Local policy choices and substantive motivation, applying the judgment Didam II in practice

In the Netherlands, private transactions of so-called ‘scarce rights’ (i.e., acquiring or renting out property, land, or limited rights under property law) by public authorities, which are normally excluded from the Public Procurement Directives, are also subject to the principles of transparency and equality. Following the judgments Didam I dated 26 November 2021 and Didam II dated 15 November 2024,[1] public authorities are required to announce intended private transactions and provide for a transparent and non-discriminatory selection process to enable equal treatment of serious interested parties. However, the requirement to set up a transparent non-discriminatory selection procedure does not apply in case the relevant transaction will only attract one actual serious interested party, provided that this transaction is nevertheless announced publicly and is accompanied by a motivation by the public authorities. This motivation must be based on objective criteria from which it follows that the intended contractual party also qualifies as the only actual serious interested party. 

Recently, the District Court Midden-Nederland ruled on 20 January 2025[2] ruled that the criteria set out in Didam-II do not preclude a municipality from selling land to a regional grid operator who had expressed interest in purchasing the land. The relevant municipality successfully demonstrated that its public announcement, which stated the intended sale to a single seriously interested party, was compatible with the Didam-criteria. 

In short, a grid operator wished to acquire the land to establish an electricity transformer substation, aiming to solely address the local grid congestion issues. The municipality honored the request of the grid operator and, subsequently, announced its intent to transfer the land to the grid operator, noting that the grid operator was the sole candidate for the purchase. The announcement further stated: 

“Since the municipal land is being sold exclusively for the installation of a transformer station, only this candidate is eligible to purchase it.” 

Of course, local residents opposed this decision, arguing that they should also be given the opportunity to purchase the land.

However, the District Court Midden-Nederland disagreed and ruled in favor of the municipality. According to the court, the municipality has the discretion to determine the use of its land. It is within the municipality's rights to sell the land to alleviate grid congestion, and as such, it can proceed with the land transfer. In that regard, the court also pointed out that the zoning plan (or physical environment plan) did not prohibit this use. Furthermore, the court ruled that the decision of the municipality to allow the realisation of an electricity transformer substation was made in accordance with the principle of due care. Firstly, the municipality acted within the general interest of providing a properly functioning electricity grid, which is based on its discretionary power. Secondly, the court ruled that the municipality assessed the necessity of the request of the grid operator and could rely upon the reports of the grid operator, which stated that the current grid capacity was insufficient to meet all demands. In addition, the court also ruled that the municipality had conducted sufficient research to conclude that no other suited alternative locations were available and also properly balanced all the different interest regarding the choice of this location against each other. 

Finally, the court ruled that the announcement of the municipality was in accordance with the requirements set out in Didam II as its intended sale in a timely manner and explained why the grid operator was the only potential buyer. The municipality had demonstrated that the grid operator was the only actual serious partner that could meet the technical and financial requirements to realise the electricity transformer substation and also made the necessary investments. 

In conclusion, the judgment of the District Court Midden-Nederland seems to confirm that private parties and public authorities are able to conclude private transactions that are compatible with the Didam-criteria. Particularly in transactions likely to attract only one actual serious interested party, public authorities can use their discretionary powers to realise projects in the general interest that comply with local policies. However, they must publish the required announcement along with a substantial justification in a timely manner. This justification must also comply with the principles of due care.

[1]Dutch Supreme Court 26 November 2021, ECLI:NL:HR:2021:1778 (Didam I); Dutch Supreme Court 15 November 2024, ECLI:NL:HR:2024:1661 (Didam II).

[2]District Court Midden-Nederland 0 January 2025, ECLI:NL:RBMNE:2025:94.