EFTA SURVEILLANCE AUTHORITY DECISION

No 232/11/COL

of 13 July 2011

on the notification of the sale of land at Nes酶yveien 8, gnr. 32 bnr. 17 in the municipality of Asker (Norway)

THE EFTA SURVEILLANCE AUTHORITY (‘渢he Authority‘�,

Having regard to the Agreement on the European Economic Area (‘渢he EEA Agreement‘�, in particular to Article 61 and Protocol 26,

Having regard to the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice (‘渢he Surveillance and Court Agreement‘�, in particular to Article 24,

Having regard to Protocol 3 to the Surveillance and Court Agreement (‘淧rotocol 3‘�, in particular to Article 1(2) of Part I and Articles 7(5) and 14 of Part II,

Having regard to the consolidated version of the Authority‘檚 Decision No 195/04/COL of 14 July 2004 on the implementing provisions referred to under Article 27 of Part II of Protocol 3 (‘渢he Implementing Provisions Decision‘� (1),

Having called on interested parties to submit their comments pursuant to those provisions (2) and having regard to their comments,

Whereas:

I. FACTS

1. PROCEDURE

By letter of 15 December 2008 (Event No 508884), received by the Authority on 13 February 2009, the Norwegian authorities notified a sale of land at Nes酶yveien 8, gnr. 32 bnr. 17 by the municipality of Asker, pursuant to Article 1(3) of Part I of Protocol 3.

By letter dated 8 April 2009 (Event No 512188), the Authority requested additional information. The Norwegian authorities replied by letter dated 11 May 2009 (Event No 518079).

By letter of 7 July 2009 (Event No 521778), the Authority sent a second request for information. The Norwegian authorities responded by letter dated 14 August 2009 (Event No 527555).

The Authority thereafter informed the Norwegian authorities that it had decided to initiate the procedure laid down in Article 1(2) of Part I of Protocol 3 in respect of the sale of land.

The Authority‘檚 Decision No 538/09/COL to initiate the procedure was published in the Official Journal of the European Union and the EEA Supplement thereto on 8 July 2010 (3). The Authority called on interested parties to submit their comments thereon.

The Authority received comments from one interested party, namely the buyer Asker Brygge AS. The letter dated 29 January 2010 was forwarded by the Municipality of Asker as an attachment to the Municipality‘檚 letter of the same date.

At 14 October 2010 a meeting between the Authority and the Norwegian authorities was held where the case was discussed. After the meeting the Norwegian Authorities submitted their final comments on the case on 19 November 2010.

2. DESCRIPTION OF THE NOTIFICATION

The Norwegian authorities notified a sale of a plot of land by the municipality of Asker to the company Asker Brygge AS (‘淎sker Brygge‘�. The property is registered in the Norwegian property register as Nes酶yveien 8, gnr. 32 bnr. 17 in the municipality of Asker (‘済bnr. 32/17‘� and is approximately 9 700 m2. There were no buildings on the property. Slependen B氓tforening rented part of the property from the Municipality.

The municipality of Asker and Asker Brygge entered into an agreement in 2001 (‘渢he option agreement‘�, according to which Asker Brygge was granted an option, lasting until 31 December 2009, to buy land for a fixed sum of NOK 8 million, adjusted according to the consumer price index. According to the option agreement the municipality intended to give Asker Brygge the option to buy the property at market price provided that Asker Brygge undertook extensive planning and research with the aim of obtaining a reregulation of the property and then developing the property.

In 2004 the option agreement was renewed, and the validity of the option was extended until 31 December 2014 under similar conditions regarding the progress of the reregulation work.

In 2005, Asker Brygge called upon the option to buy the land. The parties entered into a sales agreement on 21 March 2007 for the price of NOK 8 727 462. The land was transferred to Asker Brygge on the same date although only the first instalment of 30 % of the sales sum was paid on the date of the transfer of the property. The second and largest instalment, 70 % of the sales sum (NOK 6 109 223), is due at the latest 31 December 2011. The municipality of Asker will not charge any interest rate on the second instalment.

The municipality of Asker and Asker Brygge are of the opinion that the sales contract does not entail any state aid because the sales price reflects the market value. The Norwegian authorities nonetheless decided to notify the transaction for reasons of legal certainty.

3. COMMENTS FROM THE NORWEGIAN AUTHORITIES

The municipality of Asker is of the opinion that the sales contract does not entail any state aid because the sales price reflects the market value. The municipality of Asker has stressed that the sales price was not subject to negotiations as it was established in 2001. Though no independent value assessment was made at the time of the option agreement in 2001, the municipality at the time made its own assessment based on its extensive experience in the property market in Asker.

The municipality has submitted that it must enjoy a margin of judgment. The value assessments carried out in June 2006 and June 2008 assessed the market value in 2001 to be NOK 9,6 (with a possible variation of +/‘�15 %) million and NOK 8 million respectively. The assessments are thus in accordance with the sales price in 2001, which is the relevant period for the assessment to be made. The assessment dated 18 January 2008 is based on wrong premises, and did not take into consideration important factors for the assessment.

