Commission Decision (EU) 2021/104 of 24 January 2020 on SA.39182 (2017/C) (ex 2017/NN) (ex 2014/CP) – Alleged illegal aid to AS Tartu Agro (notified under document C(2020) 252)

Point 89 of Commission Notice on the notion of State aid as referred to in Article 107(1) TFEU (the Notice on the notion of State aid) (OJ C 262, 19.7.2016, p. 1).

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(109) In the opening decision, the Commission raised doubts as to whether the tendering procedure used for leasing the land was transparent, non-discriminatory and unconditional. The Commission assessed the tender based on the announcement of the tender, the minutes of the evaluation panel and the submitted comments. The actual submissions of the tenderers are not available.

(110) The procedure has to be transparent to allow all interested tenderers to be equally and duly informed at each stage of the tender procedure. Accessibility of information, sufficient time for interested tenderers and clarity of the selection and award criteria are all crucial elements for a transparent selection procedure.

(111) Firstly, the Commission agrees with the description of the Estonian authorities, that the tender procedure was carried out in accordance with the Rules applicable at the time the contract was signed (cf. recital 46). The Rules specified which documents to submit in order to be an eligible candidate for the bidding process.

(112) Those documents were, according to the announcement of the tender: (i) an application; (ii) a receipt of paying the participation fee of EEK 1000; (iii) an offer for the rental fee; and (iv) a business plan (cf. recital 17). In addition, paragraph 32 of the Rules specifies that the following information should be submitted with the tender: (1) the name and the place of establishment of the potential tenderer; (2) consent to the conditions of the tender procedure; (3) evidence of advance payment and payment of enrolment fees; (4) the lease fee written in numbers and in word; (5) the signature of the person submitting the tender or, in the case of a representative of the natural or legal person, the proof of representation. The above requirements were publicly available through the publication of the tender in the Official Announcements and through the law that was applicable at the time when the tender took place. Therefore, the potential tenderers had equal access to the necessary information about the selection criteria.

(113) The tenderers had sufficient time to submit their tender as they had 20 days to do so after the publication of the tender in the Official Announcements (cf. recital 16).

(114) As regards the award criteria, paragraph 19(5) of the State Assets Act specified that in the case of the restricted tendering procedure as described in recital 15, a contract is awarded to a tenderer whose bid is considered to be the best of all bidders, taking into account both the price offered and the additional conditions imposed. Therefore, in general the candidate offering a highest rental fee should be awarded the lease contract. However, in the present tender there was an additional condition that the agricultural production activity of AS Tartu Agro should be continued. As described in recitals 123–130, it is not clear how this condition would be taken into account in the assessment of the award criteria. Based on the above, the Commission finds that the award criteria were not clear.

(115) Based above the Commission thus concludes that the tender procedure was not transparent.

(116) Non-discriminatory treatment of all bidders at all stages of the procedure and objective selection and award criteria specified in advance of the process are indispensable conditions for ensuring that the resulting transaction is in line with market conditions. To guarantee equal treatment, the criteria for the award of the contract should enable tenderers to be compared and assessed objectively.

(117) As described in recital 112 the selection criteria was described in the announcement of the tender and in paragraph 32 of the Rules, therefore the Commission can conclude that the selection criteria was specified in advance of the tendering procedure and was sufficiently objective.

(118) As regards the award criteria, similarly to the analysis of recital 114, the Commission can not conclude that the additional condition that the agricultural production activity of AS Tartu Agro should be continued, was objective. It is not clearly described what it is expected from the potential tenderers and seems to favour one undertaking.

(119) As regards the exclusion of one of the tenderers from the tender procedure, according to the information submitted by the Estonian authorities, the exclusion of Aiu Põllumajanduse OÜ from the tender was based on the fact that certain elements were lacking in the application and in the business plan submitted by that company.

(120) The Estonian authorities have shown that it was clear from the Rules that the tenderers had to submit a complete application in order to be an eligible bidder (cf. recital 112). According to the evaluation panel’s minutes, the company board’s decision to participate in the tender, as well the registration card as a private limited company in the Estonian Central Commercial Register, were missing from the application of Aiu Põllumajanduse OÜ. The Ministry thus had a legal obligation to exclude Aiu Põllumajanduse OÜ from the tender (cf. recital 48).

