On selectivity and alleged fiscal State aid (today’s Judgments in Cases T-290/10 Autogrill /Commission and T-399/11, Banco Santander/Commission)
I’m writing under the influence of a few bottles of Champagne opened to celebrate two landmark Judgments rendered this morning by the General Court annulling the Commission’s decision that ruled the Spanish tax regime allowing for the deduction of shareholdings in foreign companies to be incompatible with the internal market (click here for the Court’s Press Release).
A very convenient disclosure/explanation: my firm represented all successful applicants.
The Judgments are important not only because of their economic significance (we’re talking of hundreds of affected companies and of billions of euros) but also because they are a welcome clarification on how to interpret the selectivity criterion in cases concerning alleged fiscal State aid. You may in fact recall that already 3 years ago my then colleague and still very good friend Napoleón (now on the dark side, at the European Commission) discussed the issues raised by the case on this blog (see here).
A few comments on the news:
- Whereas it’s remarkable that appeals by alleged beneficiaries were successful in a case in which the State didn’t appeal the decision, the truth is that the Judgments do not constitute any major overhaul on the system. On the contrary, these Judgments only reinstate the obvious, that in order for a measure to be selective it shall offer an advantage to a certain category of companies. Measures which, like the one at issue, are open to any company operating within the system of reference (in this case the national tax system) are not to be considered selective. Rather than being new, this is actually one of the things that is taught on the very first session of any State aid course; the fact that many people forget about it may be explained either because they arrived late to class or because their memory follows a FIFO pattern 😉
- The Judgments come at a moment when fiscal State aid –that we’ve been doing for a decade- is in the spotlight (the Lux leaks news broke only yesterday) so the first reaction of many will be to think about the impact this may have on other cases in which the Commission has also embraced an arguably excessively wide notion of selectivity (this includes my 25 fiscal State aid appeals currently pending before the General Court as well as the more recent investigations into tax rulings).
- The Judgments expose an unusual behavior on the part of the Commission, which only last week adopted another decision building on the one that has now been quashed without waiting for the Court’s Judgment, which they knew was coming. This, which was probably intended to show that Almunia also targeted Spain, doesn’t seem to have played out so well.
Chillin'Competition 
[…] Champagne tastes great. A resounding victory against the European Commission probably tastes better. Yay! As the academic one in the duo (read: as someone who does not know how it feels to win a tough case after years of hard work), however, I cannot help spoiling the party with a geeky and anti-climactic counterpart to Alfonso’s last post. […]
On Champagne and Alfonso’s last post: an analysis | Chillin'Competition
12 November 2014 at 2:28 pm
Congratulations! An impressive win, well worth celebrating with champagne! Though I am not so sure the judgment “only reinstate the obvious”. I would expect the Commission to appeal (not only to uphold its decision, but also to clarify the law) and I fear that it stands a fair chance of winning…
Madrid Lawyer
12 November 2014 at 8:03 pm
I somehow missed this when you posted it, so big and belated congrats! (And a deep sigh of relief, too, finally some sense being spoken in the realm of State Aid…!)
Miguel
17 November 2014 at 4:02 pm
Although not familiar with the case, a question comes to my mind when talking about fiscal state aids. Does/Should the intention of the granting authority matter in deciding whether selectivity exists DE FACTO under the State Aid regime?
A.M.
25 February 2015 at 7:13 pm
In my view it is clear that the notion of aid is an objective one, and that its assessment must be based on its effects, not in possible underlying intentions (which are moreover not always easy to discern). The intentions pursued by fiscal aid might nevertheless be relevant when assessing the “nature and general scheme” of certain “regulatory” taxes, but this is unrelated to the case discussed in the post.
Alfonso Lamadrid
26 February 2015 at 11:40 am
Thank you, Alfonso, for your response. I agree that intention does not matter and what is relevant is whether there is a tangible benefit which causes an effect for purposes of examining the admissibility or compatibility of a state aid with the internal EU market. The question I had was basically (and out of personal interest actually) on the issue of intention’s relevance in a possible previous stage of the analysis, that of de facto selectivity. I asked for your views on that as I am currently looking at similar issues in the parallel system on WTO subsidies, but I think the rationale is kind of different under the WTO and EU regimes. Thanks again for the input!
A.M.
26 February 2015 at 12:15 pm
[…] We nonetheless fared better in another State aid case related to the so-called “tax lease” (disclosure, in that saga of cases we are also representing the applicants/investors in 22 pending cases before the General Court against the same decision). The Judgment of the General Court of December 17th in the pilot case concerning the appeal by the Kingdom of Spain confirms the theory of selectivity with which we previously won the “Spanish financial goodwill cases” and pursuant to which investors should not have been identified as the beneficiaries of the alleged aid (for our comment on that one, see here). […]
Recent (and key) State aid judments: on SGEIs and tax selectivity | Chillin'Competition
24 February 2016 at 12:39 pm