State Aid Cases Research Articles

State Aid from the Transfer Pricing Lens: The Fiat Case

As the buzz about the Fiat state aid case subsides, questions about the transfer pricing analysis of the case persist. What would a transfer pricing analysis based on the OECD Guidelines entail?

Comfort, or not comfort, that is the question. The legal status and consequences of comfort letters issued by the European Commission in State aid cases

ABSTRACT The paper discusses issues not touched upon in legal literature, namely the legal status and consequences of comfort letters issued by the European Commission in State aid cases. The European Commission has exclusive competence to examine the compliance of support provided by Member States to domestic undertakings with State aid rules. Under EU law, the Commission's final position on the State aid character of the assessed measure must take the form of a decision. However, sometimes, the proceedings are concluded not by a decision but by a comfort letter. It presents the final position of the European Commission and, in many cases, ends the procedure. However, the legal character of the Commission's comfort letters may raise doubts. The article explains the concept of comfort letters issued in State aid cases, their legal status, and the consequences they bring to interested parties.

Proposed EU TP Directive and the Amazon Case – A New Lens on State Aid Investigations

This article delves into the Court of Justice of the European Union’s decision in the Amazon State aid case in December 2023 and its implications. It examines how the Proposed EU Transfer Pricing Directive might impact future State aid investigations led by the European Commission. Using the Amazon case as a practical example, the authors compare known facts and legal arguments with possible changes on the horizon. They offer considerations for any future harmonization of transfer pricing rules at the EU level.

Functional links between locus standi of third parties and the standard of assessment of impact on competition and trade in State aid cases

Functional links between locus standi of third parties and the standard of assessment of impact on competition and trade in State aid cases

2023: The Year of State Aid Developments

In this article, the author discusses landmark State aid cases, in particular developments during the September 2023 to December 2023 period. The author focusses not only on the most recent updates but creates a one-stop-shop guide where the reader can access the entire narrative on the State aid cases regarding Amazon, Apple, the Belgian Excess Profit Scheme, Engie and the Spanish Amortization Scheme.

Transfer Pricing and EU State Aid: What Next after the Amazon State Aid Case?

On 14 December 2023, the Court of Justice of the European Union dismissed the European Commission’s appeal against the General Court judgment that had found Amazon did not receive unlawful State aid from Luxembourg. In this article, the authors describe the transfer pricing dispute, the General Court’s important considerations concerning the interpretation of the OECD transfer pricing guidelines, the Court of Justice’s judgment deciding State aid rules cannot be used to harmonize European transfer pricing, and whether the General Court’s “transfer pricing” interpretation will gain importance under the proposed EU Transfer Pricing Directive.

Fiat State Aid Case Putting the EU Arm’s Length Principle to Bed?

This article discusses the Fiat case next to the (potential) interplay and consequences thereof for the pending (informally called) Apple and Belgian Excess Profits cases.

The Development of the European Union State Aid Rules in the Energy Sector

The present paper presents the developments on the framework that governs the investments on the energy sector, focusing on competition law and the support to renewable energy sources through state aid. The researchers examine the developments of the state aid cases that have been under assessment by the European Commission over the course of the years and particularly, those regarding investments on renewable energy sources (RES) after the announcement of the European Green Deal, in late 2019. In addition to the above, the decisions of the European Commission and its tendency to not raising any severe objections, in general, against such cases of support schemes provided as state aid, are reviewed in parallel to the energy policy of the European Union, as it has been recently shaped in order to promote the increase of the use of RES in the EU Member States. Besides, the increased penetration of RES for the European Union, bares multiple benefits since, apart from playing a key role in the Union’s policy to tackle climate change and its severe consequences, it also contributes in the extended efforts of the EU Member States to minimize their dependence on energy products highly imported from Russia, such as natural gas, in the shadow of the recent war in Ukraine. Under that prism, the present paper provides a coherent and consistent examination of the ways in which state aid can be accepted by the European Commission, within the broader framework of the Competition protection in the EU, as well as the ways in which it can be even considered not to cause any severe distort of competition. The above are mainly concluded in case in which the support provided through such schemes tends to promote the development of activities that serve - on a high degree - the common interest, both on the national and the European level. Thus, the development of renewable energy technologies in the European energy sector and their enhancement towards greening the Union’s energy mix while turning it into a more resilient and independent one, can be considered as such a type of activities, as it will be further analyzed in this paper.

