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The European Commission has formally closed its investigation into Spain's Vizcaya coordination centre regime after the Spanish government abolished the regime on April 30 2002. The Commission initiated a state aid investigation into the Spanish regime (as well as a number of other regimes in EU member states) in July 2001, and concluded that the regime constituted unlawful aid in August 2002. Under EU rules, incompatible aid may be subject to recovery from the aid recipient if the Commission was not notified of the aid.

To the surprise of many Canadian practitioners and taxpayers, the Supreme Court of Canada declined to hear OSFC Holdings' appeal of the Federal Court of Appeal decision (OSFC Holdings Ltd v The Queen, 2001 DTC 5471) upholding the application of Canada's general anti-avoidance rule (GAAR) to deny tax losses otherwise available under the specific provisions of the Income Tax Act (Canada). As is the customary practice, the Supreme Court did not give reasons for its rejection of OSFC's leave application, so practitioners and taxpayers were left to speculate on the reasons behind the decision, and the question of when the Supreme Court will wade into the growing number of appeals involving GAAR.

Ernst & Young can officially begin the difficult task of integrating some of its largest offices, after the European Commission cleared the proposed merger between Ernst & Young and Andersen in France and in Germany.

Royal & SunAlliance has transferred a portfolio of non-life insurance contracts. Its portfolio of Italian direct insurance policies has been transferred to Direct Line Insurance in Italy.

Allen & Overy has hired a team of Ernst & Young tax lawyers for its Amsterdam office. Partner Olaf van der Donk, who was previously the head of Ernst & Young's M&A tax group in the Netherlands, started on September 9 and will lead the team, which includes three associates from Ernst & Young and a fourth new associate. Two associates started in early September and the others will start in November. The associates joining Van der Donk are Roelof Goudswaard, who has 12 years' experience as a tax lawyer, Olaf Kroon, Jochem Kin and Maarten Blomme.

Royal Philips Electronics unit Philips Medical Systems and the Rabobank Group unit De Lage Landen are setting up a joint venture in the US. The new venture will be called Philips Medical Capital and will provide financing for the purchase of the full diagnostic imaging equipment that Philips Medical Systems produces throughout the US. The new venture will be based in Pennsylvania and will be 60% owned by De Lage Landen. De Lage Landen will treat it as a consolidated subsidiary. Schulte Roth & Zabel represented DeLage Landen, with Daniel Blickman leading the tax side. Sullivan & Cromwell advised Philips, with Andrew Solomon in New York leading the tax group.

Baker & McKenzie has dramatically enlarged its Paris tax group by hiring a team of 11 tax lawyers from Andersen Legal. The team includes one international partner, Véronique Millischer, one local partner, Patrick Philip, and four senior associates. Millischer, who joined the law firm at the beginning of September, is leading the group.

Versatel, the Dutch telecom network company, is restructuring its debt. About ?1.7 billion in Versatel bonds will be converted into cash and common shares, and exchanged for debt. Approval by a court in Amsterdam is expected in October. Shearman & Sterling is representing Versatel, with tax partner Bernie Pistillo and associate Lars Jensen advising. Both lawyers are in the London office.

Until 2001, capital gains obtained by foreign residents through the Mexican Stock Exchange (that is, individuals or corporations) were tax-exempt provided the transaction complied with certain formalities (for example, the shares are allocated among public investors).

The EU trade war with the US took another step forward in August when the European Commission revealed its list of US products that could potentially be subject to countermeasures.