In general, it is well-settled that the concept of aid embraces not only positive benefits, such as subsidies, but in addition other assistance which, in various forms, is capable of mitigating the charges which are regularly borne by undertakings and which, therefore, without constituting subsidies in the strict sense of the word, are similar in nature and have the same effect. Such aid measures often require more complex and thorough economic analysis to pronounce on their alleged State aid character but also contribute to enhanced case law. One instance of indirect state aid measures –among other- can be found in sale transactions of land with the State acting as the vendor of a public asset and a private party-undertaking acting as buyer. The decisional practice of both the Commission and EU Courts filter such cases according to the Market Economy Vendor Principle. That specific concept prescribes that any State can be presumed to have realised a State aid-free transaction with a private undertaking, provided that its business conduct in the context of that arrangement can be seen as a replicate behaviour of any other private vendor which would seek the very same transaction under exactly the same conditions. In other words, in order to remove any State aid concern the sale of land must be agreed under a normal market price. It must be easily perceivable that the State’s primary goal consists in the pursuit of a reasonable rate of return on its investment -or divestment as in the present case- and that the proceeds accruing from the sale transaction reflect a profit maximisation intention. To accept that the State acted as a mirror image of a private investor, the transaction as a whole must be free of any terms reflecting public policy objectives because no private investor or vendor would ensure anything more than a profit increase for itself. The extent of the profit margin that a reasonable private vendor should aim at could not be determined in an ex ante objective way. Should the State, being in a private vendor’s shoes, try to ensure as large profits as possible or its compliance with just the level of the prevailing market price of the asset under sale would be adequate evidence that it actually acted as a genuine market operator? That was the main question the CJEU was called to resolve in an authoritative way. Whether it succeeded in its above mission will be the topic of the present article.
Overview of case facts – C-39/14, BVVG Bodenverwertungs- und -verwaltungs GmbH, Thomas Erbs, Ursula Erbs v Landkreis Jerichower Land
BVVG is a legal person governed by private law, whose shares are held by a federal body responsible for special tasks connected with the reunification of Germany. BVVG has, inter alia, the statutory task of privatising land and buildings belonging to the State and used for agricultural and forestry purposes. After a public call for tenders in which they made the highest bid, Mr and Mrs Erbs concluded a contract with BVVG on 31 March 2008 before a notary for the ‘sale and transfer’ of agricultural land of around 2.6 hectares (‘the land at issue’) at the price of EUR 29 000. However, the Landkreis Jeirichower Land refused to approve the transaction on the ground that the price agreed was grossly disproportionate to the agricultural market value of the land issue (it exceed by more than 50% the agricultural market value of the land). Both the First Instance Court and the Appeal Court dismissed Mr and Mrs Erbs applications on the basis of expert reports on the market value of the land. The case came before to the Supreme Court which referred the following preliminary question:
‘Does Article 107(1) TFEU preclude a national provision such as Paragraph 9(1)(3) of the GrdstVG which, for the improvement of agricultural structures, effectively prohibits an emanation of the State, such as BVVG, from selling to the highest bidder in a public call for tenders agricultural land available for sale, if the highest bid is grossly disproportionate to the value of the land?’
The Court underlined that in the main proceedings the first, second and fourth conditions of Article 107 (1) TFEU were met and subsequently focused on the existence of an advantage by means of the land sale at issue. It contemplated that such a sale may confer on the purchaser, as a recipient, an advantage which, in essence, leads to a reduction of the State budget consisting in the State forgoing the difference between the market value of the land and the lower price paid by that purchaser.
In paragraph 37 to 38 it acknowledged that because German law enables a third party who may not have even taken part in the public call for tenders to purchase the same land, following the refusal by the competent local authority, at a price below the price offered in that call for tenders, the rule laid down in Paragraph 9(1)(3) of the GrdstVG may come under the definition of ‘State aid’, within the meaning of Article 107(1) TFEU. Furthermore, it pointed out that the advantage consists in a reduction of the State budget due to the State’s waiver of the difference between the value of the land, as assessed by the competent local authorities, and the higher price offered by the highest bidder in a public call for tender.
