A7 Statliga stöd

A7 Statliga stöd

In case C-465/20 PCommission versus Ireland, Apple Sales Int. Ltd., Apple Operations Int. Ltd., Luxembourg, Poland, and EFTA Surveillance Authority, the Grand Chamber of the European Union Court of Justice (CJEU) delivered a critical ruling comprising 404 paragraphs concerning Ireland’s advance tax rulings (ATR) granted to two Apple subsidiaries incorporated in Ireland and their branches. The EU Commission had classified the ATR as unlawful aid, ordering Ireland to recover an estimated €13 billion (SA.38373). The CJEU set aside the General Court’s earlier ruling in joined cases T-778/16 and T-892/16, which annulled the Commission’s decision. As a result, Ireland is now required to enforce the recovery order.

Given the length and complexity of this case, I will comment only on a few critical aspects of the CJEU ruling, as a full and thorough analysis would be more suitable for an article of its own—if not a book. Moreover, to facilitate the comprehension of Apple’s corporate structure, I have put together the mind map below, which shows the most relevant aspects of this case.

As illustrated in the mind map, Apple Inc. is a U.S.-incorporated company that fully owns Apple Operations International Ltd. (AOI), which is incorporated in Ireland. AOI, in turn, fully owned Apple Operations Europe (AOE) before their merging in 2023. Now, AOE is part of AOI, from which the latter also fully owns Apple Sales International Ltd. (ASI). Although both AOE and ASI were incorporated in Ireland, they were not tax residents there. Apple Inc. maintained a cost-sharing agreement with AOE and ASI, covering the costs and risks associated with research and development (R & D) of Apple’s intellectual property (IP). Under this agreement, Apple Inc. remained the legal owner of the IP, while AOE and ASI held royalty-free licenses (under the agreement), allowing them to manufacture and sell Apple products outside North and South America. Their operations primarily covered the Europe, Middle East, India, and Africa (EMEIA) regions, and the Asia-Pacific (APAC) market. Moreover, a significant number of AOE and ASI’s board members were executives from Apple Inc., based in the United States. These board members made key decisions related to dividend payments, director appointments, and business agreements for AOE and ASI, meaning that AOE and ASI lacked employees, and assets, and performed actions concerning the IP.

Under the structure described above, the profits related to IP managed by AOE and ASI in the EMEIA and APAC regions were allocated outside Ireland. The transfer pricing (TP) method applied in the ATR was similar to the OECD’s Transaction Net Margin Method (TNMM). In this context, the Irish branches of AOE and ASI were treated as the ‘tested parties,’ meaning that only routine profits were attributed to them, while the residual profits were allocated abroad. The Commission considered this allocation of profit abroad as unsubstantiated (SA.38373, in paragraphs 264–265).

Since most State aid cases involving fiscal measures focused the legal debate on the condition of selective advantage, the Apple case is no exception. The CJEU, General Court, and Commission typically assess this condition using a three-step approach (paragraph 76), which consists of the following:

1. Finding or determining the reference framework: This involves identifying the ordinary tax regime or defining what the ordinary tax regime should be in light of the regime’s intrinsic objective (also called reference framework).

2. Identifying a selective advantage: This step examines whether legally and factually comparable undertakings receive differentiated treatment in light of the regime’s intrinsic objectives.

3. Assessing justification possibilities: If a prima facie selective advantage is found, this final step involves determining whether it can be justified—e.g., to combat tax fraud and tax evasion (Commission Notice on the Notion of State Aid, paragraph 139).

In the Apple case, the first and second steps of the selective advantage assessment were the most contentious. However, in my view, the first step is the most crucial and unique to this case, a point I will elaborate on further in this commentary. Before diving into that discussion, let us first examine the summary of the Commission’s primary selective advantage assessment, which the CJEU ultimately accepted. The Court summarized this reasoning as follows:

‘(39) In essence, the Commission considered that the IP licenses held by ASI and AOE for the procurement, manufacture, sale and distribution of the Apple’s Group products outside North and South America had contributed significantly to those two companies’ income.

