Ruth Mason (Virginia; Google Scholar), Ding-Dong! The EU Arm’s-Length Standard Is Dead, 177 Tax Notes Fed. 1377 (Dec. 5, 2022):

In this article, Mason argues that the recent decision by the Court of Justice of the European Union vacating the European Commission’s state aid decision in Fiat is a positive development for the rule of law and member state tax sovereignty.

Conclusion
If you have been following my articles on state aid so far, you know that I am no fan of the commission’s sui generis state aid standard. Fiat represents an important loss for the commission, but I prefer to see it as a significant win for the rule of law in the EU.

With this decision, the CJEU showed that it was not beholden to politics but rather took a principled approach that respects the TFEU, member state sovereignty, and fundamental fairness issues related to notice to taxpayers.

At the same time that I have opposed the commission’s sui generis state aid standard, I have also acknowledged that member states may confer illegal subsidies through both rulings and allocation rules. I have simply disagreed with the commission regarding how those state aid violations should be proved. For particular rulings, I have long argued for the approach taken by the CJEU in Fiat: Rulings should be judged by domestic law. I have argued elsewhere that structural rules, including allocation rules, should be judged by a standard of internal consistency.45 Stephen Daly has argued that the underlying problem in the transfer pricing cases is not that the administration might make a mistake in applying the rights but rather the problem is administrative impropriety, so the commission’s approach ought to target impropriety directly.46 Others have suggested fruitful ways forward. Thus, it has never been my contention that the commission should get out of the business of reviewing tax state aid. And I agree with the CJEU’s statement in paragraph 122 of its Fiat decision that tax rules themselves can constitute state aid.

Indeed, I think the prohibition of state aid will be more effective and promote European interests better if its underlying values were clearly articulated, giving both taxpayers and member states notice. To that end, I observe that the CJEU in Fiat did not take the opportunity to articulate what the prohibition of state aid is meant to do. While it’s clear that article 107 aims to reduce protectionist subsidies and subsidies that discriminate on the basis of sector, less clear is whether it also aims to reduce corporate tax avoidance and/or curb member state tax competition. I hope the upcoming decision in Apple will answer these crucial questions.