The option cannot be considered granted without remuneration, since Asker Brygge in return undertook obligations related to planning and research. The municipality considered the property difficult to develop, and it did not want to undertake the research necessary to uncover the risks related to difficult soil conditions and pollution. The research by Asker Brygge removed the said risks, and the municipality could then sell the property without having to argue vis-脿-vis potential buyers regarding these risks. Thus the obligation that Asker Brygge undertook was of value to the municipality.

The municipality accepts that a private investor would not have granted postponed payment of 70 % of the sales sum free of interest, but any possible state aid due to lack of such interest would be considered de minimis aid.

4. COMMENTS FROM THIRD PARTIES

Asker Brygge has submitted that the Authority can not conclude that state aid has been involved in the sale.

4.1. The value in 2001

Asker Brygge submitted that the assessment of the alleged aid measures shall be based on the facts available to the Municipality at the time it entered into an option agreement in which Asker Brygge was given a right to purchase the property in question, i.e. in 2001. Thus, the market value of the property has to be assessed at the time of the conclusion of the Option Agreement. It is not the role of the Authority to replace the Municipality‘檚 judgment with regard to the economic assessment of the property‘檚 value in 2001. Thus, Asker Brygge submits that the Municipality enjoyed a margin of discretion in its assessment of the property‘檚 market price in 2001.

In 2001, the agreement with Slependen B氓tforening (Slependen) and the obligation to provide a future solution for Slependen must be regarded as an encumbrance on the property which clearly influenced its market value.

A reregulation of the property would be necessary to develop the land for business activity. This was not a realistic alternative for the municipality in 2001. The preparatory works that would be required prior to a complete reregulation are both expensive and time consuming. Moreover, there was a potential risk for Asker Brygge that the Municipality and other public institutions would not accept an application for reregulation, such as the Public Road Administration or the County Governor.

Further, it must be taken into consideration that the property is in close proximity to the motorway E18, which means that the property is exposed to both the noise from the road as well as pollution. In addition, the proximity to the motorway considerably limits the possibility to develop the property. According to the motorway development plan, it was prohibited to build anything closer to the road than 35 m. As the property is very narrow and situated close to the road, this limitation implies that nearly 90 % of the property was subject to that prohibition. Moreover, as follows from Section 1 of the Agreement and pursuant to a public road development plan, a part of the property was planned to be used in a new road situated beside the existing motorway. Approximately 1/3 of the property would be comprised by the new road.

Asker Brygge would also like to emphasize the uncertainty with regard to the conditions of the property. As stated above, the property in question was regarded very difficult to develop due to its soil conditions. In addition it was regarded as likely that the soil and shoreline was highly polluted. Thus, when Asker Brygge contacted the Municipality in 2001 with the purpose to buy the land, it was regarded by the Municipality as almost impossible to develop the land for business activity. Neither Asker Brygge nor the Municipality had sufficient or exact information regarding these issues, and development would require considerable analysis of the property‘檚 conditions. Asker Brygge submits that the limitations mentioned above must be regarded as encumbrances on the property which clearly influenced its market value.

Further, the Authority cannot base its assessment on subsequent factual circumstances. Doing so would imply that the Authority bases its decision using facts that were not available to the Municipality when entering into the Agreement. Any increase in value of the property after 2001 is due to work which is undertaken by Asker Brygge. Without the work undertaken by Asker Brygge the area would likely still remain undeveloped with a very limited monetary value for the municipality.

4.2. The relevance of the value in 2007

To the extent the 2007 value is relevant, the Authority shall take into consideration and deduct the added value which is a result of the work undertaken by Asker Brygge from 2001‘�007.

4.3. Remuneration for the option

The obligation to finance research work, which amounts approximately to NOK 4 or 5 million, must, in the view of Asker Brygge be taken into consideration when assessing the remuneration for the option given to Asker Brygge. In general this methodology is not unusual as a basis for fixing the price of an option as regards undeveloped land as in this case.

4.4. The value assessments

None of the value assessments of the property sufficiently takes into consideration the factual circumstances in 2001. Asker Brygge‘檚 main objection to the valuations is that the estimation of the market price inter alia has been based on a presumption that further development of the marina was possible and intended for by the Municipality and Asker Brygge. Reference is made to the value assessment undertaken by TJB Eiendomstaksering page 6-9, in which the valuer bases its assessment on the fact that it is possible to dredge the shoreline to establish further boat spaces and to establish storage yards for boats on the land area. Reference is also made to Takstsenteret‘檚 value assessment page 14 and 15, which also bases its assessment on such development of the property.

However, when the Agreement was concluded in 2001 such development of the property was neither intended nor regarded as possible by the Municipality and Asker Brygge. Further, due to the conditions of the shoreline below the land area, and to avoid displacement of mass and damaging the foundation of a road bridge close to the property, the Public Road Administration prohibited further dredging in the area.

II. ASSESSMENT

1. THE PRESENCE OF STATE AID

State aid within the meaning of Article 61(1) EEA Agreement

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