The Court then asserted that, in specific circumstances, the method of a sale to the highest bidder does not result in a price which corresponds to the market value of the property in question and that, as a result, taking into consideration factors other than the price may be justified (emphasis added). As an illustration of its above view, it said that that could be the case in particular where the highest bid is distinctly higher than any other price offered in the public call for tenders and the estimated market value of the land on the basis of its manifestly speculative nature. Up to that point, the reasoning is round and well thought. The Court outlined that market price can be presumably shaped by a public tender and designated an exception to that rule, that is when a speculative offer determines the winner of the competitive procedure.
The Court’s final upshot was that a rule of national law, as in the case, cannot be classified as State aid, provided that the application of that rule results in a price which is as close as possible to the market value, of the agricultural land concerned.
Therefore, the Court demonstrated showed that it added in the policy objective of protecting agricultural and forestry undertakings and found that such a regulatory measure does not fall into the scope of State aid law.
In the author’s opinion, the present judgment comes to cloud over a quite clear-cut application of the Market Operator Vendor Principle. It reopens the debate and contributes to added controversy on the definition, or more accurately on the overall role and weight, of the market price for the purpose of State aid. Its findings come to a direct conflict with what previous case law has established on the determination of market price. At the outset, State is presumed to act similarly to a private vendor given that a sale of a public asset is made in return of a market price. This was described quite tellingly in the Land Burgenland case which is also quoted in the present judgment. The Court alleged there that where a public authority proceeds to sell an undertaking belonging to it by way of an open, transparent and unconditional tender procedure, it can be presumed that the market price corresponds to the highest offer, provided that it is established, first, that that offer is binding and credible and, secondly, that the consideration of economic factors(emphasis added) other than the price is not justified. It also set forth that it is incorrect to hold that the highest bid submitted in a tender procedure which is unlawful on account of the presence of unlawful conditions can nevertheless correspond to the market price where the deficiencies of the conditions of the call for tenders did not affect the amount of that bid by pushing it lower. Therefore it was also accepted that there is no obligation for the Commission to examine whether there was a distortion which pushed the amount of the highest bid up and reached the conclusion that the private market-economy vendor will opt in principle for the highest offer, where that offer is binding and credible, regardless of the reasons which led the potential buyer to submit that offer, and that, as a result, the claim that the amount of the offer submitted by the Consortium was be exorbitant must be rejected. This can be seen as a textbook approach of how the market price condition should be treated.
Considering that the case under review also has as its central point the prerequisite of market value of public assets, useful lessons could be possible drawn. However, it is also undeniable that the case at hand has further implications on market value definition.
The BVVG case poses several more sophisticated questions.
First of all, the judgment differentiates between two kinds of market values. Between the market value shaped through the public tender and a second one designated as agricultural market value. To my understanding, it is inconceivable to have two legitimate market values for any asset. The artificiality of such a market price breakoff derives from the existence of public policy objective. It has been sustained by the Court in Land Burgenland case that a private vendor might accept the lower bid instead of the higher bid in two situations. The first applies when it is obvious that the sale to the highest bidder is not realisable. The second one, and more relevant to our case, applies where consideration of (economic) factors other than the price is justified, on condition that rightful factors are only those that would have been counted in by a private vendor. In our case, there is a slight differentiation. There was no lowest bid accepted in the context of the public tender. The` lowest bid´ substituting in essence the winning highest offer in the competitive sale procedure, was -even worse- imposed by public authorities by virtue of a regulatory exemption and in an ex post manner(refusal to approve the sale), thereby invalidating the highest bidder. It is obvious that such a conduct does not fit the profile of a private vendor. Public authorities ought to overlook any public policy objective which they didn’t. Hence, this is a point the judgment at hand failed to make. Rather, the judgment added a third reasonable example of when the lowest bid might be accepted. According to the Court, it occurs when the highest bid is manifestly speculative compared to the rest of the bids and the estimated market value.
