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Control of lawfulness in the European courts and national recovery of state aid: the example of the Spanish goodwill

As is known, and as has been highlighted on these same pages in the past, the European Commission has in the last years deployed intense activity at the review, under EU state aid rules, of national laws (and individual rulings) regulating the direct taxation of companies.

In this context, the classification as state aid of the deduction, by Spanish companies, of the amortisation of goodwill generated on the acquisition of foreign holdings is a good example of how a tax provision open to any company resident in a member state can still be selective (see the ECJ judgement of December 21 2016 on joined cases C-20/15 P and C-21/15 P, Commission vs. World Duty Free, Santander and Santusa Holding).

However, for that purpose, that measure must still favour companies that carry out a certain activity over others that are in a comparable situation from a factual and a legal standpoint. In the case of the Spanish goodwill, it is important to point out that the EU General Court (GC), to which the case was referred back, must still determine whether the Commission proved – as it is obliged to – that the Spanish companies that purchased subsidiaries abroad were in a comparable situation to those which acquired companies in Spain.

Whatever the case, the existence of a negative decision (or, as in the case of the Spanish goodwill, three decisions) finding the existence of state aid, requires the recovery of that aid by the national authorities that allegedly granted it. That is irrespective of whether those national authorities and/or the taxpayers affected have filed appeals for annulment with the European courts (the GC and, at second instance, the ECJ). According to Article 278 of the Treaty on the Functioning of the European Union, those appeals do not in themselves have suspensory effect, as the acts adopted by the EU institutions enjoy a presumption of lawfulness. For these same reasons, the provisional measures that the EU courts could indeed adopt require evidence of the fumus boni iuris of the claim and of the irreparable loss which the recovery of the state aid could entail for the affected companies.

Of the three decisions issued by the Commission in relation to the Spanish goodwill (the first relating to acquisitions within the EU, the second relating to acquisitions outside the EU, and the third referring to the acquisition of foreign holding entities supposedly not affected by the first two decisions), it is the third decision that is giving rise to the most important and large-scale recovery proceedings in Spain.

That is because unlike the first two, the third decision does not limit the recovery to transactions performed since the beginning of the state aid inspection proceeding (i.e. previous ones are not protected by the legitimate expectations principle), so recovery can apply to practically all the years of validity of the law, which dates back to 2002.

At the end of 2014, Spain asked the GC to suspend the recovery under the third decision, based on the annulment of the first two decisions by the GC (judgments of November 7 2014, on the cases Autogrill vs. Commission and Santander and SantusaHolding vs. Commission). At that stage, the GC rejected Spain's request, but only because the Commission had already waived the recovery de facto. In 2017, once the ECJ had overturned the GC's judgments (see above as regards joined Cases C-20/15 P and C-21/15 P), the Commission asked Spain to reactivate the recovery of the alleged aid, irrespective of the fact that the cases had been resent to the GC for analysis of the grounds for annulment that had not yet been substantiated. In that scenario, new requests for a stay have been submitted in the European courts, at least by some of the Spanish companies affected.

Regarding the Spanish national proceedings to oppose the recovery of the aid, and notwithstanding the arguments that can be brought in the relevant administrative and court jurisdictions (normally by reference to the appeal for annulment initiated before the European courts), in Spain is only possible to stay the recovery by depositing the amounts claimed in the general deposit fund (i.e. bank guarantees or other types of guarantees normally valid to stay the execution of administrative acts being appealed cannot be filed). Notwithstanding the economic impact derived from the deposit (escrow) of the amounts still under dispute, that escrow (as opposed to a simple payment to the local authorities) should favour the quick release of the funds affected if the decisions supporting the recovery are definitively overturned.

On January 31 2018 and February 1 2018, the hearings on the cases related to the first and second decisions of the Spanish goodwill will be held before the GC. Whatever is decided in those hearings (be it a new annulment of the decisions or confirmation of their validity) their outcome will obviously affect the ongoing discussions on the third decision and on the recovery proceedings currently attached to it.

Rafael CalvoAngel García

Rafael Calvo ( and Angel García (, Madrid
Garrigues Madrid

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