In its judgment of 17 December 2015, Spain a.o./Commission, the General Court once again annulled a Commission decision dealing with a fiscal State aid scheme on the grounds that the Commission did not sufficiently establish that the scheme in question conferred a selective advantage to its beneficiaries.
Strikingly, the General Court’s judgment was very much inspired by two of its previous judgments – albeit in another composition – in the cases Autogrill España and Banco Santander. In those cases, the General Court found that for the condition of selectivity to be satisfied, a category of undertakings which are exclusively favoured by the measure at issue must be identified in all cases and found that “the mere finding that a derogation from the common or ‘normal’ tax regime has been provided for cannot give rise to selectivity” . This is especially the case when the measure at issue does not exclude, a priori, any category of undertakings from taking advantage of it. 
Without entering into the merits of these two judgments, against which the Commission has brought separate appeals, the General Court’s judgment in the Spanish Tax Lease (STL) case deserves special attention, for it contains also interesting developments on the links between the separate notions of advantage and selectivity, and the need for the Commission and for the EU courts to pay special attention to the identification of the correct beneficiary when dealing with State aid schemes involving multiple layers of actors.
Without entering into excessive detail, what was at stake in the STL case was an elaborate fiscal regime by virtue of which Spanish shipyards could attract investments through leasing contracts concluded with an Economic Interest Grouping (EIG), which benefits, for that purpose, of a series of favourable fiscal advantages.  A STL operation thus allowed a maritime shipping company to have a new vessel built at a 20%-30% rebate on the price charged by the shipyard, by buying it not directly from the shipyard but from an EIG incorporated under Spanish law and set up by a bank. 
T-515- 13-1According to the Commission in its Decision (recital 19), this tax gain was initially collected by the EIG and its investors but was then partially kept by the investors (at a level of 10-15 %) and partially (at a level of 85-90%) passed on to the shipping company which in the end became the owner of the vessel through a 20% to 30% reduction on the initial gross price of the vessel.
The Commission was faced with the difficulty of identifying the beneficiary undertakings of the STL regime in this case, as it acknowledged that it was in principle possible to identify 5 major categories of actors: (i) the shipyards offering new built vessels or construction, repair and renovation services, (ii) leasing companies offering financing facilities, (iii) EIGs chartering out and selling vessels, (iv) the investors in those EIGs offering goods and services on a wide range of market (except if they are individuals not exercising any economic activity, in which case the Commission recognised that they were not covered by the Decision), and (v) shipping companies offering maritime transport services buying vessels to the EIGs through the STL system (recital 126).
Firstly, in its assessment of the STL system as a whole, the Commission ruled out that the STL regime could provide a selective advantage to the shipyards, as it could not establish that the STL “was de facto limited to the acquisition of Spanish vessels”. The Commission also indicated that the Spanish tax administration confirmed that the STL regime also applied to ships built in other EU Member States. Under these circumstances, the Commission concluded that the STL entails no further element of selectivity to the benefit of Spanish shipyards and no discrimination on the place of establishment of the shipyard (recital 160). However, a few recitals above, the Commission found that the STL as a whole was selective as it conferred discretionary powers and as the tax administration would only authorise STL operations to finance sea-going vessels, which would amount to sectorial selectivity (statistics showed that all of the 273 STL operations organised until June 2010 concerned sea-going vessels). We will come back to these findings, as they are at least implicitly questioned in the judgment of the General Court.
Secondly, the Commission found that the advantage of the STL accrues to the EIGs and by virtue of the principle of fiscal transparency deriving from the legal status of EIGs under Spanish law, to its investors. Indeed, the EIG is the legal entity that applies all the tax measures and, where applicable, the one that files requests for authorisations with the tax authorities. From a tax perspective however, the EIG is a tax transparent entity, which means that its taxable revenues or deductible expenses are automatically transferred to its investors, in proportion to their shareholding (recitals 28 and 161).
The Commission therefore concluded that the tax benefits resulting from the operation are shared between EIGs and/or their investors and the shipping companies. Whereas other participants in STL transactions such as shipyards, leasing companies and other intermediaries benefit from an indirect effect of that advantage, the Commission considered that the advantage initially collected by the EIG/investors was not transferred to them (recital 163).
In sum, where an economic advantage could be found at the level of five different groups of operators, the Commission considered that only the EIGs and their investors benefited from a selective advantage flowing directly from State resources. Shipyards and shipping companies did also benefit from an economic advantage, albeit not one which was selective or directly granted through State resources, according to the Commission.
It seems that the General Court strongly disagreed with this approach, as it transpires from several findings of the judgment.
