The EU’s highest court has annulled a European Commission finding that tax rulings from Luxembourg had granted illegal state aid to French energy company Engie.

The commission had ordered Luxembourg to recover money from Engie, a decision that was upheld by the EU’s lower General Court.

Luxembourg and Engie then appealed to the Court of Justice of the European Union (CJEU), which ruled in their favour today (5 December).

The court found that the commission had departed from an interpretation of certain provisions of tax law put forward by Luxembourg’s government.

“The commission is, in principle, required to accept the interpretation of provisions of national law given by the member state during an exchange of arguments, provided that that interpretation is compatible with the wording of those provisions,” the CJEU judgment stated.

Administrative practice

The judges also found that the EU’s lower court erred by ruling that the commission was not required to take into account the administrative practice of the Luxembourg tax authorities relating to a national provision on abuse of law.

“In order to support its decision, the commission should have established that, in the tax rulings at issue, the Luxembourg tax authorities departed from their own practice concerning transactions comparable to those at issue,” the CJEU said.

The court also ruled that the commission itself had made errors in its analysis of what constituted “the normal tax system” in Luxembourg, pointing out that the commission, in such cases, had to demonstrate that a tax measure “derogates from that reference system” by differentiating between the treatment of companies.