State Aid Recovery & Investor Protection for US Taxpayers Before and After TTIP: How Back Taxes Might Lead to an Inequitable Treat…

23 Pages Posted: 2 Feb 2016

See all articles by Raymond Luja

Raymond Luja

Maastricht University - Department of Tax Law

Date Written: January 15, 2016


Recently the European Commission started a large number of individual state aid investigations into the tax rulings of 21 EU Member States. If it turns out that national rulings contain state aid as defined in Article 107(1) of the Treaty on the Functioning of the European Union (TFEU), they should normally have gone through the EU’s approval process. In this contribution we will focus on the “what if”. It will be assumed that at least some of these investigations will end up in a finding of unlawfully granted aid resulting in an order to recover such aid by the European Commission, which will subsequently be upheld by the Union’s Courts.

In third country situations, safeguarding legitimate expectations under investor protection agreements vis-à-vis actions of national governments may go contrary to CJEU state aid doctrine. Especially in situations where a Member State actively offered certain tax benefits or took the initiative to invite companies in a showdown to attract foreign investment, fair and equitable treatment may become relevant. While the cancelling of future tax benefits because of a state aid violation may be hard to sell but still acceptable, retroactive withdrawal of benefits (the actual recovery) may be the most problematic.

In the ongoing formal investigations into tax rulings it is unlikely that claimants will be able to pass all the procedural hoops, even if they would be able to show a violation of any fair and equitable treatment obligation. Things may be different should recovery be ordered in newer EU Member States that concluded more modern BITs prior to their accession to the EU, especially if those BITs refer to the ICSID for arbitrage.

For US investors, TTIP may be a game changer. It might improve their legal position depending on the scope of the fair and equitable treatment obligation in the final text. Or, it may kill any chance of success should the US agree to the state aid carve out recently proposed by the European Commission. Any specific limitation or carve-out for tax matters under TTIP will be relevant here as well, although the optional nature of recovery via tax procedures in many EU Member States might lead to questions about their applicability.

Keywords: state aid, recovery, investment law, TTIP, taxation, arbitrage, investor protection, rulings

Suggested Citation

Luja, Raymond, State Aid Recovery & Investor Protection for US Taxpayers Before and After TTIP: How Back Taxes Might Lead to an Inequitable Treat… (January 15, 2016). Available at SSRN: or

Raymond Luja (Contact Author)

Maastricht University - Department of Tax Law ( email )

PO Box 616
Maastricht, 6200 MD


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