The aid measure concerned comprises provision 12(5) of Law 43/1995 of 27 December 1995 on corporation tax (BOE No 310 of 28 December 1995, p. 37072) which provides that the acquisition of a shareholding in a company not established in Spain could, under certain conditions, result in financial goodwill that was capable of being amortised for up to 20 years, thereby reducing the acquiring company’s tax burden. Those special conditions include the acquisition of a shareholding in a foreign company of at least 5 % and its retainment without interruption for at least one year. In conjunction with that, the Spanish tax law system does not allow the respective goodwill resulting from the participation in a company established in Spain to be deducted in such a way, with the only exemption to that being the eligibility of the amortization where undertakings are grouped together. By decisions of the European Commission (Decicion 2011/5/EC and 2011/282/EU), the aid scheme put in place by the Spanish authorities was found to be incompatible with the internal market and Spain was asked to recover the amounts of the aid. With the present judgment of the General Court of the European Union those two Commission decisions were finally overturned. The General Court followed a different line of reasoning and concluded that the Commission’s analysis on the selectivity of the tax benefit at issue was erroneous. As a result of the final holding of the judgment, there seems to be preferred a more restricted scope of selectivity by the EU courts against the explicit will of the European Commission to confirm selectivity more easily, but based on rather adequate and sound argumentation.
What the General Court asserted
One of the most important points the General Court made in deciding those twin cases is that the provision of a derogation or the enactment of an exemption clause to the general tax system of a Member State does not in itself amount to a state aid measure capable of favouring ‘certain undertakings or the production of certain goods’ so long as that measure is available, a priori, to any undertaking. The General Court shows an unreserved adherence to the letter of State aid rules by supporting that the Spanish tax regime is not planned to offer an advantage to any particular category of undertakings or the production of certain goods, but instead it attempts to regulate certain economic transactions. Thus, the Court resulted that the application of the aid measure was virtually applicable to all Spanish undertakings because its scope was not contingent upon the beneficiaries’ kind of business or activities. It also underpinned the above conclusion by further referring to the absence of any kind of threshold regarding the quantification of the 5% shareholding which, if existent, would allegedly bring the tax relief at hand more closely to the ambit of selectivity. But this statement leads to controversial and unsatisfactory results from a State aid view as it will be described in the following lines. Finally, the Court disagrees with the overall analysis followed by the Commission and sustains that it would lead to the absurd outcome of characterizing any fiscal exemption, requiring certain conditions to be met before granting a tax relief, as selective, even though the beneficiary undertakings would not share any specific characteristics distinguishing them from the rest of undertakings, except for their shared but incidental ability to satisfy certain conditions to which the grant of the aid is subject.
What the Commission asserted
The main point of difference between the Court’s judgment and the Commission’s decision lies in the definition of the expression “favouring certain undertakings or the production of certain goods” which introduces the selectivity requirement into the assessment of state aid measures at large. The Commission in its decision found that the there is concrete case law precedent which serves as a clear parallel between the case at hand and the circumstances which led to the Court judgment C-501/00 Spain v Commission of 15 July 2004. In relation to the latter case, it further argued that despite the arguments put forward by the Spanish authorities that the measure at issue was not selective because it applied to all Spanish undertakings that invest internationally, the Court concluded that the measure constituted State aid since it was limited to one category of undertakings, namely undertakings making certain international investments. According to the Commission, this same reasoning can be applied to Article 12(5) TRLIS. The selectivity of Article 12(5) TRLIS is therefore due to the fact that only companies acquiring shareholdings in foreign companies are eligible for this provision. Moreover, the Commission correctly stresses that only enterprises of a certain size and financial strength with multinational operations can benefit from Article 12(5) TRLIS, irrespective of the fact that the percentage of 5% shareholding was not quantified at all with the aid measure. Consequently, the 5% quota obviously favours only companies that perform multinational operations. The Commission also pertinently noted that only companies having their seat in Spain with a significant Spanish tax base can in practice benefit from it (goodwill amortization), since the potential benefit is linked to the size of the Spanish operation rather than of the acquisition. Although Article 12(5) TRLIS is drafted to apply to all operators established in Spain, in practice only a limited and identifiable number of companies with a Spanish tax base, which make foreign acquisitions in the relevant tax year and have a sizeable tax base against which to offset the financial goodwill deduction, can benefit from the application of the measure on an annual basis. This is a very useful and telling observation made by the Commission which went uncommented by the General Court’s judgment. It could be claimed that the amortization benefit could be found to be selective in nature given that in practice it was open only to certain (or fewer) undertakings than the ones to which it could potentially apply, thereby endorsing the well-established principle that a measure can be held to be selective if its application is narrower than the scope of the objective it seeks to achieve.
