Engie/ Luxembourg vs European Union: CASE SUMMARY
Home » Case Library »
Engie/ Luxembourg vs European Union: CASE SUMMARY
Case Information
- Court: General Court of the European Union (Second Chamber, Extended Composition)
- Case No: Joined Cases T-516/18 and T-525/18
- Applicant: Grand Duchy of Luxembourg and ENGIE
- Defendant: European Commission
- Judgment Date: 12 May 2021 (rectified 16 September 2021)
Judgment Summary
This case involves the European Commission’s ruling that Luxembourg’s tax rulings for ENGIE constituted unlawful state aid, creating tax advantages that contravened the competitive balance required under EU law. The Commission’s decision centered on Luxembourg’s application of specific tax rulings allowing ENGIE to transfer profits within the group tax-free, using zero-interest loans known as “ZORAs” (Zero-Coupon, Obligatory, Redeemable at Maturity or earlier if converted to equity). By applying ZORAs and other intra-group arrangements, ENGIE was able to avoid paying substantial corporate tax on profits generated within Luxembourg.
The Commission argued that the Luxembourg rulings effectively circumvented normal tax rules by structuring a financing mechanism that achieved minimal tax liabilities on almost all Luxembourg profits. Luxembourg and ENGIE challenged this, asserting the tax treatment was consistent with Luxembourg’s corporate tax framework and that no selective advantage was granted.
The General Court upheld the Commission’s position, finding that the arrangements led to a significant reduction in ENGIE’s Luxembourg tax base without a corresponding basis in Luxembourg tax law. The court also determined that Luxembourg’s tax authority should have applied anti-abuse provisions, which, if enforced, could have prevented this tax outcome. In line with the decision, Luxembourg was required to recover the unpaid taxes from ENGIE, estimated to amount to hundreds of millions of euros. The ruling reinforces the EU’s firm stance against state aid that disrupts fair competition, especially in tax matters, and sets a precedent for the treatment of similar tax arrangements within the EU.