(121) The Estonian authorities have also explained that a complete business plan is necessary for the assessment of the bidder’s vision and possibilities for using the agricultural land. According to the evaluation committee’s report, the business plan submitted by Aiu Põllumajanduse OÜ did not include any analysis or planning according to the Minutes of the evaluation panel. Further, it was unclear how the payment of the offered rent (EEK 200/ha) would be guaranteed (cf. recital 51). Based above, the exclusion of Aiu Põllumajanduse OÜ was not discriminatory based on the selection criteria as the company board’s decision to participate in the tender, as well the registration card as a private limited company in the Estonian Central Commercial Register, were missing from the application.

(122) However, as regards the tender procedure in general, based on the assessment of the award criteria below, the tender procedure was discriminatory because it guaranteed the future operation of one of the participants in the tender.

(123) As regards the conditionality of the tender procedure, a tender is unconditional when a potential buyer is generally free to acquire the assets, goods or services to be sold and to use them for its own purposes irrespective of whether or not it runs certain businesses. If there is a condition that the buyer is to assume special obligations for the benefit of the public authorities or in the general public interest, which a private seller would not have demanded – other than those arising from general domestic law or a decision of the planning authorities – the tender cannot be considered unconditional

Point 94 of the Notice on the notion of State aid.

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(124) It is established that the announcement of the tender set out a specific condition that required the agricultural production activity of AS Tartu Agro to continue (cf. recital 16). According to the Estonian authorities, the aim of that condition was not for the activities of AS Tartu Agro as a company to continue but was linked to its specific agricultural production. Namely, the Ministry wished to ensure the propagation of particular high-yielding varieties of seed meeting OECD standards and the storing of the necessary national seed reserve (cf. recital 52).

(125) According to the Estonian authorities, the requirement to propagate and store high-yielding varieties of seed was objective and allowed all interested parties to participate in the tender. No specific method was prescribed for the participants in the tender (cf. recital 53). However, the Commission notes that the announcement of the tender did not specify that the potential tenderer had to propagate and store certain seeds, it specified only that the agricultural activity of one specific company – AS Tartu Agro – had to be continued after acquiring the leased land. This is clearly conditional.

(126) However, even if the condition set out in the announcement of the tender was limited to the propagation and storing of the above mentioned seeds, it would still have to be considered conditional and referring to the activities of AS Tartu Agro. Namely the condition of propagating particular high-yielding varieties of seed meeting OECD standards and storing them (in the leased land) does not arise from the general domestic law. This obligation was put on AS Tartu Agro, respectively on Tartu State Farm in 1997 (cf. recital 54) by an order from the Minister for Agriculture. Therefore, this obligation is not linked to the leased land but linked to the activities of AS Tartu Agro. Likewise the comments of the complainant emphasise that the tender was important for AS Tartu Agro (recital 93). Therefore, the Commission concludes that neither – the propagation and storing special seed nor the continuation of the agricultural activities of AS Tartu Agro derived from the domestic law, but instead the latter represents a condition of the tender.

(127) As regards whether the propagation and storing of the specific seeds or the condition of continuation of the agricultural production activity of AS Tartu Agro was a decision from a planning authority, the Commission finds that it was not. In general, a planning authority prepares and implements a development plan of a certain local area including giving building permits for land parcels. The designated use of the leased land was and still is the agricultural production in general. Generally, the land use represents the economic activities like agricultural, residential, industrial, commercial uses of land. Agricultural land is defined as the land area that is either arable, under permanent crops, or under permanent pastures

https://data.oecd.org/agrland/agricultural-land.htm

. The planning authorities do not define which crops or which agricultural activities can be pursued in agricultural land. In the case at hand, the condition was even imposed by an order of a Minister on Tartu State Farm, and therefore not by a decision of a planning authority linked to the leased land. Similarly, the planning authority cannot limit the eligible companies to be active in the agricultural sector, which the condition of the continuation of the agricultural activities of AS Tartu Agro suggests.

(128) Further by making the lease of land subject to a requirement that the agricultural production activity of one certain undertaking should be continued limits clearly the use of the land for the potential tenderer. Thus renouncing from the possibility to obtain the highest possible rental fee, the State did not act as a private market operator but rather as a public authority pursuing policy considerations. A private market operator not having these constraints would have been able to attract more offers and achieved a higher price.

