General Court, 24-09-2019, nr. T-755/15

In Section 2 of the contested decision, entitled ‘Description of the aid measure’, the Commission first described FFT, the beneficiary of the tax ruling at issue, which was part of the Fiat/Chrysler automobile group (‘Fiat/Chrysler group’). It stated that FFT provided treasury services and financing to the Fiat/Chrysler group companies established in Europe, excluding those established in Italy, and that it operated from Luxembourg, where its head office was located. The Commission stated that FFT was involved, in particular, in market funding and liquidity investments, relations with financial market actors, financial coordination and consultancy services to the group companies, cash management services to the group companies, short-term or medium-term inter-company funding, and coordination with the other treasury companies (recitals 34 to 51 of the contested decision).

The Commission then described the tax ruling at issue, stating that it had been issued by the Luxembourg tax administration on 3 September 2012. It indicated that that ruling followed (i) the letter of 14 March 2012 from FFT's tax adviser to the Luxembourg tax administration, containing a request for approval of an advance transfer pricing arrangement, and (ii) a transfer pricing report containing a transfer pricing analysis, prepared by the tax adviser in support of FFT's request for a tax ruling (‘the transfer pricing report’) (recitals 9, 53 and 54 of the contested decision).

The Commission described the tax ruling at issue as endorsing a method for arriving at a profit allocation to FFT within the Fiat/Chrysler group, which enabled FFT to determine its corporate income tax liability to the Grand Duchy of Luxembourg on a yearly basis. It pointed out that the tax ruling at issue had been binding for a period of five years, from the 2012 tax year until the 2016 tax year (recitals 52 and 54 of the contested decision).

The Commission noted that, according to the transfer pricing report, the most appropriate method for determining the taxable profit of FFT was the transactional net margin method (‘the TNMM’). This method entails, according to the Commission, taking into consideration the net margins earned in comparable transactions by independent enterprises. This choice was justified, according to that report, by the fact that FFT was providing financial services only to Fiat/Chrysler group companies. The Commission added that, according to the transfer pricing report, the remuneration due to FFT, which constituted the taxable profit, had to be determined by reference to the capital needed by FFT to perform its functions and to bear its risks, in relation to the assets in use (recitals 55 and 56 of the contested decision).

Specifically, the Commission found that the transfer pricing report, as endorsed by the tax ruling at issue, proposed calculating the overall remuneration due to FFT for its financing and treasury activities and the risks that it bore, such remuneration consisting of the following two components (recital 70 of the contested decision):

In addition, the Commission noted that the tax ruling at issue had endorsed the proposal in the transfer pricing report not to remunerate the portion of FFT's equity designated as supporting FFT's financial investments in Fiat Finance North America Inc. (‘FFNA’) and Fiat Finance Canada Ltd (‘FFC’) (recital 69 of the contested decision).

The Commission indicated that the tax ruling at issue had been issued on the basis of Article 164(3) of the Luxembourg Income Tax Code (loi du 4 décembre 1967 concernant l'impôt sur le revenu (Law of 4 December 1967 on income tax), as amended, ‘the Tax Code’) and Circular L.I.R. No 164/2 of 28 January 2011, issued by the director of Luxembourg taxes (‘the Circular’). In that regard, first, the Commission noted that that article established the arm's length principle under Luxembourg tax law, according to which transactions between intra-group companies (‘integrated companies’) were to be remunerated as if they had been agreed to by independent companies negotiating under comparable circumstances at arm's length (‘stand-alone companies’). Second, it added that the Circular explained in particular how to determine an arm's length remuneration specifically in the case of intra-group financing companies (recitals 74 to 83 of the contested decision).

The Commission outlined the transfer pricing guidelines of the Organisation for Economic Cooperation and Development (OECD) and indicated that transfer prices referred to prices charged for commercial transactions between various entities belonging to the same corporate group. It stated that, in order to avoid a situation where multinational companies had a financial incentive to allocate as little profit as possible to jurisdictions where their profits were subject to higher taxation, tax administrations should only accept transfer prices between integrated companies when, in accordance with the arm's length principle, transactions are remunerated as if they were agreed to by stand-alone companies negotiating under comparable circumstances at arm's length. The Commission pointed out that that principle was to be found in Article 9 of the OECD Model Tax Convention on Income and on Capital (‘the OECD Model Tax Convention’) (recitals 84 to 87 of the contested decision).

The Commission recalled that the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, adopted by the OECD's Committee on Fiscal Affairs on 27 June 1995 and updated on 22 July 2010 (‘the OECD Guidelines’), set out five methods for approximating an arm's length pricing of transactions and profit allocation between integrated companies. Only two of those methods were relevant for the contested decision (recitals 88 and 89 of the contested decision).

The first of these is the comparable uncontrolled price (‘CUP’) method, which is a traditional transaction method. The Commission noted that the CUP method compares the price charged for the transfer of property or services in a transaction between two associated enterprises to the price charged for the transfer of property or services in a comparable transaction between independent enterprises conducted under comparable circumstances (recital 90 of the contested decision).

The second method is the TNMM, which is an indirect method used to approximate an arm's length pricing of transactions and profit allocation between companies of the same group. The Commission described that method as one that involves estimating what would be an arm's length profit for an entire activity, rather than for specific transactions. It explained that, in that context, a profit level indicator would be selected, such as costs, turnover or fixed investment, to which would be applied a profit ratio reflecting that observed in comparable uncontrolled transactions (recital 91 of the contested decision).

In Section 7 of the contested decision, entitled ‘Assessment of the contested measure’, the Commission concluded that State aid had been granted.

After recalling the conditions for a finding of State aid, according to which, in order for a measure to be categorised as State aid within the meaning of Article 107(1) TFEU, first, there must be an intervention by the State or through State resources; second, the intervention must be liable to affect trade between Member States; third, it must confer a selective advantage on the recipient; and, fourth, it must distort or threaten to distort competition, the Commission found that the first condition had been fulfilled in this case. In that regard, it stated that the tax ruling at issue was imputable to the Grand Duchy of Luxembourg. Moreover, the Commission found that that ruling had given rise to a loss of State resources, since any reduction of FFT's tax liability had resulted in a loss of tax revenue that would otherwise have been available to the Grand Duchy of Luxembourg (recitals 185 to 188 of the contested decision).

As regards the second and fourth conditions, the Commission found that since FFT was part of a group operating in all Member States, any aid in its favour was liable to affect intra-Union trade. Moreover, it found that, in so far as the tax ruling at issue relieved FFT of a tax liability, that ruling improved its financial position and, as a result, distorted or threatened to distort competition (recital 189 of the contested decision).

As regards the third condition for a finding of State aid, the Commission considered that the tax ruling at issue conferred a selective advantage on FFT, in so far as it had resulted in a lowering of FFT's tax liability in Luxembourg by deviating from the tax which FFT would have been liable to pay under the ordinary corporate income tax system (recital 190 of the contested decision).

