In 2017, the European Commission launched an in-depth investigation, based on a competitor's complaint, to determine whether the land lease agreement between Estonia's Ministry of Rural Affairs and AS Tartu Agro complied with EU state aid rules.

The investigation focused on a lease signed in 2000, in which the ministry leased land to Tartu Agro for 25 years. According to the Commission, the agreement constituted state aid, as the rent paid by Tartu Agro was below market value. In January 2020, the Commission concluded that the lease granted the company an undue and selective advantage over its competitors, requiring Estonia to recover the aid.

Tartu Agro appealed the decision, and on July 13, 2022, the European General Court annulled the Commission's decision. The court cited errors in the Commission's assessment, particularly the lack of analysis regarding the economic value and impact of certain financial obligations included in the lease agreement.

The Commission subsequently reopened its investigation into the aid provided by Estonia, taking into account the conclusions of the court ruling. In its latest decision, the Commission confirmed that AS Tartu Agro received state aid incompatible with EU internal market rules up until the end of 2019, as the rent for agricultural land was below market value. Following the Commission's initial decision, Estonia raised the rent to comply with the ruling.

Under EU regulations, any distortion of competition must be remedied by recovering the aid. The purpose of recovery is to restore the situation in the internal market to what it was before the aid was granted, and it is not considered a penalty.

By repaying illegal aid, the beneficiary loses the advantage it had over competitors in the market. Estonia must determine the amount to be recovered in line with the methodology outlined in the Commission's decision, considering that some of the aid has already been recovered under the initial ruling. The exact amount of aid to be recovered is not yet known.

The lease agreement for Tartu Agro's land is set to expire next year. As ERR reported last week, while the Ministry of Regional Affairs and Agriculture announced in June its plan to organize a new public auction for the land and divide it into four lots, the process has faced delays.

Last week, the Ministry of Economic Affairs stated that the auction is planned to be announced at the beginning of the new year.

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