(129) Also the comments of AS Tartu Agro seem to confirm that the condition introduced in the tender announcement was linked to the public task of cultivating seeds meeting OECD standards (cf. recitals 71 and 72). Those comments also show that the condition introduced in the tender announcement was relevant for the privatisation of AS Tartu Agro. This argument seems to be supported also by the complainant (cf. recital 93). However, the transactions of leasing the land and the privatisation of AS Tartu AGRO were two separate transactions and the privatisation of AS Tartu Agro is not assessed in the present decision.

(130) Based on the above, the Commission concludes that the tender procedure to lease the land was non-transparent, discriminatory and conditional and, therefore, did not fulfil the conditions necessary to conclude that the transaction was in line with market conditions.

(131) Further, it needs to be assessed whether the Ministry’s lease of land to AS Tartu Agro complied with market conditions based on the expert opinion set out in the Uus Maa report referred to in recital 28 and the data submitted by the Estonian authorities referred to in recital 39

Judgment of the General Court of 28 February 2012, Land Burgenland and Austria v Commission, Joined Cases T-268/08 and T-281/08, ECLI:EU:T:2012:90, paragraph 72.

. It should therefore, be analysed firstly whether, the rental fee, which encompasses only the rent and not the other expenses like land taxes and maintenance, paid by AS Tartu Agro was at the level of the average rental fee for agricultural land in Estonia throughout the period of the lease. As regards the other obligations of AS Tartu Agro, they will be assessed in the next step.

(132) In establishing the market price of the rental fee, the Commission will examine the possible estimates available: (i) a report of the rental prices by a private real estate company Uus Maa (cf. recital 28); (ii) data from the Statistical Office (cf. recital 39).

(133) The Commission considers the Uus Maa report to provide plausible, albeit conservative estimates of the rental fees in Tartu country in the period 2000 to 2014. As regards the data of the Statistical Office, the market estimates for the years 2015–2017 are average prices of the reported rental fee and do not constitute an expert assessment of the rental price of the land. These estimates do not take into account the specific characteristics of the rented land of AS Tartu Agro.

(134) According to the Uus Maa report, the rental fee for agricultural land in Tartumaa ranged from EUR 6–10/ha in the period of 2000–2004 (cf. recital 31). AS Tartu Agro paid a rental fee of EUR 0,20/ha, which encompasses only the rent and not the other expenses like taxes and maintenance (cf. recital 25) in 2000, therefore the rental fee paid by AS Tartu Agro is lower than the market price.

(135) According to the Uus Maa report, in the period of 2005–2009, the rental fee for agricultural land in Tartumaa increased to EUR 10–20/ha (cf. recital 32). According to the Estonian authorities, the rental fee of AS Tartu Agro was increased on 14 January 2005 to EUR 1,66/ha and on 21 March 2007 to EUR 5,21/ha. The rental fee of AS Tartu Agro is lower than the market price also in that period.

(136) In the period 2010–2014, the rental prices increased further, ranging from EUR 25–60/ha according to the report (cf. recital 35). The rental fee paid by AS Tartu Agro was increased on 12 May 2009 to EUR 8,68/ha (cf. recital 25), however it seems to have remained lower than the market price also in the period 2010–2014.

(137) Based on the data submitted by the Estonian authorities, in 2015 the average rental fee for agricultural land in Estonia was EUR 52/ha and EUR 55/ha respectively for arable land (cf. recital 39, Table). In the Tartu county, where the leased land of AS Tartu Agro is situated, the fee was EUR 63/ha and EUR 65/ha. According to the Estonian authorities AS Tartu Agro paid a rental fee of EUR 26,86/ha. Therefore, the rental fee of AS Tartu Agro was lower than the market price in 2015.

(138) In 2016, the average rental fee for agricultural and arable land in Estonia was respectively EUR 52/ha and EUR 54/ha (cf. recital 39, Table). In the Tartu county the fee was respectively EUR 61/ha and EUR 61/ha. According to the Estonian authorities, AS Tartu Agro paid a rental fee of EUR 27,30/ha. Therefore, the rental fee of AS Tartu Agro was lower than the market price also in 2016.

