In its decision of 16 September 2021 the European Court of Justice (‘ECJ’) overruled the judgement of the General Court of 14 February 2019. Different from the General Court, the ECJ concluded that the three conditions for an aid scheme to exist are met. The ECJ referred the case back to the General Court, which will have to decide on the open questions such as the existence of a selective advantage amounting to unlawful state aid.
Background: what happened before
The decision of the ECJ (case C-337/19P) relates to the appeal lodged by the European Commission against the decision of the General Court of 14 February 2019 (cases T-131/16 and T – 263/16). In its decision of 2019, the General Court set aside the final State aid decision of the European Commission of 11 January 2016 finding that the Commission had erroneously classified the Belgian excess profit ruling system as ‘a scheme’.
The current dispute between the Belgian government, the impacted Belgian companies and the Commission has been ongoing for many years. The case relates to a provision under Belgian tax law that exempted certain income, which is considered as excess profits, i.e. profits that are – on an arm’s length basis – not considered to relate to the Belgian activities. The Belgian ruling office assessed the application of this provision and rendered rulings in which the application of this provision for an individual company was confirmed, where appropriate. Those rulings, referred to as excess profit rulings, are the core of this judgement of the ECJ.
In its final decision, the Commission took the view that these rulings constitute unlawful State aid as the excess profit provision provided advantages that are selective (i.e. not available to all comparable companies). The Commission furthermore considered that the rulings should not be assessed on a case by case basis as individual aid but must be assessed as an aid scheme. However, the General Court annulled the Commission’s decision, finding that the Commission made methodological errors by considering that the excess profit rulings are an aid scheme. According to the General Court, the Commission should have reviewed the specifics of each ruling individually.
The decision of the ECJ of 16 September 2021
On 16 September 2021, the ECJ annulled the judgement of the General Court and, by doing so, upheld the final decision of the Commission regarding the qualification of the Belgian excess profit rulings as an aid scheme. Different from the General Court, the ECJ concluded that the three conditions for an aid scheme to exist are met. Consequently, the Commission does not have to investigate each ruling individually.
Takeaway
This decision merely represents the start of yet another stage in a legal procedural journey. Indeed, the General Court has not yet considered whether or not the excess profit rulings are unlawful State aid. The ECJ looked into the methodological aspects of the General Court’s judgement. The ECJ has referred the case back to the General Court which will have to decide on open questions such as the existence of a selective advantage and the identification of the beneficiaries of the alleged aid. The final decision whether the Belgian excess profit rulings constitute unlawful State aid may still take a number of years.
For the companies involved, the judgment of the ECJ will not have a direct financial impact as regards the aid recovered by the Belgian government. Until the General Court (and potentially again the ECJ) renders a final judgement in this case, the funds recovered in 2016 by the Belgian government remain blocked.
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- Accounting and Tax Compliance
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