Last November, the European Commission ruled that Estonia had granted illegal state aid to major agricultural producer Tartu Agro, which the state must now recover from the company along with interest.

Tartu Agro is dissatisfied, however, with what it sees as an anti-business stance taken by the Ministry of Regional Affairs and Agriculture.

The law firm TGS Baltic, representing the company, sent a letter to the ministry stating that under the Commission's decision, the ministry must determine the extent of the unlawful state aid received under the lease agreement signed with the company. In doing so, the ministry must also take into account the investments made by Tartu Agro under that lease.

"As a result, it may turn out that the actual amount of state aid is essentially negligible," the attorneys stated.

According to the attorneys, Tartu Agro has submitted extensive evidence to the ministry, including detailed financial data and an independent expert opinion. However, in their view, this evidence has not been substantively addressed during the proceedings.

"The ministry has taken a position that ignores a significant portion of the information presented, selectively focusing on isolated aspects while failing to properly consider important arguments and facts," the company's representatives argue.

Tartu Agro disagrees with the ministry over the total amount that must be repaid as state aid. According to the attorneys, the ministry has calculated that the value of investments made by the company that do not need to be repaid is €120,990.68.

Tartu Agro, however, considers that figure a mere fraction of its actual investments. According to the company's own calculations, the final amount it would owe the state, after deducting those investments, is €50,380.73.

"The scope of the repayment as currently proposed fails not only to account for the actual investments made but also distorts the historical context of the relationship between the parties," the attorneys stated.

They pointed out that the ministry has been aware of and monitored the company's investments throughout the entire lease period.

"For the state to now claim, without a substantive assessment of the evidence submitted, that it has no knowledge of the investments would be a clear breach of legal good faith. Such an approach undermines trust in the rule of law and the objectivity of administrative action, and casts doubt on the state's ability to protect entrepreneurs' rights fairly and proportionately," the attorneys wrote.

They added that Tartu Agro board member Andres Härm would like to meet with the ministry and the minister to present the company's evidence and explain its position.

Ministry: Calculation based on exact rules

The ministry has a different view of the matter. Alo Aasma, deputy secretary general for land and spatial planning at the Ministry of Regional Affairs, told ERR that since the land in question has been transferred to the Ministry of Economic Affairs and Communications, both ministries are involved in the process. However, neither will disclose the amount to be recovered while the case is still pending.

"We have discussed the methodology with both the European Commission — which has prescribed a very specific approach — and with representatives of AS Tartu Agro. The exact amount will be determined in the coming weeks and will then be made public," Aasma added.

He noted that in determining the amount, it's important to keep in mind that the European Commission has outlined a detailed methodology for calculating illegal state aid.

"The state is obligated to calculate the amount based on this methodology, but it must also be coordinated with the Commission. However, since the provision of illegal state aid in this case goes back nearly 20 years, AS Tartu Agro has its own interpretation, which does not align with the methodology imposed on the state by the Commission," Aasma said.

The deputy secretary general added that the ministry has taken the company's investments into account to the extent allowed by the framework set by the Commission, as the prescribed methodology and subsequent clarifications requested by the Commission do not permit all investments to be included.

As for when the minister of regional affairs and agriculture might meet with Tartu Agro's management, Aasma could not yet say. He emphasized, however, that the official order to recover the illegal aid will be signed by Minister of Economic Affairs Erkki Keldo.

"The role of the Ministry of Regional Affairs here is to help prepare the documentation, since historically it has been REM [the ministry] that has represented the Estonian state in communications with the Commission on this issue," Aasma explained.

In 1999, the Estonian state signed a 25-year land lease agreement with Tartu Agro, granting the producer access to thousands of hectares of farmland on the outskirts of Tartu at below-market rates. Five years later, in 2004, Estonia joined the European Union, making it subject to internal market rules — including a prohibition on granting state aid without the EU's prior approval. Estonia did not seek such approval in the case of Tartu Agro.

Tartu Agro's lease agreement for the land expires this fall, and the ministries of regional affairs and economic affairs had been preparing terms for a new lease auction for some time. However, the timing of the auction is now uncertain, as Tartu Agro has filed a lawsuit against the state, seeking a unilateral extension of its current lease.

Until the court case is resolved, Tartu Agro will continue to use the land.

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