January 2016



On 17 December 2015, the General Court of the European Union (the “General Court”) issued a judgment annulling the Decision of the European Commission of 17 July 2013 which held that the “Spanish tax lease system for the purchase of ships” (“STLS”)[1] constituted illegal State aid.

The judgment resolves the appeals brought by the Kingdom of Spain, among others, and is the first of several appeals brought by the private investors affected by this order for the recovery of the alleged aid.

The STLS and its implications for investors, shipyards and maritime shipping companies

The STLS consisted of a complex contractual and financial system allowing the financing of the construction of vessels (mainly by Spanish shipyards) and their acquisition by maritime shipping companies. The structure generated tax efficiencies through the participation of investors in economic interest groupings (“EIG”). The tax efficiencies principally reverted to the shipyards, and to a lesser extent, the maritime shipping companies and the investors.

The financial and tax structure was based on several contracts combined with five different tax provisions. Generally, the vessel construction contract was signed between the shipyard and a credit institution (in its role as leasing company), which thus substituted the maritime shipping company. Through a leasing contract, the EIG undertook to lease, and afterwards to buy, the vessel at a gross price from the credit institution, a price that it transferred to the shipyard under the terms of the vessel construction contract. According to the Spanish Corporate Tax Law an earlier and accelerated amortization of the vessel was allowed by the EIGs under the leasing contract, which generated a tax-deductible expense used by the EIGs’ investors. Finally, the EIGs leased, and eventually resold, the vessel to the maritime shipping company, through a bareboat charter agreement with a purchase option, but the price the ship owner paid was lower than the gross price paid by the EIG to the shipyard.

Consequently, EIGs’ investors obtained negative tax bases that were used to reduce the tax base generated by their ordinary course of business as investors and therefore their costs of corporate tax. In addition, the transaction optimised the investment in the EIGs resale of the vessel to the ship owner from a tax point of view. The capital gain obtained with this resale of the vessel could be subject to an advantageous nominal tax system by reference to the tonnage of the vessels (which had been previously authorised by the European Commission in 2002).

Although the efficiencies were mostly transferred to the shipyards and, to a lesser extent, the maritime shipping companies, the Commission only ordered the recovery of the alleged illegal State aid from the investors that participated in the EIGs.  

The judgment aims to correct the Commission’s analysis of this particular point and, in general, of the approach over the past few years towards State aid cases involving tax provisions.

Pursuant to Article 107 of the Treaty of the Functioning of the European Union (“TFEU”), a tax measure constitutes State aid when it generates a selective advantage in favour of some companies or economic sectors and can distort competition and trade between Member States. In the case of the STLS, the General Court decided that the Commission had failed to prove any of these requirements. 

The requirement of selective advantage in tax matters: the STLS is not selective

For a measure to be considered State aid, it must confer a selective advantage, i.e., it should benefit “certain companies or sectors.” In the tax field, a selective advantage is deemed to exist when a company or a group of companies can benefit from a measure that constitutes an exception in the tax model of reference, provided this exception is not justified by objectives inherent to the tax system. 

In its judgment, the General Court affirmed, in line with other recent judgments (in particular, the judgments on the Spanish financial goodwill system for the acquisition of shareholdings in foreign companies, as in the cases Autogrill, Banco Santander and Santusa), that an exception in the case of the STLS was not confirmation that the controversial measure favours certain companies or sectors under Article 107 TFEU. The reason for this being that the tax efficiencies derived from STLS were accessible to every company, regardless of their sector or size

Indeed, any investor operating in any economic sector was able to participate in an EIG, and therefore, obtain the contested advantages (in particular, the advantages derived from the tax system by reference to the tonnage of the vessels and the earlier amortisation system). The fact that the advantages were granted to invest in a specific asset, a vessel, excluding de facto other assets and other types of investments, did not make them selective as regards investors. 

The General Court did not accept the Commission’s view that the existence of a system of prior administrative authorisation for the early amortisation of the assets, which was allegedly discretional, would give the STLS a selective advantage. Without analysing whether or not the authorisation system was discretional, as the Commission stated, the General Court found that the requirements to obtain this authorisation only affected the features of the asset subject to earlier amortisation, but not the investor’s characteristics. Therefore, it was held that the Commission did not prove that the ex-ante authorisation restricted any company’s access in any way; there was no discrimination as regards the possibility of participating in these transactions. Furthermore, the General Court found that the investors could acquire the EIGs’ shareholdings after obtaining administrative authorisations for earlier amortisation, and so the authorisation would not prevent or impede the participation of investors with certain characteristics in the system.

Finally, the General Court rejected the Commission’s opinion that the STLS could be considered selective towards investors for favouring a specific activity, i.e., the acquisition of sea-going vessels through lease agreements, with a view to a bareboat charter agreement and its eventual resale. These activities were only performed by the EIGs. However, as the General Court pointed out, the EIGs obtained no advantage from the STLS, since the tax efficiencies were obtained by the investors according to the tax transparency principle applicable to the EIGs’ legal regime. As regards the investors, the General Court also rejected the Commission’s view: the Commission misunderstood - and did not proper reasoning in its Decision - that the investors undertook a maritime shipping activity when that activity was performed by the EIGs at that time.  

