The selectivity criterion should be interpreted very broadly.122 This condition excludes a general financial advantage, such as a tax advantage, from qualifying as state aid provided that the measure is not selective.
However, if the measure is only applicable to a certain group of enterprises the measure is treated as being selective. In addition, if the aid granted is the result of a discretionary decision of a government
through State resources that the independent grant of pecuniary advantages which were not paid for by a Member State was caught by Article 92. He mentioned the example of reduced rates which a Member State might require private electricity companies to grant to certain undertakings.
117 See cases Van der Kooy e.a./Commission, cases 67/85, 68/85 en 70/85; Italy/Commission C-303/88 and C-305/89 , and Air France/Commission, T-358/94.
118 See Commission notice on the application of the state aid rules to measures relating to direct business taxation, OJ C 384, 10.12.98, p. 3 et seq., p. 4 section 10.
119 See ECJ Judgement of 13 October 1982, joined Cases 213 to 215/81, Norddeutsches Vieh- und Fleischkontor, [1982] ECR 3583, section 22.
120 See Council Regulation (EC) N° 1260/1999 of 21 June 1999 laying down general provisions on the structural funds, OJ L 161, 26.6.1999, p. 1, Art. 12, p. ; e.g. Commission Regulation (EC) N° 68/2001 of 12 January 2001 on the application of Art. 87 and 88 of the EC Treaty to training aid, OJ L 10, 13.1.2001, p. 20 et seq., Art. 6; e.g. Community guidelines on state aid for environmental protection, OJ C 37, 3.2.2001, sect. 74.
121 See Mederer/Triantafyllou in Schröter/Jakob/Mederer, Kommentar zum Europäischen Wettbewerbsrecht, Art. 87 Abs. 1, note 29; idem in von der Groeben/Schwarze, EUV/EGV, Art. 87 Abs. 1, note 29.
based on a general law or administrative regulation,123 or if it is the result of a request by the undertaking itself,124 then the selectivity condition is met.
Measures that favour certain undertakings can still have a general character if the specific preferential
treatment follows from the normal application of the general system.125 Such measures are not within the scope of article 87 (1) EC.
In a decision regarding the Dutch financing company regime126, the European Commission concluded that the condition of selectivity was fulfilled because the regime was only applicable to international groups, provided they were established on two continents or in four countries. To establish a European Company, the group is required at the outset to be established in at least two Member States.
In that case the Commission recognised that international transactions entailed specific risks which could justify a derogation. But the main problem was that the eligibility criterion set by the Dutch authorities, namely the requirement to carry out financial activities in at least four countries or at least two continents, did not fit with the rationale of the system.127 Operating in two or more countries invokes the same risks.
Although the Dutch case has not been brought before the ECJ the decision of the European
Commission is based on three joined cases.128 In these cases tax benefits were granted to new companies which invested more than Euro 480,810 in Spanish Basque country. The quantitative restrictions proved the existence of a selective measure.
The case of a specific tax regime is different. Although an SE will typically be formed by businesses established in more than one country, this is not a quantitative measure but a qualitative one. It indicates that the company has to operate on a sustained and permanent basis across national borders. If the company operates across national borders then a specific regime might perhaps be justified by the nature and structure of the system.
An argument in favour of this reasoning is that the SE regime deals with the particular problems of cross border undertakings. This ranges from legal aspects like relocation of the seat of the company to tax arguments like not having to deal with exit taxes and transfer pricing problems if the CBT system is chosen. All these problems need to be solved and would likely be solved for SEs by, in this case, the CBT system.
123 C-241/94, Kimberly [1996] I-4551; C-200/97, Ecotrade [1998] I-7907; C-256/97, DMT [1999] I-3913. 124 C-156/98, Germany/Commission [2000] I-6857.
125 Case 173/73, Italy/Commission [1974] p. 709. 126 D/289741
127 See European Commission, Report on the implementation of the Commission notice on the application of the state aid rules to measures relating to direct business taxation, p. 10.
However, a specific tax regime for the SE seems selective. The European Commission concluded in its guidance on the implementation of the fiscal state aid rules that, although a specific tax regime is open to all sectors, the measures could be regarded as selective because such measures exclude all small businesses or local firms from receiving aid.129
Would one of the two systems delivers benefits which the other does not? Ireland introduced a system whereby under certain circumstances double taxation was relieved by using the exemption system for permanent establishment profits while the normal system provides for a tax credit. Although under certain circumstances the double tax relief is equal, sometimes the taxes levied from the PE are lower than if the profits were taxed in Ireland right away. In these situations the exemption system provides for an advantage. Translated to the SE situation it is likely that companies would be able to choose. So, if one of the options delivers an advantage under certain circumstances the situation can be considered to be state aid.
An advantage granted through state resources qualifies as state aid if it favours certain undertakings. It could be argued that the fact that the regime is available only to entities in the legal form of an SE
makes it selective. It seems to follow from case law and European Commission practice130 that even though the SE tax regime would be a measure capable of applying across sectors, it would only be available to enterprises organised under the legal form of an SE. It seems to be reiterated by the restrictions and the cost for the constitution of an SE.131