EC rules Bulgaria’s controversial land swops as incompatible state aid

Written by on September 5, 2014 in Bulgaria - Comments Off on EC rules Bulgaria’s controversial land swops as incompatible state aid

The European Commission has ordered Bulgarian authorities to recover incompatible state aid from companies that benefitted from controversial land swops under the socialist-led tripartite coalition in 2007/09.

The Bulgarian law that allowed exchanging privately-owned land against publicly-owned forest land – in force at the time Bulgaria joined the EU in 2007, until the practice was discontinued in January 2009 – was incompatible with EU State aid rules, the Commission ruled.

Such land swops had become one of the hallmarks of the Sergey Stanishev administration, with the law used to swop larger tracts of forested land in remote areas for smaller plots in prime land development locations (usually alongside the Black Sea coast), all in the name of nominally increasing the area of state-administered forests.

The swops were usually done at the nominal value of the land, without taking into account the higher potential price of the plots given up by the state – enabling developers to make a hefty profit from the transactions, since the change in land status allowed them to get the required construction permits.

“Under the contested legislation, private owners of forest land were allowed to swap their estates for publicly-owned forests. The value of the forest land – both private and public – was determined for the purpose of the swap by an administrative method prescribed by Bulgarian law. The scheme had not been notified to the Commission for prior authorisation as required by [EU] Treaty rules,” the EC said.

Since these administrative prices, charged by Bulgarian authorities, were rarely updated and did not take into account market considerations, private parties participating in these swop transactions gained a competitive advantage, which was incompatible with EU state aid rules, the Commission said.

However, the changes in the status of the land – which allowed the redevelopment of the plots gained by private parties in these transactions – “was not financed by state resources and therefore did not constitute state aid within the meaning of the EU rules”, the EC said.

“Bulgaria must now either recover the incompatible state aid granted to undertakings that participated in the forest land swaps, or undo the swaps concerned. In this respect the Commission notes that, even though the total number of swap transactions during the period under scrutiny was substantial – 132 transactions in total – the number of individual cases where aid recovery is necessary is expected to be much smaller.”

(Photo: Sébastien Bertrand)

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