As a starting point, the GC took care to distinguish between the advantages granted to the EIGs and to their investors. At paragraph 116 of the judgment, which is a key paragraph in its reasoning, it stated – quite bluntly – that according to article 1 of the Decision, if the EIGs have indeed benefited from the three fiscal measures composing the STL regime, it is only the members of these EIGs (i.e. the investors) that have benefited from the economic advantages deriving from it. In order to support this finding, the GC based itself on recital 140 of the Decision, where the Commission found that, because of the tax transparent status of the EIGs, which enables different operators to join and finance any investment or carry out any economic activity, the tax status of the EIGs under Spanish law did not confer any selective advantage to the EIGs or to their members. The GC deducted from this finding that the fiscal advantages granted to the EIGs could only have benefited their members, the so-called “investors”, which were also the only entities targeted by the recovery order in article 4(1) of the Decision.
Therefore, the GC found that the Commission wrongfully concluded in article 1 of the Decision that the EIGs had also benefited from a State aid within the meaning of article 107(1) TFEU.
This conclusion could have been developed in more detail, as it is pivotal in the remainder of the GC’s analysis on the notion of selectivity, in which it only examined whether the investors had benefited from a selective advantage, without considering the situation of the EIGs any further in that respect.
Indeed, it is one thing to argue – as the Commission did at recital 19 of the Decision – that, according to the principle of fiscal transparency, the economic advantages initially received by the EIGs in the form of tax benefits are then transferred to its investors and to the shipping companies. It is quite another thing however to deduce from this fact that the EIGs never received an advantage in the first place, and are therefore not the beneficiaries of State aid.
After all, only the EIGs constituted under Spanish law could benefit from the tax benefits accruing from the STL regime (see recitals 15-19 of the Decision).
If we accept as a starting point the summa divisio between EIGs and investors, the reasoning of the General Court is quite easy to follow: the possibility to invest in a particular EIG was open to all enterprises in all sectors. Therefore, the mere fact that the fiscal advantages were granted on the condition of investing in particular goods, to the exclusion of other goods or other type of investments does not render them selective insofar as those investors are concerned (para. 143). The judgment quotes, in that regard, the recent judgments of the General Court in Banco Santander and Autogrill. It also distinguishes, in a very pedagogic and useful manner, several precedents that were invoked by the Commission in order to ascertain the selective character of the STL regime, such as Germany v. Commission , Associazione italiana del risparmio gestito and Finco Asset Management/Commission, Le Levant 001 a.o./Commission, Spain/Commission, Italy/commission and Diputación Foral de Álava e.a./Commission.
Basically, the General Court explained that in all those cases involving indirect aid, the Commission never found that there was a selective advantage and therefore a State aid at the level of the individual investors, but rather at the level of the companies ultimately benefiting from those favourable investment conditions. In the present case, it is true that the Commission did not find that the shipyards benefited from State aid. The Commission however found that two sets of operators benefited from a selective advantage, namely the EIGs and their investors.
 Para. 49 of the Banco Santander judgment and para. 45 in Autogrill.
 Para. 65 of the Banco Santander judgment. And para. 61 in Autogrill.
 The STL system is in fact composed of 5 different measures, namely (1) the accelerated depreciation rule (Article 115(6) of the Spanish Tax Law on Corporate Tax (TRLIS)); (2) the discretionary application of early depreciation (Article 115(11) TRLIS and Articles 48(4) and 49 of the Spanish Regulation on Corporate Tax (RIS); the tax status of EIGs (Article 48 and 49 TRLIS); (4) the Tonnage Tax system (Articles 124 to 128 TRLIS); and (5) a rule according to which certain sea-going vessels that would normally be regarded as used or second hand upon their transfer into the Tonnage Tax system are deemed to be new (Article 50(3) RIS). See recitals 21 to 42 of the Decision for a detailed description of those measures.
 See recital 11 of the Decision.
 For an example, see the Commission’s Decision on the Belgian coordination centres (Decision of 13.11.2007 in Case C 15/2002, OJ L 90, 2.4.2008).
 For an example, see the Commission’s Decision of 2 August 2004 on the on the State Aid implemented by France for France Télécom (Case C 2004/3060, OJ L 257, 20.9.2006, p.11).
 See, inter alia, Banco Santander, para 33. It is quite clear that the STL scheme and the fulfilment of its conditions was not open to all companies but was designed in such a way that only EIG’s constituted by a bank were eligible to the fiscal advantages.
 It is interesting to note as well, in this respect, that the GC found that the Commission should have given more indications as to how such a scheme would have conferred an advantage to the investors – and not to the shipyards or shipping companies – that would be liable to distort competition and to affect trade between Member States within the meaning of Article 107 TFUE (para. 200 of the judgment).
 See, to that effect, Case T-538/11, Belgium v. Commission, EU:T:2015:188, para. 124, and the Opinion of AG Bobek on appeal, released on 21 April 2016 in Case C-270/15 P.
 See, in that respect, Joined Cases C‑106/09 P and C‑107/09 P, Commission/Government of Gribaltar a.o., EU:C:2011:732.
Sébastien Thomas Posted in Competition law, State Aid, Taxation Tagged with Autogrill España, beneficiary, Joined Cases T‑515/13 et T‑719/13, selectivity test, Spain a.o./Commission, the ‘Spanish Tax Lease’; judgment.