# C_2020027EN.01005601.xml

| 27.1.2020 | EN | Official Journal of the European Union | C 27/56 |
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27.1.2020

EN

Official Journal of the European Union

C 27/56

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Action brought on 7 November 2019 – WPP Jubilee and Others v Commission

(Case T-756/19)

(2020/C 27/57)

Language of the case: English

Parties

Applicants: WPP Jubilee Ltd (London, United Kingdom) and 11 other applicants (represented by: C. McDonnell, Barrister, B. Goren, Solicitor, M. Peristeraki, laywer, and K. Desai, Solicitor)

Defendant: European Commission

Form of order sought

The applicants claim that the Court should:

| — | hold that there has been no unlawful State Aid, annul Article 1 of the Commission decision of 2 April 2019 on the state aid SA.44896 implemented by the United Kingdom concerning CFC Group Financing Exemption, to the extent that it finds that there has been unlawful State aid, and set aside the requirement for the UK to recover alleged unlawful State aid received by the applicants in this context (Articles 2 and 3 of the contested decision); |
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hold that there has been no unlawful State Aid, annul Article 1 of the Commission decision of 2 April 2019 on the state aid SA.44896 implemented by the United Kingdom concerning CFC Group Financing Exemption, to the extent that it finds that there has been unlawful State aid, and set aside the requirement for the UK to recover alleged unlawful State aid received by the applicants in this context (Articles 2 and 3 of the contested decision);

| — | in the alternative, annul Articles 2 and 3 of the contested decision insofar as they require the UK to recover from the applicants the alleged State aid; and |
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in the alternative, annul Articles 2 and 3 of the contested decision insofar as they require the UK to recover from the applicants the alleged State aid; and

| — | in any event, order the Commission to bear the costs incurred by the applicants for these proceedings. |
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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 applicants rely on seven pleas in law.

| 1. | First plea in law, alleging that the contested decision is vitiated by manifest errors in the appreciation of the relevant facts and laws. In particular, it is alleged that the Commission misunderstands the way the UK CFC rules in question work with respect to the treatment of non-trading finance profits. In addition, it is alleged that the contested decision wrongly construed the Group Financing Exemption as a tax exemption. This is particularly self-evident given that some of the loans which are the subject matter of this application were funded out of qualifying resources. |
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1.

First plea in law, alleging that the contested decision is vitiated by manifest errors in the appreciation of the relevant facts and laws. In particular, it is alleged that the Commission misunderstands the way the UK CFC rules in question work with respect to the treatment of non-trading finance profits. In addition, it is alleged that the contested decision wrongly construed the Group Financing Exemption as a tax exemption. This is particularly self-evident given that some of the loans which are the subject matter of this application were funded out of qualifying resources.

| 2. | Second plea in law, alleging that the Commission was wrong to find that the CFC rules constituted an aid measure within the meaning of Article 107(1) TFEU and, as such, that the rules conferred a selective advantage to certain operators. More precisely, the Commission, it is said, wrongly determined the reference system for the assessment of the effects of the CFC rules, and wrongly identified two different situations as being comparable to the situation where the Group Financing Exemption applies. As a result of either or both of these errors, the Commission was wrong to identify that these rules conferred a selective advantage to certain market operators. Moreover, the applicants argue that the Commission wrongly identified the CFC rules as a distinct set of rules from the overall UK corporation tax system, while ignoring other features of the UK corporation tax system intended to work in conjunction with the CFC rules. As a result, the analysis of the Commission on comparability and selectivity is said to be vitiated by manifest errors of appreciation of the relevant facts and errors in law. |
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2.

Second plea in law, alleging that the Commission was wrong to find that the CFC rules constituted an aid measure within the meaning of Article 107(1) TFEU and, as such, that the rules conferred a selective advantage to certain operators. More precisely, the Commission, it is said, wrongly determined the reference system for the assessment of the effects of the CFC rules, and wrongly identified two different situations as being comparable to the situation where the Group Financing Exemption applies. As a result of either or both of these errors, the Commission was wrong to identify that these rules conferred a selective advantage to certain market operators. Moreover, the applicants argue that the Commission wrongly identified the CFC rules as a distinct set of rules from the overall UK corporation tax system, while ignoring other features of the UK corporation tax system intended to work in conjunction with the CFC rules. As a result, the analysis of the Commission on comparability and selectivity is said to be vitiated by manifest errors of appreciation of the relevant facts and errors in law.