(40) Thus, the Commission criticised the Irish tax authorities for having incorrectly allocated assets, functions and risks to the head offices of ASI and AOE, although those head offices had no physical presence or employees outside Ireland. More specifically, regarding the functions related to the IP licences, the Commission found that such functions could not have been performed only by the boards of directors of ASI and AOE, without any head office staff of those companies. It noted, in that regard, the lack of references to discussions and decisions in relation to IP in the board minutes that had been provided to it. Therefore, according to the Commission, in so far as the head offices of ASI and AOE had been unable to control or manage the Apple Group’s IP licences, those head offices should not have been allocated, in an arm’s length context, the profits derived from the use of those licences. Consequently, those profits should have been allocated to ASI’s and AOE’s branches, which alone were in a position effectively to perform functions related to the Apple Group’s IP that were crucial to ASI’s and AOE’s trading activity.

(41) Therefore, by not allocating the profits deriving from the Apple Group’s IP to ASI’s and AOE’s branches, thereby acting in breach of the arm’s length principle, the Irish tax authorities had conferred an advantage on ASI and AOE for the purposes of Article 107(1) TFEU in the form of a reduction in their respective annual chargeable profits. According to the Commission, that advantage was of a selective nature, because it resulted in a lowering of ASI’s and AOE’s tax liability in Ireland as compared to non-integrated companies whose chargeable profits reflect prices negotiated at arm’s length on the market. The Commission added, lastly, that a similar conclusion could be reached by applying the approach authorised by the OECD for profit allocation to a permanent establishment (‘the Authorised OECD Approach’).’

In sum, the Commission reached this conclusion based on the view that both integrated and non-integrated companies fell under the same reference framework, as the Irish corporate tax system made no distinction between them. Additionally, since the objective of the Irish tax system was to tax all companies’ profits in Ireland, both resident and non-resident companies were considered to be in a comparable legal and factual situation for corporate tax purposes. As a result, Section 25 of the Tax Consolidation Action (TCA 97)—which governs the taxation of non-resident companies—was not regarded as a separate reference framework of its own but rather as part of the broader corporate tax system established by the TCA, from which the Commission drew such conclusions (SA.38373, in paras. 229–230, and T-778/16 and T-892/16, in paras. 141–142).

Based on the above, the first critical aspect to highlight here is that the General Court rejected the arguments presented by Ireland, ASI, and AOE, which claimed that the reference framework was limited solely to Section 25 of the TCA 97 and should be considered a separate system in itself (T-778/16 and T-892/16, in paras. 140–165). Notably, even though the General Court ultimately annulled the Commission’s State aid decision, Ireland, ASI, and AOE did not appeal the General Court’s ruling, particularly the part concerning the reference framework. Consequently, the CJEU treated this matter as res judicata, meaning it was legally settled and could not be discussed (para. 276).

In my view, this is the most critical aspect of this Apple case analysis from a State aid point of view. Without a cross-appeal from Ireland, this matter became settled, and the CJEU ruled from the starting position that Section 25 of the TCA 97 was not the sole reference framework and accepted the Commission’s interpretation of the TCA. In another direction, Ireland argued that Section 25 of the TCA 97 had a limited scope (SA.38373, in para. 265):

‘(…) under Section 25 TCA 97 it only has the competence to tax that portion of the profits of the company which is commensurate with the activities of the Irish branches and that this means that, for profit allocation purposes, only the activities that take place in the Irish branches need to be considered by Irish Revenue (183). According to Ireland, the Apple IP licences held by ASI and AOE should not be allocated to the Irish branches for tax purposes, since there are no management activities associated with those licences in those branches (184). By endorsing a method for calculating the taxable profit of the Irish branches based on the perspective of the Irish branches only, Ireland contends that Irish Revenue correctly applied Section 25 TCA 97 and did not grant a selective advantage to ASI or AOE.’

