Case C-736/22 P: Appeal brought on 30 November 2022 by the Portuguese Republic against the judgment of the General Court (Eighth Chamber) delivered on 21 September 2022 in Case T-95/21 Portugal v Commission
Date: 2022-11-30
Institutions: Court of Justice
Subjects: Madeira, State aid, aid to undertakings, control of State aid, corporation tax, principle of legal certainty, reimbursement of aid, rights of the defence, tax exemption, tax relief








C_2023094EN.01001901.xml










13.3.2023   


EN


Official Journal of the European Union


C 94/19






Appeal brought on 30 November 2022 by the Portuguese Republic against the judgment of the General Court (Eighth Chamber) delivered on 21 September 2022 in Case T-95/21 Portugal v Commission
(Case C-736/22 P)
(2023/C 94/21)
Language of the case: Portuguese

Parties


Appellant: Portuguese Republic (represented by: P. Barros da Costa, L. Borrego and A. Soares de Freitas, acting as Agents, and M. Gorjão-Henriques and A. Saavedra, advogados)

Other party to the proceedings: European Commission

Form of order sought

The appellant claims that the Court of Justice should:






—


set aside the judgment of the General Court of 21 September 2022 in Case T-95/21 Portugal v Commission, EU:T:2022:567, dismissing the action brought by the Portuguese Republic seeking annulment of Article 1 and Articles 4 to 6 of the European Commission’s Decision of 4 December 2020 on aid scheme SA.21259 (2018/C) (ex2018/NN) implemented by Portugal in favour of the Madeira Free Zone (MFZ) — Regime III; (1)











—


order the European Commission to pay the costs in their entirety, including those incurred by the Portuguese Republic and those relating to the application for interim measures (T-95/21 R).





Grounds of appeal and main arguments









1.



Error of law in the application of Article 108(1) TFEU and Article 1(b)(ii), Article 21 and Article 23 of Regulation (EU) 2015/1589, (2)
in that the aid at issue is existing aid and not new aid







—


MFZ Regime III comprises a regime of existing aid (and not new aid), authorised by the Commission in its Decisions of 2007 and 2013. The General Court erred in law by relieving the Commission of the requirement of submitting MFZ Regime III to a review of existing aid, to which Article 108(1) TFEU and Articles 21 to 23 of Regulation (EU) 2015/1589 refer.
















2.



Error of law consisting in the misinterpretation of the requirement relating to the origin of the profits to which corporation tax is applied, since the MFZ Regime has been applied in compliance with the Commission’s decisions of 2007 and 2013 and with Articles 107 and 108 TFEU







—


The requirement that profits be the result of activities effectively and materially performed in Madeira should not be interpreted as meaning that only the additional costs incurred by undertakings registered in the MFZ associated with remoteness are to be taken into consideration, that the tax benefits are to apply solely to profits derived from transactions directly subject to those additional costs, or that activities performed outside Madeira by MFZ licensed undertakings engaged in international activities are to be excluded.
















3.



Error of law consisting in a failure to state reasons or an insufficient or contradictory statement of reasons — Lack of consistency between the OECD’s international legal requirements in tax matters and the interpretation given to the concept of ‘activities effectively and materially [performed] in the region’







—


The General Court erred by failing to explain the consistency between the OECD’s (and the European Union’s) international legal requirements in tax matters and the interpretation given to the concept of ‘activities effectively and materially [performed] in the region’ in the context of the State aid scheme.
















4.



Error of law in the interpretation of the criterion of ‘activities effectively and materially [performed] in the region’ on account of a failure to take into consideration the case-law of the Court of Justice on the centre of main interests, the spillover effect and fundamental freedoms







—


The General Court erred in law by disregarding the case-law of the Court of Justice on the ‘centre of main interests’ of an undertaking in its interpretation of ‘activities effectively and materially [performed] in the region’. The General Court erred in its interpretation of EU rules, which interpretation conflicts with the fundamental principles of EU law, specifically freedom of establishment and free movement of persons, services and capital, under Article 45 TFEU et seq., and the Commission’s decision-making practice in matters of State aid for outermost regions.
















5.



Errors of law consisting in the absence or insufficiency of the statement of reasons and/or distortion of evidence and/or substitution of the grounds of the decision — criterion relating to job creation/maintenance







—


The General Court erred in finding that the Commission did not impose the use of the full-time equivalent (‘FTE’) and annual labour unit (‘ALU’) methods on the Portuguese authorities. The contested decision and the preliminary decision to open the formal investigation procedure directly contradict that interpretation.
















6.



In the alternative, error of law consisting in the misinterpretation of the criterion relating to job creation/maintenance and/or contradictory and/or insufficient statement of reasons







—


For the purposes of assessing the job creation or maintenance criterion under MFZ Regime III, the contested decision errs in law by applying the methodology for defining jobs as ‘FTE’ or ‘ALU’, since the concept of ‘job’ applicable to the MFZ Regime is that under national employment legislation.
















7.



Error of law, in that the national authorities provided the Commission with ‘a method allowing the reality and permanence of the jobs declared to be checked’ for the purposes of Regime III







—


The judgment under appeal is vitiated by an error of law, in that the General Court found that the Commission merely claimed that the national authorities had failed to adopt a method allowing the reality and permanence of the jobs declared by the beneficiaries of Regime II to be checked, whereas the Commission concluded that there had been a failure to comply with the job creation/maintenance criterion through the uncritical application of the concepts of FTE and ALU.
















8.



Error of law consisting in the reversal of the burden of proof







—


The General Court reversed the burden of proof, in so far as it was for the Commission to prove that the Portuguese authorities were not in a position to check the reality or the permanence of the jobs declared. It was for the Commission to identify which MFZ licensed undertakings benefitted from the allegedly misused aid.
















9.



The judgment under appeal infringes the rights of the defence of the general principles of European Union law







—


The judgment under appeal infringes the rights of defence of the Portuguese Republic and the general principles of EU law of legal certainty, legitimate expectations and sound administration.










(1)  Commission Decision of 4 December 2020 on aid scheme SA.21259 (2018/C) (ex2018/NN) implemented by Portugal for Zona Franca da Madeira (ZFM) — Regime III.

(2)  Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ 2015 L 248, p. 9).