European Commission takes Britain to EU Court of Justice over €100mn state aid dispute in Gibraltar

The European Union has launched legal proceeding against the UK concerning London’s failure to recover €100 million ($119mn) of state aid which allegedly gave multinational companies based in Gibraltar an unfair advantage.

On Friday, Margrethe Vestager, the European Commission vice president responsible for competition, announced that Britain would be referred to the EU Court of Justice for breaking European laws on state aid and failing to act on the commission’s requests from 2018. The recipients of the state aid were multinational firms based on the British Overseas Territory of Gibraltar. 

“The aid granted by Gibraltar in the form of corporate tax exemption for passive interest and royalties gave an unfair advantage to some multinational companies and had to be recovered by the United Kingdom and the Gibraltar authorities,” Vestager said in a statement.

The commissioner added that the EU had adopted the decision that the UK’s actions were incompatible with European law on state aid more than two years ago, in December 2018, and that the UK had still not fully recovered the funds.

“The deadline for the Gibraltar authorities to implement the Commission decision and recover all illegal aid was on 23 April 2019,” the statement read.

The statement notes that the corporate tax exemptions granted by London covered passive interest and royalties between 2011 and 2013 when Britain was still part of the EU.

European law demands that all state aid must be recovered by the issuing government in order to avoid distortion of competition in the EU’s Common Market. 

Issues concerning state aid were a major sticking point during Brexit negotiations, with the UK requesting continued access to the EU market but wishing to relax laws on state intervention.

On Monday, the EU also launched legal proceedings against the UK after London unilaterally decided to delay the implementation of post-Brexit checks on goods entering Northern Ireland from Great Britain.

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