Lease Contracts and Competitive Selection

By: Phedon Nicolaides (Lexxion)

After receiving a complaint, the Commission opened a formal investigation into alleged State aid granted by the Estonian Ministry of Rural Affairs to AS Tartu Agro, a private limited company, which produced milk, meat and cereals.

According to the complaint, the Ministry had granted unlawful State aid to AS Tartu Agro by renting to it through a lease contract agricultural land in the region of Tartumaa at rates which were below market level.

The Commission concluded the investigation by adopting decision 2021/104 in which it concluded that incompatible aid had been granted even though AS Tartu Agro was selected on the basis of a procurement procedure.

According to the decision, “(15) the lease contract with AS Tartu Agro was based on the result of a restricted tendering procedure. In that procedure a shortlist of pre-selected candidates was to be established based on selection criteria set out in an officially published announcement of the tender (“the announcement of the tender”). These pre-selected candidates were then eligible to negotiate the further conditions to be laid down in the lease contract (“the restricted negotiation”).” “(17) The announcement of the tender stipulated that the participants should submit (i) an application, (ii) a receipt of paying the participation fee of Estonian kroon (“EEK”) 1000, (iii) an offer for the rental fee and (iv) a business plan (“the selection criteria”).” “(18) Two companies submitted an offer: AS Tartu Agro and Aiu Põllumajanduse OÜ.” Only AS Tartu Agro was selected to proceed to the negotiation stage…