State aid and the state as private creditor: the Vitesse case

In a decision of 6 March 2013, the European Commission (Commission) came to the conclusion that the Dutch municipality of Arnhem (municipality) did not grant state aid to local football club Vitesse (Vitesse) by accepting a creditors’ agreement.

The case

In 2007, Vitesse faced severe financial problems. The club had incurred losses for a net total of EUR 27.4 million. The mountain of debt was therefore huge. The municipality was the largest creditor. About 45% of all claims Vitesse owed to the municipality.

After the municipality pressed Vitesse to pay its debts in December 2007, Vitesse entered into negotiations with its creditors to restructure its debts. A draft creditors’ agreement was reached with all creditors except the municipality. Vitesse then applied for a temporary suspension of payments in 2008. On the basis of the Dutch Bankruptcy Act, a Dutch court can provide temporary protection to an undertaking, which foresees that it will be unable to pay its debts in the near future, while an appointed trustee explores the possibility of finding an agreement with the creditors that would allow the undertaking to continue operations with a restructured balance sheet. This is done under the condition that there is a perspective for continuity of the undertaking.

The simple majority of creditors who had accepted the creditors’ agreement represented more than half of the debt. Consequently, the court could accept the agreement offered by Vitesse. Moreover, the court would also be able to bind unwilling creditiors to this agreement. Under these circumstances, the municipality entered into negotiations with the Vitesse trustee. This ultimately made the municipality agreeing with the creditors’ agreement. Like the other creditors, the municipality received about 12% of its recognised claims on Vitesse.

Opinion of the Commission

The Commission is of the opinion that the municipality has done everything in its power to recollect its claims on Vitesse. In addition, Vitesse would have gone bankrupt if the municipality had persisted in refusing to accept the creditors’ agreement and the court would not have declared the creditors’ agreement binding. In that situation, the municipality would have received a smaller share of its claims than under the creditors’ agreement. In this context, the Commission points out that in case of bankruptcy the KNVB, the Dutch national football federation, would have withdrawn the Vitesse license with the result that the players could leave the club free of transfer. The potential indemnities concerning these players accounted for most of the immaterial assets on Vitesse’s balance sheet.

By accepting the creditors’ agreement, the municipality did not, according to the Commission, provide Vitesse with a selective advantage. Rather, the municipality acted in the same way as “a hypothetical private creditor would have done if placed in the same position“. This means that the acceptance of the creditors’ agreement does not constitute state aid.


A measure qualifies as State aid if (i) one or more undertakings receive (ii) a non-market conform advantage that is (iii) provided by the government or through state resources, thereby (iv) distorting competition and (v) affecting trade between Member States. Among others, the Altmark judgment [recital 74] shows that these are cumulative conditions. If one condition is not met, a measure does not qualify as state aid.

The present decision only concerns the ‘advantage‘ element. Strictly speaking, the municipality gave a financial advantage to Vitese. Because the municipality accepted the creditors’ agreement, Vitesse merely had to pay about 12% of the municipality’s claims. The decisive point, however, is that, according to the Commission, the municipality acted as a “hypothetical private creditor“. In other words, this private creditor would have accepted the creditors’ agreement likewise. This means that the municipality has acted as a market economy operator. In the SFEI / La Poste judgment [recitals 60-61] the Court of Justice has confirmed that in such a situation no advantage as referred to in the State aid rules is provided.

In order to assess whether a public creditor has acted as a market economy operator, it has to be examined what a hypothetical private creditor would have done under the given circumstances. There is no need for a real example to exist. A hypothetical private creditor suffices. It is however important to note that the public creditor is compared with a private creditor who is “in the same situation” as the public creditor. This follows, for example, from the DMT judgment [recital 25]. If the public creditor has collateral, like a right of pledge, the hypothetical private creditor must have the same privileges in the context of the comparison. As the Court of Justice noted in Spain v Commission [recital 59] this comparison requires “a complex economic assessment“.

door | 10 april 2013 | Staatssteun

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