Joined Cases T‑268/08 and T‑281/08

Land Burgenland (Austria) and
Republic of Austria

v

European Commission

(State aid — Aid granted by the Austrian authorities to the Grazer Wechselseitige group (GRAWE) in connection with the privatisation of Bank Burgenland — Decision declaring the aid to be incompatible with the common market and ordering its recovery — Private investor in a market economy test — Application where the State acts as vendor — Determination of the market price)

Summary of the Judgment

1.      State aid — Concept — Sale of property by a public authority to a private person on preferential terms — Included — Assessment according to the private investor test

(Art. 87(1) EC)

2.      State aid — Concept — Assessment according to the private investor test — Sale of an undertaking — Determination of the price — Preference to be given to the result of an open, transparent and unconditional tender procedure as opposed to a study

(Art. 87(1) EC)

3.      State aid — Concept — Assessment according to the private investor test — Sale of an undertaking — Uncertain outcome and duration of an authorisation procedure does not a priori imply the exclusion of a buyer by a private investor

(Art. 87(1) EC)

4.      State aid — Concept — Assessment according to the private investor test — Sale of an undertaking — Need to avoid rules imposed on a public authority exercising powers as a public authority interfering in choices made by that same authority when exercising an economic activity

(Art. 87(1) EC)

5.      State aid — Concept — Assessment according to the private investor test — Taking into account the risk for determining the transfer price of an undertaking represented by the existence of a statutory guarantee measure benefiting the undertaking to be sold — Not included

(Art. 87(1) EC)

1.      The supply of goods or services on preferential terms is capable of constituting State aid within the meaning of Article 87(1) EC. When applied to the situation of a sale of property by a public authority to a private person, the consequence of that principle is that it must be determined whether, in particular, the sale price for that property is equivalent to the market price in that it corresponds to the price which could have been obtained by the purchaser under normal market conditions. From that viewpoint, the Commission must apply the private operator in a market economy test, to determine whether the price paid by the presumed recipient of the aid corresponds to the price which a private operator, operating in normal competitive conditions, would be likely to have fixed. The specific application of that test requires in principle a complex economic assessment.

(see paras 47, 48)

2.      The market price of an undertaking, which generally depends on the interplay of supply and demand, corresponds to the highest price that a private investor operating in normal competitive conditions would be prepared to pay for that undertaking. When a public authority intends to sell an undertaking belonging to it and makes use of an open, transparent and unconditional tender procedure to do that, it can therefore be presumed that the market price corresponds to the highest offer, provided that it is established, firstly, that that offer is binding and credible and, secondly, that the taking into account of economic factors other than the price is not justified, such as the off-balance-sheet risks existing between the offers. Therefore, the Commission does not commit a manifest error of assessment in concluding that the aid element can be assessed from the market price, which in principle itself depends on the offers actually made in a tender procedure. In those circumstances, it cannot be complained that the Commission did not take account of independent studies.

Reliance on such studies for the purpose of determining an undertaking’s market price would only make sense if no tender procedure with a view to the sale of that undertaking was carried out or, possibly, if it was concluded that the tender procedure set up was not open, transparent and unconditional. In that regard, it is unquestionable that the offers which have been properly and actually submitted in the course of the tender procedure launched for the purpose of the privatisation of a particular undertaking in principle amount to a better approximation of the market price of that entity than independent studies. Such studies, irrespective of the method and parameters selected for their drafting, are based on a prospective examination and therefore lead to an evaluation of the market price of the undertaking in question which is of less value than that which results from offers actually and properly submitted in connection with a lawfully set up tender procedure. For the same reasons, the Commission can neither be reproached for not having considered it necessary to have an ex post study drawn up by an independent expert nor be accused of having in that way failed in its duty to undertake a diligent and impartial examination of the measures to which it must give attention.

In addition, from the viewpoint of the private vendor in a market economy, the subjective or strategic reasons which lead a certain bidder to submit an offer of a certain amount are not crucial. In principle, the private market-economy vendor will opt for the highest offer, regardless of the reasons which led the potential buyers to submit offers of a certain amount.

(see para. 69-73, 89)

3.      As regards the private investor test, in order to determine whether the sale of an undertaking by a public authority to a private person constitutes State aid, it must be held that a market economy vendor can accept the lower bid if it is obvious that the sale to the highest bidder is not realisable. In this respect, a market economy vendor would not choose a buyer who in all probability will not obtain the necessary permissions from the competent authorities.

However, neither the uncertain outcome nor the anticipated duration of the authorisation procedure justify a prospective purchaser being excluded as a buyer. As regards the sale of an undertaking in the context of a privatisation, it is inter alia the case where there is no particular urgency which justifies the sale of the undertaking to another buyer and where it is not demonstrated that the length of the authorisation procedure would seriously compromise the chances of privatisation.

(see paras 107, 132, 133)

4.      In the context of determining the existence of an advantage for the purposes of Article 87(1) EC, a distinction must be drawn between the obligations which the State must assume as an undertaking exercising an economic activity and its obligations as a public authority. Whilst the State acts as a private operator in a market economy in connection with a decision to sell, it exercises powers as a public authority when it acts as the authority responsible for the prudential evaluation of acquisitions of and increases in holdings in entities in the financial sector.

In such a case, the Commission wrongly puts forward, in support of its refusal to find that the probably longer duration of the authorisation procedure before the competent authority in the event of the sale of the undertaking to a certain bidder would be capable of preventing such a sale, that there was a risk of putting an end to the equal treatment of bidders. There is a conflict between, on the one hand, examining the conduct of the State in the light of the private operator in a market economy test and, on the other hand, raising against it the risk of contravening the principle of non-discrimination because of the difference in duration between the authorisation procedure in the event of the sale of the undertaking to a bidder and that in the event of sale to another bidder.

(see paras 128-130)

5.      A statutory guarantee measure, which involves the obligation for State authorities, inter alia regional ones, to intervene in the event of insolvency or liquidation of the credit institution in question and according to which the creditors of the credit institutions can exercise a direct right against the public authority acting as guarantor in a situation where the credit institution is in liquidation or insolvent and the assets of that institution do not suffice to satisfy them, cannot be taken into account when it is a matter of examining a given transaction in terms of the principle of a private operator in the market economy.

What is decisive when applying the private operator test is whether the measures in question are those which a private operator in a market economy, who counts on making a profit in the shorter or longer term, could have granted. Thus, regardless of how the commitments at issue could have been classified, the fundamental question which arises is that of whether those commitments are among those which could have been entered into by a private operator in a market economy. Consequently, a statutory guarantee measure with the characteristics described above was not entered into on normal market conditions and cannot, therefore, be taken into account in the assessment of the conduct of national authorities in the light of the private investor in a market economy test.

(see paras 149, 157, 158)