Case T-751/19: Action brought on 4 November 2019 – Reckitt Benckiser Investments and Others v Commission
Date: 2019-11-04
Institutions: General Court
Subjects: State aid, United Kingdom, control of State aid, corporation tax, equal treatment, foreign enterprise, group of companies, tax avoidance, tax exemption, tax law








C_2020027EN.01004901.xml










27.1.2020   


EN


Official Journal of the European Union


C 27/49






Action brought on 4 November 2019 – Reckitt Benckiser Investments and Others v Commission
(Case T-751/19)
(2020/C 27/53)
Language of the case: English

Parties


Applicants: Reckitt Benckiser Investments Ltd (Slough, United Kingdom) and 5 other applicants (represented by: C. Quigley, Barrister, P. Halford and A. Langley, Solicitors)

Defendant: European Commission

Form of order sought

The applicants claim that the Court should:






—


annul the Commission decision of 2 April 2019 on the State aid SA.44896 implemented by the United Kingdom concerning CFC Group Financing Exemption;










—


alternatively, annul Article 2 of the contested decision insofar as it applies to the applicants;










—


in the further alternative, annul Article 2 of the contested decision in respect of any aid granted under the Group Financing Exemption in the period prior to 24 November 2017 in so far as it applies to the applicants;










—


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 three pleas in law.






1.


First plea in law, alleging the illegality of Article 1 of the contested decision on the following grounds:






a.


the Commission erred in law and shows manifest errors of assessment determining that the Group Financing Exemption constitutes an (economic) advantage within the meaning of Article 107(1) TFEU by, in particular:






i.


failing to take into account: the historical background to the introduction of CFC rules in the UK’s corporate tax system; limitations imposed on the UK through the application of EU law, in particular freedom of establishment; territoriality and other policy reasons for the structure of the CFC rules introduced in the Taxation (International and Other Provisions) Act 2010 with effect from 1 January 2013; and the scope of fiscal sovereignty of Member States, including the UK, in designing CFC rules;










ii.


asserting that the optional character of a claim under Chapter 9 of Part 9A of the Taxation (International and Other Provisions) Act 2010 constitutes favourable treatment giving rise to an advantage.














b.


the Commission erred in law and shows manifest errors of assessment determining that the Group Financing Exemption constitutes a selective advantage within the meaning of Article 107(1) TFEU by, in particular:






i.


As regards the relevant reference framework:






1.


Wrongly identifying the reference framework as being composed solely of the CFC rules and/or solely Chapter 5 of Part 9A of the Taxation (International and Other Provisions) Act 2010;










2.


Wrongly determining the objective of the reference system as being solely to tax profits arising from UK activities and assets that have been artificially diverted from the UK, without due regard to whether the relevant targeted transactions actually give rise to risk of erosion of the UK tax base.














ii.


As regards the determination of a derogation from the reference framework:






1.


Wrongly assessing the relevance and importance of significant people functions;










2.


Wrongly assessing the comparability of ‘qualifying loan relationships’ with loans (i) to UK-resident related parties and (ii) to third parties;










3.


Unlawfully relying on Council Directive (EU) 2016/1164; (1)











4.


Mistakenly assessing the comparable risks to infringement of freedom of establishment for exempted and non-exempted categories of CFC.














iii.


As regards justification for the alleged derogation,






1.


Wrongly deciding that the justification relating to the need for the system to be manageable and administrable did not extend to significant people functions;










2.


Wrongly deciding that the Group Financing Exemption was not justified by reference to compliance with freedom of establishment.






















2.


Second plea in law, alleging the illegality of Article 2 of the contested decision on the grounds of breach of legitimate expectation and infringement of the principles of legal certainty and proportionality.










3.


Third plea in law, alleging that, alternatively, recovery should not be ordered in respect of any aid granted through the Group Financing Exemption prior to 24 November 2017, when the Commission published its opening decision.






(1)  Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market (OJ 2016 L 193, p. 1).