Recalling some of the CJEU’s recent rulings on matters involving direct taxation non-harmonized at the EU level, the Court has been very emphatic about the Commission’s limitation when assessing such measures under Article 107(1) of the TFEU, particularly the selective advantage condition. For instance, in the World Duty Free Group (C-51/19 P and C-64/19 P, in paras. 61–62), Commission versus Hungary (C-596/19 P, in para. 44), in FIAT (C-885/19 P and C-898/19 P, in para. 74) and Engie group (C-451/21 P and C-454/21 P, in paras. 120–121), the CJEU has emphasized that the Commission cannot deviate from the Member State’s national law when identifying or determining the reference framework. More precisely, the Commission cannot compare a Member State’s choices with those of other Member States or with non-binding OECD soft laws unless the Member State in question has explicitly incorporated those OECD soft laws into its national law. In such cases, the OECD soft laws would form part of the national framework itself.

However, the Commission may determine the reference framework in a way that deviates from the one identified by the Member State and its wording if it finds that:

1. Interpretations by national courts show a different understanding of those laws in question, or

2. The actual practice of the Member State demonstrates a different interpretation and application of its own legal provisions.

Consequently, the Commission’s determination of the reference framework, based on the objectives intrinsic to the tax system, must respect those limitations and conditions.

The case law mentioned previously demonstrates that the interpretation of national law, when determining the reference framework, is rooted within the Member State’s legal system, as explained in points (1) and (2) above. Moreover, for the Commission to justify deviating from the national law identified by the Member State (as Ireland argued), it must demonstrate that the Member State’s case law and administrative practice diverge from the framework identified. Otherwise, the Commission risks encroaching on the Member State’s sovereignty. As seen in previous case law—including Commission versus Hungary, FIAT, and Engie group (discussed above)—misidentifying the reference framework often undermines the analysis of the selective advantage condition entirely, leading to the annulment of the Commission’s State aid decision. Against this background, an unanswered question remains: Would the CJEU have reached the same conclusion if Ireland had appealed to the General Court’s findings on what constituted Ireland’s reference framework?

In my view, the CJEU ruling contains several critical legal aspects that went unchallenged due to the absence of a cross-appeal by Ireland—issues that could potentially have altered the outcome of the case. The CJEU explicitly highlights certain arguments that were not contested and therefore treated them as res judicata or accepted them as “valid” when delivering its judgment. However, the ruling also touches on other elements relevant to the State aid analysis, where it is unclear whether the Court accepted those arguments on the basis of res judicata or for other reasons.

Another critical aspect that influenced the outcome of this ruling—one that the CJEU explicitly accepted on the basis of res judicata—was the Commission’s on Ireland’s allocation of profits related to IP abroad. The Commission attributed the profits related to IP to the Irish branches of AOE and ASI. The General Court considered that the Commission’s view was based on the lack of functions performed by AOE and ASI as head offices, and that attributing the profits to their Irish branches followed an exclusion approach that contradicted Section 25 of the TCA 97 (paragraph 106).

However, the CJEU ruled that the General Court erred in law by stating that the Commission failed to prove that the Irish branches had control over the IP. According to the CJEU, this was a distortion of the Commission’s decision (paragraph 130). The CJEU clarified that the Commission’s profit allocation to the Irish branches was based on two distinct findings: (1) AOE and ASI, as head offices, performed no function and assumed no risks; and (2) their Irish branches performed key functions and assumed risks (paragraphs 128–129).

Embedded in this analysis is the Commission’s reliance on the arm’s length principle, as interpreted through the Authorized OECD Approach (AOA), to interpret Section 25 of the TCA 97, based on the strong resemblance between the two. The General Court found that the Commission’s approach did not constitute an error, but was consistent with the overlapping principles of both frameworks—a conclusion that appears contradictory to the CJEU’s prior case law (Fiat). Let us now examine the General Court’s reasoning so I can demonstrate later how res judicata may have prevented the CJEU from overturning this part of the ruling. In the General Court’s words:

‘(238) Moreover, it should be borne in mind, as Ireland itself acknowledged in paragraph 123 of its application without being challenged in that regard by the Commission, that, when applying section 25 of the TCA 97 it is necessary to look at the facts and circumstances of the branches in Ireland, including the functions performed, the assets used and the risks assumed by the branches. In addition, it should also be borne in mind that, when questioned specifically on that point in a written question put by the Court and orally at the hearing, Ireland confirmed that, in order to determine the profits to be allocated to branches for the purposes of section 25 of the TCA 97, it was necessary to carry out an objective analysis of the facts that included, first, identifying the ‘activities’ performed by the branch, the assets it uses for its activities, including intangibles such as IP, and the related risks that it assumes and, second, determining the value of that type of activity on the market.

