Didam judgment: line in case law
The Supreme Court has ruled that government bodies may no longer simply sell municipal land and real estate privately. A government body must disclose its desire to sell and select the eventual buyer based on objective, testable and reasonable criteria. Such a selection procedure is not necessary if it has already been established that there is only one serious candidate. In that case, the public body must justify and publish the intention to sell to that one serious bidder, so that everyone can learn about it. The justification should again be based on objective, testable and reasonable criteria.
Earlier this year I wrote that the interim relief judge of the District Court of Midden-Nederland ruled that the Didam rules also apply if a government body wants to lease municipal land. The Didam ruling has a broader meaning than that it only applies to the sale of real estate, according to the court.
In addition, case law has colored when there can be "one serious candidate."
- This party is the only one capable of allowing an integral area development to go ahead(Rb. Rotterdam d.d. September 23, 2022, r.o. 5.14);
- This party is most appropriate by capacity, such as being an admitted institution. Indeed, this gives certain guarantees to realize housing policy. Being a housing corporation is objectively determinable and testable(Rb. Midden-Nederland d.d. August 22, 2022, r.o. 4.1, in similar vein: this ruling by the District Court of North Holland).
- This party is most appropriate because of its land position. A joint development of adjacent parcels is necessary to meet the ambitions and objectives of an environmental plan of the public body(Rb. The Hague d.d. October 5, 2022, r.o. 5.8.4. See also this ruling and this recent judgment of the Court of Appeal of The Hague dated July 18, 2023, which concerned the issuance of land on a long lease).
- This party is the most suitable according to its nature, capacity, ability and financial clout.
- This party has already made certain (pre-)investments (see Rb. North Holland dated August 4, 2022, r.o. 4.10).
What about pre-Didam agreements?
What we often encounter in practice is that a municipality has made certain agreements or promises to a party years before the Didam judgment, which it now wants to fulfill. The question is then what carries more weight: the (purchase) agreement entered into between the municipality and that party or the principle of equality which means that everyone must have the opportunity to compete.
The Amsterdam court found earlier this year that the municipality had not violated the principle of equality by entering into a purchase agreement with the party in question (without a selection procedure) in 2020, after years of negotiations with that party. That, for example, there had been favoritism or exclusion of other parties was not proven, the court said. The openness of the planning procedures implies that it had been clear for years that the area in question would be developed, but no one had come forward. This line is also followed by the North Holland court in its July 10, 2023 ruling.
The Arnhem-Leeuwarden Court of Appeal ruled in April of this year that the Didam judgment has retroactive effect. So even before the date of the Didam ruling, governments had to take the interests of potential candidates into account.
So far, it is just not clear what the legal consequences of the Didam judgment are for contracts that were not created according to the "Didam rules." For example, it cannot be ruled out that such agreements are void or voidable. Because this is not yet clear, the District Court of Midden-Nederland wants to submit preliminary questions to the Supreme Court. These are questions that a court can ask the Supreme Court about the interpretation of certain rules of law, about which there is much uncertainty. In its ruling, the court formulated questions that it wants to see answered by the highest court. Is it relevant whether an agreement was concluded before or after the Didam ruling? And what is the consequence if the Didam rules were not followed, is that nullity, voidability or does the contract remain legally valid? Answering these preliminary questions may have implications for the handling of other Didam cases. For example, a court may reserve its decision until the Supreme Court rules.
Conclusion
In the past two years, many proceedings have already followed on the application of the Didam judgment. Particularly with regard to the legal validity of contracts entered into before the Didam judgment, there is still much uncertainty. It is now up to the Supreme Court to clarify this. As for the selection criteria and the circumstances under which a party can invoke the Didam judgment, fortunately, much has already become clear through various rulings. Would you like to know whether the Didam ruling applies to your situation or do you feel that a government body has wrongly denied you the opportunity to compete? Please contact me, I am of course happy to think along with you!
