On June 8, 2023, Advocate General Kokott delivered her opinion on the Commission’s appeal of the General Court’s judgment annulling the Commission’s decision finding that Luxembourg had granted unauthorized State aid to Amazon in the form of a tax advantage. [1]  Advocate General  Kokott’s opinion endorsed the recent Court of Justice’s findings in Fiat,[2] which confirmed that there is no EU-wide arm’s length principle that the Commission can use as a standard of review for Member States’ tax decisions under EU State aid rules.  This opinion signals that the Fiat judgement will likely be the guide for ongoing and future tax ruling cases and investigations. 


As part of a restructuring of Amazon’s European business in 2006, two Amazon entities established in Luxembourg, Amazon Europe Holding Technologies SCS (“LuxSCS”) and Amazon EU Sarl (“LuxOpCo”) entered into a license agreement.  LuxOpCo, as the license holder, acquired the right to exploit certain intellectual property rights of LuxSCS in return for a royalty payment.  In 2003, Amazon successfully applied to the Luxembourg tax authorities for a ruling concerning the calculation of the royalty fees. In practice, higher intra-company royalties result in lower corporate income tax in Luxembourg.

In October 2017, following a three-year investigation, the Commission found that the royalty calculation method that the Luxembourg authorities approved in their tax ruling misapplied the OECD arm’s length principle.  Consequently, the Commission concluded that the tax ruling conferred an illegal selective advantage of c. €250 million to LuxOpCo by lowering its corporate income tax liability between 2006 and 2014, which constituted an illegal State Aid.

Both Luxembourg and Amazon successfully appealed the Commission’s decision to the General Court, which annulled the Commission’s decision on grounds that the Commission could not demonstrate that the determination of the royalties by the Luxembourg tax authorities was erroneous.[3]  The Commission appealed this ruling to the Court of Justice in July 2021.

Selective advantage in fiscal State aid

Under EU State aid rules, Member States cannot provide fiscal incentives that selectively benefit a business, save some narrowly-defined exceptions.  To evaluate the selective nature of a tax measure, the first step is to determine the ordinary tax regime applicable in the Member State, i.e., the “reference system”.  The second step is to assess whether the tax measure in question derogates from the reference system by treating differently comparable taxpayers.

The Advocate General’s Opinion

Advocate General Kokott argued that the Commission’s appeal should be dismissed because the Commission used the incorrect reference system in determining the existence of a selective tax advantage for Amazon.

Advocate General Kokott first argued that the ECJ has jurisdiction to assess whether the Commission used the correct reference system.  Even though Luxembourg and Amazon did not directly challenge this determination,[4] this question is inextricably linked to the existence of a selective advantage and thus of an illegal State aid.[5]  In addition, finding that the Commission used the incorrect reference system would not contravene the non-ultra petita ruling principle as this results in the annulment of the Commission’s decision on the grounds that no selective advantage was granted, which is what Luxembourg and Amazon are seeking.[6]

Second, in substance, Advocate General Kokott concluded that the Commission could not use the OECD Transfer Pricing Guidelines as a reference system because Luxembourgish law does not explicitly refer to these Guidelines.  To the contrary, Luxembourg contended that it applied its own national transfer pricing rules which were applicable at the time and which were different from the OECD Guidelines.[7]

Lastly, should the Court of Justice decide that it does not have jurisdiction to review the determination of the reference system, Advocate General Kokott still recommended to dismiss the Commission’s appeal, as the Commission did not demonstrate that the Luxembourg tax authorities manifestly misapplied the OECD Guidelines.[8]


The opinion closely follows the Court of Justice’s reasoning in Fiat, which had reaffirmed Member States’ autonomy in direct taxation matters and eroded the Commission’s attempts at tackling inconsistent tax practices through the imposition of “objective” EU-wide standards via State aid rules.  AG Kokott used the same arguments in her opinion in the Engie tax ruling case last May, advising the Court of Justice to annul the Commission decision ordering Luxembourg to recover €120 million in unpaid tax from Engie.[9]  This implies that other ongoing tax ruling cases will likely be similarly impacted by Fiat, including the appeal before the Court of Justice in Apple[10] and at least three other Commission investigations.[11]

[1]              Commission v. Luxembourg (Case C-457/21 P), opinion of Advocate General Kokott, EU:C:2023:466.

[2]              Fiat Chrysler Finance Europe and Ireland v. Commission (Cases C‑885/19 P and C‑898/19 P) EU:C:2022:859 (the “Fiat Judgment”); Luxembourg and Fiat Chrysler Finance Europe v. Commission (Cases T‑755/15 and T‑759/15) EU:T:2019:670.  For an analysis of the Fiat Judgement, see our November 2022 European Competition Law Newsletter, pp. 8–9.

[3]              Luxembourg v. Commission (Case T-816/17) ECLI:EU:T:2021:252.

[4]              Commission v. Luxembourg (Case C-457/21 P), opinion of Advocate General Kokott, EU:C:2023:466., paras. 57 and 60.

[5]              Ibid., para. 59.

[6]              Ibid., para. 62.

[7]              Ibid., paras. 66, 73-79.

[8]              Ibid., paras 97, 100, 103.

[9]              State aid implemented by Luxembourg to Engie (Case COMP/SA.44888), Commission decision of June 20, 2018; Engie Global LNG Holding and Others v. Commission (Case T-516/18):EU:T:2021:251 (ECJ’s decision is still pending).

[10]             State aid implemented in Ireland to Apple (Case COMP/SA.38373), Commission decision of August 30, 2016 ( “Apple”); and  Ireland and Apple v. Commission (Cases T-778/16 and T-892/16) EU:T:2020:338 (appeal pending).

[11]             Alleged State aid implemented in Luxembourg to Huhtamäki (Case COMP/SA.50400), Commission decision of March 7, 2019, initiating the formal investigation procedure;  Alleged State aid implemented in The Netherlands to IKEA  (Case COMP/SA.46470), Commission decision of December 18, 2017, initiating the formal investigation procedure; and Alleged State aid implemented in the Netherlands to Nike (Case COMP/SA.51284), Commission decision of January 10, 2019, initiating the formal investigation procedure.