When you think about impermissible state aid these days, the tax breaks which EU Member States might give to multinationals through tax rulings quickly come to mind. The prohibition on state aid has a wider reach, however. Housing associations, hospitals and football clubs can also, for example, come into conflict with state aid rules and the European Commission. This blog will outline a few major developments.
Fighting tax evasion is a top priority of the European Commission. This will have consequences for the business climate in various Member States (see this blog, too). One example is the decision, in which the Commission ordered Ireland to recover EUR 13 billion in tax breaks from Apple. Tax rulings are on the agenda this year as well. Investigations into the tax breaks which Luxembourg supposedly gave Amazon, McDonald’s and Engie are currently pending. In the meantime, the Commission’s recovery decisions regarding Starbucks, Apple, the Belgian exemption of excess profit and Fiat are still on appeal. A crucial question here will be whether the “selectivity criterion” has been satisfied, which is used to distinguish between general economic support measures and state aid granted to “certain undertakings or certain sectors of activity”. A recent decision by the European Court of Justice is not very promising in this respect for multinationals. In World Duty Free Group, the European Court of Justice reversed a judgment by the General Court, which had held that the Commission had failed to demonstrate that a Spanish tax scheme was selective in nature.
The way in which housing associations are funded clashes with the state aid rules set forth in Article 107 TFEU. After all, housing associations receive government aid in the form of, say, guarantees by government authorities for public housing. They often engage in commercial activities, too. For instance, did the “Vestia tax” amount to illegal state aid in the Netherlands? After granting restructuring aid to housing corporation Vestia, the Central Fund for Social Housing (“CFV”) imposed an additional levy totalling EUR 508 million on all Dutch housing associations. Six housing associations brought suit, arguing that the CFV’s actions violated the prohibition on state aid. The Council of State’s Administrative Jurisdiction Division ruled that this was not so and that the restructuring aid satisfied the requirements set by the Commission. Due to the strict interdependence between this restructuring aid and the Vestia tax, the Vestia tax was also lawful.
In two recent judgments, the European Court of Justice set aside a judgment by the General Court in proceedings between several housing associations and the Commission about the Dutch Housing Act 2015 (Woningwet 2015). This Act states that housing associations must allocate at least 80% of the available homes to households with low incomes. This provision is a direct consequence of an earlier Commission decision that public housing may only be furnished to a clearly defined group of less affluent or socially weak individuals and that housing associations need to carry out their commercial activities in line with market conditions. The General Court had denied the housing associations’ appeal on procedural grounds. The Court of Justice, however, held that the General Court had employed the wrong standard of review, and reversed the judgment. The General Court will now have to look at the case for a third time.
Hospitals likewise need to bear in mind the state aid prohibition (see this blog, too). Last year, for example, the Commission concluded that government financing of public hospitals in Brussels was consistent with the state aid rules. The financing was intended to compensate deficits for providing a service of general economic interest (SGEI) in the form of health and social services. The Commission explained in the decision why the financing of these hospitals could affect trade between Member States.
Another example is the judgment by the District Court of The Hague on the Dutch subsidies to academic hospitals to pay for the NIPT test for pregnant women. Gendia, a Belgian company which also offered this test, had sought in interim relief proceedings to have the provision of the subsidy ended, because it supposedly resulted in unfair competition. The Interim Relief Judge held that Member States have a broad margin of discretion in determining that a service is an SGEI. A service may be considered an SGEI if it is provided in the market in a manner that is unsatisfactory to the State, for instance, because the price is too high. The Interim Relief Judge thus ruled that the subsidy scheme complied with the SGEI exemption decision and was compatible with the internal market.
Football clubs have caught Brussels´ attention as well. The European Commission scrutinised, for example, the aid which four ailing Dutch football clubs (FC Den Bosch, MVV Maastricht, NEC Nijmegen and Willem II) had received. This aid, the Commission found, was permissible, because the clubs concerned had implemented realistic restructuring plans, so that competition had not been disrupted. The sale-and-leaseback construction which the Municipality of Eindhoven and the Eindhoven club PSV had submitted to the Commission for assessment was not even deemed state aid at all. Not all football clubs have fared so well: aid to seven Spanish football clubs, including Real Madrid, FC Barcelona and Athletic Bilbao, was disapproved by the Commission. The appeal process is still going on.
Last week, the Commission expanded the General Block Exemption for permissible investments in ports and airports (see this blog, too). The possibilities to give aid to cultural activities have also been broadened. This expansion is in line with the Commission’s goal of making European laws and regulations as effective and efficient as possible. The approval which the Commission gave to the development of the cruise terminal in Harlingen is illustrative.
One interesting development in the Netherlands is the bill on the recovery of state aid. This bill provides a legal basis under national law to recover state aid in cases in which the Commission has taken a recovery decision. The idea is to close several gaps in Dutch laws regarding recovering unlawfully granted state aid. The bill has not been introduced yet. To be continued!