State aid for airlines in the EU: policy changes during the COVID-19 pandemic

The paper analyses the developments in the EU state aid policy as a result of the COVID-19 pandemic breakout. The general framework for state aid in the EU was presented. Based on a case study analysis of selected airlines that benefited from state aid following the COVID-19 crisis, changes in the European Commission approach were identified. In general, investigation of arrangements between the state aid cases is a complex (and thus often lengthy) process. The outbreak of the COVID-19 pandemic was a challenge for EU member states and the European Commission as well due to the unexpected, turbulent, and very profound nature of the crisis. It made it necessary to look for new or revised policies for state aid to respond quickly and keep airlines afloat in times when the flow of revenue was practically stopped. One of the key issues that needed to be addressed was inflexibility and lengthiness of state aid approval processes. To this end, additional guidelines were introduced to make the state aid policy of the EU more flexible. This way member states could respond to the ongoing developments in a more targeted and objective-oriented approach, which possibly made state aid more efficient. It should be stressed that it could have been achieved without changes to pre-existing legislation and by adjusting executive guidelines instead.

Fiat Emerges Victorious in State Aid Battle with European Union: What’s Next?

This article delves into the decision by the Court of Justice of the European Union concerning the Fiat State aid case. The outcome of this case will set a precedent for similar ongoing disputes and influence the European Commission’s future strategy in this field. State aid remains a tool to combat harmful tax competition; yet, recent developments signal that further tax harmonization at the European level is approaching.

The Advocate General’s Opinions in the Fiat State Aid Case: Underestimating the Arm’s Length Principle

In this article, the author undertakes a critical review of the Advocate General’s two Opinions in the State aid case against Luxembourg’s tax ruling regarding Fiat’s finance subsidiary. He urged the Court of Justice to overturn the General Court’s decision and annul the European Commission’s decision. The Advocate General failed to appreciate the Commission’s authority to rely on the arm’s length principle regardless of whether that authority derives from Luxembourg’s positive law or directly from EU competition law.

European Union and United Kingdom Competition Law Developments in the Aviation Sector: January to June 2022

It goes without saying that the effects of the COVID-19 pandemic continue to be acutely felt by the aviation industry. This can be readily seen from the competition law developments in the first half of 2022 which continues to be dominated by State aid cases – not only Commission decisions approving State aid to carriers and arports, but also appeals against previous Commission decisions. This article summarizes the main developments over the past six months and provides the reader with an overview of the details of each of these developments. The first six months of 2022 continue to be dominated by State aid cases, be it decisions by the European Commission (‘Commission’) to approve State aid applications, appeals of those or previously decided State aid cases, or the handing down of judgments from the General Court (GC). As mentioned previously, this is to be expected for years to come. Taking a quick look at the State aid applications submitted to the Commission, most of the applications were submitted under Article 107(2)(b) of the Treaty on the Functioning of the European Union (‘TFEU’), which enables the Commission to approve State aid granted to compensate specific companies or specific sectors for the damages directly caused by ‘exceptional occurrences’. While COVID-19 restrictions continued to be eased in early 2022, operators continued to count the cost of the pandemic, and Member States continued to support operators for the damages directly linked to the COVID-19 pandemic. The Commission is also empowered to assess State aid measures under Article 107(3)(b) TFEU, which enables it to approve State aid granted to promote important projects of common European interest or to remedy a serious disturbance in the economy of a Member State and few would dispute that the COVID-19 pandemic caused serious disturbances in the economies of EU Member States. The final main mechanism to consider State aid is the Temporary Framework specifically set up by the Commission to enable the quick approval of State aid providing that the measures fell within defined parameters. The author is not aware of any merger notifications to EU/UK authorities – indeed, following the abandonment of some previous mergers, and challenges faced by the industry as it attempts to ramp up operations following the pandemic, it is perhaps unsurprising that mergers have not been a priority matter in the aviation sector.

Fiat State Aid Coming to a Positive End?

This article discusses the Opinion of Advocate General Pikamäe in Fiat Chrysler Finance Europe v. Commission, in particular the considerations whereby the Advocate General concluded that this is not a State aid case.

Government early policy responses on COVID-19 challenges in central and eastern europe: SME support

he main aim of the given research is to analyse Government policy early response due to the Covid-19 crisis in Central and Eastern Europe regarding SME support. The research methodology is based on an analysis of the pandemic impact on key indicators of countries development as well as an analysis of SME support policies responses by selected countries (Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovenia and Ukraine). The dynamic trends of Covid-19 spread and its impact on macroeconomic indicators were analysed. The negative growth of GDP, as well as current account balance and increasing gross debt burden, were explored in all analysed countries and the policy responses were the required measures to avoid possible economic collapse. Implemented measures were mainly directed to achieve economic recovery and capturing stability, but the main focus of the research is to analyse the support policies according to the criterion of enterprise size, SME in particular. The study is based on country-level data as well as on individual State Aid cases of each analysed CEE country. It allowed to evaluate policy response mechanisms in terms of measures regarding enterprise size. Although SMEs suffered the most during the crisis, CEE countries spent most of their resources on supporting companies, regardless of their size.