Reflections on selectivity
The judgment at hand gives room for useful reflections on the evaluation of the selectivity criterion. The way of interpreting the expression “certain undertakings or the production of certain goods” is more than crucial to establish legal certainty in State aid control in general. On one part we have the majority of case law admitting that “certain undertakings” means a certain category of undertakings which can be defined according to an organizational or sectoral test which restricts itself only to typical categorization of beneficiaries according to their specific traits. However, the decisional practice of both the Commission and EU courts has also found state aid measures to be selective on different terms than mere sectoral or organizational criteria. The Commission considered in a past decision involving a tax state aid measure that the measure was selective because it favoured only the companies performing specific business activities indicated by the Greek law. In conjunction with that, there is judgment C-501/00 which found that undertakings making certain international investments comprise a separate and distinct category of undertakings as beneficiaries of an advantage granted to them, thereby fulfilling the requirements of article 107 TFEU. In another interesting case, the Court also deviated from a strict organizational approach and ruled that the selectivity criterion is also satisfied provided that the aid measure (tax base reduction) benefits solely newly-established firms which satisfy various other special conditions regardless of the type of their activities. Moreover, it was also held that the application of a tax measure (e.g. a tax credit) only to investments exceeding a certain threshold may mean that the measure is de facto reserved for undertakings with significant financial resources [Joined Cases T-92/00 and T-103/00 Ramondin SA and Ramondín Cápsulas SA v
Commission  ECR II-1385, paragraph 39]. Case law further favours a resilience treatment of selectivity. It prescribes in numerous cases that neither the very large number of undertakings nor the diversity and size of a business sector is adequate to qualify a measure as general and also suggests that when the category of aid recipients is particularly wide and diverse, it is sometimes more expedient to adopt as the decisive factor for determining whether the measure is selective the delineation of excluded companies rather than the beneficiaries. Furthermore, to claim that the Spanish contested measure, in our case the goodwill amortization benefit, does not apply to or is not aimed at any particular category of undertakings or an individual business sector but on the contrary was only limited to a category of economic transactions is at least a poorly stated contention. All legal uncertainty surrounding the notion of selectivity results from its narrow interpretation in combination with a similarly insufficient analysis on whether and when a measure should be classified as a general measure. The concepts of selectivity and that of a general measure should be seen as inextricably connected and should always comprise two interdependent parts of a single legal analysis in State aid cases. The Court noted that because the Spanish regime does not exclude, a priori, any category of undertakings from benefiting themselves -since its application is independent of the nature of an undertaking’s activity- the tax exemption is not selective but on the contrary was a general measure. In other words the Court held that the goodwill amortization benefit was potentially open to all business operators established in Spain. What the Court missed to observe was that undertakings were not automatically benefited by the aid measure. Potential beneficiaries had to proceed to the acquisition of foreign shareholdings in order to get the amortization of the goodwill of their investment. In my opinion this is the crucial part in which the Court should have focused on. The aid measure requires beneficiaries to act before they can claim the tax amortization and ensure the reduction of their tax base in comparison to their competitors. Thus, it refers to an additional risk assumed by potential beneficiaries and the aid measure is not virtually open to all Spanish undertakings as the Court supports since nobody can force all Spanish undertakings to engage in foreign investments. If the benefit was directly applicable like ordinary tax exemptions or automatically and unconditionally granted to all operators then the general nature of the aid measure would be almost impossible to be challenged.
