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Spanish shipbuilders

General Court of EU considers former 'tax lease' to be lawful

Thursday 17 December 2015

The General Court of the European Union considers that the Spanish Tax Lease System (STLS) is lawful and does not constitute State aid, as ruled by the European Commission.

In a ruling made public today, the General Court of the European Union thus upheld the appeal by the Government of Spain which defended from the outset that the STLS was not of a selective nature, given that all taxpayers in Spain that carry on an economic activity and invest in this type of operation may be beneficiaries of the system.

The former tax lease system

The former tax lease system came into operation in Spain back in 2002. Under this system, 273 operations were carried out for a sum of 8.73 billion euros. This system allowed Spanish shipbuilders to compete in the international market under the same conditions as their competitors, including Dutch shipbuilders, which had similar systems in their own countries.

It was precisely as a result of the continuous complaints filed before the European Commission by Dutch shipbuilders - the main competitors of Spanish shipbuilders - that on 29 June 2011, the European Commission notified Spain of the start of a formal investigation procedure of the STLS.

From the start of the investigation procedure back in 2011, a situation of mistrust and uncertainty arose regarding the Spanish sector which led to the immediate paralysation of the commissioning of new vessels by Spanish shipbuilders

By means of a Decision on 17 July 2013, the European Commission ruled that the STLS constituted a form of State aid that was incompatible with the internal market of the EU and ordered Spain to recover the State aid from investors that had benefitted through this system in operations authorised from 30 April 2007 to 29 June 2011.

More than 60 appeals were lodged against this Decision by a wide range of agents, including investors, financial institutions, the Kingdom of Spain and PYMAR (Development Company of Small- and Medium-sized Spanish Shipbuilders).

Ruling of 17 December

As a result of the ruling made public on 17 December, the General Court of the European Union overturned the Decision of the European Commission. Furthermore, as a result of this ruling, the order to recover the alleged aid granted through the STLS, a process that required complex calculations to determine the specific aid granted which was deemed to be incompatible, and which the Spanish Tax Agency had initiated in strict compliance with the aforesaid Decision, was also ruled to be null and void. However, there is no record that, to date, any of these procedures requiring specific returns to any investor has concluded.

The ruling, which likewise orders the European Commission to pay the costs of the proceedings, is enforceable from the moment it was made public, and hence the annulment of the Decision enjoys immediate effects as from this date, and can only be appealed against before the Court of Justice of the European Union within a term of two months, which may be extended by 10 days due to the distances involved.