| 3. | Third plea in law, alleging that, even assuming that the CFC measures in question constituted aid within the meaning of Article 107(1) TFEU, the contested decision wrongly concluded that there was no justification that could apply to defend the compatibility of the measures in question with EU State aid rules. In addition, the contested decision is irrational and inconsistent, in that the Commission has correctly accepted that Chapter 9 of Part 9A of the Taxation (International and Other Provisions) Act 2010 is justified in cases where the only reason for a CFC charge to apply is the ‘UK connected capital’ test, on the basis that that test may be excessively difficult to operate in practice, but at the same time, and without providing adequate reasoning, the Commission contends that the said Chapter 9 is never justified in cases where the significant people functions test causes a CFC charge to apply. In fact, although, on the applicants’ own facts, the position is clear, the significant people functions test is generally excessively difficult to apply in practice, such that the Commission should have found the said Chapter 9 to be justified in the context of that test as well and, hence, it should have concluded that there is no State aid. |
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3.

Third plea in law, alleging that, even assuming that the CFC measures in question constituted aid within the meaning of Article 107(1) TFEU, the contested decision wrongly concluded that there was no justification that could apply to defend the compatibility of the measures in question with EU State aid rules. In addition, the contested decision is irrational and inconsistent, in that the Commission has correctly accepted that Chapter 9 of Part 9A of the Taxation (International and Other Provisions) Act 2010 is justified in cases where the only reason for a CFC charge to apply is the ‘UK connected capital’ test, on the basis that that test may be excessively difficult to operate in practice, but at the same time, and without providing adequate reasoning, the Commission contends that the said Chapter 9 is never justified in cases where the significant people functions test causes a CFC charge to apply. In fact, although, on the applicants’ own facts, the position is clear, the significant people functions test is generally excessively difficult to apply in practice, such that the Commission should have found the said Chapter 9 to be justified in the context of that test as well and, hence, it should have concluded that there is no State aid.

| 4. | Fourth plea in law, alleging that, were the contested decision to be upheld, enforcement of it through recovery of the alleged State aid from the applicants would infringe fundamental principles of EU law, including the freedom of establishment and the freedom to provide services, noting that, in the applicants’ case, the CFCs in question are situated in other Member States. |
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4.

Fourth plea in law, alleging that, were the contested decision to be upheld, enforcement of it through recovery of the alleged State aid from the applicants would infringe fundamental principles of EU law, including the freedom of establishment and the freedom to provide services, noting that, in the applicants’ case, the CFCs in question are situated in other Member States.

| 5. | Fifth plea in law, alleging that the recovery order resulting from the contested decision is unfounded and contrary to fundamental Union principles. |
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5.

Fifth plea in law, alleging that the recovery order resulting from the contested decision is unfounded and contrary to fundamental Union principles.

| 6. | Sixth plea in law, alleging that the Commission failed to provide adequate reasons for critical elements in the contested decision. The Commission, it is argued, failed to consider the ‘qualifying resources’ exemption to any material extent, and failed to analyse the reasons or justifications for it. Other examples include the conclusion that the CFC charge under the said Chapter 5 could be applied using the significant people functions test without difficulty or disproportionate burden. |
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6.

Sixth plea in law, alleging that the Commission failed to provide adequate reasons for critical elements in the contested decision. The Commission, it is argued, failed to consider the ‘qualifying resources’ exemption to any material extent, and failed to analyse the reasons or justifications for it. Other examples include the conclusion that the CFC charge under the said Chapter 5 could be applied using the significant people functions test without difficulty or disproportionate burden.

| 7. | Seventh plea in law, alleging that the contested decision also breaches the principle of good administration, which requires that the Commission allow transparency and predictability in its administrative procedures and render its decisions within a reasonable time-frame. It is not reasonable for the Commission to take more than four years to issue its decision opening the investigation in the present case and to give a decision more than six years after the contested measure came into effect. |
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7.

Seventh plea in law, alleging that the contested decision also breaches the principle of good administration, which requires that the Commission allow transparency and predictability in its administrative procedures and render its decisions within a reasonable time-frame. It is not reasonable for the Commission to take more than four years to issue its decision opening the investigation in the present case and to give a decision more than six years after the contested measure came into effect.

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