The way the General Court decided and justified both cases is arguable and based on weak argumentation not to say unable to resolve a great number of State aid disputes in an effective and abstract fashion. To accept that selectivity is only met when we have an aid measure applied to a particular and clearly defined category of undertakings which share the same business activity is equal to acceding a blank cheque to State authorities to assess as compatible any aid procured to certain undertaking on the sole condition that the beneficiaries exercise different business activities, although a specifically identifiable group of undertakings actually receives aid. The General Court seemed to shape an exemption rule in both decisions by exonerating “pure financial operations” (in our case the purchase of shareholding in foreign companies) inasmuch as those transactions are independent of the nature of the business of the involved parties (investor and investee company). The logical fault in such a holding consists, first, in accepting that the Spanish tax regime and the goodwill amortization benefit relates exclusively to an economic transaction and, secondly, in removing out of the equation the undertakings and the accruing advantages from economic transactions to certain undertaking in an indirect manner. Such an isolated consideration of economic transactions for the purpose of State aid assessment is at least peccant. Economic transactions are made by companies whose business behaviour and activities are the actual subjects of any tax regulation. The selectivity test of fiscal measures should not be vitiated by the addition of extra steps, principles and exemptions to the classical three step analysis. In the first step the reference framework has to be defined. The reference framework is the general legislative framework which would be applicable if the aid measure was not in place. It is the normal tax system applicable in a given national territory. The second step consists in a discrimination test. It has to do with the examination of whether the measure in question creates a derogation from the normal tax system and subsequently favours certain undertakings at the expense of other operator which are in a comparable legal and factual situation. If such a comparison shows that the undertakings taking advantage from the aid measure enjoy a reduced tax burden exactly due to the derogations established than they would be obliged to defray, it can be presumed that the aid measure under investigation constitutes State aid. Finally, in the third step of the analysis, a justification of the derogation is probed in the sense that it is objectively justified by the nature, structure, or logic of the tax scheme of which it is a constituent part. In our case it is more than obvious that the goodwill amortization measure is not even classified by the Court as a derogation and the analysis –incorrectly- stops in the second layer of the three step analysis!! This is quite an absurd and surprising conclusion to reach and indicates that the whole examination of the amortization measure is deficient. If the Court had held that the aid measure at issue was indeed a derogation then the amortization benefit would have certainly failed to meet any kind of justification.
 T-219/10, Autogrill Espana SA / European Commission of 7 November 2014 & T-399/11, Banco Santander SA-Santusa Holding SL / European Commission of 7 November 2014
 C-274/12 P, Telefonica S.A. / European Commission & T-221/10, Iberdrola SA / European Commission
 See articles 13 and 17 of the Telefonica case which show the procedural nature of the claims of Telefonica against the General Court’s previous judgment (T-228/10), that is to say infringement of its right to effective judicial protection, misinterpretation of article 263 TFEU and most importantly the definition of the concept of an act not entailing implementing measures within the meaning of the final limb of the latter provision. Numerous Spanish companies had filed an application for annulment of that decision, and some of those cases were resolved during 2012, namely in relation to Cementos Molins, Iberdrola, Asociación Española de Banca (Spanish Banking Association), Ebro Foods, Telefónica, BBVA and Iberdrola. In all those cases the application for annulment was dismissed because the required individual concern was not found to exist.
 See Press release No 145/14 of the General Court of the European Union on the cases under commentary here.
 See paragraph 57 of Banco Santander judgment
 Ibid Press release
 Paragraph 69 of the Commission decision
 Paragraph 70 of the Commission decision
 Paragraph 71 of the Commission decision
 See the article of Prof Phedon Nicolaides at http://stateaidhub.eu/blogs/stateaiduncovered/post/323 with special emphasis to the Court rulings therein, British Aggregates and Commission decision.
 Commission Decision of 18 July 2007 ON STATE AID No C 37/2005 (ex NN 11/2004)
 The measure being that certain companies were allowed to set up a special tax-free reserve fund of up to 35% of their profits in order to carry out investments of an equal amount.
 Cases T-346/99, T-347/99, T-348/99, Territorio Historico de Alava et al / European Commission, paragraph 64
 Case C-75/97, Belgium / European Commission Maribel case, paragraph 48
 Case T-55/99, CETM / European Commission, paragraphs 39, 40, 47
 See paragraph 60 of Banco Santader judgment & paragraph 56 of Autogrill judgment
 See article Developments in the notion of selectivity, EStaL 4/2008 p. 640
 See article Asymmetric tax measures and EU State aid, EStaL 1/2014 p.57