Possibility of state aid rules breach in db Group’s ITS project raised

Possibility of state aid rules breach in db Group’s ITS project raised

Commission not in position to verify breach

An artist’s impression of  the planned development.

An artist’s impression of the planned development.

The European Commission is not in a position to verify whether State aid rules have been breached by the government through the transfer of public land to the Seabank db Group at much lower rates than current market prices, the Times of Malta is informed.

The issue of a possible breach of EU State aid rules was raised in the European Parliament by Germany Green MEP Ska Keller.

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The MEP asked if the EU executive was investigating the Maltese government following the transfer of 24,000 square metres of prime public land, valued at €204 million, to the db Group for just €15 million.

“Given that the entire procedure for the sale of the land in question, including the price for which the land was sold, puts the db Group at a considerable advantage over other companies, can the Commission provide assurances that State aid rules were adhered to – especially as no formal tender was issued but only a request for proposals,” the MEP asked.

“The transfer of the ITS land has not been notified yet by the Maltese authorities, nor has any competitor of San Ġorg Property Ltd – the db Group company awarded the land – submitted a complaint in relation to the transfer,” Competition Commissioner Margrethe Vestager said.

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“The Commission is not in a position to pronounce itself on whether the transfer resulted in the grant of State aid,” the Commissioner insisted.

“As a general principle, the mere fact that a public tender process is not carried out is, in itself, insufficient to conclude that a transfer such as this entails the grant of State aid.”

According to the Commission’s competition boss, “what ultimately matters is whether the public authority acted in its capacity as private seller in concluding the transaction and that the land was sold to the buyer at market price”.

EU sources told Times of Malta that although the government was not necessarily obliged to notify the Commission on this issue, as it would want to avoid an investigation, it was unusual for other rival companies of the db Group, particularly those with similar projects in the area, not to make a formal complaint.

“It is obvious that the sale of this prime site was not carried out at market prices and may be creating unjust competition for all those selling apartments and having similar projects in the area and who have paid market prices for the land they bought,” the sources said.

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Arnold Cassola, former chairman of Alternattiva Demokratika told Times of Malta that in his opinion: “Works should stop immediately until the db Group pays the Maltese government the €120-140 missing millions between the sale price and the estimated market price of around €204 million, as calculated by the private audit company that conducted the master plan study”.

However, a competition lawyer, who wished to remain anonymous, said that the issue was not as simple and straight forward as Dr Cassola was arguing, even though there may be an issue of State aid.

“EU State aid and competition rules are complex and full of exemptions. One has to investigate thoroughly first to arrive to some form of conclusion,” the lawyer said.

According to a public study carried as part of a draft Paceville master plan, the price of seafront land at St George’s Bay was estimated, some three years ago, at €8,500 per square metre.

This means that although the former ITS land awarded to the db Group after an expression of interest could have fetched over €200 million in an open market, the government only got €15 million from the db Group for a 99-year emphyteutical concession.

The interest-free payment terms, harshly criticised by almost all constituted bodies, among whom the Malta Developers Association, include other generous concessions, including a premium payment of just €5 million upon the signing of the contract, with the rest (€10 million) to be paid over a staggered seven-year period and a discounted €1,000 ground rent rate until the project is completed instead of €1.5 million a year.

Apart from building a five-star hotel and a casino, still unlicensed, the Seabank db Group are also developing the public land into a mega luxury apartment tower which they are already selling at around a million euros per apartment.


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