As a preliminary point, the Commission observed that the case-law had established a three-step analysis to be used in determining whether a tax measure is selective. The first step is to identify the common or normal regime applicable in the Member State (‘the reference system’). In the second step, it is necessary to determine whether the tax measure in question constitutes a derogation from that system, in so far as it differentiates between economic operators who, in the light of the objectives intrinsic to the system, are in a comparable factual and legal situation. The Commission then recalled that, in the third step, if the measure constitutes a derogation from the reference system, the State must establish whether that measure is justified by the nature or the general scheme of the reference system (recital 192 of the contested decision).

As regards the first step, identification of the reference system, the Commission considered that, in the present case, this was the general Luxembourg corporate income tax system, the objective of which was to tax the profits of all companies subject to tax in Luxembourg. It stated in that regard that the general Luxembourg corporate income tax system applied to domestic companies and foreign companies resident in Luxembourg, including Luxembourg branches of foreign companies. The Commission considered that the fact that there was a difference in determining the taxable profits of stand-alone companies and integrated companies had no bearing on the objective of the general Luxembourg corporate income tax system, which aimed to tax the profits of all companies resident in Luxembourg, whether or not integrated, and that both types of company are in a similar factual and legal situation in the light of the intrinsic objective of that system. The Commission rejected all the arguments put forward by the Grand Duchy of Luxembourg and by FFT to the effect that Article 164 of the Tax Code or the Circular constituted the relevant reference system, and also their argument that the reference system for determining whether the tax ruling at issue was selective had to be limited to undertakings subject to transfer pricing rules (recitals 193 to 215 of the contested decision).

As regards the second step, the Commission stated that whether a tax measure constituted a derogation from the reference system would generally coincide with identification of the advantage granted to the beneficiary under that measure. In its view, where a tax measure results in an unjustified reduction of the tax liability of a beneficiary who would otherwise be subject to a higher level of tax under the reference system, that reduction constitutes both the advantage granted by the tax measure and the derogation from the reference system. The Commission also noted that, according to the case-law, in the case of an individual measure, the identification of the economic advantage is, in principle, sufficient to support the presumption that it is selective (recitals 216 to 218 of the contested decision).

The Commission went on to state that a tax measure which results in a group company charging transfer prices that do not resemble prices which would be charged between independent undertakings under the arm's length principle confers an advantage on that company, in so far as it results in a reduction of its taxable base and thus its tax liability under the ordinary corporate income tax system, which, according to the Commission, the Court of Justice had accepted. Therefore, the Commission explained that it was required to verify whether the methodology accepted by the Luxembourg tax administration by way of the tax ruling at issue for the determination of FFT's taxable profits in Luxembourg departed from a methodology that led to a reliable approximation of a market-based outcome, and thus from the arm's length principle. In that case the tax ruling at issue would be deemed to confer a selective advantage on FFT for the purposes of Article 107(1) TFEU (recitals 222 to 227 of the contested decision).

Consequently, the Commission found that the arm's length principle necessarily formed part of its assessment, under Article 107(1) TFEU, of tax measures granted to integrated companies, irrespective of whether a Member State had incorporated that principle into its national legal system. The Commission then explained, in response to the arguments raised by the Grand Duchy of Luxembourg during the administrative procedure, that it had not examined whether the tax ruling at issue complied with the arm's length principle, as laid down in Article 164(3) of the Tax Code or in the Circular, but that it had sought to determine whether the Luxembourg tax administration had conferred a selective advantage on FFT for the purposes of Article 107(1) TFEU (recitals 228 to 231 of the contested decision).

In the first place, the Commission considered that several of the methodological choices approved by the Grand Duchy of Luxembourg and underlying the transfer pricing analysis in the tax ruling at issue resulted in a reduction of the corporate income tax that stand-alone companies would have been obliged to pay (recitals 234 to 240 of the contested decision).

First, in relation to the capital to be remunerated, the Commission did not consider the tax adviser's chosen profit level indicator, namely FFT's hypothetical regulatory capital, to be appropriate in the application of the TNMM for estimating an arm's length remuneration for the functions performed by FFT. The Commission went on to find that, by taking into account the hypothetical regulatory capital of EUR 28.5 million, instead of the accounting equity, which was EUR 287.5 million in 2011, on the basis of which the CAPM was applied, the tax adviser had divided FFT's taxable remuneration by 10. The Commission made clear that it had rejected all the arguments of the Grand Duchy of Luxembourg and FFT in that respect (recitals 248 to 266 of the contested decision).

Second, as regards the application of the Basel II framework in order to determine the hypothetical regulatory capital, the Commission considered that the Grand Duchy of Luxembourg had made errors that led to FFT's hypothetical regulatory capital being underestimated and resulted in a lowering of FFT's tax liability (recitals 267 to 276 of the contested decision).

Third, the Commission found that the tax adviser had made several deductions from FFT's remaining capital that departed from a market-based outcome. First of all, it observed that if the hypothetical regulatory capital had been correctly estimated, it was likely that no capital in excess of regulatory capital would have been found. Next, the Commission took the view that the tax adviser's decision to isolate the equity component designated as ‘equity supporting the financial investments in FFNA and FFC’ and to accord it a zero remuneration for the purpose of estimating FFT's tax base was inappropriate. The Commission indicated that it did not regard the Grand Duchy of Luxembourg's arguments on this point as convincing (recitals 277 to 291 of the contested decision).

Fourth, the Commission considered that the tax adviser's choice of a beta of 0.29 when using the CAPM to determine the return on capital to be applied to FFT's hypothetical regulatory capital resulted in a profit allocation to FFT that was not in line with the arm's length principle (recitals 292 to 301 of the contested decision).

Among the conclusions reached by the Commission in the light of those findings are: (i) the appropriate level of remuneration for the financing and treasury functions of FFT should be established on the basis of FFT's accounting equity; (ii) 2012 was an appropriate reference year for assessing FFT's tax base in Luxembourg; (iii) the pre-tax return on equity of 6.05% (and the post-tax return of 4.3%) accepted by the tax ruling at issue and calculated using the CAPM was well below the required returns on capital in the financial sector, which had remained consistently at or above 10%; and (iv) the required post-tax return on equity was 10%, applied to the full amount of the accounting equity (recitals 302 to 311 of the contested decision).

In the second place, the Commission rejected FFT's argument that there was no advantage for the Fiat/Chrysler group because any increase in the tax base in Luxembourg would have been offset in full by an increased tax deduction in other Member States (recitals 312 to 314 of the contested decision).

In the third place, as a subsidiary point, the Commission found that, in any event, the tax ruling at issue also granted a selective advantage under the more limited reference system, invoked by the Grand Duchy of Luxembourg and by FFT, consisting of Article 164(3) of the Tax Code and the Circular, which laid down the arm's length principle in Luxembourg tax law (recitals 315 to 317 of the contested decision).

In the fourth place, the Commission rejected FFT's argument that, in order to prove selective treatment benefiting FFT as a result of the tax ruling at issue, the Commission should have compared that ruling to the practice of the Luxembourg tax administration under the Circular and, in particular, to the tax rulings granted to other financing and treasury companies that the Grand Duchy of Luxembourg had submitted to the Commission as part of a representative sample of its tax ruling practice (recitals 318 to 336 of the contested decision).

