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In December 2011, the Swedish Government notified the Commission a measure for a new multi-purpose arena in Uppsala involving the grant of financial support to a privately-owned company in order to facilitate its construction and operation. The aid would amount to a total of approximately 16.5 million EUR (150 million SEK). The Commission initiated the procedure laid down in Article 108 (2) TFEU.
The notification emphasized that the arena should be designed to cater for several types of sport (ice hockey, basketball etc.), cultural and entertainment events (concerts etc.), conferences and trade fairs with a capacity to accommodate up to 10 000 visitors. The arena would also house a gym and several restaurants. Three separate privately-owned companies were involved in the set-up of project, an Arena Company, a Property Company and an Events Company.
The structure of the project
According to the notification, the grant was to be received by the Property Company, not formed at the time of notification. The Arena Company would manage and coordinate the arena project until the Property Company and Events Company had been established at a later stage .
The Property Company would perform the construction and be the owner of the arena building. Moreover, the Property Company would lease the land-site from the municipality and pay a rent to the municipality. The municipality was not intended to own any part of the arena project nor influence the activities of the Property Company as such. Instead, in return for its grant the municipality was to receive an option to purchase the Property Company.
The Events Company, was planned to be in charge of the operation of the arena. To ensure that the arena would be used by schools, sports clubs and the general public as well as enable for the municipality to host own events, the municipality would enter into a lease agreement with the Events Company.
The Swedish Government´s point of view
The Swedish Government assumed that the funding amounted to state aid and argued that it should be considered compatible under Article 107 (3) (c) TFEU. It was submitted that the project would satisfy a well-defined common interest of providing the general with sports and cultural events which the market would not fulfill without the aid in question. In addition, it was argued that the public co-funding of 23 per cent of the total project budget was limited to what was strictly necessary and proportionate.
State aid or not?
The Commission concluded that the requirement of measure granted through state resources and attributable to the state (via the municipality), were clearly fulfilled. The municipality would, as a public authority and part of the state, itself contribute with a direct grant, pay rent for use of the arena and provide the land where the arena would be built.
Regarding the grant of 16.5 million EUR to the Property Company for the construction of the arena, the Commission concluded that the grant constituted an economic advantage to the company. Thus, the grant constituted state aid to the Property Company. In respect of the site leasehold, the Commission noted that the rent corresponded to comparable rent levels for other sports facilities in the region. The terms of the lease would therefore not contain any additional aid to the Property Company. The Commission did not exclude the possibility that an economic advantage also would be given to the Events Company as the operator of the arena or to the undertakings that would rent the arena for use.
Compatible with the internal market pursuant to Article 107 (3) (c) TFEU
Given the conclusion that to at least the grant of 16.5 million EUR to the Property Company would constitute state aid, the Commission performed a balancing test assessing whether the aid was compatible under Article 107 (3) (c) TFEU, i.e. would pursue a policy objective of common interest, as well as whether it was necessary and proportional and did not cause undue distortion of competition.
In its assessment the Commission took particular consideration of the fact that the construction of venues for sport and other public events and supporting activities which benefit the general public can be considered as a state responsibility. By pursuing the arena project that responsibility would be fulfilled and a policy of objective common interest was achieved. The Commission further acknowledged that the need for additional capacity in the city of Uppsala would not be met only by expansion of existing arenas and that the market would not fulfill the need for the additional capacity.
Further, the state aid investment was considered as been ensured to be limited to the strictly necessary to realise the project and to achieve the public benefits thereof. Due to the possibility of hosting international events in the arena, an effect on competition and trade between member states could not be completely excluded. However the municipality’s involvement in the arena project was not considered to cause undue distortion of competition and trade between Member States mainly because of the “local character” of most of the activities to be carried out in the arena.
Consequently, the Commission held that the aid was compatible with the internal market pursuant to Article 107(3) (c) TFEU.
See Commission Decision of 2 May 2013 on State aid SA.33618 (2012/C).
As per January 2019, no arena has been built in Uppsala. According to a document presented by the municipality on 28 December 2018 (reg nr KSN-2018-2867), the delay is due to lack funding in addition to the municipality’s grant. The municipality is said to revise its plans for an arena.