(139) In 2017, the average rental fee for agricultural and arable land in Estonia was respectively EUR 58/ha and EUR 60/ha (cf. recital 39, Table). There is no data for Tartu county for that year. According to the Estonian authorities, AS Tartu Agro paid a rental fee of EUR 27,28/ha. Therefore, the rental fee on its own of AS Tartu Agro was lower than the market price also in 2017.

(140) Based on those figures, the rental fee on its own was below the market price throughout the period 2000–2017.

(141) Below, the other obligations listed in the contract: (i) annual investments in drainage systems; (ii) expenditures for the maintenance of the land and for increasing the soil quality including expenditures such as those for crop protection, mineral and organic fertilisers, liming and maintenance of roadsides; and (iii) payment of all taxes (recital 26) will be assessed.

(142) The Estonian authorities argue that all above mentioned lessee’s obligations should be taken into account when assessing the rental income.

(143) The Commission can accept that argument for part of the annual investments in the drainage system (recitals 36, 60 and 79). Pursuant to Section 16(1) of the Land Improvement Act (Maaparandusseadus) in force at the time, the maintenance of a land improvement system was the obligation of the owner of the land. However, the above-mentioned legal basis refers to the maintenance of the land improvement system in general, and does not specify e.g. the minimum requirements for the land improvements systems or regulate the investments in new drainage systems. In the case at hand, according to the Ministry AS Tartu Agro made the investments in the amount fixed in the contract without being reimbursed by the State. But as regards the amount of these investments, it seems that it was proposed by AS Tartu Agro and not imposed on AS Tartu Agro (cf. recitals 77–79). According to the evaluation panel’s minutes, AS Tartu Agro’s initial offer for the rental fee was EEK 10000 (ca. EUR 639) per year, respectively EEK 3,24/ha (EUR 0,20/ha), plus to pay the land tax of EEK 85000 (ca. EUR 5432) and to make investments with up to EEK 5 million (ca. EUR 320000) per year (cf. recital 20). After the restricted negotiations, the rental fee was fixed at the same level as in the initial offer (cf. recital 25 and the other obligations as followed (i) annual investments amounting to EEK 400000 (ca. EUR 25565 respectively EUR 8,28/ha) in drainage systems; (ii) expenditures for the maintenance of the land and for increasing the soil quality in total of EEK 3981100 (ca. EUR 254444); and (iii) payment of all taxes (cf. recital 26). Further, AS Tartu Agro argues that it invested even more in the drainage system, namely 3,57 times more than what was required in the lease contract (cf. recital 78). Therefore, this seems to suggest that the amount of investments in the drainage system originated from AS Tartu Agro and was definitely not required by a law or been imposed solely by the State, especially taken into account that the tender procedure was non-transparent, discriminatory and conditional (cf. recital 130).

(144) Further, these kind of investments are for a longer term compared e.g. to the investments in crop protection and mineral fertilisers, which have to be made annually. At the same time, the lessor AS Tartu Agro also benefitted from such investments, which were contributing to the more efficient use of the land. The Commission notes that the lease contract had a long duration of 25 years, therefore, these investments also largely benefited AS Tartu Agro, which is the user of the land. As in general, the agricultural land drainage adds value to the production and maximises return for the crops grown for the producer

http://www.fao.org/3/w7224e/w7224e05.htm

. It increases yield potential, meaning that well drained soils maximise crop growth rates. Further, a drainage system reduces the variable costs of the production as well drained soils need less fertilisers and pesticides. Further, having well drained soils allow farm equipment to operate in an efficient way, therefore reduces e.g. diesel consumption, and consequently, decreases the costs of the producer. However, the Commission acknowledges that the State was relieved from some costs (maintenance) that it would otherwise had to bear as owner of the land, while still benefitting from a possible increase in land value. Therefore, contrary to the finding in the opening decision (cf. recital 61 of the opening decision), the Commission finds that the investments in the drainage system should be taken into account partly as revenue to the State. Taking into account the above mentioned arguments, the Commission finds that adding half of the investments in the drainage system to the rental income of the Ministry represents conservative estimate for the additional rental income for the Ministry. Especially as the overall benefits of these investments favoured largely AS Tartu Agro and the amount of the investments exceeded what was required by the law. Based above, half of the annual investments should be seen as a part of the rent income for the Ministry.

