THE ECONOMIC AGREEMENT BETWEEN THE BASQUE COUNTRY AND SPAIN
Azores case introduced a new approach to the definition of regional selectivity of tax rules, the High Court of Justice of the Basque Country asked the EC of Justice for a preliminary ruling on the question that if some tax reductions made by the HTs should be considered regional State Aid (in the sense of Article 87(1) EC). The preliminary judgment of the EC of Justice did not have to say if the HTs met the conditions because that is a responsibility of national courts275. The EC of Justice only had to clarify the meaning of the conditions established in the Azores judgment, so that the High Court of Justice of the Basque Country could decide if the tax measures of the HTs were o not regional State Aids. In the proceedings before the EC of Justice, though, several interested parties submitted observations. Among those were the Commission and the ACs of La Rioja and Castile and León276. All three argued that, for different reasons, the HTs did not meet the three criteria established in the Azores Judgement. However, first the Advocate General of the case Juliane Kokott in her Opinion277 and later the Court in its Judgement278 dismissed all the allegations of the Commission, La Rioja and Castile and León. The Court did not say that the tax rules of the HTs were not regional State Aid because it could not say so, but dismissed all the arguments given by the Commission and the two Spanish ACs questioning the autonomy (institutional, procedural and financial) of the HTs. After dismissing the arguments of the interested parties, the Judgement of the Court of Justice of the EC (in September 2008) said that to asses whether a measure is selective it should be determined if the adopting authority has institutional, procedural and economic autonomy. The judgement also said that only the High Court of the Basque Country had jurisdiction to identify the national law applicable and to apply Community law to the cases before it. That is, the High Court of the Basque Country had to decide if the three autonomy criteria were met by the HTs. Upon receiving this Judgment the High Court of Justice of the Basque Country analyzed if the HTs comply with the three autonomies (institutional, procedural and economic) and ruled that they do. The Court then (in December 2008) dismissed the actions against the tax rules of the HTs. In the end, the debate about the compatibility of the Basque Tax regulations with the EU regulations can be summarized in two main conclusions: a) After the Azores judgment it is clear that EU countries, if they wish, can decentralize business taxes to all or (under certain autonomy conditions) only to some sub-central governments (regional or local). 275
The national court has to apply Community law to the cases before it, and has to identify and interpret the national law applicable to the case.
276
It should be noted that the United Kingdom and Italy submitted observations in favour of the HTs. Several Basque Organizations and Institutions also argued in favour of the HTs.
277
See Opinion of Advocate General Kokott, delivered on 8 May 2008, Celex code 62006J0428
278
Judgment of the Court, Joined cases C-428/06 to C-434/06 ) of 11 September 2008, Celex code 62006J0428.
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