site.btaEC Orders Bulgaria to Recover Incompatible State Aid Granted to Certain Parties to Forest Swap Transactions

ESD 16:53:00 05-09-2014
DD1652ES.116
116 POLITICS - EC - STATE AID - BULGARIA

EC Orders Bulgaria to Recover Incompatible
State Aid Granted to Certain Parties
to Forest Swap Transactions


Brussels, September 5 (BTA) - After an in-depth investigation,
the European Commission has concluded that a Bulgarian law that
allowed the swapping of privately-owned against publicly-owned
forest land was incompatible with EU State aid rules, the
European Commission said.

The law, which was in force at the time of Bulgaria's accession
to the EU in January 2007 until January 2009, conferred a
selective advantage on undertakings which benefited from these
forest swap transactions, distorting competition in the Single
Market. Bulgaria must now either recover the incompatible State
aid from the companies that received it or undo the swaps
concerned.

Following the receipt of two complaints the Commission launched
an in-depth investigation in June 2011 into the Bulgarian forest
swap transactions and subsequent change in the designated use
of the swapped forest land that occurred in some cases (see JOCE
C/273/2011). The Commission's investigation focused on the
period from 1 January 2007, when Bulgaria joined the EU, until
27 January 2009, when the swaps were discontinued by Bulgarian
authorities, the Commission said.

Under the contested legislation, private owners of forest land
were allowed to swap their estates for publicly-owned forests.
The value of the forest land - both private and public - was
determined for the purpose of the swap by an administrative
method prescribed by Bulgarian law. The scheme had not been
notified to the Commission for prior authorisation as required
by Treaty rules.

The Commission found that the administrative prices used in the
context of the swap transactions were not regularly updated and
did not sufficiently take into account market considerations.
Consequently, in the majority of cases they were relatively far
from market prices for similar forest estates. As a result,
private parties participating in these swap transactions gained
a competitive advantage. Such aid is incompatible with EU rules.
In particular, the Commission did not find any indications that
the aid had been limited to the minimum necessary to achieve a
certain policy objective.

In its investigation, the Commission also examined the
reclassification by Bulgarian authorities of the swapped forest
into land available for construction that occurred in a number
of cases. However, the Commission concluded that, while changing
the designated use of the swapped forest land may increase its
value, this increase was not financed by state resources and
therefore did not constitute State aid within the meaning of the
EU rules.

Bulgaria must now either recover the incompatible State aid
granted to undertakings that participated in the forest land
swaps, or undo the swaps concerned. In this respect the
Commission notes that, even though the total number of swap
transactions during the period under scrutiny was substantial -
132 transactions in total - the number of individual cases where
aid recovery is necessary is expected to be much smaller.
Indeed, physical persons not having an economic activity related
to the forest estates they swapped are not subject to EU State
aid rules since they are not considered undertakings under EU
law. Consequently, they will not be required to pay back any
advantage received. Moreover, if the advantage received by an
undertaking did not exceed the equivalent of EUR 200,000 over a
three-year period (and provided the other requirements of the de
minimis Regulation are respected), this is not considered as
State aid under EU law and does not have to be recovered either.

In the context of the Bulgarian legislation allowing the swaps
of forest estates against administrative prices, the Commission
has disputed the use of administrative prices that are not
sufficiently close to market prices observed in similar
transactions. The decision adopted today, therefore, does not
call into question the use of administrative prices by Member
State authorities as such, but only the lack of regular updates
and the coefficients used for the administrative price-setting
in the specific case of the swaps of forest estates in Bulgaria.

The Commission does not impose fines on Member States in State
aid procedures. A fine on a Member State may only be imposed by
the EU Court of Justice if a Member State has infringed EU law
by failing to comply with a previous order to recover
incompatible aid.