(145) However, the Commission finds that the expenditures for maintenance of the land and for increasing the soil quality are in the interest of the lessee, as they are mostly linked to the costs of production inputs such as crop protection (pesticides) and mineral and organic fertilisers (also cf. recital 36). Generally, such inputs are used for each growing period and their type depends on the crop grown. Therefore, they form part of the annual production activity of AS Tartu Agro and benefit in essence only AS Tartu Agro as they increase for example the yields of the crops it grows. Therefore, Commission does not agree with the arguments of the Estonian authorities (recital 62) and of AS Tartu Agro (recitals 80 and 81). Further, if the State had decided to use the land for other purposes (e.g. building houses in

the plots due to the vicinity of the second biggest city of Estonia – Tartu), the past use of the pesticides and fertilisers would have limited impact on the value of the land. In addition, taking into account the long lease period of 25 years, the primary beneficiary is the user of the land – AS Tartu Agro. In addition, as the complainant indicates, the State did not verify AS Tartu Agro’s performance of those obligations (cf. recital 87). Based on the above, the Commission concludes that the expenditures for maintenance of the land and for increasing the soil quality in total of ca. EUR 254444 should be not considered as part of the rent income of the State.

(146) Taxes are generally no rental income as such, as they are paid by the owner of the assets to the State. However, in the case at hand, AS Tartu Agro paid the taxes on behalf of the owner of the land (the State) as argued by the Estonian authorities and AS Tartu Agro (respectively recitals 63 and 82–83) and, therefore, the State did not have its own expenses on this item. Therefore, contrary to the opening decision (cf. recital 61 of the opening decision), the value of the annual land taxes paid by AS Tartu Agro should be seen as a part of the rental income for the Ministry.

(147) Even if the rental fee is increased by the following components described above – half of the investments in the drainage system and the taxes paid by AS Tartu Agro – the rental income remains lower than the market rental fee.

(148) Based on the above, the rental fee paid by As Tartu Agro was below the market price throughout the period 2000–2017. In addition, taking into account that the tender procedure was non-transparent, discriminatory and conditional, the Commission therefore, concludes that the lease of the land by the Ministry conferred an advantage on AS Tartu Agro.

Selectivity

(149) As the Court has stated, where individual aid is at issue, the identification of the economic advantage is, in principle, sufficient to support the presumption that a measure is selective

See judgment of 4 June 2015 Commission v MOL, C-15/14 P EU:C:2015:362, paragraph 60.

. The Commission does not agree with the argument of the Estonian authorities that the measure was not selective (recital 66). In that regard, the measure conferred an advantage only on AS Tartu Agro as the public land in question was leased only to that company (cf. recital 14). This decision was a result of a tender procedure, which was non-transparent, discriminatory and conditional (see recitals 110–130). Therefore, the selectivity condition is fulfilled.

Distortion of competition and effect on trade

(150) The measure must be liable to distort competition and affect trade between Member States to be considered State aid within the meaning of Article 107(1) TFEU.

(151) According to the case law of the Court of Justice, the mere fact that the competitive position of an undertaking is strengthened compared to other competing undertakings, by giving it an economic benefit, which it would not otherwise have received in the normal course of its business, points to a possible distortion of competition. Therefore, any aid granted to AS Tartu Agro, in the form of a discounted rent, would allow the company to increase or at least maintain its activities as a result of the aid. The aid is thus liable to limit the opportunities for other undertakings.

(152) Pursuant to the case law of the Court of Justice, aid to an undertaking appears to affect trade between Member States where that undertaking operates in a market open to intra-EU trade. The beneficiary operates on the dairy, meat and cereals markets (cf. recital 10) where intra-trade takes place. In 2018, the value of Estonian exports in EU‐28 intra trade in meat and dairy production was EUR 51 million and EUR 177 million respectively

Eurostat: https://ec.europa.eu/eurostat/web/international-trade-in-goods/data/database

. The sectors concerned are open to competition at EU level and therefore sensitive to any measure in favour of the production in one or more Member States. On the contrary, to the Estonian authorities (recital 66), the Commission finds, in the light of the foregoing considerations, that the measure is liable to distort competition and affect trade between Member States.

(153) Since all the necessary conditions of Article 107(1) TFEU are met, the Commission concludes that the measure under assessment constitutes State aid. Therefore, the advantage has to be quantified.

