In a judgment of 26 November 2021, the Dutch Supreme Court ruled that public authorities must provide competitive space and be transparent when selling scarce real estate.
The Dutch municipality of Monfertland (Municipality) is planning to refurbish the centre of Didam (one of its villages). To this end, the ‘Masterplan Didam‘ was drawn up in 2016. Part of the Municipality’s plan is that a supermarket will be located at the site of Didam’s old town hall (Town Hall site).
Immediately after the plan was announced, Didam Have B.V. (Didam Have), an undertaking operating a franchised Albert Heijn supermarket on the outskirts of Didam, informed the Municipality of its interest in the Town Hall site. The Municipality referred Didam Have to project developer Groenstaete. Furthermore, the Municipality informed Didam Have that the site in question was not for sale separately, but was part of “the total development of the Raadhuisplein (town square)”. In 2018 Didam Have again spoke with the Municipality about the relocation of its Albert Heijn supermarket to the Town Hall site. Didam Have was once again referred to Groenstaete. In view of this, Didam Have asked the Municipality to cease all negotiations with Groenstaete on the redevelopment and to start a public bidding procedure. The Municipality refused.
Didam Have and an associated property developer subsequently commenced summary proceedings before the interim relief judge of the District Court of Gelderland. The main purpose of the claim was to prohibit the Municipality from selling and transferring the Town Hall site, other than following a prior open and non-discriminatory bidding procedure. In a judgment of 8 January 2019, the claims of Didam Have c.s. were declared inadmissible due to a lack of urgent interest. Didam Have c.s. then appealed to the Court of Appeal of Arnhem Leeuwarden (Court of Appeal). Pending this appeal, the Municipality sold the Town Hall site to Groenstaete. Subsequently, in a judgment of 19 November 2019, the Court of Appeal quashed the interim order insofar as the claim of Didam Have c.s. had been declared inadmissible. Subsequently, the claim was rejected on substantive grounds. Didam Have c.s. appealed against this judgment to the Dutch Supreme Court.
Judgment of the Dutch Supreme Court
Obligation to provide room for competition
Article 3:14 of the Dutch Civil Code implies that, when entering into and performing private-law contracts, public authorities must observe the general principles of proper administration (ABBB) and thus the principle of equality. The latter principle implies that public authorities, when selling real estate for which there are several candidates, must give (potential) buyers the opportunity to compete for the real estate concerned. In view of this, the public authority must draw up objective, verifiable and reasonable criteria on the basis of which the buyer is selected. In order to achieve a level playing field, the public authority is required to ensure an “adequate degree of publicity” concerning the availability of the real estate, the selection procedure, the timetable and the selection criteria to be applied. The aforementioned room for competition need not be provided “if it is established in advance, or may reasonably be assumed, that on the basis of objective, verifiable and reasonable criteria only one serious candidate will be selected for the purchase“. This does not affect the obligation of prior publication of the intended sale. The Court of Appeal misjudged the above (recitals 3.1.1 – 3.1.7).
Scarce real estate
For the question whether the real estate to be sold is scare, it is only decisive whether there are more interested parties for the real estate concerned. Contrary to what the Court of Appeal had assumed, it is not relevant whether other, comparable real estate is available (recitals 3.1.8 – 3.1.9).
Since the appeal in cassation succeeded, the case was referred back to the Court of Appeal of ‘s-Hertogenbosch.
Scarce rights and scarce goods
The judgment discussed is in line with the judgment of 2 November 2016 of the Dutch Council of State (the supreme administrative court), in which it was determined that “Dutch law is governed by a legal norm whereby, in the distribution of scarce permits, a public authority must in some way offer (potential) candidates the opportunity to compete for the available permit(s)” (recital 8). According to an opinion of 25 May 2016 by A-G Widdershoven, scarce permits are “a species of the genus scarce public rights. The group of scarce public rights includes, besides permits, other scarce governmental authorisations, such as concessions, exemptions or dispensations, scarce tradable public rights, such as emission rights or quotas, and scarce subsidies or other financial claims” (marginal 2.5). Viewed in this way, it is understandable that real estate that a public authority wants to sell and for which there are more interested parties, in principle qualifies as a scarce good. Subsequently, it is comprehensible that a public authority must offer room for competition and be transparent when selling such real estate.
It is notable that the Dutch Supreme Court formulates only one exception to the obligation to provide room for competition: it must be established in advance that there is only one candidate. It is a pity that this criterion is not further specified.
Groenstaete as the only bidder
The Municipality wants to allow only two complementary supermarkets in the centre of Didam to strengthen the retail structure. In the vision of the municipality, according to a post of 2 December 2021 by Omroep Gelderland (the provincial broadcasting corporation), this can only be achieved if the Town Hall site is sold to Groenstaete. Groenstaete apparently wants to buy the location only for Coop (a Dutch supermarket chain). This chain already had a supermarket in the planning area. After this supermarket has moved to the Town Hall site, a discount supermarket like Aldi can be established on the vacant site.
If, however, the Albert Heijn franchise store of Didam Have moves to the Town Hall site, the Coop supermarket will remain at its current location. The result is that Didam town centre will then have two supermarkets in the same segment. In view of this, the Municipality believes that the town centre plan can only be realised if the Town Hall site is sold to Groenstaete. This implies that the Municipality believes that there is only one candidate for the location in question, so that there would be no need to provide room for competition.
The question is whether this interpretation fits within the exception formulated by the Dutch Supreme Court. This will undoubtedly be a subject of discussion at the Court of Appeal in ‘s-Hertogenbosch. It may be conceivable to draw a parallel with the way in which real estate sales in the context of the relocation of undertakings must be dealt with under the European state aid rules. If the real estate to be sold is a component of a larger plan that can only be realised if the real estate concerned is sold to one specific party, this should be included in the assessment. See the blogs (only in Dutch) about this: Business relocation and land transactions: the Konsum Nord case (also a dispute between two supermarkets) and Business relocation and land transactions: it can be state aid proof.
In the present case, the establishment of an Albert Heijn supermarket at the Town Hall site would probably not prevent the town centre plan from being realised. It seems that only one part cannot be achieved, namely the policy choice of the Municipality to only allow two complementary supermarkets in the planning area. This choice is based on the assumption that only two complementary supermarkets can strengthen the retail structure in Didam. The question is whether this assumption is at all or only partially correct. In other words, how substantial should a policy choice be in relation to the larger plan? If subordinate policy choices also suffice, the exception to the obligation to provide room for competition formulated by the Dutch Supreme Court may become manipulable.