The Market Economy Investor Principle (MEIP) applied to a lease agreement and the use of a tender procedure for this purpose

On 16 July, the ETA Surveillance Authority (ESA) opened an in-depth investigation into potential aid granted by the Icelandic authorities through a lease of an optical fibre previously operated on behalf of NATO.

In April 2008, the Icelandic State Trading Centre organised a tender for the use and operation of two optical fibres out of the three fibres previously reserved for defence purposes. The purpose of the tender was to lower the State's maintenance and operating costs of the optical fibres, increase public broadband access and encourage competition in data transmission. In February 2010, a contract with Vodafone Iceland was concluded on the basis of the tender for the use of one of the fibres.

Following a complaint lodged on behalf of Míla, a competitor of Vodafone Iceland, ESA opened a preliminary examination of the allegedly subsidised lease. In 2012, without opening a formal investigation procedure, ESA concluded that the lease was awarded following an open and well-publicised tender procedure. Thus, it did not contain aid.[1] This Decision was challenged before the EFTA Court. In January 2014, the Court annulled it in Case E-1/13.

In particular, as the EFTA recalled, «[w]here a public authority proceeds to sell an asset by way of an open, transparent and unconditional tender procedure, it may be presumed that the market price corresponds to the highest offer, provided, that it is established that the offer is binding and credible, and that the consideration of economic factors other than the price cannot be justified. … The criteria used in the tender procedure in the present case were as follows: “Stimulation of competition” was awarded 40 out of 100 points, “rental charge” 15 points, “commencement of services” 10 points, “supply of services” 10 points, “number of network termination points” 15 points, and “one tariff throughout the country” 10 points. It is obvious that the tender procedure in question did not use price or leasing charge as the sole or main selection criterion. It was accorded a relative weight of just 15%. Moreover, as pointed out by the Commission, the remaining selection criteria appear to reflect public policy or regulatory considerations. They do not appear to be criteria that a similarly situated private operator would consider relevant when tendering out a lease.[2]

As the Court ruled, the examination conducted by ESA was insufficient. Thus, «ESA adopted the contested decision notwithstanding that the information and evidence it had at its disposal during the preliminary examination phase should, objectively, have raised doubts or serious difficulties as to whether the lease agreement conferred an economic advantage on Vodafone»[3]. As noted, the 2012 decision was annulled.

ESA has now preliminarily concluded that the lease with Vodafone may contain aid. In the course of the in-depth investigation procedure, it will verify whether the tender procedure ensured that the payment for the lease was at market price and, as a consequence, whether awarding the lease complied with the MEIP or whether it amounted to aid in favour of Vodafone Iceland.

The decision to open a formal investigation procedure is without prejudice to the final decision of ESA, which will now call for further comments from the Icelandic authorities and third parties with an interest in the case. A non-confidential version of today’s decision to will shortly be published on ESA’s website and in the Official Journal of the European Union.

[1] 410/12/COL: EFTA Surveillance Authority Decision of 21.11.2011 on alleged state aid through subsidised lease of optical fibres previously operated on behalf of NATO.

[2] Case E-1/13 - Míla ehf. v EFTA Surveillance Authority, judgment of 27.1.2014, see paras 97-99.

[3] Ibid, para 101.