Quantification of the advantage

(154) Taking into account the above mentioned considerations, the Uus Maa report should be used to establish the estimates for the rental fee for the period 2000–2009. According to the Uus Maa report, the rental fee for agricultural land in Tartumaa ranged from EUR 6-10/ha in the period of 2000–2004 (cf. recital 33). Based on the above, an annual average rental fee (a simple average) based on the Uus Maa report should be compared to the annual rental fee paid by AS Tartu Agro in the years 2000–2004.

(155) As regards the period 2005–2009, the rental fee for agricultural land in Tartumaa increased to EUR 10–20/ha. Similarly, an annual simple average rental fee based on the Uus Maa report should be compared to the annual rental fee paid by AS Tartu Agro in the years 2005–2009.

(156) In the period 2010–2014, the rental fees based on the Uus Maa report ranged from EUR 25–60/ha. This range is rather large, therefore the available average rental fees (in Estonia, agricultural land) of the Statistical Office should be used to establish the annual market proxy (cf. recital 39, Table). Similarly, for the years 2015–2018, the average annual rental fees (in Estonia, agricultural land) of the Statistical Office should be used.

(157) Further, the Estonian authorities argue that at least 12,34 % of the leased land is unsuitable for agricultural production (cf. recital 56). However, the Commission finds that the contract did not specify that any part of the land was unsuitable for agriculture. The contractual partners would normally specify the particularities of the assets in the contract and adapt the use of terms, namely the rental fee, accordingly.

(158) In addition, the complainant has submitted information as regards the size and use of the plots (cf. recitals 88–91). That information shows that AS Tartu Agro has applied for EU agricultural support and had the possibility to receive additional income from the land, e.g. by selling lumber (cf. recital 91). As an example of payments of agricultural support, AS Tartu Agro received in 2010 agricultural support for 2912,76 ha, representing approximately 95 % of the leased object. The Commission thus finds that, even if not all the plots were pure arable land, the non-arable land could be useful in other ways. For example, the forest land could be used for the production of timber, the grassland could be used for the production of fodder and was eligible for payments of EU agricultural support and the access roads (cf. recital 56) gave a valuable direct access to the plots to transport away production output (wheat, fodder etc.). Taking into account that it is difficult to find reliable proxies for the market price for renting forest land, grass land and other land, the Commission finds that the number of hectares for which agricultural support was paid could serve as a basis to calculate the advantage. The number of hectares for which agricultural support was paid represented approximately 95 %–97 % of the leased object during the period of 2004–2018.

(159) Further, the Estonian authorities claim that there was only a limited number of agricultural producers who were interested in leasing more than 3000 ha of agricultural land (cf. recital 57). In this regard, the Commission considers that the Estonian authorities could have rented the land in separate plots. The land was divided already into 23 separate plots, which could have been rented out separately. Moreover, the number of potential eligible tenderers was further limited by the condition that the agricultural production of AS Tartu Agro should be continued.

(160) The Estonian authorities also argue that the non-existent lease market put limits on the outcome of the tender. The Uus Maa report suggests that the market situation was unstable but still indicates that there were rental contracts for the use of agricultural land signed for a short period. Therefore, taking into account the market situation, a private market investor would have set a shorter lease period than 25 years.

(161) The Estonian authorities further argue that all the lessee’s obligations – (i) annual investments in drainage system; (ii) expenditures for maintenance of the land and for increasing the soil quality; and (iii) payment of taxes – should be taken into account when assessing the rental income (cf. recital 26).

(162) The Commission can accept that argument as far as the annual investments in the drainage system are concerned (recitals 36, 60 and 79) as described in recitals 143 and 144. Therefore, half of the value of the annual investments as fixed in the lease contract should be seen as a part of the rent income. This appears to be a conservative estimate based on the facts that the maintenance of a land improvement system was the obligation of the owner of the land according to the law (cf. recitals 143 and 144), however, as the lease contract had a long duration of 25 years, these investments largely benefitted AS Tartu Agro, which is the user of the land.

(163) However, the Commission finds that the expenditures for maintenance of the land and for increasing the soil quality are mainly of interest to the lessee, as they are mostly linked to the costs of production inputs such as crop protection (pesticides) and mineral and organic fertilisers as described in recital 145 and should be not considered as rental income for the State.

