The Office of the State Aid Control Authority announces that, following the debate in the House of Representatives on 2/3/2023 on the new Limassol stadium, it has already notified the European Commission on 14/12/2022, together with the following information, which was received from the Cyprus Sports Organisation (CSO) on 12/12/2022:
a) Completed and signed notification form from the CTO.
b) "License Agreement" of the stadium between the CTO and the three local Limassol clubs.
c) Official study by an internationally renowned organization (KPMG), selected after a tender by the CTO to calculate the market annual rent to be paid by the three clubs to the CTO, including the relevant rights for the name of the stadium "Alpha Mega".
c) Official study by an internationally renowned organization (KPMG), selected after a tender by the CTO to calculate the market annual rent to be paid by the three clubs to the CTO, including the relevant rights for the name of the stadium "Alpha Mega".
d) A detailed report by the CAA on all aspects of the matter, which included a justification for the choice of one of the three scenarios for the calculation of the annual market rent. On the basis of the study, the scenario with an annual rent of €400K was selected by the CTO Board. The scenario of paying €851K per year was not selected as it was assessed by KPMG as unsustainable, nor was the scenario of paying an annual rent based on revenues due to the complexity and difficulty in monitoring revenues.
It is noted that, in our Office's opinion dated 31.12.2008. 24/5/2022 in response to a letter from the CMO dated 24/5/2022. 3/3/2022, regarding the use agreement, in addition to our reference, inter alia, to the public utility and multifunctional role that the stadium should have had, the necessity to create for safety reasons and the unsuitability of the existing stadium, as well as the specificity of the local character, we stressed that the correct appropriate procedure for determining the market rent, should have been that of an open, transparent procedure in order to determine the market rent for the use/management/maintenance of the land on market terms, as required by State aid rules, and not by direct award, as provided for in the use agreement to be assessed, which had been sent to the Office for an opinion.
For history purposes, the discussion of this case started in the year 2014 with different facts which changed in the process and therefore the communication between the Competent Authority, the State Aid Control Office and the European Commission ended on 25/9/2018 without examining the issue of the management of the land.
Finally, on 3/3/2022, the agreement for the use/management/maintenance of the stadium was sent by the CTO to the Controller's Office for an opinion, while the construction of the stadium had already been started by the CTO on state land with a completion date of August 2022 and provided for the direct award to a company where the shareholders were the three local football clubs. On this basis, in order to avoid any element of State aid, the Office of the State Aid Control Authority, in its multi-page and multi-dimensional opinion dated 30 June 2009, stated that the State aid was not involved. 24/5/22 inter alia:
a) It set out all the terms and conditions relating to the State Aid Rules that should have been included in the agreement with the concurrence of the Legal Service.
b) He indicated the importance of calculating the MARKET RENT under the State Aid Rules, so that the calculation of the market rent by the reputable organisation would result in a market rent in almost the same way as a possible open bidding process would result in a market rent under market terms and conditions.
c) It drew attention to other individual issues of operation, charging policy, procedures and usage to apply transparent procedures and to avoid preferential pricing and preferential usage by local user groups, since the local groups were shareholders of the company.
d) It stressed, in conclusion, that the case should have been notified to the European Commission for legal certainty, mainly because the open tender procedure had not been followed.
Based on the above timelines, it is understood that it was not possible to obtain relevant approval from the EU for the use of the stadium before its completion with a now final completion date of October 2022, since the COA completed the notification and sent it to our Office on 12/12/22, due to the fact that in the meantime the agreement underwent several modifications, where according to the guidance of the Legal Service, the agreement was finally made between the CTO and the three Associations, and included, to a large extent, additional conditions set by our Office. Despite not adopting all of our Office's conditions, such as the review of the annual rent every five years, we considered that sending the case to the EU should not be further delayed, as the most competent body to assess the case as a whole would be the EU.
On the basis of the above and
a) To prevent the operation of the stadium from coming into force without the prior approval of the EU and being considered illegal state aid.
b) To avoid a loss of revenue for the State from a property costing around €40M which had already been completed and had already exceeded its original budget by around €10M.
c) Because the signing of the stadium agreement with the three clubs was to follow (done on 15/11/2022) and no other alternative, even temporary, for the operation of the stadium had been proposed.
d) The Stadium Licensing Authority restricted the use of the existing Chirio stadium to only 50% use due to building inadequacy, which related to security issues.
Our Office, as the competent body of the Republic of Cyprus, contacted the EU on 19/10/2022, and received the relevant consent/approval on 31/10/2022, allowing the operation/use of the new Limassol stadium, prior to notification to the EU for safety reasons, but subject to recovery in case it becomes apparent during the assessment of the case that this is illegal state aid.
The Office of the State Aid Control Authority, however, did not limit itself only to the above approval, nor to the content of the notification to the EU on 14/12/2022. Instead, the notification was followed by two teleconferences with the EU, in the presence of the Director General of the CMO, the first on 13/1/2023 where the EU requested clarifications to understand the facts of the case, which were answered in writing by the CMO on 31/1/2023, and the second teleconference on 6/2/2023 where it was agreed, at the EU's suggestion, to follow the pre-notification procedure as this allows for an open and more flexible approach to the matter on the part of the EU to communicate with Member States.
In addition to the aforementioned communication of the State Aid Control Office with the European Commission, the State Aid Control Office also communicated with the Auditor General of the Republic. It is worth noting that the Office of the State Aid Control Authority took care and provided all necessary answers in writing to questions and/or concerns raised by the Office of the Auditor General of the Republic in a letter. Nevertheless, the Auditor General of the Republic contacted the European Commission directly, without notifying the Office, and provided his own views in writing, referring mainly to the choice of the annual rent and performance, given that at this stage in this particular case the European Commission has exclusive competence to examine the matter, to which, it should be noted, all the necessary data, studies, reports, etc. for the assessment of the matter had been sent by our Office, in a prompt and transparent manner.
It should be noted that, at present, the communication of the State Aid Control Office with the European Commission continues, based on the credibility that we are constantly trying to build as an Office and we hope for the positive development of the matter on the basis of our opinion dated. 24/5/2022 as soon as possible, within the framework of approvals granted by the European Commission, which unfortunately may be time-consuming with several cases exceeding one year.
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