Secondly, the case at hand comes to direct contradiction with the Land Burgenland case. Although a public tender had taken place and its highest bid was presumed to indicate the current market value of the land concerned, there were expert valuations reports ordered and relied upon by both the First Instance and Appeal national courts as well as the CJEU. Thus, the opinion in Land Burgenland case that a binding and credible highest offer absolves the Commission to resort to other methods in order to check the market price, such as independent studies was rejected by the present Court. Paragraph 31 of the present judgment reads as follows: A number of methods are capable of providing prices corresponding to the market value. Those methods include sales to the highest bidder or an expert report, which are referred to in Title II, points 1 and 2, of the Communication. Likewise, it cannot be ruled out that other methods may also achieve the same result. The critical question to answer is which method prevails assuming that they deliver different figures? The judgment at hand seems to like better the expert valuation reports over the price achieved under real market conditions. This is in its essence problematic as well as the fact that such a choice went without further argumentation by the Court.
Thirdly, let’s reiterate the general principle of Land Burgenland that where a public authority proceeds to sell an undertaking belonging to it by way of an open, transparent and unconditional tender procedure, it can be presumed that the market price corresponds to the highest offer, provided that it is established, first, that that offer is binding and credible and, secondly, that the consideration of economic factors other than the price is not justified. Again, the Court there held that only economic considerations could rebut the presumption of equivalence between the highest bid results in the market value of the asset. This is absolute rational in the sense that any non-economic consideration, such as public policy considerations, is in principle inconsistent with the Market Economy Vendor Principle. In my opinion, non-economic factors could be justifiably taken into account by the State as a private vendor merely so long as they would have an negative impact or a incremental effect on its expected profitability.
The question plausibly arising is: are we before an adulteration of the MEVP with non-economic considerations? In the author’s opinion between two market values the State is obliged to opt for the higher if it aspires to claim the application of the MEVP principle. Alternatively, if the market value of an asset increases over time, the State acting as putative market trader is bound to accept the most recent and possibly higher market value as more profitable. The author is also of the view that the justification invoked by the Court on the non-classification of the measure at hand as State aid is flawed. The final conclusion mentions that the measure cannot be classified as State aid, provided that the application of that rule results in a price which is as close as possible to the market value of the agricultural land concerned. The ‘as close as possible’ condition constitutes a guiding line to follow and a decisive criterion against sales agreed on a value falling short of the market price, yet not in cases where the market value appears to be exorbitant. The whole reasoning or the lack of substantiation of the present judgment could be even regarded as questioning the essentials of State aids, the determinants for finding incompatible aid or the way the MEVP should be applied. In the end, what is the safest indicator for the existence of State aid? The loss of revenue on behalf of the State in favour of an undertaking or the safeguarding of the non-circumvention of a market value of the asset as calculated by experts’ valuation? The judgment absurdly enough seems to fix on the second one. It neglects to see that the loss of revenue is an element strictly linked with the substance of article 107 (1) while the second issue goes well against the stream of previous case law. For example, it has been pronounced that in order to determine whether an undertaking received State aid when it acquired an asset from a public-sector undertaking, it is necessary to examine whether the purchasing undertaking bought that asset at a (preferential) price which it would have been unable to obtain under normal market conditions. As you can see, all past case law refers to real market transaction as a point of reference for market price definition. The present one fully invalidated the merit of a de facto market price proposed in tender procedure. That collation speaks for itself. Finally, it would be a completely different thing if the Court classified the aid as incompatible and then searched for a legitimate justification on public policy objective pursued.
 C 73/11, Frucona Kosice v Commission, EU:C:2013:32, para. 69
 See paragraph 28 of the judgment
 See paragraph 39 of the judgment
 Joined Cases T-127-129-148/99, Territorio Historico de Alava v Commission, ECR-II-1275, para. 72-73