The requirements of distortion of competition and harmful effects on trade between Member States

It was also held that the Commission gave insufficient reasons for its findings that the STLS distorted competition and affected trade between Member States. The General Court stated that the Commission was at least obliged to state the circumstances in its reasoning that led it to conclude that trade had been harmed or competition distorted.

The General Court further noted the Commission’s inconsistent analysis. The original complaints received about the STLS’ alleged distortion of competition and trade regarding the market for the construction of vessels and not the market in which the investors operate (which the European Commission identified as beneficiaries of the illegal state aid). It made no sense to consider that the investors, operating in all sectors of the economy, received an advantage that distorted competition in all such sectors, instead of considering that the shipyards were the indirect beneficiaries of the aid.

The judgment also refers to the Commission’s finding by which it rejected the validity of some clauses in the agreements between investors, maritime shipping companies and shipyards, by which the shipyards were obliged to indemnify the rest of the parties if they could not obtain the tax advantages desired, or if, as a result of a decision like the one annulled, participation might prove detrimental to them. The General Court did not examine the validity of this type of repetition clauses as they were not the object of the appeal of the Kingdom of Spain. Therefore, it is necessary to await the ruling of the General Court in the remaining appeals lodged by investors where the validity of these clauses is claimed. Nonetheless,  the judgment in the case at hand may serve as clear orientation to confirm the validity of these clauses. The General Court criticised the Commission’s reasoning, highlighting the unusual practice of having in a State aid Decision a declarative statement about the alleged unenforceability of an agreement that is strictly inherent to the private intentions of the parties. State aid decisions deal with State aid measures or measures prompted by the State, not by private parties. But more importantly, the General Court also criticised the Commission’s rejection of the validity of these clauses invoking the need to “re-establish the competitive situation in the market or the markets where the distortion has been produced”. The Commission failed to explain in its decision why the advantage obtained by the investors (instead of the shipyards), could distort, or threaten to distort, competition and affect trade.  Since no distortion of competition had been produced in the markets where the investors operate, the argument of the Commission to consider the repetition clauses void is not operative.

Consequences of the judgment and future implications

As previously indicated, in its Decision the Commission did not enter into the situation of shipyards and maritime shipping companies and ordered the recovery of the aid only to those investors that benefitted from the advantages at issue. If the judgment becomes final (the Commission is entitled to appeal) the affected investors would not have to reimburse any money and could analyse whether to request the application of the tax deductions that were interrupted when the Commission required the suspension of the measures at issue. 

The judgment supports the STLS through investors participating in EIGs. However, the system has been modified to meet the requirements imposed by the Commission, being replaced by a new system approved by the Commission. The judgment makes it clear, referring to many precedents of the Court of Justice, that there is no “selectivity” when investors finance a particular activity or sector and that investors should not return any benefits they obtain. In the event of aid, this may only be found in companies operating in the sector where the investors invest, provided the companies are considered indirect beneficiaries of the aid.

This judgment represents a clear setback for the Commission and it cannot be ruled out that the Commission will lodge an appeal to have the judgment annulled before the European Court of Justice within the term of two months and 10 working days from the date of notification of the judgment, as was the case in the judgments related to the Spanish goodwill cases. However, it is also true that there are differences in this judgment compared with the goodwill cases, including additional arguments that reinforce the General Court’s decision and may discourage the Commission from appealing.

If the Commission finally appeals and the European Court of Justice of the European Union supports the General Court’s judgment, this would imply rejecting the broad interpretation of the selectivity requirement which the Commission has been using in tax rulings. In such scenario, it is likely that the Commission will have to rethink its strategy in this type of matters, adopting more restrictive criteria and allowing the national authorities more freedom to act in designing open and non-discriminatory tax regimes.

Unfortunately, the judgment did not decide on many important aspects of the Commission’s decision that the Kingdom of Spain did not raise and which are highly significant for the design of complex tax structures used by investors and credit institutions. It would be desirable to clarify these issues in the future judgments on the other investors’ appeals. For example, such issues include the validity of repetition clauses, and the possibility of considering or not as State aid tax efficiencies exclusively derived from the combination of several independent tax provisions through private contracts in tax structures designed by private parties. It is yet to be seen whether the General Court will clarify these points and provide investors with greater legal certainty.

[1] As result of the European Commission’s Decision the contested STLS was partially modified. Today, the legal regime to finance vessels is covered by new regulations and has been consistently used in significant transactions in 2014 and 2015. In addition, this regime was approved by the European Commission in its Decision of 20 November 2012 in case SA.34736.

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(*) For further information please contact the following lawyers of Uría Menéndez:

Guillermo Canalejo

Partner in the Tax department
Madrid office
guillermo.canalejo@uria.com /

Carlos López-Quiroga

Partner in the Logistics and Transport department
Madrid office
carlos.lopez-quiroga@uria.com /


Patricia Vidal

Partner in EU & Competition department
Madrid office
patricia.vidal@uria.com /


The information contained in this Newsletter is of a general nature and does not constitute legal advice