In the fifth place, neither the Grand Duchy of Luxembourg nor FFT had, according to the Commission, advanced any possible justification for the selective treatment of FFT as a result of the tax ruling at issue. Nor had the Commission identified any ground justifying the preferential treatment from which FFT had benefited (recitals 337 and 338 of the contested decision).

The Commission thus concluded, in the light of the foregoing considerations, that the tax ruling at issue had conferred a selective advantage on FFT in that it had resulted in a lowering of FFT's tax liability, principally, under the general Luxembourg corporate income tax system as compared to stand-alone companies and, as a subsidiary point, under the tax regime applicable to integrated companies (recitals 339 and 340 of the contested decision).

Finally, the Commission considered that the beneficiary of the advantage at issue was the Fiat/Chrysler group as a whole, in so far as FFT formed an economic unit with the other entities within the group, and that those entities had benefited from the tax reduction granted to FFT, given that that tax reduction necessarily had the effect of reducing the pricing conditions of its intra-group loans (recitals 341 to 345 of the contested decision).

In the light of all of the foregoing considerations, the Commission concluded that the tax ruling at issue constituted State aid and that the aid in question was operating aid (recitals 346 and 347 of the contested decision).

In Section 8 of the contested decision, entitled ‘Compatibility of the aid’, the Commission concluded that the aid granted to FFT was incompatible with the internal market. In this respect, it noted that the Grand Duchy of Luxembourg had not invoked any of the derogations provided for in Article 107(2) and (3) TFEU and, moreover, that the aid in question, which had to be considered to be operating aid, could not normally be considered compatible with the internal market (recitals 348 to 351 of the contested decision).

In Section 9 of the contested decision, entitled ‘Unlawfulness of the aid’, the Commission observed that the Grand Duchy of Luxembourg had not notified it, in accordance with Article 108(3) TFEU, of any plan to grant the tax ruling at issue, nor had it complied with the standstill obligation laid down in that provision. Consequently, the tax ruling at issue constituted unlawful State aid, put into effect in contravention of that provision (recitals 352 and 353 of the contested decision).

In Section 10 of the contested decision, entitled ‘Recovery’, the Commission stated, first, that the arguments advanced by the Grand Duchy of Luxembourg as to observance of the principles of protection of legitimate expectations and legal certainty were without merit (recitals 354 to 364 of the contested decision).

Second, the Commission pointed out that it was not required to state the exact amount of the aid to be recovered, and that it was sufficient for the contested decision to include information enabling the addressee to work out the amount itself without overmuch difficulty. In the present case, the Commission proposed one possible methodology in the contested decision for eliminating the selective advantage granted to FFT by the tax ruling at issue, and made clear that it would also be prepared to accept another method of calculation should the Grand Duchy of Luxembourg propose one before the deadline for implementation of the contested decision, provided that that method resulted in a reliable approximation of a market-based outcome (recitals 365 to 369 of the contested decision).

Third, the Commission found that, in the first instance, the Grand Duchy of Luxembourg was required to recover from FFT the unlawful and incompatible aid granted by means of the tax ruling at issue. Should FFT not have been in a position to repay the aid in full, the Grand Duchy of Luxembourg was to recover the balance from Fiat Chrysler Automobiles NV, the successor of Fiat SpA, since it was that entity which controlled the group to which FFT belonged (recital 370 of the contested decision).

In conclusion, the Commission found that the Grand Duchy of Luxembourg had, by way of the tax ruling at issue, unlawfully granted State aid to FFT and to the group to which it belonged, in breach of Article 108(3) TFEU, that that aid was incompatible with the internal market and that, consequently, the Grand Duchy of Luxembourg was required to recover it from FFT or, in the event of FFT failing to repay the full amount of the aid, from Fiat Chrysler Automobiles (recital 371 of the contested decision).

The operative part of the contested decision is worded as follows:

By document lodged at the Court Registry on 6 June 2016, the Grand Duchy of Luxembourg requested that the case be heard and determined by a Chamber sitting in extended composition. The Court took formal note, pursuant to Article 28(5) of its Rules of Procedure, of the fact that Case T-755/15 had been referred to the Fifth Chamber, Extended Composition.

Following a change in the composition of the Chambers of the Court on 26 September 2016, the Judge-Rapporteur was assigned, pursuant to Article 27(5) of the Rules of Procedure, to the Seventh Chamber, Extended Composition, to which Case T-755/15 was accordingly allocated.

Since a member of the Seventh Chamber, Extended Composition, of the General Court was unable to sit in the present case, the President of the General Court, by decision of 6 February 2017, designated the Vice-President of the General Court to complete the Chamber.

By decision of 12 December 2017, the President of the Seventh Chamber, Extended Composition, of the General Court approved the proposal of the Judge-Rapporteur that Case T-755/15 be given priority under Article 67(2) of the Rules of Procedure.

By separate document lodged at the Court Registry on 30 December 2015, the Grand Duchy of Luxembourg requested that Case T-755/15 be dealt with under the expedited procedure provided for in Article 151 of the Rules of Procedure. On 2 February 2016, the Court decided not to grant that request.

By document lodged at the Court Registry on 6 April 2016, the United Kingdom of Great Britain and Northern Ireland applied for leave to intervene in support of the form of order sought by the Commission.

By document lodged at the Court Registry on 7 April 2016, Ireland applied for leave to intervene in support of the form of order sought by the Grand Duchy of Luxembourg.

By order of 25 May 2016, the President of the Fifth Chamber of the General Court granted the applications to intervene of the United Kingdom and Ireland.

By document lodged at the Court Registry on 9 November 2016, the United Kingdom withdrew its intervention.

By order of 15 December 2016, the President of the Seventh Chamber, Extended Composition, of the General Court removed the United Kingdom as intervener from Case T-755/15.

By documents lodged at the Court Registry on 29 April, 27 June and 24 October 2016, the Grand Duchy of Luxembourg requested that certain information contained in the application, in the reply, in the rejoinder and in certain annexes to those pleadings be treated as confidential vis-à-vis the United Kingdom and Ireland. By document lodged at the Court Registry on 3 January 2017, the Grand Duchy of Luxembourg informed the Court that it wished to maintain its applications for confidential treatment vis-à-vis Ireland, in the event of any joinder of Cases T-755/15 and T-759/15.

The Grand Duchy of Luxembourg claims that the Court should:

Ireland, intervening in support of the form of order sought by the Grand Duchy of Luxembourg, claims that the Court should annul the contested decision in whole or in part.

The Commission contends that the Court should:

Following a change in the composition of the Chambers of the Court on 26 September 2016, the Judge-Rapporteur was assigned, pursuant to Article 27(5) of the Rules of Procedure, to the Seventh Chamber, Extended Composition, to which Case T-759/15 was accordingly allocated.

On a proposal from the Seventh Chamber, the Court decided, on 15 February 2017, to refer the case to a Chamber sitting in extended composition.

Since a member of the Seventh Chamber, Extended Composition, of the General Court was unable to sit in the present case, the President of the General Court, by decision of 23 February 2017, designated the Vice-President of the General Court to complete the Chamber.