(239) Contrary to what is claimed by Ireland in its arguments concerning the differences between section 25 of the TCA 97 and the Authorised OECD Approach, it is clear that there is essentially some overlap between the application of section 25 of the TCA 97 as described by Ireland and the functional and factual analysis conducted as part of the first step of the analysis proposed by the Authorised OECD Approach.

(240) In those circumstances, the Commission cannot be criticised for having relied, in essence, on the Authorised OECD Approach when it considered that, for the purposes of applying section 25 of the TCA 97, the allocation of profits to the Irish branch of a non-resident company had to take into account the allocation of assets, functions and risks between the branch and the other parts of that company.-

Based on the above, the General Court concluded in paragraphs 246 to 248 that the Commission’s assessment of the reference framework was correct. The CJEU accepted this finding due to res judicata, albeit implicitly, through the following statement (paragraph 124): “Those findings must be taken as read, in so far as they have not been validly called into question by the other parties in the context of the present appeal.”

I find it difficult to believe that the Grand Chamber of the CJEU would have deviated so drastically from its previous case law—Fiat—if it were not procedurally bound by res judicata. Recalling the FIAT case (C-885/19 P and C-898/19 P), the Grand Chamber expressed a clear view on how the Commission cannot rely on the OECD Guidelines, but on the national law:

‘(96) Moreover, even assuming that there is a certain consensus in the field of international taxation that transactions between economically linked companies, in particular intra-group transactions, must be assessed for tax purposes as if they had been concluded between economically independent companies, and that, therefore, many national tax authorities are guided by the OECD Guidelines in the preparation and control of transfer prices, without prejudice to the considerations set out in paragraphs 120 to 122 of the present judgment, it is only the national provisions that are relevant for the purposes of analysing whether particular transactions must be examined in the light of the arm’s length principle and, if so, whether or not transfer prices, which form the basis of a taxpayer’s taxable income and its allocation among the States concerned, deviate from an arm’s length outcome. Parameters and rules external to the national tax system at issue cannot therefore be taken into account in the examination of the existence of a selective tax advantage within the meaning of Article 107(1) TFEU and for the purposes of establishing the tax burden that should normally be borne by an undertaking, unless that national tax system makes explicit reference to them.’ (emphasis added)

Consequently, I can only conclude that the Grand Chamber’s acceptance of the use of the AOA to interpret Section 25 of the TCA 97 in the Apple case (paragraph 124) was a result of procedural constraints imposed by res judicata. Otherwise, the Grand Chamber would have risked a serious contradiction to its own case law.

Another critical aspect, which is worth a brief commentary, concerns the performance of functions analysis relevant to profit allocation, the interpretation of the arm’s length principle, and, consequently, whether the ATR granted State aid. As outlined in the CJEU ruling, the Commission argued that the General Court misapplied the separate entity approach, the arm’s length principle, and Article 107(1) of the TFEU in its assessment of whether AOE and ASI’s head offices performed functions in relation to the IP licenses (paragraph 224). The Commission contended that the General Court incorrectly classified formal acts—such as AOE and ASI directors granting powers of attorney and signing agreements—as actual functions performed by their head offices (paragraph 226). Furthermore, the Commission claimed it was subjected to an excessive burden of proof by having to demonstrate that key decisions were not made during board meetings, despite those meetings being the only documented evidence submitted to the Commission during the investigation (paragraphs 225, 244, 245, and T-778/16 and T-892/16, paragraph 304).

