Developers appeal EU decision to let Nama fund housebuilding

Review sought of commission ruling allowing Nama finance clients’ building projects

The developers argue that Nama is taking cash meant to repay nationalised banks’ debt and using it for housebuilding and the redevelopment of Dublin’s docks. Photograph: Cyril Byrne

The developers argue that Nama is taking cash meant to repay nationalised banks’ debt and using it for housebuilding and the redevelopment of Dublin’s docks. Photograph: Cyril Byrne

 

Developers are appealing a European Commission decision that allows the National Asset Management Agency to fund house and commercial building, saying that the ruling is flawed.

Brussels has ruled that a Government move to allow Nama finance clients’ residential and commercial building projects did not break the European Union’s state-aid rules, following a complaint by a group of developers.

Three of the developers that originally complained to the commission are appealing the commission’s decision to reject their complaint to the General Court of the EU saying it is flawed.

The builders – Michael O’Flynn, Paddy McKillen and David Daly – want EU judges to review the ruling on the grounds that the commission made a “manifest error” when making its decision.

Details of the appeal appeared in the Official Journal of the European Union on Tuesday.

The developers argue that the commission’s position that the original decision by Brussels to allow the government establish Nama in 2010 covered any aid to the agency was wrong.

The trio’s submission argues that the Government’s decision to allow Nama fund housebuilding, and the agency’s involvement in projects such as the Dublin docklands strategic development zone, marked a “sea change in the Irish State’s policy objectives” for the organisation.

Nama’s original purpose was to rescue Irish banks left insolvent by the 2008 financial crash by taking control of their property loans. The agency was meant to collect the debts and refund the State the €31.8 billion it spent on buying them.

Housebuilding

The developers argue that instead of operating as a means of providing aid to the banks, Nama takes cash meant to repay debt and uses it for housebuilding and the redevelopment of Dublin’s docks.

In these circumstances, they say, the commission is wrong, as the aid approved in 2010 was not meant for Nama itself or the builders whose residential and commercial projects it is funding.

The Government allowed Nama to finance residential building in late 2014 as part of its effort to tackle the Republic’s housing crisis.

Mr O’Flynn, Mr McKillen, Mr Daly and others complained to Brussels on the grounds that as a State agency Nama could raise cash far more cheaply than private sector operators could, giving it an unfair advantage.

EU law bans state aid where it threatens to distort normal commercial competition.

The developers’ appeal also points out that the commission’s ruling, published in January, states that their original complaint did not allege misuse of state aid.

In fact, they say the original complaint did allege misuse of state aid in paragraph 5.25.

“The commission thus entirely disregarded a significant aspect of the complaint,” they say.

The developers claim that the commission infringed their rights by not carrying out a fair and impartial investigation, a failure that also breached principles of good administration.

The commission ruled against the developers in January, stating among other things that Nama was operating in the same way as a normal commercial player.

Since 2014, Nama has financed the construction of 7,300 homes. Another 3,800 are under way or have finance approved, while its clients have planning permission for a further 7,500. Applications have been lodged or will be lodged for another 8,500.

Nama is also working on the redevelopment of key areas of Dublin’s docklands with the likes of Ballymore Properties and Kennedy Wilson.

Agency chairman Frank Daly last month argued that properties under Nama’s control, including the Irish Glass Bottle site in Ringsend, Dublin, which has space for 3,500 homes, had huge potential.