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Can Selectivity Result from the Application of Non-Selective Rules? journal article

The Case of Engie

Phedon Nicolaides

European State Aid Law Quarterly, Volume 18 (2019), Issue 1, Page 15 - 28

This paper identifies a significant shift in the approach for determining whether a tax measure is selective. The European Commission, in its decisions on tax rulings, has found that the selective nature of the rulings stemmed from the fact that they endorsed arrangements whose terms deviated from those that would have been agreed under normal conditions of competition. Unlike its other decisions on tax rulings, the Commission in the Engie case does not examine whether Engie benefitted from treatment that was not available to other companies. Instead, the Commission bases its finding of selectivity on the fact that Engie minimised its tax liability. This is an ‘outcome-based’ approached rather than a ‘treatment-based’ approach which requires comparison between companies in similar situations. Without a benchmark of comparison, an outcome-based approach is meaningless. In addition, the Commission breaks new ground by finding a selective advantage in favour of Engie in the non-enforcement by Luxembourg of anti-abuse rules. The Commission asserts that Luxembourg should have refused to issue the tax ruling. Keywords: Selectivity; tax rulings; anti-abuse rules.


Ten Years of State Aid to Financial Institutions journal article

Is there still a ‘Serious Disturbance’?

Phedon Nicolaides

European State Aid Law Quarterly, Volume 18 (2019), Issue 2, Page 121 - 137

State aid to financial institutions has been massive. State aid rules together with the directive on bank recover and resolution and the regulation establishing the Single Resolution Mechanism require that banks that receive State aid must be resolved or liquidated. The exception to this rule is that State aid may be granted without leading to resolution or liquidation when the beneficiary bank is solvent, the aid is necessary to preserve financial stability and the aid is intended for liquidity support or precautionary recapitalisation. This paper identifies a number of ambiguities in the application of Article 107(3)(b). First, it is unclear whether aid under Article 107(3)(b) has to counteract and/or prevent a ‘serious disturbance’ in the economy of a Member State. Second, it is unclear how Article 107(3)(b) can apply to aid that addresses regional rather than national problems. Third, it is unclear how the double requirement of remedying a serious disturbance and preserving financial stability is applied to solvent banks which are not systemically significant. Fourth, it is unclear whether the requirement that resolution aid must be in the ‘public interest’ also implies that aid must be limited to banks with systemic significance. Keywords: Banks; Serious disturbance; Burden sharing; Resolution.


Multi-rate Turnover Taxes and State Aid journal article

A Prelude to Taxes on Company Size?

Phedon Nicolaides

European State Aid Law Quarterly, Volume 18 (2019), Issue 3, Page 226 - 238

In order to determine whether a tax measure is selective, it is necessary to determine first the reference tax system. The General Court has recently ruled that the reference system is that which is defined by Member States and includes such components as the tax base, the tax rates, and the various bands of taxable income, profit, or revenue. The Commission may not identify a hypothetical or artificial reference system. The General Court has also ruled that differentiation of tax payers is not necessarily selective as long as it follows from the objective of the system and that the progressivity of tax rates is a form of differentiation that is not necessarily selective. In this connection, progressive tax rates on profit can be justified according to the ability to pay. This article argues, however, that progressive taxes on turnover are unlikely to correspond to ability to pay. It also warns that Member States may be tempted to target company size under the pretext of levying progressive taxation. Keywords: State aid; Turnover; Taxation; Progressive rates; Selectivity




Do Member States Grant State Aid When They Act as Regulators? journal article free

Phedon Nicolaides

European State Aid Law Quarterly, Volume 17 (2018), Issue 1, Page 2 - 18

When Member States act as regulators, they need not maximise revenue from the granting of permits, licences or concessions rights. However, they must grant permits, licences or concession rights on the basis of procedures which are open, transparent, non-discriminatory and unconditional. This article argues that qualitative selection criteria may not in fact support the effective achievement of the stated regulatory objectives and, as a result, they may confer an advantage and transfer State resources to the chosen undertakings. Since the concept of State aid does not depend on policy aims or intentions, the regulatory objectives of the authority that grants the exclusive permits, licences or concessions should be irrelevant. EU law does not prevent Member States from using procedures that can aim simultaneously at revenue maximisation and achievement of public policy objectives. Keywords: Competitive Selection; Regulation; Non-Discrimination.


The Definition of the Reference Tax System is still a Puzzle · Case C‑203/16 P Heitkamp BauHolding v European Commission · Annotation by Phedon Nicolaides journal article

Annotation on the Judgment of the Court (Second Chamber) of 28 June 2018 in Case C‑203/16 P Dirk Andres (acting as liquidator in the insolvency of Heitkamp BauHolding GmbH) v European Commission.

Phedon Nicolaides

European State Aid Law Quarterly, Volume 17 (2018), Issue 3, Page 419 - 427

A tax measure is selectivity if it deviates from the reference tax system and if it cannot be justified by the logic or internal economy of the reference system. In order to determine whether a tax measure deviates from the reference system, only its effects are taken into account, not the regulatory technique used by the Member State in question Keywords: Selectivity; Reference tax system; Regulatory techniques.


The Case of the Spanish Tax Lease System · Case C-128/16 P Commission v Spain · Annotation by Phedon Nicolaides journal article

Annotation on the Judgment of the Court (Second Chamber) of 25 July 2018 in Case C-128/16 P European Commission v Kingdom of Spain and Others.

Phedon Nicolaides

European State Aid Law Quarterly, Volume 17 (2018), Issue 3, Page 412 - 418

A tax measure can be selective in relation to both direct and indirect beneficiaries. A beneficiary that passes on all benefits to third parties may still derive a selective advantage. The selectivity of such advantages have to be determined on the basis of their effects, not the form of the tax. Keywords: Selectivity; Direct beneficiaries; Indirect beneficiaries; Passing on advantage.


Is there a Need for a New Concept of ‘Ex-ante Creditor’? journal article

Consequences of the FIH Holdings Judgment

Phedon Nicolaides

European State Aid Law Quarterly, Volume 17 (2018), Issue 3, Page 368 - 374

The amount of State aid in a loan or guarantee is not necessarily equal to the principal of the loan or the guaranteed amount. Moreover, the liability of the State and the risk borne by the State depend on the rights or collateral that the State secures before it grants a loan or guarantee. For this reason, State aid law needs a third concept to describe the behaviour of the State apart from that of ‘public authority’ or ‘private investor’. That third concept is labelled here as ‘ex-ante creditor’. It applies to those sums over which the State can exercise a claim without expecting ex-ante to receive a profit. Past loans or guarantees that contain State aid should be ignored, as prescribed by the Court of Justice, only when the State has no prospect of recovering any amount that is due to it or when it has no claim to exercise against the borrower who is the aid recipient. Keywords: Private investor; Private creditor; Loans; Guarantees; Past State aid.