Additionally, the Commission argued that the General Court relied on inadmissible evidence introduced during the proceedings rather than during the formal investigation (paragraph 225). It also asserted that the General Court misinterpreted national law, thereby distorting the interpretation of the arm’s length principle (paragraphs 226–228). The CJEU partially upheld the Commission’s claim, agreeing that the General Court had imposed an excessive burden of proof (paragraph 245). However, the CJEU rejected the Commission’s argument that the General Court had ruled that AOE and ASI’s head offices had performed significant functions (paragraphs 249–251).

In my view, when it comes to the functions performed, several factors raise serious questions about how Ireland could justify allocating the vast majority of AOE and ASI’s profits abroad. First and foremost, Ireland became a hub for tech companies for a reason: its low corporate tax rate and national law that grant foreign companies such tax relief, while they gain market share in Europe and beyond. As a result, Ireland attracted substantial foreign investment from tech companies. In return for this approach, jobs were created, manufacturing facilities, retail outlets, and other establishments were created to enable their business development, which led to a significant increase in Irelad’s GDP, particularly from the 1990s onward.

Then, we have Apple’s corporate structure, which appears to have been designed to align with Ireland’s tax legislation, particularly the provisions that allowed profits to be allocated outside Ireland. Although the Irish branches of AOE and ASI were not legally separate entities, they were responsible for most of the production and all trading of Apple products within the EU (noting that trade outside the EU falls outside the scope of State aid rules). Moreover, the branches ultimately assumed the risks and costs arising from the agreements between the head offices and Apple Inc., which indicates some sort of performed function—although I still find it difficult to delimit the scope of this definition. Meanwhile, Apple was increasing its global sales and market share, while Apple Inc. and its Irish-incorporated entities were avoiding significant corporate taxation through this structure.

Notably, there are more aspects to this case than I can explore here. This commentary has not even touched on the selectivity discussion, which would require another format of discussion (as suggested previously, an article or a book of its own). Still, I want to share a final reflection to spark discussion.

It is difficult to reread and analyze the CJEU ruling, the General Court’s judgment, and the Commission State aid decision without taking into account the broader geopolitical dynamics that may have subtly influenced the Apple case outcome. Apple—a multinational corporation well-known for its tax avoidance strategies—has long paid minimal corporate tax, both in the U.S. and other jurisdictions. By strategically structuring its operations under Ireland’s ATR scheme, Apple benefited from non-corporate taxation, all while expanding its revenues and consolidating market dominance.

My impression—though I acknowledge it may be mistaken—is that the Grand Chamber seized on a critical procedural misstep by Ireland, AOE, and ASI: their failure to appeal the General Court’s findings, despite being the prevailing party. This oversight enabled the CJEU to invoke res judicata, effectively locking in key legal interpretations to this particular case that, had they been appealed, might have produced a different outcome.

In doing so, the Grand Chamber was able to address Apple’s tax avoidance strategies in Europe—albeit not without criticism from different actors—while possibly avoiding a direct contradiction of its previous case law. By relying on res judicata, the Court preserved the possibility of clarifying, in future cases, that it accepted certain interpretations in casu.

In the case C-741/22 Casino de Spa, and others versus Belgium, a preliminary ruling, the CJEU addresses six questions referred by the Belgium national court concerning VAT payments between 1 July 2016 and 21 May 2018, along with associated fines and interest.

The first key issue raised by the referring court concerns Article 135(1)(i) of the VAT Directive allows for a distinction between online lotteries and other forms of online gambling, based on the principle of neutrality (the first and second question). The CJEU clarified—citing its previous case law (paragraphs 25–34)—that it is for the national court to determine whether the two forms of gambling services are similar and thus in competition with each other, from the perspective of the average consumer. However, the CJEU also provided general parameters for assessing the comparability of these services. In paragraphs 36–42, the CJEU briefly examined the nature of lotteries versus other types of gambling, suggesting that they appear to differ in nature—a conclusion that must ultimately be confirmed by the referring court. If the national court finds them to be distinct, differentiated VAT treatment would not be in breach of Article 135(1)(i) of the VAT Directive, when interpreted in the light of the principle of neutrality.

