OS ECJ-TF 1/2020 on the General Court Decisions of 24 September 2019 in The Netherlands v. Commission (Starbucks) (Joined Cases C-760/15 and T-636/16) and Luxembourg v. Commission (Fiat Finance and Trade) (Joined Cases T-755/15 and T-759/15), on State Aid Granted by Transfer Pricing Rulings

Abstract

This article provides a comprehensive exame of the decisions of the EU General Court in the cases The Netherlands v. Commission (Starbucks) (Joined Cases C-760/15 and T-636/16) (hereinafter Starbucks NL) and Luxembourg v. Commission (Fiat Finance and Trade) (Joined Cases T-755/15 and T-759/15) (hereinafter Fiat), decided on 24 September 2019. These are the first in a series of expected decisions concerning the legality of the European Commission's decisions considering certain transfer pricing rulings granted by Member States to multinational enterprises (hereinafter MNEs) to constitute State aid.

The GC reached different verdicts in the two cases. Whereas in Starbucks NL it annulled the Commission's decision, in Fiat, it upheld it, ordering Luxembourg to recover the aid. Despite the different outcomes, the decisions have several commonalities in terms of how the GC interpreted the applicable European law on State aid in respect of tax matters. Therefore, they may provide an indication of how the GC will decide similar pending cases. In addition, the decisions are of paramount importance in understanding: (i) the role and limits of the Commission in reviewing rulings granted by Member States; (ii) the role of the OECD's arm's length concept and of the OECD Transfer Pricing Guidelines (2017) (the OECD Guidelines) in assessing the Treaty on the Functioning of the European Union's (TFEU) (2007) prohibition of State aid; and (iii) the level of evidence that has to be provided by the parties in these procedures.

The importance of these two decisions cannot be emphasized enough. Although the Commission has apparently decided not to appeal the Starbucks NL decision, the appellants in Fiat will do so, thus seeking a final resolution from the Court of Justice of the European Union (ECJ). The latter is not bound to follow the GC and may decide the matter on points on law in a way that deprives the current decision of its jurisprudential value. It follows that the GC would have to follow the ECJ's reasoning in future decisions as to the interpretation of EU law on State aid.

In the meantime, however, these GC decisions are the best guidelines that MNEs and Member States have (and will have in the near future) concerning the admissibility of their TP rulings in light of the EU State aid rules.

Given the length of the two decisions and the number of topics covered, the article only focuses on issues considered to be of interest in understanding the GC's reasoning and the impact of the cases.

Keywords: Taxation, Tax law, European taxation

JEL Classification: K33, K34, F13, E62, D78, E62, F02, F23, F42, H20, H22, H23, H25, H26, H87, O19, O23, O24