The European Union’s Official Journal published Ireland’s appeal asking for an annulment of the European Commission’s decision that Ireland had granted unlawful state aid to technology company Apple Inc.

Following an in-depth state aid investigation, the Commission concluded that two tax rulings issued by Ireland substantially and artificially lowered Apple’s tax liability. Last August, it imposed $14 billion in taxes on the U.S. company to pay for the illegal subsidies received from Ireland over many years.

What Ireland contends

Primarily, Ireland challenged the fairness of the Commission’s investigation and maintains that Brussels made fundamental errors in its interpretation of Irish law. The appeal claims that the Commission violated the principles of legal certainty and breached the EU’s Charter of Fundamental Rights.

Among other arguments, Ireland specifically contends that Brussels:

  • Misunderstood Irish law and the relevant facts,
  • Erred in its assessment of state aid,
  • Was inconsistent and erroneous in its application of the arm’s-length principle,
  • Breached essential procedural requirements and the principles of legal certainty and legitimate expectations,
  • Lacked competence to take the decision,
  • Violated the principle of fiscal autonomy of EU member states, and
  • Breached provisions of the Treaty on the Functioning of the European Union and the Charter of Fundamental Rights of the European Union.

Meanwhile, Liza Lovdahl-Gormsen, Director of the Competition Law Forum at the British Institute of International and Comparative Law, wrote that, while the EU corporate tax system needed reform, state aid enforcement “is not the appropriate tool.” Writing in the Irish Times, she said that, in her view, the ruling against Ireland and Apple “was ill-conceived, wrong and makes reform harder to achieve.” She added that the European Commission’s “aggressive use of state aid rules to pursue its corporate taxation agenda risks undermining legal certainty, a principle that has contributed more than any other single factor to our society’s prosperity.”

Sovereignty issues

Moreover, Lovdahl-Gormsen insisted that the decision “has worrying implications for national sovereignty as direct taxation remains a competence of the member states and isn’t shared with the Commission.” She warned that the Commission’s ruling will make companies “more wary of investing in Europe.”

What’s next?

If the appeals process is successful, the money held in escrow would have to be paid back to Apple. Reports say the appeals process could take several years.

Despite the appeals process being ongoing, under EU law the state has four months to recover the money deemed to be illegal state aid. This deadline has passed, but the recovery hasn’t taken place. EU Competition Commissioner Margrethe Vestager said she was relaxed about the deadline being missed, because she could see the process that was ongoing by the Irish authorities to achieve the recovery.

© 2017