The third question concerned the obligation of a national court to disapply national provisions that breach EU law, even if the national constitutional court of that Member State has ruled to preserve their effects. The CJEU confirmed that under the principle of sincere cooperation and primacy of EU law, a national court must disregard such provisions and give full effect to EU law, regardless of any conflicting rulings by national authorities. The fourth question asked whether EU law grants a taxable person the right to a refund of VAT collected in breach of Article 135(1)(i) of the VAT Directive. The CJEU answered affirmatively, stating that a taxable person has a right to be refunded, but only if the refund does not result in unjust enrichment—for example, if the VAT burden has already been passed on to consumers.

The sixth question concerned whether a taxable person who has paid VAT is entitled to damages equivalent to those VAT paid, if the national court determines that the VAT exemption granted to other operators constitutes unlawful State aid. The CJEU rejected this claim, reasoning that only those who actually benefitted from the unlawful VAT exemption could be subject to recovery measures. Therefore, a taxable person who paid VAT under the normal and lawful regime cannot claim damages, as doing so would effectively result in the non-payment of that tax.

Finally, given that a taxable person cannot claim damages equivalent to VAT paid under an unlawful VAT exemption that may constitute State aid, the CJEU dismissed the fifth question, which sought clarification on the classification of such an exemption as State aid. Since the original case focused on damages compensation, the Court deemed this question irrelevant to the dispute at hand.

In the joined cases C-555/22 P, C-556/22 P and C-564/22 P, United Kingdom (UK) and Northern Ireland, and ITV versus Commission and Others, the CJEU set aside the General Court’s ruling, thereby annulling the Commission State aid decision concerning UK’s Controlled Foreign Companies (CFC) group financing exemption granted to ITV. In this case, the key issue was the determination of the appropriate reference regime, as adopted by the Commission. The CJEU found that the Commission’s approach deviated from the general parameters established in the CJEU case law, including those set out in the Fiat Chrysler Finance Europe ruling (C-885/19 P and C-898/19 P, paragraphs 65–69), the World Duty Free Group ruling (C-51/19 P and C-64/19 P, in paragraphs 62–63), and the Engie Group ruling (C-451/21 P and C-454/21 P, paragraphs 112, 120–122), as also previously explained in the Apple case. In essence, the Commission must rely on the Member State’s interpretation of its national provisions unless it can provide clear evidence that an alternative interpretation prevails in the national case law or administrative practice.

In thirty-six paragraphs, the CJEU reviewed the General Court’s assessment of the Commission’s stance on whether the UK’s CFC rules constitute a distinct legal framework (as argued by the Commission and accepted by the General Court) or whether they form an integral part of the UK’s General Corporate Tax System (GCTS). The CJEU concluded, as argued by the UK that the CFC rules supplement and follow the logic of the GCTS rather than constitute a separate tax system. The Court highlighted that the CFC rules do not create a separate tax base beyond the territorial scope of UK taxation but instead extend the GCTS to address artificial profit diversion. Moreover, both the GCTS and CFC rules apply only to profits with a territorial link to the UK, reinforcing the territoriality principle (paragraphs 102–108).

The Commission’s view that the provisions of Section 371IA of Chapter 9 should be interpreted in isolation, leading to a specific interpretation of the CFC charge and exemptions—was rejected by the CJEU. In contrast, the UK maintained that Chapters 5 and 9 of the CFC rules must be read together, as they reflect the UK’s risk-based approach to identifying tax avoidance and artificial profit diversion. Furthermore, the UK contended that even when the criteria of Chapter 5 are met, the exemptions under Chapter 9 apply, provided that there is no significant risk of tax base erosion or artificial diversion (paragraphs 112–127). The CJEU accepted the UK’s interpretation, affirming that Chapters 5 and 9 wording appear to complement each other and, thereby, as argued by the UK, must be read together when determining the application of the CFC charge and exemptions. Consequently, the CJEU found that the General Court erred in accepting the Commission’s argument that the GCTS and the CFC charge apply to different tax bases, taxable persons, taxable events, and tax rates (paragraphs 129–132). Instead, the CJEU clarified that the CFC rules supplement and form an integral part of the GCTS, following the same logic, under which only “profits with sufficient territorial link to the UK are subject to tax” (paragraph 135). Finally, the CJEU ruled that the General Court erred in concluding that the Commission had correctly identified the reference regime for assessing whether the CFC exemptions constituted a selective advantage under State aid rules (paragraph 135).