By decision of 12 December 2017, the President of the Seventh Chamber, Extended Composition, of the General Court approved the proposal of the Judge-Rapporteur that Case T-759/15 be given priority under Article 67(2) of the Rules of Procedure.

By separate document lodged at the Court Registry on 29 December 2015, FFT requested that Case T-759/15 be dealt with under the expedited procedure provided for in Article 151 of the Rules of Procedure. On 2 February 2016, the Court decided not to grant that request.

By document lodged at the Court Registry on 6 April 2016, the United Kingdom applied for leave to intervene in support of the form of order sought by the Commission.

By document lodged at the Court Registry on 7 April 2016, Ireland applied for leave to intervene in support of the form of order sought by FFT.

By order of 18 July 2016, the President of the Fifth Chamber of the General Court granted the applications to intervene of the United Kingdom and Ireland.

By document lodged at the Court Registry on 9 November 2016, the United Kingdom withdrew its intervention.

By order of 15 December 2016, the President of the Seventh Chamber, Extended Composition, removed the United Kingdom as intervener from Case T-759/15.

By documents lodged at the Court Registry on 20 May, 11 June, 27 July and 28 July 2016, FFT requested that certain information contained in the application, in the defence, in the reply and in certain annexes to those pleadings be treated as confidential vis-à-vis the United Kingdom and Ireland.

By document lodged at the Court Registry on 17 January 2017, FFT stated that it maintained its claims of confidentiality with regard to Ireland, in the event of the case being joined with Case T-755/15.

FFT claims that the Court should:

Ireland, intervening in support of the form of order sought by FFT, claims that the Court should annul the contested decision in whole or in part.

The Commission contends that the Court should:

By document lodged at the Court Registry on 1 December 2016, the Grand Duchy of Luxembourg applied for Cases T-755/15 and T-759/15 to be joined for the purposes of the oral part of the procedure and of the decision which closes the proceedings.

By document lodged at the Court Registry on 1 December 2016, FFT also applied for Cases T-755/15 and T-759/15 to be joined for the purposes of the oral part of the procedure and of the decision which closes the proceedings.

By order of the President of the Seventh Chamber, Extended Composition, of the General Court of 27 April 2018, the parties having been heard, Cases T-755/15 and T-759/15 were joined for the purposes of the oral part of the procedure, in accordance with Article 68(1) of the Rules of Procedure. By the same order, it was decided to exclude the confidential information from the case file to be made available to Ireland.

By letter lodged at the Court Registry on 7 February 2017, the Grand Duchy of Luxembourg requested that a hearing be held, in accordance with Article 106(2) of the Rules of Procedure.

By letter lodged at the Court Registry on 10 February 2017, FFT requested that a hearing be held, in accordance with Article 106(2) of the Rules of Procedure.

Acting on a report from the Judge-Rapporteur, the Court decided to open the oral part of the procedure in Cases T-755/15 and T-759/15. By way of measures of organisation of procedure under Article 89 of the Rules of Procedure, the Court asked the parties to answer questions in writing. The parties complied with those requests within the prescribed periods.

On 24 May 2017, FFT lodged a submission containing further evidence, on which the parties submitted their observations.

The parties presented oral argument and their answers to the questions put by the Court at the hearing on 21 June 2018.

As a preliminary point, it must be borne in mind that, according to the case-law, classification as State aid requires all the conditions referred to in Article 107 TFEU to be fulfilled. It is thus established that, for a measure to be categorised as State aid within the meaning of that provision, there must, first, be an intervention by the State or through State resources; second, the intervention must be liable to affect trade between Member States; third, it must confer a selective advantage on the recipient; and, fourth, it must distort or threaten to distort competition (see judgment of 21 December 2016, Commission v Hansestadt Lübeck, C-524/14 P, EU:C:2016:971, paragraph 40 and the case-law cited).

In the present case, it must be noted that, as is apparent from paragraphs 21 to 37 above, in the contested decision, the Commission examined the two criteria of the existence of an advantage and the selectivity of the measure at issue concurrently.

Specifically, principally, the Commission considered that the tax ruling at issue conferred a selective advantage on FFT with regard to the general Luxembourg corporate income tax system, because the methodology accepted in that tax ruling did not comply with the arm's length principle, which necessarily formed part of the Commission's assessment under Article 107(1) TFEU of tax measures granted to group companies, independently of whether a Member State had incorporated that principle into its national legal system, and according to which intra-group transactions should have been remunerated as if they had been negotiated between independent undertakings (‘the arm's length principle as described by the Commission in the contested decision’) (see recitals 219 to 231 of the contested decision and, in particular, recital 228 of that decision). The Commission then set out, in recitals 234 to 311 of the contested decision, its reasoning according to which the methodology for determining FFT's taxable profit, accepted by the tax ruling at issue, could not result in a reliable approximation of an outcome obtained under market conditions (arm's length outcome).

Moreover, as a subsidiary point, the Commission considered that the tax ruling at issue conferred an advantage on FFT because it derogated from Article 164(3) of the Tax Code and the Circular, which established the arm's length principle under Luxembourg law (see recitals 316 and 317 of the contested decision). The Commission then referred to its analysis, according to which the method validated by the tax ruling at issue could not result in a reliable approximation of a market-based outcome, as set out in the context of its main line of reasoning (see recitals 234 to 311 of the contested decision).

The Commission's approach of examining the criteria of advantage and selectivity concurrently is not in itself incorrect, in so far as, as the Commission observes, both the advantage and the selective nature of that advantage are examined. Nevertheless, the Court considers it appropriate to consider, first of all, whether the Commission was entitled to conclude that there was an advantage, before going on, if necessary, to examine whether that advantage had to be considered to be selective.

In that regard, it must be noted that, although some of the arguments raised by the Grand Duchy of Luxembourg and FFT, including those put forward in the second part of the first plea of the Grand Duchy of Luxembourg, are presented as relating to the selectivity of the measure at issue, the Court considers that they are also intended to elicit a finding that the Commission wrongly concluded that the measure at issue conferred an advantage on FFT. The Court will therefore examine the arguments raised in the second part of the first plea of the Grand Duchy of Luxembourg in conjunction with the pleas challenging the Commission's conclusion that the tax ruling at issue conferred an advantage on FFT.

In the light of these observations, the Court will examine the pleas put forward in support of the argument that FFT did not enjoy an advantage, distinguishing, first, the complaints made in respect of the Commission's principal line of reasoning and, second, those relating to what was set out as a subsidiary line of reasoning. Third, the Court will examine the complaint by which the Grand Duchy of Luxembourg argues that the Commission has failed to prove the existence of an advantage at the level of the Fiat/Chrysler group.

The pleas put forward by the Grand Duchy of Luxembourg and FFT to challenge the examination of the advantage, the principal facet of the Commission's approach, may be summarised as follows. First, the Grand Duchy of Luxembourg and FFT, supported by Ireland, dispute the existence of the arm's length principle as described by the Commission in the contested decision and the Commission's application of that principle as a criterion for assessing the existence of a selective advantage. Second, the Grand Duchy of Luxembourg disputes the Commission's conclusion that the method validated by the tax ruling at issue for determining the amount of tax payable by FFT does not comply with the arm's length principle.

