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Spanish Government withdraws legal action – 928/2020

By December 23, 2020 No Comments

HMGoG is delighted to announce that the Spanish Government has withdrawn the legal action it had brought against the European Commission before the European Court challenging a Commission state aid decision on Gibraltar’s Income Tax Act 2010 (Case T-241/19, Spain v European Commission). The European Court has now struck off the case from its list.

The principal ground of appeal brought by Spain was that it considered that the European Commission had committed an error in law in finding that the conditions for the application of the state aid principle of regional selectivity were not met in Gibraltar. The contrary view, which is what Spain was contending, would mean that Gibraltar would have to effectively operate a system of corporate taxation similar to that in the UK. Such a finding would have had devastating effects to our economy.

By withdrawing its legal action, Spain effectively allows the Commission’s decision to stand. The United Kingdom had intervened in the case in support of the Commission.

Commenting on this development, the Chief Minister Mr Fabian Picardo QC MP stated: “I am very pleased with the announcement we have made today. It is clear that with EU law ceasing to apply in Gibraltar by 1 January 2021, the importance of this case had diminished, but there were still vital issues at stake, not least the retrospective effects of an unfavourable finding. But perhaps more importantly, we will now leave the EU with clarity that on such a fundamental issue as Gibraltar’s independent taxing powers there was never a requirement that Gibraltar should be treated as part of the UK’s fiscal territory. This was the position of the European Commission, the United Kingdom and Gibraltar. We therefore welcome the withdrawal of the case. We were confident, in any event, that Spain’s challenge was unlikely to succeed. The Gibraltar Government could not intervene in the case, but the United Kingdom Government could and did do so, working closely with HM Attorney General for Gibraltar, Mr Michael Llamas QC”.