(164) Taxes are generally no rental income as such, as they are paid by the owner of the assets to the State. However, in the case at hand, AS Tartu Agro paid the land taxes on behalf of the owner of the land (the State) as argued in recital 146 therefore, the value of the annual land taxes paid by AS Tartu Agro should be seen as a part of the rental income for the Ministry.

(165) Based on the above, the advantage shall be calculated as the difference between the annual estimates of the market value for the rental fee (cf. recitals 154–156) and the actual rental fee paid to the Ministry. In addition, half of the value of the annual implemented investments that AS Tartu Agro has made in the drainage system and the land taxes paid by AS Tartu Agro on behalf of the owner of the land should be added to the actual rental fee as described in recitals 162–164. As regards the size of the leased object, the number of hectares for which agricultural support was paid should serve as a base to calculate the advantage (cf. recital 158).

5.2.

Qualification of measure as existing or new aid

(166) The lease contract between the Ministry and AS Tartu Agro was concluded in 2000 and thus existed prior to Estonia’s accession to the European Union. However, it does not fulfil the conditions for being considered to be existing aid, as defined in Article 1(b) of Council Regulation (EU) 2015/1589

Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ L 248, 24.9.2015, p. 9).

, read in combination with Annex IV to the Act of Accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia

OJ L 236, 23.9.2003, p. 17.

. According to Annex IV Section 4 Agriculture point 4, to be regarded as existing aid, the aid measure shall be communicated to the Commission within 4 months of the date of accession, all other aid is considered new aid. Since no such notification took place, the current measure is a new aid within the meaning of Article 1(c) of Regulation (EU) 2015/1589 from 2000 onwards.

5.3.

Compatibility of the aid

(167) A measure caught by Article 107(1) TFEU is generally incompatible with the functioning of the internal market, unless if it can benefit from one of the derogations provided for in the TFEU. Under Article 107(3)(c) TFEU, an aid may be considered compatible with the internal market, if it is found to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest. For this derogation to be applicable, the aid must comply with the relevant Union State aid rules.

(168) According to the Commission notice on the determination of the applicable rules for the assessment of unlawful State aid

OJ C 119, 22.5.2002, p. 22.

, all unlawful aid under Article 1(f) of Regulation (EU) 2015/1589 must be assessed in accordance with the texts in force at the time when the aid was granted.

(169) As the aid was granted in 2000 and the conditions of the lease contract changed several times (cf. recital 27), this measure must be examined in the light of the Community Guidelines for State Aid in the agricultural and forestry sectors 2000 to 2006

OJ C 28, 1.2.2000, p. 2.

and the subsequent Guidelines. The Commission considers that this measure cannot be declared compatible on the basis of the Guidelines applicable 2000–2006. Neither can this measure be declared compatible on the basis of the Community Guidelines for State Aid in the agricultural and forestry sectors 2007 to 2013

OJ C 319, 27.12.2006, p. 1.

nor on the basis of the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020

OJ C 204, 1.7.2014, p. 1. Amended by the Notices published in OJ C 390, 24.11.2015, p. 4; OJ C 139, 20.4.2018, p. 3 and OJ C 403, 9.11.2018, p. 10.

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(170) In general, State aid in the form of unduly low land rental fees constitutes operating aid in that it reduces the normal operating costs of the beneficiary. Operating aid is deemed to be prima facie incompatible with the internal market, in particular under Article 107(3)(c) TFEU

Case C-156/98 Germany v Commission, EU:C:2000:467, paragraph 30, Joined Cases C-71/09 P, C‐73/09 P and C-76/09 P Comitato Venezia vuole vivere v Commission, ECLI:EU:C:2011:368, paragraph 136, and Case T-459/93 Siemens v Commission, EU:T:1995:100, paragraph 48.

.

(171) In any event, it has not been sufficiently demonstrated that the measure was necessary and proportionate to attain any objectives of common interest. Estonia did not advance any arguments on compatibility and in any event the measure at stake are to be regarded as operating aid. Therefore, the Commission has not identified any grounds to declare the aid compatible with the internal market in the light of Article 107(3) TFEU.

(172) The Commission therefore concludes that the lease of the land to AS Tartu Agro by the Ministry constitutes State aid and that it is unlawful and incompatible with the internal market on basis of Article 107(1) TFEU.

