Rigged public bidding for the lease of a sports complex in Dorcol

The City of Belgrade has announced an advertisement for the lease of a sports complex in Dorcol with conditions that abuse the purpose of public bidding because it can be met by a single company, which has organised this year’s tennis tournaments ATP and WTA 250 series.

On 10 July 2021, the Commission for Business Premises of the Secretariat for Property and Legal Affairs of The City Administration of Belgrade has announced the long-term lease of a sports centre previously known as “25 May” and now as “Mila–Gale Muskatirovic” in Dorcol, under the inconspicuous title “Public announcement to lease real estate in the public property of the City of Belgrade through the collection of written offers”.

The advertisement does not even mention the recognisable name of the sports centre, only the numbers of cadastral parcels and areas: 1) indoor facilities within the sports complex, with a total area of ​​2,024 m2 and 2) outdoor facilities within the sports complex, with a total area of ​​12,386 m2.

The announcement also states, “in a visionary way”, the following: “the leasing procedure will be carried out even if only one offer arrives”. It is clear that there could not be more than one offer, because the competition conditions are set so that only one company can meet them. Namely, in the section “Condition and manner of submitting bids,” it is stated that the bidder can only be: 1. a legal entity established in the Republic of Serbia, operating for at least one year; 2. which has organised an ATP 250 or WTA 250 series tournament, in the last 12 months, as a user of the required licenses; 3. which deposits 6.3 million dinars. Obviously, these conditions can be fulfilled only by the company that organised this year’s “Belgrade Open” tennis tournament and which is owned by one of the members of the Djokovic family (Djordje Djokovic spoke in the media as the tournament director, but the name of the company which is ATP license holder is not visible at the ATP website).  

The regulations do not recognise the possibility of setting such conditions. Under Article 7 of the Decree on Conditions for Acquisition and Alienation of Real Estate by Direct Agreement and Leasing of Public Property, i.e. Acquisition and Assignment of Use of Other Property Rights, as well as Procedures for Public Tendering and Collection of Written Bids (“Official Gazette of RS”, no. . 16/2018), the advertisement for leasing real estate contains, among other things, “conditions under which real estate in public ownership is leased (term of the lease, etc.)”, as well as “obligations of the lessee in connection with the use of the real estate for a specific aim and purpose.“

As can be seen, the Decree stipulates that the advertisement must prescribe the conditions relating to the lease and does not prescribe requirements relating to the lessee himself. Such a rule is also logical because the city that leases land should aim to make as much money as possible through the lease, and restricting competition always results in reduced earnings.

However, the setting of conditions (who can lease land) is not explicitly prohibited, nor did the legislator envisaged a procedure for renting land in which interested persons could challenge unjustifiably discriminatory conditions. Such rules and procedures, for example, exist in conducting public procurement. In the absence of more explicit prohibitions, general principles apply, for example, the duty of everyone who decides on things in public ownership to act as a good host (Article 7 of the Law on Public Property). This would, among other things, mean that the condition set for the lessee must be relevant, to serve the purpose of the contract. The advertisement says that the lease is concluded for 20 years “for the purpose of performing sports activities”. The absence of a more precise definition of the type of sports activity that can be performed in the sports complex area indicates that no regulation or city plan determines in advance which sports can be in question. Accordingly, a legitimate condition would be that the tenant is registered to perform sports activities. At the same time, it is not legitimate to set any condition related to the organisation of any tennis tournament. This condition is illogical even if we look at the current purpose of the leased space. The more significant and more valuable part of the facilities and land consists of indoor and outdoor swimming pools and exercise halls, and the smaller one consists of outdoor tennis courts.

In their desire to conclude a contract with a pre-selected company, the city leaders violated the elementary logic in several other ways. Not only is it set as a condition that the company has organised ATP 250 or WTA 250 tournaments, but it must be a company registered in Serbia as if the money of a foreign lessor is somewhat different from a domestic one. In addition, the organisation of the “ATP 250” series tournament is explicitly set as a condition, not some higher tiers. This means that the Commission for Business Premises of the City of Belgrade considered it undesirable for the Dorcol courts to be leased by some of the organisers of the ATP500 or ATP1000 series tournaments, and even the companies that organised Roland Garros, Wimbledon, US and Australia Open last year!

It is possible to make offers not only for the complex as a whole but also for individual facilities, which additionally testifies to the absurdity of this advertisement. Thus, a company potentially only interested in renting indoor sports centre pools would have to prove that it has a license to organise ATP 250 or WTA 250 tennis tournaments and has organised such a tournament in the past year!

In addition to all that, the ad states that the lowest rental price for indoor facilities within the sports complex is 513.00 dinars per square meter and for outdoor ones 85.00 dinars per square meter, which includes VAT. For the given square footage, it amounts to 2,091,122 dinars. Since it is not stated that this is an annual rent, it could be interpreted as a minimum price for the entire twenty-year period. It is unlikely that this was the intention since a three times higher deposit (6.3 million dinars) was required, it can be assumed that the idea was for the city to lease the sports complex for a total of 41,822,440 dinars, i.e. about 355 thousand euros for 20 years. However, if the Djokovics offered only 17,800 euros, the city commission would not have the right to reject such an offer based on the advertisement formulated in this way.

However, based on all the above, it can be concluded that the city commission disposed of public funds in a non-domestic manner. By excluding the possibility of any competitor appearing at a public tender to a pre-selected business partner of the city, the local self-government will earn less, and in the best case, equal to that which would occur in a competitive procedure.

Suppose the City of Belgrade wanted to be a co-organiser of a world-class tennis tournament. In that case, it could have entered into a partnership with the Djokovics and clearly defined, by the contract, what does the City of Belgrade invest in the organisation of that tournament or in what way subsidises the organiser. Instead of such clean bills, a rigged public tender for the lease of a sports centre created the illusion that it was a purely commercial business with a business entity. In fact, it is a matter of ceding space owned by the city under non-market conditions to achieve some other goals.