The finding, in paragraph 286 above, that the Commission did not make an error in its principal line of reasoning alone is sufficient for it to be concluded that the Commission has established that the tax ruling at issue conferred an advantage on FFT. Nevertheless, the Court considers it appropriate to examine, for the sake of completeness, the Commission's subsidiary line of reasoning, according to which the tax ruling at issue derogated from Article 164(3) of the Tax Code and from the Circular.

In that regard, the Court notes that, in the second part of its first plea, the Grand Duchy of Luxembourg submits that the tax ruling at issue is in line with the arm's length principle as provided for in the domestic law of Luxembourg.

The Commission contests those arguments.

It must be observed in that regard that, as a subsidiary point, in Section 7.2.4 of the contested decision, entitled ‘Subsidiary line of reasoning: Selective advantage due to a derogation from Article 164 [of the Tax Code] and/or the Circular’ (recitals 315 to 317 of the contested decision), the Commission found that the tax ruling at issue conferred an advantage on FFT on the ground that it derogated from the arm's length principle under Luxembourg law, provided for in Article 164(3) of the Tax Code and in the Circular (see recitals 316 and 317 of the contested decision).

In recital 316 of the contested decision, the Commission stated the following:

Next, in recital 317 of the contested decision, the Commission recalled that it had already demonstrated, in the context of Section 7.2.2 of that decision, that the tax ruling at issue did not enable a reliable approximation of an arm's length outcome to be achieved. On the basis of that finding, it concluded that the tax ruling at issue ‘also [gave] rise to a selective advantage under the more limited reference system of Article 164(3) [of the Tax Code] or the Circular, since it [resulted] in a lowering of FFT's tax liability as compared to the situation where the arm's length principle laid down in that provision had been properly applied’.

It is clear from recitals 316 and 317 of the contested decision that the Commission concluded that the tax ruling at issue conferred a selective advantage on FFT, since it resulted in a lowering of the tax liability as compared to the situation where the arm's length principle laid down by Article 164(3) of the Tax Code and in the Circular had been properly applied.

It must be noted that the Commission based that conclusion on the examination of the tax ruling at issue which it undertook in the context of its principal analysis. It thus confirmed that it had already demonstrated, in Section 7.2.2 of the contested decision, that the tax ruling at issue did not enable a reliable approximation of an arm's length outcome to be achieved.

In that regard, first, it must be noted that Article 164(3) of the Tax Code provides that ‘taxable income comprises hidden profit distributions’ and that ‘a hidden profit distribution arises in particular when a shareholder, a stockholder or an interested party receives either directly or indirectly benefits from a company or an association which he normally would not have received if he had not been a shareholder, a stockholder or an interested party’. In addition, the Circular states, in Section 2, that ‘where an intra-group service has been rendered, as with other types of intra-group transfers, one should ascertain whether an arm's length price is charged for such service, i.e. a price corresponding to the price which would have been charged and agreed to by independent enterprises in comparable circumstances’. It follows that Article 164(3) of the Tax Code and the Circular provide that the remuneration for intra-group transactions must be determined as though the price of those transactions had been agreed between stand-alone undertakings. The Grand Duchy of Luxembourg and FFT do not, moreover, dispute the Commission's assessment, in recital 75 of the contested decision, that those provisions establish the arm's length principle under Luxembourg law.

Second, it must be noted that the Circular refers to Article 9 of the OECD Model Tax Convention and to the OECD Guidelines as the international benchmark for transfer pricing purposes. In its principal analysis of the selective advantage, the Commission largely referred to the OECD Guidelines, notably in identifying the five errors in the methodology for determining FFT's remuneration. It follows that the same analytical framework could be used by the Commission both in its principal analysis and in its subsidiary analysis.

Accordingly, in the circumstances of the present case, it must be concluded that the Commission did not make an error in considering itself entitled to transpose the analysis undertaken in the light of the arm's length principle as described in the contested decision, entailing the determination of FFT's remuneration, in order to conclude that the tax ruling at issue conferred an advantage on FFT because FFT had paid less tax than it would have had to pay under Article 164(3) of the Tax Code and the Circular.

The arguments of the Grand Duchy of Luxembourg that the tax ruling at issue complies with Luxembourg law cannot call into question the finding in paragraph 297 above. Those arguments have already been rejected in paragraphs 226 and 227 above.

It follows from all of these findings that the Commission was fully entitled to consider that, in any event, the tax ruling at issue conferred a selective advantage on FFT because it resulted in a lowering of FFT's tax liability as compared to the tax it would have had to pay under Article 164(3) of the Tax Code and the Circular.

The Grand Duchy of Luxembourg and FFT claim, in essence, that the Commission has not demonstrated that there is an advantage at the level of the Fiat/Chrysler group and has thus infringed its obligation to state reasons as provided for in Article 296 TFEU and also Article 107 TFEU.

Specifically, the Grand Duchy of Luxembourg contends that the statement of reasons for the contested decision is manifestly deficient and contradictory in that the Commission refused, in recital 314 of that decision, to take account of its effects at the level of the Fiat/Chrysler group, whilst simultaneously relying on the effects of that advantage in designating that group, in recitals 342 and 344 of the decision, the beneficiary of the alleged aid at issue.

The Grand Duchy of Luxembourg maintains that, unlike the facts in the case giving rise to the order of 31 August 2010, France Télécom v Commission (C-81/10 P, not published, EU:C:2010:475, paragraph 43), any charges borne by the other subsidiaries, such as higher taxation, are not ‘unconnected’ with the advantage that FFT allegedly obtained. Moreover, it relies on the judgment of 17 December 2015, Spain and Others v Commission (T-515/13 and T-719/13, EU:T:2015:1004, paragraphs 115 and 116), in criticising the Commission for having failed to investigate or to explain how the Fiat/Chrysler group had actually been given an advantage.

For its part, FFT claims that the Commission misapplied Article 107 TFEU by ignoring the effect of the tax ruling at issue on the Fiat/Chrysler group as a whole when determining whether FFT and the Fiat/Chrysler group had benefited from an advantage.

First, FFT observes that, in recital 155 of Commission Decision 2011/276/EU of 26 May 2010 concerning State aid in the form of a tax settlement agreement implemented by Belgium in favour of Umicore SA (formerly Union Minière SA) (State aid C 76/03 (ex NN 69/03)) (OJ 2011 L 122, p. 76, ‘the Umicore decision’), the Commission recognised that national tax authorities had to have a margin of appreciation in the assessment of transfer pricing. The alleged advantage to FFT is, in its submission, not out of proportion and is only a consequence of that margin of appreciation.

Second, FFT observes that, in recital 314 of the contested decision, the Commission wrongly considered it unnecessary to examine whether the impact of the tax ruling at issue was neutral at group level. FFT thus submits that, even if the transactions between FFT and another group company had given it a higher profit margin in Luxembourg, that would have meant that the other company of the Fiat/Chrysler group would have been entitled to a correspondingly higher deductible interest expense.

