The government has denied that the transfer of a tract of land in Paceville to International Hotel Investments (IHI), the owners of the Corinthia hotel chain, on a 99-year lease will breach EU state-aid and public procurement laws following a complaint submitted by a Maltese business consortium against the deal.

The consortium called Foresite, is said to be made up of Maltese businessmen with an interest in developing what they called Malta's 'Golden Mile'. Members behind the consortium who are not known sent a letter to MPs from lawyer Joseph Camilleri, writing in the ir name, asking to stop the €52 million deal for Corinthia to develop a six-star tourism and residential complex at a price they described as being "far below market price and without having issued a tender." 

IHI currently holds a lease on the land in question, where it owns three hotels - but it wants to redevelop the area to hold a six-star hotel as well as have the lease extended to 99 years, and for MPs to remove the currently imposed restriction on tourism development.  This is so IHI can develop two high-rise residential blocks on the coastline.  The price reduction is down to Tourism Minister Konrad Mizzi, and is reduced as such so that it compensates for the two hotels that will be demolished to make way for the development.

"Thanks to the proposed deal with IHI, the Government of Malta would effectively be granting special and exclusive rights on land owned by the Government of Malta to IHI, in an entirely arbitrary manner and following no form of call for the expression of interest or consultation with other potential bidders", the Foresite consortium said, quoting cases of EU state aid breaches. 

"IHI will benefit from a substantial waiver of public revenues by the government, an unfair advantage which will lead to distortion of a level-playing field within the Maltese tourist industry. This is in breach of EU state aid rules, which require that, when granting concessions for public land, the government should act in a commercially sensible way like any market economy operator."

"There is still time to stop this from happening. Hence our appeal to you," MPs were told in the letter. 

Foresite also warned they will proceed with a formal report to the European Commission and other authorities, as well as court action in Malta, on what it said was a "clear breach of State aid regulations". 

The letter said that though the deal, in which IHI pays just a €17 million premium while the rest of the €35 million is paid in ground rent redemptions, the hotel chain would have received "a discriminatory gain from State resources". 

Foresite said the grant of public land to IHI, was not a normal market condition but a direct State intervention. "By replacing the existing concessions by a new concession, the government is categorically granting unto IHI special and exclusive rights in an arbitrary manner and without granting the same opportunity to competitors in the market." 

Foresite said that there was no doubt this was State aid, granted at values far less than the true property market price, as well as allowing IHI to redeem the land to transfer it third parties at a premium in their favour.

The government meanwhile confirmed the receipt of the complaint, saying that the consortium members have so far remained anonymous and therefore their interests cannot be ascertained.

In a statement published on Friday morning, the government said that it was still engaged in the ongoing process of the deal, based on legal and economic expert advice that the government had been seeking.

"Clearly, the government would not enter into any transaction in relation to which it would have received expert advice that it was not consistent with Maltese or EU laws", the statement read.

The government said that the deal will go through parliament once a conclusion is reached and that it will "naturally fully respect its EU obligations".  They also said that "as a matter of standard practice", the government is addressing in "an appropriate manner" the points raised by the various stakeholders.

The government maintained that this would be a very important project that tallies with its vision to aim towards a more qualitative level of tourism based on value rather than volume, through the creation of a six-star luxury environment so necessary for Malta. They added that IHI would also be undertaking significant investment, with significantly direct and indirect income for the government, and creating tangible benefits to Malta.