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    The General Court of the EU: the Leidschendam project development renegotiations were not, after all, state aid

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  • The Municipality of Leidschendam-Voorburg is not, after all, being obliged to reclaim an amount of EUR 6.9 million from the project developer Schouten-De Jong Bouwfonds (SJB). The European Commission had previously ruled that this amount constituted state aid which is incompatible with EU rules but, on 30 June 2015, the General Court of the European Union annulled the Commission’s decision ordering the money to be recovered.

    The Damplein Leidschendam project

    This case relates to a large construction and regeneration project planned for the centre of Leidschendam: the Damplein Project. In 2004, SJB was selected by the municipality to execute this project. However, due to the crisis and delays in obtaining the necessary licences/permits, SJB ran into problems in 2008 rendering it unable to pay the agreed purchase price and contributions for the ground; nor was it in a position to start the construction phase. In 2010, after some renegotiations, the Municipality and SJB agreed that the amount owed by SJB could be reduced by approximately EUR 6.9 million, on condition that the entire Damplein complex would be completed by the end of 2011; in its turn, SJB agreed it would waive the requirement that the construction work would only begin if 70% of the accommodation to be built were sold.

    Judgement of the European Commission

    A complaint was subsequently submitted to the Commission by an interest group, as a result of which the Commission instituted an investigation to assess whether there was any question of unlawful state aid. In 2013, the Commission found that reducing the total owed by SJB gave SJB an advantage that the project developer would not have had under normal market conditions.

    In this context, the Commission applied the private investor test; according to the Commission, this test demonstrated that it was improbable that a private investor operating under normal market conditions would have accepted a measure like the one under discussion, without first considering commercially attractive options such as dissolution, compliance or compensation. Moreover, it added that a private investor would not have allowed itself to be solely influenced by general interest considerations as, in the Commission's opinion, the Municipality had been, but would instead have been influenced by economic interests. The Commission, therefore, ordered the Netherlands to reclaim an amount of approximately EUR 6.9 million from SJB.

    The Court examined all the circumstances and the context

    The Court did not uphold the Commission's judgement. The Court ruled that when applying the private investor test, the Commission's analysis had been both incorrect and incomplete. In the Court's opinion, the Commission should have taken account of all the relevant aspects of the measure and its context. In particular, the Court expressed the opinion that the Commission took insufficient account of the existing contractual agreements between the parties which demonstrated the obvious intention of the parties to uphold the agreement or, if necessary, to renegotiate it.

    Furthermore, it felt the Commission was too quick to assume that the Municipality had allowed itself to be primarily influenced by considerations of general interest. In so doing, the Commission erroneously failed to analyse what the Municipality would have done if it had allowed itself to be exclusively influenced by purely economic and financial interests. Given SJB’s strong contractual position, the Municipality’s interest in receiving income as quickly as possible from the commercial space and accommodation, and the fact that, ultimately, the Municipality only had to bear 50% of the loss (the other 50% was for the account of SJB), the Court ruled that the Commission had failed to demonstrate adequately that a private investor would not have made the same choices as the Municipality.

    For more information, please contact Sarah BeestonMark Moolhuizen or Maria Geilmann.