On 14 July 2021, the General Court in case T-648/19 dismissed the appeal of Nike European Operations Netherlands BV (“Nike”) and Converse Netherlands BV (“Converse”), against the decision of the European Commission to initiate a formal investigation into the alleged State aid granted by the Netherlands to Nike in the form of tax rulings and more specifically advance pricing agreements (“APA”). Although such a decision is a challengeable act as it is liable to entail independent legal effects, this judgment shows that the provisional nature of such a decision to open the formal investigation makes it very difficult to challenge its findings successfully.
Indeed, with regard to the obligation of the Commission to state reasons, the General Court noted that the Commission’s assessment of the measures at issue is not definitive and may evolve during the formal procedure for obtaining additional information from the Netherlands and interested parties. Consequently, the Court concluded that the applicants cannot complain that the Commission’s reasoning as regards the individual character of the measures at issue was incomplete. The contested decision contains a clear and unequivocal statement of reasons in that respect.
In the same spirit, the General Court also set aside criticism from Nike and Converse that the facts on which the contested decision is based should have led the Commission to investigate as a priority the existence of an aid scheme. The Court noted that the Commission is entitled to treat a measure as being individual aid without being obliged to verify beforehand and as a matter of priority whether that measure may have been derived from such a scheme.
Also with regard to the criticism of the applicants that the Commission made the incorrect principal assumption that the measures at issue were selective, the General Court again emphasised that, given that at the preliminary stage of investigation the Commission cannot be certain that the criteria of Article 107(1) TFEU are satisfied, the Commission was entitled, in the contested decision, to presume, provisionally, that the measures at issue were selective. Not surprisingly, the General Court also concluded that the preliminary examination does not require the Commission to conduct a thorough examination, the latter being carried out with regard to measures for which the assessment raises serious difficulties, once the formal investigation procedure is initiated.
Another interesting argument raised by Nike and Converse was that the Commission should have compared their tax treatment with that of other companies subject to the same rules in order to check whether the applicants received special treatment. Here too, however, they failed to convince the General Court, which ruled that a comparison has to be made between the actual APA and a hypothetical one under market conditions, not between the APA and those of other companies receiving similar treatment.
In line with the above, Nike and Converse had also argued that the Commission breached the principles of good administration and equal treatment by arbitrarily choosing to investigate whether the measures at issue complied with State aid law and not extending its analysis to the general scheme on which the measures at issue were based and its potential beneficiaries. The General Court did not accept this argument. According to the Court, the fact that the Commission chose to review, as a priority, only the compliance of the measures at issue with State aid law, without extending its examination to include the possible existence of any aid scheme of which other undertakings might be beneficiaries, does not entail a breach of the principle of equal treatment. In other words, the Commission remains free to determine those State measures, whether individual or constituting an aid scheme, which it wishes to examine. With regard to other undertakings possibly benefiting from measures similar to those at issue in the present case, the Court noted that under Article 107 TFEU, a beneficiary of aid cannot have the right to maintain its advantage merely because other undertakings are also liable to benefit. The purpose of this is to preserve the practical effect of State aid law.
Please contact Pierre de Bandt or Jeroen Dewispelaere for further information about this case and/or for general legal advice relating to State aid law.