Beyond Borders: Uncertainty in Supragovernmental Tax Enforcement and Corporate Investment

ABSTRACT Amid growing globalization, many countries have offered tax incentives to attract corporate investment. Prior research studies the role such incentives play in firms' location and investment choices. However, we have limited evidence regarding the role that uncertainty about the intensity of future tax enforcement plays in those decisions. In 2013, the European Commission (E.C.) abruptly began investigating the tax-ruling practices of several countries in response to allegations that certain firms received preferential tax treatment (“state aid cases”). We use this setting to study the economic consequences of increased uncertainty about future tax enforcement. We find evidence consistent with significant reductions in U.S. multinational enterprises' subsidiary investments within, firm input purchases from, and aggregate investment of U.S. firms flowing to targeted state aid countries. Specifically, for U.S. multinational enterprises' subsidiary investments, we find fixed assets declined by 1.7 percent of total assets, or $7.6 million per subsidiary. JEL Classifications: M41; M48; H25; H26.

Update on the Autostrada Wielkopolska S.A. Case · Case C-933/19 P Autostrada Wielkopolska S.A. · Annotation by Marek Rzotkiewicz

In cases before the EU Courts, parties who challenge the legal acts of EU institutions, eg Commission decisions, frequently raise many different pleas claiming violations concerning both EU law and the factual assessment. But it is for the EU Courts to adjudicate on those claims. When a party dissatisfied with the General-Court judgment appeals to the Court of Justice, in the appeal, the party cannot simply repeat the pleas raised in the action for the annulment before the General Court. An appeal to the Court of Justice must be limited to points of law and the appraisal of the facts by the General Court does not constitute, save where the clear sense of the evidence produced before it is distorted, a question of law which is subject, as such, to review by the Court of Justice. In State aid cases, case law frequently refers to the concept of the private operator to assess whether an action by public bodies can be compared to those of a comparable private operator, and if a State granted an advantage within the meaning of Article 107(1) TFEU. But the concept of the private operator has many variations which cannot all be reduced to the private investor or to private creditor formulas.

The Relationship Between State Aid and Nuclear Energy and A Legal Analysis of Nuclear Energy State Aid Cases in Terms of European Union State Aid Rules

State aid to the nuclear energy sector has increased significantly within the last decade and in parallel to this increase, controversy about giving state aid to nuclear energy has soared. In addition to this controversy, the existence of a special treaty for nuclear energy, called the Euratom Treaty, exclusion of nuclear energy from the ‘Guidelines on State aid for environmental protection and energy 2014-2020’ and very intrinsic risks and market failuresrelated to the nuclear energy sector distinguish nuclear state aid cases from other energy state aid cases. Considering the scarcity of research dealing with increasing nuclear state aid cases in detail, this research intended to focus on the relationship between state aid and nuclear energy and analyse prominent nuclear state aid cases. During the research, prominent nuclear state aid cases which have shaped the case law and related legislations were analysed. It could be briefly concluded that nuclear state aid cases will likely continue to increase as energy markets become more competitive. But it is very clear that intrinsic risks of nuclear energy and related market failures stemming from imperfect market conditions are keenly appreciated by the European Commission and the European Courts, and nuclear cases are treated more leniently in line with these conditions. This sends a very clear message that the lenient approach of the Commission and the Courts toward the nuclear state aid cases will remain as long as market failures and the Euratom Treaty exist and in this regard, the absence of guidelines for nuclear energy, while it seems like a disadvantage, will ensure the needed flexibility of the Commission when making its state aid assessment in nuclear state aid cases.

Taxation and State Aid – Recent Case Law on Progressive Turnover Taxes

In this article, the author, in light of the 60th anniversary of European Taxation, reflects on 60 years of State aid case law. In particular, he highlights the two ECJ decisions of 16 March 2021 in Commission v. Poland and Commission v. Hungary, wherein the ECJ determined that the Polish and Hungarian taxes at issue, which apply a progressive tax rate on turnover, do not contradict the EU State aid rules.

Getting State Aid Approved by the European Commission: Explaining the Duration of Preliminary Investigations in the State Aid Notification Procedure*

AbstractThis article aims to explain the variation in duration of preliminary investigations in the state aid notification procedure. While this procedure is guided by objective standards, preliminary investigations result in an overwhelming majority of cases being approved in combination with a large variation in duration. This study explores the explanatory power of political and managerial factors at the member state and state aid case level to account for this variation. Based on multilevel regression analysis of a newly created dataset, results show that both political and managerial factors at the state aid case level affect the duration of preliminary investigations. No evidence was found for member state level factors having an effect.

Commission

This overview highlights the Commission’s (i) proposal to follow the OECD agreement on Pillars One and Two as regards the design of the EU single corporate tax rulebook, (ii) proposal for a 6th Anti-Money Laundering Directive, (iii) proposal to continue authorizing Germany to exclude the right to deduct input VAT for certain supplies for private purposes, (iv) provision of technical rules on automated exchange of information related to an import scheme, (v) decision to appeal the General Court’s decision on the Amazon State aid case in Luxembourg, and (vi) several actions brought against certain Member States on diverse tax matters.