No arm´s Length Principle independently from national tax law – the ruling of the CJEU in the Fiat Chrysler Luxemburg case
On November 8, 2022, the CJEU overturned the judgment of the lower court, which was the subject of an appeal, regarding a tax ruling that the Grand Duchy of Luxembourg had issued to Fiat Chrysler. The Commission had classified this ruling as unlawful state aid by its decision of October 21, 2015; the lawsuits filed against this decision had been dismissed by the General Court. In terms of EU State aid law the appeals ruling is of central importance because it tears down one of the pillars that supported the decision-making practice of the Commission in cases relating to so-called tax rulings issued vis-à-vis multinational corporate groups. In its practice, the Commission has considered the so-called arm’s length principle, with the help of which transactions within such an internationally operating group of companies were compared with those between non-affiliated companies, to be always applicable, regardless of whether of whether this arm’s length principle is enshrined in the national tax law of the Member State that had issued the tax ruling. The Commission based this view on the judgment of the Court of Justice in the case of the Belgian coordination centers from 2006 (cf. joined cases C-182/03 and C-217/03, Belgium and Forum 187 ASBL v. Commission). The CJEU has now clearly rebuffed this opinion, which was supported by the General Court of the EU. By no means may it be deduced from the judgment regarding the Belgian case that the Commission is entitled to apply the arm’s length principle in abstraction from the regulations of the applicable national tax law (see to this already Bartosch, Transferpreisvereinbarungen im international operierenden Konzern als unerlaubte Beihilfen – ein Paradigmenwechsel in der EU-Wettbewerbskontrolle, BetriebsBerater 2015, 34-37).