Appeal brought on 22 July 2021 by the European Commission against the judgment of the General Court (Seventh Chamber, Extended Composition) delivered on 12 May 2021 in Joined Cases T-816/17 and T-318/18, Luxembourg and Amazon v Commission

(Case C-457/21 P)

(2021/C 452/11)

Languages of the case: English and French

Parties

Appellant: European Commission (represented by: P.-J. Loewenthal, F. Tomat, Agents)

Other parties to the proceedings: Grand Duchy of Luxembourg, Amazon.com, Inc., Amazon EU Sàrl, Ireland

Form of order sought

The Appellant claims that the Court should:

— set aside the judgment of the General Court (Seventh Chamber, Extended Composition) of 12 May 2021 in Joined Cases T-816/17 and T-318/18, Luxembourg and Others v. Commission;

— reject the first plea in Case T-816/17 and the second, fourth, fifth and eighth pleas in Case T-318/18;

— refer the case back to the General Court for reconsideration of the pleas not already assessed;

— alternatively, make use of its power under the second sentence of the first paragraph of Article 61 of the Statute of the Court of Justice of the European Union to give final judgment in the matter; and

— reserve the costs of the present proceedings, if it refers the case back to the General Court, or order Luxembourg, Amazon EU S.à.r.l, and Amazon.com, Inc. to pay the costs of the proceedings, if it gives final judgment in the matter.

Pleas in law and main arguments

The Commission puts forward two grounds of appeal against the judgment.

First ground of appeal: the General Court, in rejecting the Decision’s (1) primary finding of advantage, infringed Article 107(1) TFEU, failed to state reasons, breached procedural rules and distorted the Decision. This ground of appeal is divided into two parts:

— First part: In paragraphs 162 to 251 of the judgment, the General Court erred in rejecting the Decision’s functional analysis of Amazon Europe Technologies SCS (‘LuxSCS’) and its selection of LuxSCS as the tested party on the basis that LuxSCS held legal ownership of the Intangibles, made them available to Amazon EU S.à.r.l (‘LuxOpCo’), and participated financially in their development. In so doing, it misinterpreted and misapplied the arm’s length principle, which constitutes an infringement of Article 107(1) TFEU in relation to the condition of advantage, and failed to state reasons, due to contradictory and inadequate reasoning. The General Court also improperly invoked arguments on its own motion to reject the Decision’s selection of LuxSCS as the tested party on the basis that there were no comparable independent companies with which to apply the transactional net margin method (‘TNMM’) to LuxSCS. In so doing, the General Court exceeded its competence of judicial review, which constitutes a breach of procedure and a breach of the Commission’s rights of defence, and distorted the Decision.

— Second part: In paragraphs 257 to 295 of the judgment, the General Court erred in rejecting the Decision’s calculation of the arm’s length royalty due by LuxOpCo to LuxSCS on the basis that LuxSCS, as tested party, should have been entitled to the market value of the intangibles assets under licence and that LuxSCS did not perform low-value adding services. In so doing, the General Court misinterpreted and misapplied the ALP, breached procedural rules, distorted the Decision, and failed in its duty to state reasons.

Second ground of appeal: the General Court, in rejecting the Decision’s first subsidiary finding of advantage, erred in the standard of proof for a finding of advantage, infringed Article 107(1) TFEU, failed to state reasons, and breached procedural rules. This ground of appeal is divided into three parts:

— First part: While the General Court endorsed the correct standard of proof for a finding of advantage in paragraphs 310 and 513 of the judgment, it actually applied a different, stricter standard to reject the Decision’s first subsidiary finding of advantage in paragraphs 503 to 538 of the judgment. In so doing, the General Court erred in the standard of proof for a finding of advantage and failed to state reasons due to contradictory reasoning.

— Second part: In paragraphs 314 to 442 of the judgment, the General Court erroneously invoked functions performed by U.S.-based Amazon Group entities in support of its conclusion that the Commission exaggerated the complexity of functions performed by LuxOpCo in relation to the intangible assets under licence. It also failed to provide reasons why it considered the functions performed by LuxOpCo in relation to the Amazon brand and in relation to Amazon’s European retail and service business not to be unique. In so doing, the General Court misinterpreted and misapplied the ALP, which constitutes an infringement of Article 107(1) TFEU in relation to the condition of advantage, and failed to state reasons due to inadequate reasoning.

— Third part: In paragraphs 499 to 537 of the judgment, the General Court improperly invoked arguments on its own motion to reject the Decision’s first subsidiary finding of advantage on the basis that the Commission’s reliance on the profit split method with a contribution analysis does not demonstrate that the tax ruling necessarily leads to an advantage. In so doing, the General Court exceeded its competence of judicial review, which constitutes a breach of procedure and a breach of the Commission’s rights of defence.

(1) Commission Decision (EU) 2018/859 of 4 October 2017 on State aid SA.38944 (2014/C) (ex 2014/NN) implemented by Luxembourg to Amazon (OJ 2018, L 153, p. 1; ‘the Decision’).