plot of land and a building (Measure 4) do not constitute
state aid.

(42) Regarding the objectives to which the assisted project
contributes,
the Commission notes the following: The
Dutch authorities indicated that, according to a 2001
survey, 65 % of the inhabitants of Haaksbergen felt insecure
and thus avoided the centre of the municipality. This feeling
of insecurity is borne out by police records of offences

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committed. The project, with commercial premises on the
ground floor and apartments above and with new
residential buildings on what was until now waste ground,
is designed in particular to tackle that feeling of insecurity.
The Dutch authorities also indicated that three shopping
streets have been successfully developed around the centre,
which is still though underdeveloped commercially and
forms a barrier of sorts in the midst of
those three
economically successful areas. The project is designed to
make the centre more attractive and therefore to prevent
further squalor and abandonment of the existing shops.
Accordingly,
the project has
positive repercussions on the common interest, as claimed
by the municipality in support of the aid.

it can be concluded that

(43) With regard to the proportionality of

the aid,

it covers actual

the
Commission notes that the aid is intended to cover the
losses incurred by the companies in carrying out
the
project, which would not otherwise be undertaken. To the
extent that
losses incurred by the six
companies, which will sell or rent the apartments and
premises at prices corresponding to the customary prices
for comparable property in that area, the aid is propor-
tionate. However, the project also contains potential ‘extra’
aid as a consequence of the ‘partial repayment provision’.
That provision of the cooperation agreement between the
municipality and the construction companies means that
the actual project losses will be calculated at the end of the
project by an expert on the basis of the realised costs and
revenues. If the actual losses are smaller than the estimated
losses on the basis of which the grant (Measure 1) is to be
awarded during the course of the project, only 50 % of the
part of the grant which is in excess of the actual losses
needs to be repaid to the municipality. The construction
companies can therefore retain 50 % of the part of the
grant not covering actual losses. For instance, if the actual
losses were around zero instead of the expected €2,98
million, the companies would repay €1,49 million and
retain a similar amount for themselves. The amount of state
resources in excess of the actual losses is not necessary for
the execution of the project. It can therefore be concluded
that only a provision stipulating repayment in full of the
part of the subsidy in excess of the actual
losses could
restrict the aid to the minimum necessary and, in so doing,
render it proportionate. The Commission also notes that
such a ‘full repayment provision’ must also cover the aid
included in the partial guarantee (Measure 3), and not only
the grant (Measure 1), as is the case with the present ‘partial
repayment provision’.

distortion of competition and the consequent effect on
trading conditions generated by such a local, limited project
are small and do not outweigh the positive effects identified
earlier.

(45) As already indicated in connection with the additional
distortions of competition, the Commission considers that
the aid, to the extent that it covers losses actually incurred,
does not provide the six companies with resources that they
can use for future projects in order to distort competition
and affect trade. However, this conclusion does not hold for
the aid granted in excess of actual losses. As stated above,
the ‘partial repayment provision’ leaves the door open for
such ‘extra’ aid.

(46) The Commission concludes that the part of the aid that
covers the actual project losses calculated ex post by an
independent expert facilitates the development of certain
economic activities or of certain economic areas without
adversely affecting trading conditions to an extent contrary
to the common interest. It also concludes that the part of
the aid in excess of the actual project losses calculated ex
post by an independent expert is not necessary for the
realisation of the project and, at the same time, adversely
affects trading conditions.

7.

CONCLUSION

(47) On the basis of the foregoing considerations, the Commis-
sion concludes that the part of the aid that covers the actual
project losses calculated ex post by an independent expert,
up to a maximum of €2,98 million (Measure 1), plus an
appropriate guarantee premium (Measure 3), is compatible
with the common market on the basis of the Article 87(3)
(c). The part of the aid in excess of the actual project losses
calculated ex post by an independent expert
is not
compatible on the basis of Article 87(3)(c) or on the basis
of any another exemption. It is therefore incompatible with
the common market,

HAS ADOPTED THIS DECISION:

Article 1

is planning to implement

The transfer of plots of land free of charge (Measure 2) that the
the
Netherlands
construction companies
involved in the Marktpassageplan
project in Haaksbergen does not constitute state aid as it is
accompanied by a large transfer free of charge in the opposite
direction (Measure 2a).

in favour of

The sale of a plot of land and a building to those companies
(Measure 4) does not constitute state aid either.

(44) With regard to the extent of the distortion of competition
and of the effect on trade, the Commission notes that the
aid increases the supply on the market by 58 apartments
and 11 commercial premises, which will be offered at prices
corresponding to the prices customarily observed for
similar property in that area. It would point out that the

Article 2

The grant of €2 984 000 (Measure 1) and the 35 % coverage of
potential payments resulting from claims for damages (Mea-

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that

the Netherlands is planning to award to the
sure 3)
companies involved in the Marktpassageplan project in Haaaks-
bergen constitute state aid.

Article 4

The Netherlands shall
inform the Commission, within two
months of notification of this Decision, of the measures taken to
comply with it.

Article 3

Article 5

The part of the aid mentioned in Article 2 that covers the actual
project losses as calculated ex post by an independent expert is
compatible with the common market.

This Decision is addressed to the Kingdom of the Netherlands.

Done at Brussels, 4 April 2006.

The part of the aid mentioned in Article 2 that exceeds the actual
project losses as calculated ex post by an independent expert is
incompatible with the common market.

For the Commission

Neelie KROES

Member of the Commission