# C_2020045EN.01005401.xml

| 10.2.2020 | EN | Official Journal of the European Union | C 45/54 |
| --- | --- | --- | --- |

10.2.2020

EN

Official Journal of the European Union

C 45/54

---

Action brought on 11 November 2019 – BAE Systems v Commission

(Case T-773/19)

(2020/C 45/47)

Language of the case: English

Parties

Applicant: BAE Systems plc (London, United Kingdom) (represented by: N. Gràcia Malfeito, lawyer, W. Leslie, Solicitor, and I. Lunneryd, lawyer)

Defendant: European Commission

Form of order sought

The applicant claims that the Court should:

| — | annul Commission decision C(2019) 2526 Final of 2 April 2019 on the State aid SA.44896, implemented by the United Kingdom concerning Controlled Foreign Companies (CFC) Group Financing Exemption; |
| --- | --- |

—

annul Commission decision C(2019) 2526 Final of 2 April 2019 on the State aid SA.44896, implemented by the United Kingdom concerning Controlled Foreign Companies (CFC) Group Financing Exemption;

| — | in any event, order the Commission to bear the costs incurred by the applicants for these proceedings. |
| --- | --- |

—

in any event, order the Commission to bear the costs incurred by the applicants for these proceedings.

Pleas in law and main arguments

In support of the action, the applicant relies on five pleas in law.

| 1. | First plea in law, alleging that the Commission has made an error of law and a manifest error of assessment in concluding that the relevant reference system is the CFC rules rather than the UK corporate tax system. In particular, the Commission's conclusion that the reference system is the UK CFC rules misapplies the EU courts' jurisprudence. The Commission should instead have concluded that the appropriate reference system was the UK corporate tax system, of which the CFC rules are an intrinsic and inextricable part. |
| --- | --- |

1.

First plea in law, alleging that the Commission has made an error of law and a manifest error of assessment in concluding that the relevant reference system is the CFC rules rather than the UK corporate tax system. In particular, the Commission's conclusion that the reference system is the UK CFC rules misapplies the EU courts' jurisprudence. The Commission should instead have concluded that the appropriate reference system was the UK corporate tax system, of which the CFC rules are an intrinsic and inextricable part.

| 2. | Second plea in law, alleging that the Commission has made an error of law and a manifest error of assessment in relation to the objectives of the reference system. |
| --- | --- |

2.

Second plea in law, alleging that the Commission has made an error of law and a manifest error of assessment in relation to the objectives of the reference system.

| 3. | Third plea in law, alleging that the Commission has made an error of law, a manifest error of assessment and failed to state reasons in concluding that the Group Financing Exemption amounts to a selective derogation from the reference system and, in particular, that undertakings in receipt of other types of non-trading finance profits are in a comparable legal and factual position to undertakings in receipt of non-trading finance profits from qualifying loans. Indeed, the Commission erred in concluding that non-trading finance profits from upstream loans and moneyboxes do not give rise to significant and materially greater risk of artificial diversion than qualifying loans. Further, the Commission erred by focusing on the legislative technique, rather than the effects, of the Group Financing Exemption. |
| --- | --- |

3.

Third plea in law, alleging that the Commission has made an error of law, a manifest error of assessment and failed to state reasons in concluding that the Group Financing Exemption amounts to a selective derogation from the reference system and, in particular, that undertakings in receipt of other types of non-trading finance profits are in a comparable legal and factual position to undertakings in receipt of non-trading finance profits from qualifying loans. Indeed, the Commission erred in concluding that non-trading finance profits from upstream loans and moneyboxes do not give rise to significant and materially greater risk of artificial diversion than qualifying loans. Further, the Commission erred by focusing on the legislative technique, rather than the effects, of the Group Financing Exemption.

| 4. | Fourth plea in law, alleging that the Commission has made an error of law, a manifest error of assessment and failed to state reasons in concluding that the Group Financing Exemption was not justified by the nature and overall structure of the tax rules in relation to the significant people functions test. In particular, the Commission made an error in concluding that the administrative burden of applying the significant people functions test does not justify the Group Financing Exemption, and that the Group Financing Exemption is not justified by the necessity of complying with the freedoms in the Treaty on the Functioning of the EU. |
| --- | --- |

4.

Fourth plea in law, alleging that the Commission has made an error of law, a manifest error of assessment and failed to state reasons in concluding that the Group Financing Exemption was not justified by the nature and overall structure of the tax rules in relation to the significant people functions test. In particular, the Commission made an error in concluding that the administrative burden of applying the significant people functions test does not justify the Group Financing Exemption, and that the Group Financing Exemption is not justified by the necessity of complying with the freedoms in the Treaty on the Functioning of the EU.

| 5. | Fifth plea in law, alleging that the Commission has made an error of law and manifest error of assessment regarding the existence of an advantage, as required by Article 107 TFEU. The Commission’s assessment is based on unsubstantiated assertions and it has failed to actually show that there is an advantage, not simply stipulate that there could be one in certain circumstances. |
| --- | --- |

5.

Fifth plea in law, alleging that the Commission has made an error of law and manifest error of assessment regarding the existence of an advantage, as required by Article 107 TFEU. The Commission’s assessment is based on unsubstantiated assertions and it has failed to actually show that there is an advantage, not simply stipulate that there could be one in certain circumstances.

---