Updated at 2.20pm with government denial

The government has reopened talks with the Corinthia Group to modify deals on projects on the St George’s Bay peninsula after receiving legal advice that it could be in breach of EU State aid rules.

The advice came from a reputable Brussels-based legal firm, which noted that if the present draft deal was cleared, the government could face a legal challenge by interested parties over breach of EU State aid rules, sources said.

One main bone of contention was the price tag, the sources pointed out. The concession in question would fetch about €700 million at current market prices but it has been reported the hotel chain would only be paying about €17 million.

This, the sources warned, was likely to be deemed discriminatory towards other developers who might want to compete with Corinthia in the sale of real estate.

The government was warned that the deal, in its present form, did not make for an equal level playing field for real estate developers.

The government was also advised that the new temporary emphyteusis agreement it wants to sign with Corinthia would require the issue of a public call for tenders as it involves public land and a complete change in use.

The deal does not make for an equal playing field for real estate developers

However, Tourism Minister Konrad Mizzi, who is leading the talks, is reportedly not agreeing with the legal advice, fearing the government might not be in a position to honour the “unwritten commitment” it has with the Corinthia chain.

The government last week cancelled at the eleventh hour a meeting of the parliamentary committee discussing the deal. It should now meet next month.

Apart from the potential legal challenges, the government is also facing  opposition from a section of the business community, including the Malta Developers’ Association and real estate agents.

In the 1990s, the Corinthia Group had been granted temporary emphyteusis for 99 years to use large parts of public land at St George’s Bay exclusively for touristic purposes, mainly hotels. The group had decided not to bid when a large parcel of public land adjacent to their properties in the area, the site where the former Institute of Tourism Studies stood, was made available for real estate development through a tender.

The land was awarded to the db Group, the only bidder, for €15 million payable over seven years. This deal is being scrutinised by the National Audit Office.

After the db Group deal was announced, the Corinthia Group started talks with the government aimed at dropping the arrangements signed in the 1990s and instead negotiating a new deed allowing it to develop about 100,000 square metres of real estate into apartments and retail areas for speculation purposes. The government agreed and Corinthia was given terms similar to those granted to the db Group.

According to a draft deed, which is still unpublished, Corinthia will pay a premium of €17 million for the land occupying most of the peninsula. Payments will be made over a number of years according to how much real estate was built and sold. On the basis of the draft agreement, the hotel chain would pay about €4 million during the first three years from the signing of the deed.

Both the Nationalist Party and Democratic Party said they would vote against the deal when it is presented in Parliament.

'No reason to change opinion' - government denies claims

In a statement issued on Wednesday afternoon, the government denied that it had received legal advice to amend the deal, saying this was "an outright fabrication". 

It however acknowledged that it was meeting with stakeholders "to understand their concerns about the project" and talking to the Corinthia Group to address the concerns. These talks, it insisted, had nothing to do with state aid considerations. 

PM: We cannot discriminate against the investors

Replying to questions on Wednesday, Prime Minister Joseph Muscat confirmed that changes were being made to the draft deal with the Corinthia.

He said the government listened to everyone and concerns, where justified, would be addressed.

But it was important that there was a level playing field, he said. Given the way public land was disposed of so far, one could not discriminate against these investors. This applied both to the value of the land and the term of the concession.

He had no doubt, he said, that this would be a good deal for the country.

“If this country wants to modernise itself and have best quality tourism, we need to take decisions,” he said.

NGOs request meeting

Later on Wednesday, a  large number of NGOs, residents’ groups and three local councils said they have written to Labour MP  Alex Muscat, chairman of parliament's Environment and Development Planning Committee, requesting an urgent meeting of the committee to discuss the proposed deal.

They said that the deal would have repercussions on the public and the natural environment. In terms of the Aarhuus Convention, early public participation, when all options were still open, was a requisite when decisions of such magnitude were being made.

Moreover,  the public has a right to know whether the necessary studies for such a massive development had been conducted and concluded.  

The request was made by Pembroke, Swieqi and St. Julian’s local councils and the Din l-Art Ħelwa, Flimkien għal Ambjent Aħjar, Friends of the Earth Malta, Moviment Graffitti, BirdLife Malta, Żminijietna – Voice of the Left and the Ramblers Association. They were joined by residents’ groups of Pembroke, St. Julians, Ibraġ, St. Andrews, Sliema, Għargħur and Baħar iċ-Cagħaq.