In its Judgment of 22 July 2013 in case E-9/12 - Iceland v EFTA Surveillance Authority**, the EFTA Court analysed two interesting issues concernig the use of 'bidding procedures' and 'expert evaluations' for State aid purposes--and, more specifically, concerning the sale of public real estate (for general discussion and a review of CJEU case law, see Nicolaides' piece here).
Firstly, the EFTA Court analysed whether on-line property listings can be cosidered well-publicised bidding procedures comparable to auctions. This is relevant in light of Decision No 275/99/COL of 17 November 1999 (equivalent to the 1997 Communication on State aid elements in sales of land and buildings by public authorities), whereby
A sale of land … following a sufficiently well-publicised, open and unconditional bidding procedure, comparable to an auction, accepting the best or only bid is by definition at market value and consequently does not contain State aid (para 2.1).
Secondly, the EFTA Court assessed if, where the on-line listings were not sufficiently publicised, a tax evaluation of the properties to be sold constitutes an adequate benchmark (ie an independent expert evaluation) to determine the 'State aid-free' price of transfer of the real estate. That was relevant because the EFTA authority based the existence of State aid in the discrepancies between tax evaluation and price paid for the real estate concerned.
In relation to the first issue, ie whether on-line listings can be assimilated to auctions, according to the EFTA Court
67 Pursuant to subparagraph (a) of point 2.1 of the Land Sale Guidelines, an offer is regarded as sufficiently well-publicised when it is repeatedly advertised over two months or more in the national press, estate gazettes or other appropriate publications and through real estate agents addressing a broad range of potential buyers, so that it can come to the notice of all potential buyers.
68 The criterion of an offer being well-publicised must be interpreted such that where two or more properties are offered on sale together, but not necessarily only as one single unit, specific advertisements must be made for the individual properties. A general call for interest cannot suffice, as such a method cannot reasonably be expected to reach all potential buyers of specific properties.
69 As regards the publication format, the wording of the Land Sale Guidelines does not in principle exclude adequate publication on the internet. However, advertisements must be placed in a publication, be it printed or digital, which is appropriate for reaching all potential buyers. The seller’s own website can only exceptionally be regarded as such a publication.
70 In the present case, four of the five buildings in question were specifically advertised solely on KADECO’s website. There is nothing to suggest that this website was appropriate for reaching all potential buyers. It must therefore be held that ESA did not err in finding itself unable to conclude that a sufficiently well-publicised bidding procedure, or a procedure comparable to that, was followed (E-9/12, paras 67-70, emphasis added).
In my view, the EFTA Court is correct in that mere calls for interest are too far away from auction procedures to be considered sufficient for the purposes of excluding the existence of an economic advantage for the purposes of State aid control. However, the EFTA Court could have ellaborated on the minimum requirements that on-line listings should meet for them to be considered susceptible of reaching 'all potential buyers'. Nonetheless, the restraint of the Court is fully understandable and this basically opens the door for a revision / upgrade of the 1997 guidance to include on-line advertising and bidding methods (both at EFTA and EU level).
In relation to the second issue, the EFTA Court found that an evaluation conducted for tax purposes may serve as the adequate criterion to determine the 'State aid-free' price of the real estate, as long as it was deemed to reflect market value. Indeed,
90 Iceland has a system established by law to evaluate the market price of properties. Pursuant to Article 1 of Act No 6/2001, all real property in the country shall be registered in the Real Property Register, operated by Registers Iceland. According to Article 27 of Act No 6/2001, Registers Iceland is obliged to evaluate and register the market price of properties in Iceland.
91 The applicant argues, first, that the purpose of the valuation carried out by Registers Iceland is to determine the likely value of a property for tax purposes, and that the private investor test cannot rely solely on that valuation.
92 It is true that valuation in the context of a tax audit does not necessarily show the market value of land (see, for comparison, Case C-290/07 P Commission v Scott [2010] ECR I-7763, paragraph 97). However, in an email of 13 May 2012, the Icelandic authorities themselves confirmed that, as a matter of Icelandic practice, the valuation for taxation purposes is generally understood to reflect the market rate (E-9/12, paras 90-92, emphasis added).
In my view, this finding is potentially problematic, particularly in countries where the evaluations carried out for registration and/or tax purposes tend to be well below market value and seldomly updated. Therefore, the finding of the EFTA Court needs to be taken with a pinch of salt and read in the very circumstance-specific Icelandic background. This too seems to be an area for development / upgrade of the existing guidance on State aid in the sale of land and property.
** I am thankful to Kristjan Birgisson for bringing this case to my attention.