DB Project: Letter to EU Commissioner for Competition
Ms Margaret Vestager
European Commissioner for Competition
Subject: Transfer of public land to private real estate company — compatibility with state aid rules
Sliema, 22 October 2018
You have been made aware of the situation concerning the sale of public land from the Maltese Government to the company db San Gorg Property Ltd in St George’s Bay, locality St. Julian’s, in the context of the Pembroke “City Centre” development project. Such transfer raises significant suspicion to be in contradiction with EU state aid rules.
In your reply to MEP Ska Keller of 18 October 2018, you mention that such transfer of land “has not been notified to the Commission by the Maltese authorities, nor has any competitor of San Gorg Property Ltd submitted a complaint in relation to that transfer. Consequently, the Commission is not in a position to pronounce itself on whether that transfer resulted in the grant of state aid by the Malta to San Gorg Property Ltd within the meaning of Article 107 of the Treaty on the Functioning of the European Union (TFEU).”
You also mention that “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. What ultimately matters is whether the public authority acted in its capacity as a private seller in concluding the transaction and that the land was sold to the buyer at a market price.”
With the present letter I would invite you to investigate further into whether the Maltese Government did indeed act as a private seller and sold the land at market price, as this might not be the case.
- Short summary of the facts
In November 2015 Projects Malta, a State agency, issued a Request for Proposals for the design, building and operation of an upmarket mixed tourism and leisure development at St George’s Bay with the intention of awarding a 99-year concession for the site currently occupied by the Institute of Tourism Studies (ITS).
No formal tender was issued as per EU procurement regulations, but only a request for proposals. Only the db group submitted a formal proposal despite the Corinthia Group – owners of three hotels in the area – having originally also shown an interest in the government concession. In February 2016, the government announced the db Group as the preferred bidder and started formal negotiations, announcing that the company would be paying 60 million EUR for the land.
In February 2017, the Maltese Government transferred 24 000 square metres of public land at the prime seafront location St George’s Bay, locality St. Julian’s, to the company db San Gorg Property Ltd, in return for a total of 15 million EUR payable over a span of 7 years. No interest will be charged.
- Did the government act as a private seller?
The Maltese Government did not issue a formal tender. While this is not sufficient to conclude that a such transfer entails the grant of state aid, as you mention, it might make it more likely to be the case.
The absence of competitors also raises the suspicion that the sale was dealt with as a “deal among friends” rather than based on market procedures. The absence of competitors - and thus the absence of actors who could validly submit a complaint - should not translate in a denial of justice due to the impossibility for the Commission services to proceed to an evaluation of the case.
- Was the land sold at market value?
The Maltese Government claim that the valuation of the land for a total of 15 million EUR was based “on an innovative model” designed by audit firm Deloitte, which has not been made public.
The market value of the public land being transferred to private property is by all indicators much higher than the 15 million EUR negotiated by the authorities. The Government’s own master plan for the area reports a value of 8 500 EUR per square metre, which would amount to a total of 204 million EUR for the land at stake.
The “City Centre” project will have a very big impact on the whole North Harbour area of Malta. Despite its approval by the Planning Authority, legal appeals have been announced.
In this regards, it is important that the European Commission vigilates over the respect of EU law and the rule of law in the procedure, to ensure that
Maltese citizens are not robbed twice of their own land.
I therefore encourage your services to:
- request from the Maltese government that the mentioned Deloitte valuation model is made public;
- evaluate whether the price of the sale of land corresponds to market value, also in relation to what included in the Paceville Master Plan, and whether the government acted in its capacity as a private seller;
- conclude whether the transaction is in compliance with EU state aids rules, or not.