Valuation of Assets Disposed by the State

The value of an asset can be determined according to different methods. The main methods examine future income or comparable transactions or stock market valuation. Agreements between sellers and buyers that contain indemnification clauses or settle past claims do not reflect the true market value of the sold asset.



9 December 2015, the General Court rendered its judgment in cases T‑233/11 Hellenic Republic v Commission and T‑262/11, Ellinikos Chrysos v Commission both of which concerned appeals against Commission decision 2011/452.[1] The decision found that Greece had granted incompatible aid to Ellinikos Chrysos through the sale of three gold mines below their market value. The issue at hand was how to value an asset whose revenue fluctuates according to the price of its output in international markets.


The mines were originally owned by a Canadian company. The mining operations caused excessive environmental damage whose remediation raised operating costs but also sparked legal proceedings between the company and the relevant authorities. In 2004, the Canadian company agreed to settle its legal dispute, end mining operations, and sell the mines to the Greek state for the amount of EUR 11 million. In the agreement, the Greek state consented to discharge the company from any administrative or criminal liability and any other obligations for any offences under environmental legislation. On the same date that the Greek state acquired the mines, it sold them for EUR 11 million to Ellinikos Chrysos which, as it happens, was set up by another Canadian company. Ellinikos Chrysos was also absolved from any liability concerning environmental damage or damage caused to third parties.

After opening the formal investigation procedure, the Commission found that Ellinikos Chrysos benefitted from illegal and incompatible aid of EUR 15.34 million because i) the mines were sold at a price below their market value and because ii) Ellinikos Chrysos benefited from a tax waiver and reduction of legal fees.

Two different taxes had to be paid at the time of the sale: i) A tax on the transfer of the ownership of the mines, which amounted to 5% of the sale price of the mines and ii) a tax on the transfer of the ownership of the land plots attached to the mines, which amounted to 7-9% of their sale price.

On the basis of an expert report, the Commission concluded that the three mines had the following net market values: EUR –23.7 million, EUR 8.6 million and EUR 12.9 million. The overall value of the three mines together was negative and equalled EUR –2.59 million. The negative value was mostly the result of the low price for gold at that time and was predicated on the assumption that the mines would be kept in operation. However, the Commission thought that a rational operator would choose not to operate the first mine and limit the loss to EUR 5.5 million which was the cost of environmental protection and maintenance. Therefore, the true value of the mines at that time was EUR 16 million [= 8.6 + 12.9 – 5.5]. On top of this amount, the Commission added EUR 6 million for the value of the surrounding land owned by the mines and EUR 3 million for the value of the stock of minerals. The total value was, therefore, EUR 25 million. From this amount it subtracted the sale price of EUR 11 million to arrive at an aid figure of EUR 14 million. The tax waiver and the reduction of legal fees were estimated by the Commission to be EUR 1.54 million. Hence the total amount of State aid obtained by Ellinikos Chrysos was EUR 15.34 million.

Existence of advantage

After considering the typical arguments in favour and against admissibility, the Court found the appeal to be admissible and proceeded to examine the substance of the case.

The Court reiterated established case law that the supply of goods or services on favourable terms was State aid. In order to determine the amount of aid involved in the sale of land at a preferential price, it must be ascertained whether the buyer purchased the land at a price it would not have obtained under normal market conditions. The amount aid is equal to the difference between what would have been paid under normal market conditions for an equivalent plot of land from a private seller and the amount actually paid. The calculation of the amount of aid may require complex economic assessment by the Commission.

At this point the Court also reiterated established case law that when the Commission makes complex economic assessments, the review carried out by EU courts is limited. It aims to ensure that the Commission i) complies with procedural rules, ii) states the reasons for its decisions, iii) relies on accurate facts, iv) makes no manifest error of assessment, and v) does not misuse its powers. An applicant can prove that the Commission committed a manifest error by adducing evidence that can make the factual assessment in the decision implausible. This means that it is not enough to argue that the Commission should have arrived at conclusion B instead of A. It is necessary to show that the Commission should not have arrived at conclusion A at all.

