Brussels, 27 March 2014
State aid: Commission finds that German land development scheme does not involve state aid
The European Commission has concluded that a German scheme providing direct grants for the development and revitalisation of land does not constitute state aid. The Commission has found that the development of land by local authorities is part of their public tasks and therefore outside the realm of EU state aid rules.
The German land development scheme is aimed at making land ready to build, ensuring that the territory is connected to utility (water, gas, sewage and electricity) and transport networks (rail and roads). It does not concern the construction of buildings or the management of land.
The Commission's examination showed that developers are selected through an open, transparent and non-discriminatory public procurement procedure. Moreover, the land is sold either through a tender procedure or after an independent expert evaluation of the land, in line with the Commission's communication on land sales (see further here). This ensures that developers are remunerated on market terms and that purchasers of land pay the market price. Since neither developers nor the final purchasers receive an advantage through the measure, there is no state aid involved.
This decision provides an important clarification as regards the notion of state aid under EU law because it confirms that the development of land by a local authority is a public task and that this qualification has not changed after the Leipzig/Halle judgments of the EU Courts (joined cases T-443/08 and T-455/08 and case C-288/11 P).
Germany first notified the land development scheme in 2002. In July 2003, the Commission found that it did not constitute state aid. Although the essence of the measure has not changed since the Commission's 2003 decision, Germany decided to re-notify the scheme in light of the Leipzig/Halle judgments of the EU General Court (Joined cases T-443/08 and T-455/08) and the EU Court of Justice (case C-288/11 P). Germany considered that the financing did not involve state aid but notified the measure for legal certainty.
In the Leipzig/Halle judgments, the courts held that the construction of infrastructure that is inextricably linked with its subsequent economic use constitutes an economic activity in itself and that therefore EU state aid rules apply to the financing. On the other hand, the performance of public duties is outside the scope of the state aid rules. Following these judgments, there has been some legal uncertainty as regards the applicability of EU state aid rules to land development. Today's decision confirms that land development by public authorities is part of the performance of public duties, namely the provision and supervision of land infrastructure in line with local urban and spatial development plans.
The Commission is planning to adopt in the near future a Communication on the notion of state aid, which will further clarify the notion of state aid pursuant to Article 107(1) of the Treaty on the Functioning of the European Union on the basis of the jurisprudence of the EU Courts and the Commission's decision-making practice. The Commission held a public consultation on the draft Communication earlier this year (IP/14/30).
The non-confidential version of the decision will be made available under the case number SA.36346 in the State Aid Register on the Commission's competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.