Opinion of the Advocate General of the EU Court: set aside judgment in Apple state aid case

The judgment of the European Court, in which the EU judicial body ruled that Apple does not have to repay 13 billion euros to Ireland in the context of a state aid case, must be set aside. This is the advice of the Advocate General of the European Court of Justice.

Advocate General Giovanni Pitruzzella sets his advice to the Court of Justice of the European Union, that a series of legal errors were made by the European General Court when it ruled in favor of Apple and Ireland in 2020 in the context of the state aid case brought by the European Commission. The General Court is also said to have incorrectly assessed the seriousness and consequences of several methodological errors, which according to the Commission indicate state aid. “In view of the foregoing, I recommend that the Court set aside the judgment under appeal, refer the case back to the General Court and reserve the decision on costs,” the conclusion reads.

The state aid case revolves around two tax arrangements that Ireland had made specifically for Apple. This led to the tech giant paying less tax since 1991. The first ruling took place in 1991 and the second in 2007. Both rulings concerned the taxable profits of two companies, Apple Sales International and Apple Operations Europe. The profits from this were channeled to offices that only existed on paper. In accordance with the Irish tax laws at the time, this profit was not taxed anywhere, which meant that the effective tax rate in 2003 and 2014 was 1 and 0.005 percent respectively.

In the Commission’s view, Apple therefore paid less tax than other companies and therefore had a competitive advantage. According to the Commission, this also allowed the company to avoid tax on a large part of the profits from the sale of European products, because all sales were made via Ireland. That’s why in 2016, after a two-year investigation, the Commission decided that Apple had to repay the unpaid tax. That amounted to 13 billion euros.

Both Apple and Ireland appealed this decision. Both parties stated that actions were taken in accordance with Irish and European laws. The European Court of First Instance ruled in 2020 that the Commission had not demonstrated legally convincingly that it was in the Treaty on the Functioning of the EU established ban on state aid has been violated. Therefore, Apple did not have to refund the amount. The EC then appealed again. The Commission asked the Advocate General of the EU Court to assess whether the case was legally sound.

Pitruzzella has now announced that he believes this is not the case. Pitruzzella’s judgment is non-binding; the EU court will decide within a few weeks whether the original decision will be honored or whether the case will be brought before the European Court again. According to Reuters the EU court follows the advice of the Advocate General in approximately eighty percent of the cases.