Example news report October 2013

The Court: “Amsterdam did not grant State aid to music production centre MuzyQ”

The guarantee granted by the Municipality of Amsterdam to music production centre MuzyQ does not constitute State aid. There exists no adverse impact on the trade – such was the conclusion by the Court of Amsterdam at the beginning of October 2013. The outcome of this case may well be a guiding principle to other local and regional authorities in similar situations.

State aid?

The question raised in this case, was whether the guarantee by the Municipality of Amsterdam and the Amsterdam East District for a loan of MuzyQ at the Friesch-Groningsche Hypotheekbank (FGH Bank) had to be considered as State aid or not. Because of the fact that the respective guarantee did not have any adverse impact on the trade between Member States, the Court reached a negative answer to this question.

Case

MuzyQ is established in Amsterdam and lets rehearsal studios to musicians. The Municipality of Amsterdam and the Amsterdam East District have acted as guarantor towards FGH Bank for a loan raised by MuzyQ’s project developer. Upon realisation of the music production centre, the project developer has leased the centre to a company that exploits it. However, the latter company did not pay any rent to the foundation. Therefore, the foundation could not fulfil its obligations towards FGH Bank. As a consequence, FGH Bank has made a claim under the municipality’s guarantee.

Dispute

Apart from MuzyQ, there are also other companies in the local region offering rehearsal studios to musicians. These companies (the claimants) bring forward that the above-described construction constitutes, among other things, forbidden State aid. They assert that MuzyQ could never have raised the afore-mentioned loan without the municipality’s guarantee, i.e. under normal market conditions.

According to the claimants, this advantage is not in conformity with market conditions and should be considered as illegal State aid within the meaning of Article 107(1) TFEU.

Judgment by the Court of Amsterdam

The Court judges that State aid only exists if all cumulative requirements of Article 107(1) TFEU have been met. One of these requirements is that the disputed measure must have a potential adverse impact on the trade between the Member States.

However, according to the Court, no such a potential adverse impact on the trade between the Member States exists. The Court judges that MuzyQ is an undertaking that operates on a local, possibly regional, market and that MuzyQ’s rehearsal studios do not attract any international artists.

Conclusion

Aid to an undertaking operating on a strictly local or regional level, may in some cases fall outside the scope of the European prohibition of State aid. As the Court has judged in this case, it is possible that such aid does not have an adverse impact on the trade between the Member States and, therefore, does not constitute State aid.

Source:

Judgment of the Court of Amsterdam, C-13-519298 – HA ZA 12-667

More information:

Transboundary impact, State aid, Europa decentraal
State aid, Europa decentraal