Commission finds Estonian State aid to agricultural company Tartu Agro AS to be incompatible State aid

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The European Commission has concluded that by renting agricultural land at a rate below market price to Tartu Agro AS, an Estonian private company producing among other things milk, meat and cereals, Estonia granted support not in line with EU State aid rules.

Estonia must now recover the incompatible State aid, including interest, from the beneficiary.

The Commission’s investigation

In 2017, following a complaint by a competitor, the Commission opened an in-depth investigation to establish whether a land lease contract between the Estonian Ministry of Rural Affairs and Tartu Agro AS was in line with EU State aid rules. The lease contract was signed in 2000 with Tartu Agro AS for a duration of 25 years and is therefore still in force.

The Commission found that the lease of land involved State aid, as the lease fee paid by Tartu Agro AS was below the market price. On this basis, in January 2020, the Commission concluded that the lease contract gives an undue and selective advantage to Tartu Agro AS over its competitors, and ordered Estonia to recover the incompatible aid.

On 13 July 2022, following an appeal by Tartu Agro AS, the General Court annulled the Commission decision due to errors of assessment and lack of reasoning in examining the rental price of the land and the economic value and impact of certain financial obligations included in the lease contract.  

Following the General Court’s judgment, the Commission reopened its investigation into the Estonian support to Tartu Agro AS, taking into account the judgment’s findings. With today’s decision, the Commission confirms that Tartu Agro AS received incompatible aid from Estonia through the rent of agricultural land at a rate below market price, until the end of 2019, after which Estonia increased the lease fee in order to enforce the first Commission decision.

Estonia must now recover the incompatible aid, plus interest. As a matter of principle, EU rules require that incompatible State aid is recovered without delay in order to remove the distortion of competition created by the aid. The purpose of recovery is to restore the situation which existed in the internal market before the aid was paid, and hence does not constitute a fine. By paying back the unlawful aid, the beneficiary forfeits the advantage which it has enjoyed over its competitors.

Estonia will determine the amount to be recovered, in line with the methodology set out in today’s Commission decision and taking into account that the recovery order of the first Commission decision was enforced and therefore part of the illegal aid was already recovered. The total aid amount to be recovered is not know at this stage.

Background

Under EU State aid rules, public interventions involving companies can be considered free of State aid when they are made on terms that a private operator, placed in the same conditions as the State, would accept under market conditions (the market economy operator principle – MEOP). If this principle is not complied with, public interventions typically involve State aid within the meaning of Article 107 of the Treaty on the Functioning of the European Union, as they confer an economic advantage to beneficiaries with respect to their competitors.

The non-confidential version of the decision will be made available under the case number SA.39182 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.

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