Furthermore, FFT maintains that the contested decision is contradictory in that the Commission, on the one hand, concludes that the tax advantage benefits the whole group and, on the other, refuses to take into consideration the effect of the measure on the whole group. FFT claims that, in the present case, unlike the facts in the case giving rise to the judgment of 30 November 2009, France and France Télécom v Commission (T-427/04 and T-17/05, EU:T:2009:474), the effects of the measure are neutralised at group level, and that therefore there is no advantage.

In addition, FFT submits that the seven judgments to which the Commission refers are no authority for the latter's position that it is not obliged to review the existence of an advantage at the level of the Fiat/Chrysler group.

In that regard, FFT notes that the importance of the effect on the Fiat/Chrysler group when determining whether the tax ruling at issue conferred an advantage is illustrated by the difficulties faced by that group, since the Italian tax administration found that FFT's taxable profit was too high to be considered arm's length. Consequently, FFT had overstated its taxable profit and paid too much corporate income tax in Luxembourg.

Last, as regards the various methodological points, FFT submits that the Commission should have applied a proportionality test when determining whether the tax ruling at issue conferred an advantage on it. Furthermore, FFT states that it fully supports the arguments of the Grand Duchy of Luxembourg, in Case T-755/15, concerning the methodology for determining its remuneration and challenging the errors identified by the Commission.

The Commission contests those arguments.

As a preliminary point, it must be stated that the Grand Duchy of Luxembourg does not make any distinction between the arguments it puts forward, whether to establish the existence of an infringement of Article 107 TFEU or of a failure to state reasons in that regard. However, it must be noted that, in essence, its arguments are intended to establish, on the one hand, a failure to state reasons, in so far as there is allegedly an inconsistency in the contested decision, and, on the other hand, an infringement of Article 107 TFEU in so far as, in its view and according to FFT, the Commission was not entitled to conclude that FFT and the Fiat/Chrysler group had been given an advantage.

As regards, in the first place, the alleged inconsistency of the contested decision, it should be noted that, in recital 314 of the contested decision, the Commission concluded, in essence, that FFT had received a selective advantage in so far as its tax burden in Luxembourg had been lowered. In that regard, the Commission also noted in that recital that, according to the case-law, the fact that that lowering of the tax in Luxembourg had led to a greater tax burden in another Member State would have no bearing on the categorisation of that measure as aid.

Moreover, in recitals 341 to 345 of the contested decision, the Commission found that, while the tax ruling at issue granted a selective advantage to FFT within the meaning of Article 107(1) TFEU, the favourable tax treatment afforded to FFT would benefit that group as a whole, since FFT and the Fiat/Chrysler group formed an economic unit. The Commission made clear in that respect that, since the amount of tax paid by FFT influenced the pricing conditions of the intra-group loans granted by it to the companies of that group, reductions of FFT's tax liability reduced the pricing conditions of its intra-group loans.

It must therefore be held — as regards the requirement that there be an advantage, which is the third prerequisite for a finding of State aid according to the case-law cited in paragraph 118 above — that there is no inconsistency in the Commission's assessments in the contested decision with regard to determining the beneficiary of the aid, who is identified, in essence, as being FFT, directly, and the Fiat/Chrysler group, indirectly, inasmuch as FFT forms an economic unit and, therefore, an undertaking, for the purposes of the law on State aid, with the Fiat/Chrysler group.

That first complaint of the Grand Duchy of Luxembourg, alleging a failure to state reasons, must therefore be rejected as unfounded.

As regards the complaint that the Commission infringed Article 107 TFEU by finding that FFT and the Fiat/Chrysler group had been given an advantage, it must be stated at the outset that, as the Commission indicates, the Grand Duchy of Luxembourg has not put forward any argument to establish that the Fiat/Chrysler group and FFT do not constitute an economic unit for the purposes of State aid law. In any event, as the Commission pointed out in recital 342 of the contested decision, FFT is fully controlled by Fiat SpA, which in turn controls the Fiat/Chrysler group. Therefore, any advantage that would benefit FFT would benefit that group as a whole, in particular if it involves, as the Commission observes, without being contradicted in that respect by the Grand Duchy of Luxembourg, conditions of loans granted by FFT to other group companies that are more advantageous because of the lowering of FFT's tax burden.

In addition, and in any event, assuming that that factor may be relevant, it must be noted that neither the Grand Duchy of Luxembourg nor FFT has established that the tax reductions from which FFT benefits in Luxembourg are ‘neutralised’ by higher taxes in other Member States.

Furthermore, even if that were the case, such ‘neutralisation’ would not permit the inference that FFT or the Fiat/Chrysler group had not benefited from an advantage in Luxembourg. It must be noted that, in the context of a tax measure, the existence of an advantage is determined by reference to normal taxation rules, so that the tax rules of another Member State are not relevant (see, by analogy, judgment of 11 November 2004, Spain v Commission, C-73/03, not published, EU:C:2004:711, paragraph 28). Consequently, where it has been established that an integrated undertaking benefits, under a tax measure granted by a Member State, from a reduction of the tax burden that it would otherwise have had to bear in accordance with the normal rules of taxation, the tax situation of another undertaking of the same group in another Member State has no bearing on the existence of an advantage. For the same reason, and without it being necessary to rule on the admissibility of the documents lodged by FFT following the reply to show that an arbitration procedure had been initiated to avoid double taxation of FFT in Luxembourg and in Italy, the Court must reject as unfounded FFT's argument that, in essence, in any event, its income is taxed either in Italy or in Luxembourg, so that it does not benefit from an advantage.

None of the arguments which the Grand Duchy of Luxembourg and FFT advance in that respect can call that finding into question.

First, in so far as the Grand Duchy of Luxembourg claims that the Commission could not refer to the order of 31 August 2010, France Télécom v Commission (C-81/10 P, not published, EU:C:2010:475, paragraph 43), since it did not investigate whether the Fiat/Chrysler group had actually benefited from an advantage, that argument must be rejected as unfounded. Suffice it to note in that regard that, in recital 343 of the contested decision, the Commission found that any favourable tax treatment afforded to FFT necessarily benefited the other group companies in respect of which it charged transfer prices.

Second, in so far as the Grand Duchy of Luxembourg relies on the judgment of 17 December 2015, Spain and Others v Commission (T-515/13 and T-719/13, EU:T:2015:1004, paragraphs 115 and 116), in order to establish that the Commission should have investigated whether the Fiat/Chrysler group actually benefited from an advantage, it must be pointed out not only that that judgment has been set aside by the Court of Justice (judgment of 25 July 2018, Commission v Spain and Others, C-128/16 P, EU:C:2018:591), but that the facts in the case that gave rise to that judgment are, in all events, unconnected with the facts of the present case.

In the judgment of 17 December 2015, Spain and Others v Commission (T-515/13 and T-719/13, EU:T:2015:1004), the General Court held that the Commission had made an error in finding that the beneficiaries of aid were Economic Interest Groupings (EIG) and their members, when it could not be established that their members, who were the only entities referred to by the recovery order, benefited from selective advantages.

In the present case, the Commission has established to the requisite legal standard that not only FFT but also all the companies forming part of the group and dealing with FFT would benefit from the tax advantage granted by FFT, in view of its impact on the pricing conditions of its intra-group loans. That argument of the Grand Duchy of Luxembourg must therefore be rejected as unfounded.