Then the Court recalled the process by which the Commission establishes whether the sale of public land and buildings contains State aid. The sale of land (or buildings) is presumed to be free of State aid when the land is either auctioned or valued by an independent expert before the sale is effective. Since in this case neither of those two options was followed, the price at which the mines could have been sold had to be established ex post but relying exclusively on information available at the time of the sale. In the circumstances, the Court acknowledged that it was reasonable for the Commission to rely on expert reports. However, the Commission, the Court said, was not bound to accept without question the results of the reports. [Paragraphs 93-94]

The expert calculated the value of the mines using three different approaches. The Commission took into account the results of only the first approach – the so-called Income approach. The Income approach valuation determined fair market value by discounting the cumulative benefits generated by an asset, which converted the benefits over the lifetime into a present value. The Related Transactions valuation determined fair market value based on contemporaneous transactional values for gold properties where fair market value could be determined. Finally, the Market Capitalisation approach was based on the then value accorded on public stock markets for gold companies in relation to those companies’ proven and probable reserves.

The Income approach itself relied on a range of prices. Here too the Commission selected one of the various price ranges. The Court did not find anything to indicate that the Commission was wrong to select one valuation approach and within that approach to select one price range. The Court also accepted as reasonable other assumptions in the expert report such as the calculation of the value of the mines as a “going concern”.

The Court found as sufficiently plausible the Commission’s assessment that no private investor would have accepted to pay a positive price to purchase an asset with a negative value. The negative value was the result of the low price of gold, the fact that even without being operational the mine would need maintenance costing EUR 5.5 million and the very low prospect of obtaining a mining licence given the environmental degradation caused by the mine. [Paragraphs 105-107]

In response to the argument that the Greek state sold the mines at the price it had bought them, the Court noted that “112 […] the former owner of those assets and, having incurred substantial losses in running them, was seeking to end its investment project. Moreover, the price fixed for the transfer of the [mines] to the Hellenic Republic is clearly not the result of negotiations about the value of the assets sold involving an objective evaluation of those assets. As expressly stated in the wording of the preamble to the extrajudicial settlement, the price of EUR 11 million is referred to as ‘reasonable monetary compensation’ putting an end to all reciprocal claims between the former owner and the Hellenic Republic. That implies logically that not only the value of the assets as such was taken into account, but also the claims arising from non-compliance with other obligations. Factors such as these are extrinsic to the value of the assets and are contingent on past factual circumstances which are not necessarily relevant for a new purchaser for the future.”

“114 Although it cannot be ruled out on principle that the amount of EUR 11 million also represents the correct market value of the assets subsequently transferred by the Hellenic Republic to Ellinikos Chrysos, it is not possible to assert that that amount was unlinked to the clearing of the claims the Hellenic Republic and [the former owner] had against each other. In the light of the foregoing, nor did the Commission make an error of fact in finding, […], that that amount was the result of the clearing of the reciprocal claims of the two parties to the extrajudicial settlement.”

The Court also examined how the Commission calculated the value of the land and of the stock of minerals and accepted the validity of its calculations.

Loss of revenue and assumption of liabilities

Then it turned its attention to the second main plea of the applicants that the Greek state was not a vendor but merely an “intermediary” in “consecutive” or “back-to-back” contracts between private undertakings. Therefore, it was alleged that there was no loss of state resources. On the same day the Greek state paid EUR 11 million and received EUR 11 million.

In this connection, the General Court recalled that “153 […] for the purposes of establishing the existence of State aid, the Commission must establish a sufficiently direct link between, on the one hand, the advantage given to the beneficiary and, on the other, a reduction of the State budget or a sufficiently concrete economic risk of burdens on that budget”.