In four different appeals, the parties sought to annul the same Commission State aid decision concerning Germany’s energy law (EnWG) and network charge regulation (StromNEV). The regulation governs the costs of efficient network operation, which the Commission classified as unlawful State aid, requiring recovery. Although the parties differed, they all fundamentally debated the same legal points, leading the CJEU to deliver identical rulings in each case.

Below, I provide commentary on the following four cases:

• Joined cases C-790/21 P och C-791/21 P, Covestro Deutschland and Germany versus Commission (hereafter referred as to Covestro’s case);

• Joined cases C-792/21 P och C-793/21 P AZ, Germany versus Commission (hereafter referred as to AZ’s case);

• Joined cases C-794/21 P och C-800/21 P, Inflneon Technologies AG, and Others versus Commission (hereafter referred as to Inflneon’s case), and

• Joined cases C-795/21 P och C-796/21 P, WEPA Hygieneproducts GmbH, and Others versus Commission (hereafter referred as to WEPA’s case),

In 2011, the StromNEV introduced a full network charge exemption for continuous load consumers, replacing the previous system of individual charges with a “minimum charge” safety net. This exemption was financed through a surcharge levied on other consumers and redistributed among network operators. However, in 2013, StromNEV was amended to reintroduce individual charges, along with fixed percentage charges (10%, 15%, or 20%). A transitional regime applied retroactively for 2012–2013 to those who had not yet received the exemption. The exemption was ruled unlawful by German courts in 2013 and 2015, leading to its abolition on January 1, 2014.

Meanwhile, in 2011, the Commission received multiple complaints from energy consumers questioning the exemption’s compatibility with EU State aid rules. In 2013, the Commission opened a formal investigation, which, after several years of exchanges and analysis, led to the 2018 State aid decision concerning the effects of StromNEV 2013 on the 2012 and 2013 calendar years. The Commission concluded that the exemption granted to baseload consumers and the circumstance where certain costs were charged below the minimum threshold, constituted unlawful State aid. Consequently, Germany was ordered to recover the unlawful aid, including interest, from the beneficiaries. The General Court upheld the Commission’s decision, dismissing all appeals and crossed-appeals from the parties and Germany, thereby rejecting their annulment requests.

The first and second procedural discussions sought concerned the time limit for bringing an action for annulment under Article 263 TFEU, and whether the period started when the parties became aware of the decision or upon its publication in the Official Journal. The CJEU ruled that it was the latter took precedence, meaning that the annulment actions were brought on time, dismissing the Commission’s argument that the General Court erred in law or distorted facts and evidence on these matters.

The third procedural issue, raised in the Covestro, AZ, and WEPA cases (but not in Inflneon’s case) concerned whether the General Court failed to consider arguments, distorted facts, or misinterpreted the national law regarding:

1. the nature of state control over the surcharge;

2. the methodology used to calculate the network charges and exemptions; and

3. the degree of control exercised by network operators and German regulators (BnetzA).

The CJEU dismissed all these allegations, affirming that the General Court correctly assessed the existence of State control over the surcharge and found no procedural errors.

Each appeal presented different legal arguments regarding the classification of the German scheme as State aid, summarized in the table below:

The CJEU dismissed or rejected all the parties’ arguments in all four appeals, confirming that the exemption constituted a selective advantage and that the scheme met all conditions for State aid under Article 107(1) of the TFEU. As a result, the aid remained classified as unlawful.

Joana Pedroso, universitetslektor, Handelshögskolan, Göteborgs universitet