Third, in so far as FFT takes the view that the Commission should have applied a proportionality test to determine whether the tax ruling at issue conferred an advantage, notably in the light of the Umicore decision, that argument must be rejected as unfounded. First, it must be borne in mind that the Commission is not bound by its previous practice in taking decisions. Second, as it points out in the Umicore decision, the Commission recognised that the tax authorities have a discretion in the context of a transaction bringing an end to a dispute, thereby avoiding potentially long or uncertain litigation, but not in the context of a tax ruling to determine the tax which a company should pay in the future.

It follows from all of the foregoing that the third plea must be rejected as unfounded.

Accordingly, in the light of the considerations set out in paragraphs 118 to 325 above, it must be held that the Commission did not infringe Article 107 TFEU by finding that FFT and the Fiat/Chrysler group had benefited from an advantage as a result of the fact that FFT had paid less tax than that which an undertaking transacting on the market would have had to pay.

In those circumstances, the second series of pleas raised by the Grand Duchy of Luxembourg and FFT, relating to the existence of an advantage, must be rejected in its entirety.

The Grand Duchy of Luxembourg contends that the Commission breached the principle of legal certainty and Article 16(1) of Regulation 2015/1589 in ordering the recovery of the alleged aid at issue.

Ireland states that it shares the Grand Duchy of Luxembourg's view that the Commission breached the principle of legal certainty.

The Commission contests those arguments.

It should be noted that Article 16(1) of Regulation 2015/1589 provides as follows:

In the contested decision, first of all, the Commission indicated that, under Article 16(1) of Regulation 2015/1589, it was obliged to order recovery of unlawful and incompatible aid, unless recovery would be contrary to a general principle of law (recitals 354 and 355 of the contested decision). The Commission went on to find that the arguments of the Grand Duchy of Luxembourg to the effect that recovery would breach the principles of protection of legitimate expectations and of legal certainty were without merit (recital 364 of the contested decision). First, with regard to the protection of legitimate expectations, it observes that it did not give any precise assurance to the Grand Duchy of Luxembourg or to FFT (recitals 356 to 358 of the contested decision). Second, with regard to breach of the principle of legal certainty, it states that there is no previous decision-making practice that might have created uncertainty about the fact that tax rulings could lead to the granting of State aid. Moreover, and in particular, the Commission recalls that, according to the case-law, it is not required to state the exact amount of the aid to be recovered (recitals 360 to 363 of the contested decision).

According to the case-law, the principle of legal certainty, which is a general principle of EU law, requires that legal rules be clear and precise and aims to ensure that situations and legal relationships governed by EU law remain foreseeable (judgment of 15 February 1996, Duff and Others v Commission, C-63/93, EU:C:1996:51, paragraph 20).

In the present case, first, inasmuch as the Grand Duchy of Luxembourg maintains that, in accordance with Article 16(1) of Regulation 2015/1589, recovery should not be ordered as it would breach the principle of legal certainty, it must be noted that the legal rule that led to the adoption of the contested decision — that is Article 107 TFEU, and the four conditions for a finding of such aid, which are recalled in paragraph 118 above — is clear and precise.

In that regard, it must be borne in mind that the concept of State aid is defined on the basis of the effects of the measure on the competitive position of its beneficiary (see, to that effect, judgment of 22 December 2008, British Aggregates v Commission, C-487/06 P, EU:C:2008:757, paragraph 87). It follows from this that Article 107 TFEU prohibits any aid measure, irrespective of its form or the legislative means used to grant such aid (see, to that effect, judgment of 21 December 2016, Commission v World Duty Free Group and Others, C-20/15 P and C-21/15 P, EU:C:2016:981, paragraph 79).

Accordingly there is no doubt that any State measure, such as a tax ruling, that fulfils the conditions referred to in Article 107 TFEU is, in principle, prohibited and must be made the subject of a recovery order.

Second and in any event, it must be noted that, as the Commission has observed, there was no objective fact on the basis of which the Grand Duchy of Luxembourg or FFT were entitled to conclude that the Commission would not apply Article 107 TFEU to tax rulings. First, it is evident from the Commission's practice in taking decisions, to which it refers in footnote 71 of the contested decision and the validity of which is not disputed by the Grand Duchy of Luxembourg, that the Commission has previously examined the compatibility of tax rulings with Article 107 TFEU. Second, the Grand Duchy of Luxembourg does not dispute that the Commission has already examined individual tax measures and has used the arm's length principle to order the recovery of aid.

In those circumstances, the application alone of Article 107 TFEU to the tax ruling at issue does not constitute a breach of the principle of legal certainty. Accordingly, it is not possible properly to rely upon any breach of that principle in order to justify non-recovery of the aid resulting from the tax ruling at issue, pursuant to Article 16(1) of Regulation 2015/1589.

The other arguments put forward by the Grand Duchy of Luxembourg and Ireland are not persuasive.

First of all, inasmuch as the Grand Duchy of Luxembourg maintains that the framework used by the Commission to analyse FFT's tax base was not sufficiently foreseeable, that it is necessary to display flexibility in not requiring an unrealistic level of precision and that it cannot be concluded that there was bad faith, it should be recalled that the Member States have a margin of appreciation in determining transfer pricing, and that it is only if the Commission finds an error in the determination of that pricing, which is such that that transfer pricing does not represent a reliable approximation of a market-based outcome, that it is entitled to identify an aid measure (see paragraph 204 above). In the present case, the Court has found that the Commission was fully entitled to conclude that the Grand Duchy of Luxembourg had endorsed, by the tax ruling at issue, errors in the methodology for determining FFT's remuneration the effect of which was that the transfer price did not reflect the prices that would have been negotiated under market conditions. In those circumstances, it cannot be concluded that the Commission required an unrealistic level of precision, or that its analytical framework is unforeseeable. The Grand Duchy of Luxembourg cannot therefore properly claim that it was not foreseeable that the Commission would make a finding of aid and order its recovery.

Next, in so far as the Grand Duchy of Luxembourg submits that its tax ruling practice was compatible with the Code of Conduct in relation to business taxation and the OECD Guidelines, it is sufficient to note that the Commission found that, by the tax ruling at issue, which was not notified to it, the Grand Duchy of Luxembourg had granted State aid that was incompatible with the internal market within the meaning of Article 107 TFEU. In so doing, the Commission did not call into question the tax ruling practice as such. Moreover, the existence of State aid is examined in the light of the criteria laid down in Article 107 TFEU. In those circumstances, the fact that transfer pricing texts — which are not binding on the Commission — have been approved by the Council of the European Union or by the OECD has no bearing on the finding that the tax ruling at issue grants a selective advantage to FFT.

In addition, the Grand Duchy of Luxembourg and Ireland maintain that the application of the principle of legal certainty may require the retroactive effect of an act to be limited if there are serious economic risks and if the interested parties are acting in good faith, conditions that are met in the present case. In so far as the Grand Duchy of Luxembourg raises that argument in order to challenge the recovery of the aid at issue, it is sufficient to recall that an order for recovery does not constitute the retroactive implementation of an act. Removing unlawful aid by means of recovery is the logical consequence of a finding that it is unlawful and seeks to re-establish the previous situation (judgment of 19 October 2005, CDA Datenträger Albrechts v Commission, T-324/00, EU:T:2005:364, paragraph 77 and the case-law cited).

