Case T-207/01: Action brought on 7 September 2001 by the Government of Gibraltar against the Commission of the European Communities
Date: 2001-10-27
Institutions: Court of First Instance
Subjects: European Commission, Gibraltar, State aid, action for annulment (EU), control of State aid, tax system

27.10.2001

EN

Official Journal of the European Communities

C 303/27

Action brought on 7 September 2001 by the Government
of Gibraltar against the Commission of the European
Communities

(Case T-207/01)

(2001/C 303/42)

(Language of the case: English)

An action against the Commission of the European Communi-
ties was brought before the Court of First Instance of the
European Communities on 7 September 2001 by the Govern-
ment of Gibraltar, represented by Alastair Sutton, Michael
Llamas and Walter Schuster, of White & Case, Brussels
(Belgium).

The applicant claims that the Court should:

— annul the Commission’s decision to open the procedure
under Article 88(2), in the form of the letter of 11 July
2001 addressed to the United Kingdom;

— take such other or further measure as justice may require;

— order the defendant to pay the costs.

Pleas in law and main arguments

In 1983 the Government of Gibraltar introduced a tax scheme
under which certain companies, under certain conditions, are
liable to income tax at a reduced rate (the qualified company
legislation).

The Commission has decided to open a procedure under
Article 88(2) EC, qualifying the legislation in question as non-
notified new aid. That decision is now contested by the
applicant.

According to the applicant, the Commission has violated
Gibraltar’s rights of defence, by providing an insufficient
statement of the reasons for the contested decision and by
insufficiently hearing the Government of Gibraltar as the party
directly and individually concerned by the decision. By the
the Commission has violated the United
same token,

Kingdom’s rights of defence,
essential procedural requirements.

in so far as they constitute

Further, the applicant claims that the decision is incompatible
with Article 88 of the EC Treaty and that the Commission has
violated the principle of proportionality and the principles of
legal certainty and legitimate expectations, as well as failing to
fulfil its duty to exercise due diligence.

According to the applicant, the legislation in question cannot
be qualified as non-notified new aid. The qualified company
legislation has already been in existence for 18 years. Further,
the legislation was notified by the Government of the United
Kingdom in 1998 within the framework of the Primarolo
group, which worked on the problem of the relationship
between fiscal measures and State aid regulations. The present
proceedings of the Commission are a consequence of the
findings of that group. The legislation in question should
therefore be regarded instead as existing aid under Article 88(1)
EC.

To pursue now the procedure in respect of non-notified new
aid would be to impose an unjustified burden with possibly
grave consequences, especially since an investigation under
Article 88(1) EC would, for the applicant, constitute a measure
having a comparable effect and less severe consequences. In
addition, having regard to the time which has elapsed since
the introduction of the system, the applicant considers that
the decision is disproportionate.

The applicant further claims that, since the introduction of the
system, the interpretation of ‘State aid’ under EC law has
evolved, especially in relation to fiscal measures. At that time,
that type of measure was, according to the applicant, not
generally regarded as falling within the rules of the EC Treaty
concerning State aid. There was therefore no reason to notify
the legislation at that time. To regard that legislation now as
new aid would violate the principle of legal certainty and the
legitimate expectations of the applicant. The applicant refers
to Article 1(b)(v) of Regulation No 659/1999, which provides
that,
in the event of developments in the law, measures
introduced before those developments took place are to be
regarded as existing aid.

Finally, the applicant states that the Commission’s investigation
prior to the decision was too lengthy, and therefore constitutes
a breach of the Commission’s duty to exercise due diligence
and of the principle of good administration.