“154 In the present case, it is common ground that the contract at issue which gave rise to the advantage in favour of Ellinikos Chrysos was agreed upon by it and the Greek State. Under that contract, the Greek State, as vendor, takes on a certain number of obligations and rights towards the other contracting party, […] It is therefore clear that the advantage resulting from that same contract, of which the Greek State was promoter, signatory and guarantor, may be attributed to the Greek State.”

“155 As regards the fact that the advantage is granted directly or indirectly using State resources, it must be observed, firstly, that the disputed sale, being the resale to Ellinikos Chrysos of the [mines] at a price lower than the market price implies a reduction of revenues for the Greek State in relation to what it could have obtained and therefore a loss of resources. That in itself entails an advantage for the company that acquires the assets and is liable to place a burden on the resources of the State. Secondly, […], the Greek State exposed its budget to a risk of burdens linked to possible actions to be undertaken to comply with the applicable legislative provisions instead of the purchaser. These guarantees given by the Greek State give rise to a sufficiently real risk of there being an additional burden for the State budget in future.”

In other words, the Greek state did not simply act as an intermediary. First, it lost potential revenue from the sale and, second, by indemnifying Ellinikos Chrysos from any environmental liability, it assumed liabilities that could have a negative impact on its budget.

Effect on trade and distortion of competition

A third plea by the applicants alleged error of assessment of the condition that there be a distortion of competition and an effect on trade between Member States.

The General Court recalled that “165 […] the two conditions of application of Article 107(1) TFEU concerning the effect on trade between Member States and the distortion of competition, are, as a general rule, inextricably linked. In particular, when aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade, the latter must be regarded as affected by that aid.” “166 […] In its assessment of the conditions of application of Article 107(1) TFEU, the Commission is required, not to establish that the aid has a real effect on trade between Member States and that competition is actually being distorted, but only to examine whether that aid is liable to affect such trade and distort competition”.

The Court accepted that the Commission demonstrated that trade could be affected because “168 […] the sector in which Ellinikos Chrysos was active, …, concerned products which were in wide circulation in the internal market, that the mining in question was carried on in 11 Member States, that the aid conferred an advantage on Ellinikos Chrysos compared with its competitors and that, in conclusion, there was a risk of distortion of competition and an effect on trade between Member States.”

Then the Court made two additional but important observations. First, “169 the Hellenic Republic’s arguments disputing the definition of the relevant market endorsed by the Commission do not refute the soundness of that conclusion. The Commission merely needs to establish that the aid in question is of such a kind as to affect trade between Member States and distorts or threatens to distort competition. It does not have to define the market in question”.

And second, “170 the Hellenic Republic’s argument concerning the allegedly pro-competitiveness of the first of the aid measures, alleging shortfalls in the European market for raw materials, must be rejected as ineffective. Even if it were true, it does not offset the risk of distortion of competition arising from the strengthening of Ellinikos Chrysos’s market position as a result of the adoption of that measure”. “171 Although the European market has shortfalls in the production of minerals, Ellinikos Chrysos in any event enjoys a competitive advantage over other mining undertakings because it competes with other mining undertakings on the internal market without having to resort to imports of those minerals.”

With respect to possible affectation of trade and distortion of competition caused by the tax waiver, the Court observed that “186   since the second aid measure is auxiliary to the first of the aid measures and since the condition that there be a distortion of competition and an effect on trade between Member States must be regarded as met with respect to the first measure, so must it be regarded as met with respect to the second aid measure”.

On the basis of the above reasoning, the Court rejected the appeal.


[1] The text of the judgment can be accessed at:



Phedon Nicolaides

Dr. Nicolaides was educated in the United States, the Netherlands and the United Kingdom. He has a PhD in Economics and a PhD in Law. He presently holds positions at the College of Europe and the University of Maastricht. He has published extensively on European integration, competition policy and State aid. He is also on the editorial boards of several journals. Dr. Nicolaides has organised seminars and workshops in many different Member States, and has acted as consultant to several public authorities.

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