In any event, in so far as the Grand Duchy of Luxembourg submits that the contested decision would have serious economic repercussions or cause serious difficulties for it and for other Member States, as has been observed in particular by representatives of the United States of America, it must be noted that Article 16(1) of Regulation 2015/1589 does not provide for aid that has been declared incompatible to be unrecoverable for that reason. Moreover, none of the arguments raised by the Grand Duchy of Luxembourg establishes that such serious economic repercussions exist. It is clear that the recovery of the aid at issue cannot, as such, have negative economic effects for the Grand Duchy of Luxembourg, since the sums recovered are allocated to its public finances. Further, contrary to what the Grand Duchy of Luxembourg seems to contend, as such, recovery from FFT of the aid received by FFT pursuant to the tax ruling at issue cannot have the direct effect of possibly ‘calling into question a very large number of tax rulings in the Grand Duchy of Luxembourg and potentially thousands in all the other Member States’. The mere fact that the Commission has called into question a tax ruling that grants a selective advantage to an undertaking means only that that tax ruling, issued contrary to Article 107 TFEU, will be subject to recovery, but not that all tax rulings, including those that do not constitute State aid, will be subject to recovery.

Therefore, the contested decision cannot be considered to have novel or serious consequences for international taxation, as the Commission has always had the power to investigate whether any tax measure constitutes State aid within the meaning of Article 107 TFEU.

Last, in so far as Ireland submits, in essence, that the Commission could not suggest, as it did in the contested decision, that if the Commission does not identify the amount of aid, the Member State is to contact it to determine the amount, suffice it to note that, in the present case, the Grand Duchy of Luxembourg has neither claimed nor established that the Commission's findings, in recital 311 of the contested decision, with respect to the methodology for calculating the tax payable by FFT were so imprecise that it would have been impossible to calculate the amount of aid received without contacting the Commission, and thus that the contested decision created a legal uncertainty. On the contrary, the Grand Duchy of Luxembourg acknowledges having estimated the amount of the aid to be recovered as EUR 23.1 million. That argument must therefore be rejected as unfounded.

In the light of the above, the first part of the series of pleas concerning recovery must be rejected as unfounded.

The Grand Duchy of Luxembourg submits that, in accordance with the Commission's practice in taking decisions, where the amount of the aid cannot be assessed, it is not appropriate to order recovery. Where it is not possible to quantify the aid precisely, or to identify criteria by which a Member State, in conjunction with the Commission, could quantify it precisely, the Member State's rights of defence are infringed, precluding recovery.

In that regard, the Grand Duchy of Luxembourg states that it has admittedly required the beneficiary of the alleged aid to pay an amount into an escrow account. That amount was calculated according to the information given by the Commission in recital 311 of the contested decision, and it was made clear that that calculation was without prejudice to the challenge to the Commission's methodology. However, the Grand Duchy of Luxembourg considers that that calculation is completely artificial in that it would be impossible to quantify the alleged aid precisely, ‘without resorting to the Commission's entirely arbitrary assessments in this case’. It maintains that there is not, in essence, one correct transfer price, according to the OECD and the Commission, but a broad range of correct prices. Further, the Grand Duchy of Luxembourg submits that it has no real flexibility to deviate from the methodology proposed by the Commission in the contested decision.

The Commission contests those arguments.

In the contested decision, the Commission found first of all in recital 367 that, according to the case-law, although EU law does not require the exact amount of the aid to be recovered to be quantified, it is sufficient for the Commission's decision to include information enabling the addressee of the decision to work out that amount itself without overmuch difficulty. The Commission went on to explain that it had identified, in recital 311 of the contested decision, a methodology for eliminating the selective advantage granted to FFT if the Grand Duchy of Luxembourg chose to use the TNMM, while also mentioning that the Grand Duchy of Luxembourg could use an alternative method within the deadline for the implementation of the decision (recitals 367 to 369 of the contested decision).

In the present case, first, it must be noted that the Grand Duchy of Luxembourg does not dispute the Commission's assessment that it is apparent from the judgment of 18 October 2007, Commission v France (C-441/06, EU:C:2007:616, paragraph 29 and the case-law cited), that a Commission decision does not necessarily have to indicate the amount of aid to be recovered if it includes information enabling the Member State to work out that amount itself without overmuch difficulty.

Second, the Grand Duchy of Luxembourg does not claim that, in the present case, the contested decision failed to provide information enabling it to work out the amount to be recovered itself. It thus acknowledges having calculated and assessed that amount as EUR 23.1 million, for the purpose of its recovery from FFT. Moreover, far from considering the Commission's method of calculation to be imprecise, it merely submits, in essence, that that method does not give it ‘real flexibility to deviate from the Commission's dogmatic approach’. In so doing, the Grand Duchy of Luxembourg recognises, at least implicitly, that that method is sufficiently precise to enable it to calculate the amount of aid to be recovered.

In those circumstances, the Commission cannot be accused of having infringed the rights of defence of the Grand Duchy of Luxembourg by failing to indicate the amount of aid to be recovered in the contested decision.

None of the arguments advanced by the Grand Duchy of Luxembourg is liable to undermine that conclusion.

First, in so far as the Grand Duchy of Luxembourg submits that the fact that it asked FFT to pay an amount of EUR 23.1 million into an escrow account is without prejudice to the fact that it challenges the Commission's method of calculation, that argument must be rejected as ineffective. The Grand Duchy of Luxembourg has not established that the contested decision is insufficiently precise to the extent that it is unable to determine the amount that must be recovered. It merely challenges the methodology used by the Commission for the purposes of calculating the amount of aid to be recovered, which it describes as arbitrary. The question as to whether or not the methodology is correct is unconnected with infringement of the rights of the defence, to which the second part of the fifth series of pleas relates.

Next, in so far as the Grand Duchy of Luxembourg maintains that, by identifying a ‘broad range’ of possible amounts, the contested decision fails to comply with the requirement that the amount of the aid be identified relatively precisely, it is sufficient to note that, by identifying a method which was followed by the Grand Duchy of Luxembourg, the Commission satisfied the condition set out in the case-law mentioned in paragraph 423 above, according to which the method must enable the amount to be recovered to be determined without difficulty. Moreover, the range proposed by the Commission does not relate to the amount of aid to be recovered but to the amount it considers appropriate for FFT's tax base. That information is sufficiently precise to enable the Grand Duchy of Luxembourg to calculate the amount of aid to be recovered. Furthermore, the fact that the Commission confirmed that other methods could have resulted in other amounts and that it provided an opportunity to propose an alternative method for calculating the amount to be recovered does not affect the fact that the contested decision contains sufficiently precise information regarding recovery, nor in itself prevent recovery of the aid.

In those circumstances, the second part of the fifth series of pleas relating to recovery, and this series as a whole, must be rejected as unfounded.

It follows from all of the above considerations that the actions in Cases T-755/15 and T-759/15 must be dismissed.