1. RECOVERY

(173) Given that the aid is unlawful and incompatible with the internal market, the Republic of Estonia should put an end to the measure and recover the aid granted from AS Tartu Agro, unless the aid has been granted to a specific project, which, at the time of granting, fulfilled all conditions of the block exemption regulations, de minimis regulation or of an aid scheme approved by the Commission.

(174) Further, the amount of aid must be recovered in order to re-establish the situation that existed on the market prior to the granting of the aid. Article 17 of the Regulation (EU) 2015/1589 states that the powers of the Commission to recover aid shall be subject to a limitation period of 10 years (limitation period). The limitation period shall begin on the day on which the unlawful aid is awarded to the beneficiary. In the context of the measure at hand, the contract for the lease of agricultural land was signed between the Ministry and AS Tartu Agro on 16 November 2000 (cf. recital 24).

(175) However, the Article 17 of the Regulation (EU) 2015/1589 specifies that any action taken by the Commission or by a Member State, acting at the request of the Commission, with regard to the unlawful aid shall interrupt the limitation period. In this context, the Commission contacted the Estonian authorities on this measure for the first time on 14 August 2014. Namely after receiving a complaint on 24 July 2014, the Commission forwarded the complaint to the Estonian authorities and invited them to submit information and to comment on the allegations made by the complainant (cf. recital 1). Therefore, the limitation period was interrupted by the action taken by the Commission at that date.

(176) Therefore, the aid received by AS Tartu Agro should be recovered from 14 August 2004 onwards. The amount to be recovered should be calculated as described in recitals 154 to 165. That amount shall bear interest, calculated in compliance with Article 9 of Commission Regulation (EC) No 794/2004

Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ L 140, 30.4.2004, p. 1).

, from 14 August 2004 and until full recovery,

HAS ADOPTED THIS DECISION:

Article 1

The State aid in form of a rent of agricultural land for a rate, which is below the market price, was unlawfully granted by Estonia, in breach of Article 108(3) of the Treaty on the Functioning of the European Union, in favour of AS Tartu Agro.

Article 2

The aid does not constitute State aid if, at the time it was granted, it met the conditions of Article 2 of Council Regulation (EC) No 994/98

Council Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of horizontal State aid (OJ L 142, 14.5.1998, p. 1).

which applied at the time the aid was granted.

Article 3

Individual aid granted under the measure referred to in Article 1, which, at the time it is granted, fulfils the conditions laid down by Commission Regulation (EU) No 702/2014

Commission Regulation (EU) No 702/2014 of 25 June 2014 declaring certain categories of aid in the agricultural and forestry sectors and in rural areas compatible with the internal market in application of Articles 107 and 108 of the Treaty on the Functioning of the European Union (OJ L 193, 1.7.2014, p. 1).

or by any other approved aid scheme is compatible with the internal market, up to maximum aid intensities applicable to that type of aid.

Article 4

1. The Republic of Estonia shall recover the aid referred to in Article 1 from AS Tartu Agro.

1. The sums to be recovered shall bear interest from the date on which they were put at the disposal of AS Tartu Agro until their actual recovery.

1. The interest on the sum to be recovered shall be calculated on a compound basis in accordance with Chapter V of Regulation (EC) No 794/2004 and Commission Regulation (EC) No 271/2008

Commission Regulation (EC) No 271/2008 of 30 January 2008 amending Regulation (EC) No 794/2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ L 82, 25.3.2008, p. 1).

amending Regulation (EC) No 794/2004.

Article 5

1. Recovery of the aid granted under the schemes referred to in Article 1 shall be immediate and effective.

1. The Republic of Estonia shall ensure that this Decision is implemented within four months following the notification of this Decision.

Article 6

1. Within two months following notification of this Decision, the Republic of Estonia shall submit the following information:

the total amount (capital and interest) to be recovered from AS Tartu Agro that received aid, which is not covered by the de minimis rule, Regulation (EU) No 702/2014 or by any approved aid scheme;

1. The Republic of Estonia shall keep the Commission informed of the progress of the national measures taken to implement this Decision until recovery of the aid referred to in Article 1 has been completed. It shall immediately submit, on simple request by the Commission, information on the measures already taken and planned to comply with this Decision.

Article 7

This Decision is addressed to the Republic of Estonia.

Done at Brussels, 24 January 2020.

For the Commission

Margrethe Vestager

Executive Vice-President