EU drops decision to pursue legal action against the UK over Gibraltar ‘state aid’

The European Commission announced, on 6 October, that it had decided to repeal its decision to refer the UK to the European Court of Justice over Gibraltar’s failure to fully recover illegal state aid.

In December 2018, the Commission found that Gibraltar’s corporate tax exemption regime for interest and royalties, as well as five tax rulings, were illegal under EU State aid rules. It ordered Gibraltar to recover unpaid taxes from the affected companies.

In March this year, the Commission declared that it would take the UK to court over Gibraltar’s failure to recover all the outstanding amount. Despite the UK’s withdrawal from the EU, the Commission said the withdrawal agreement left the UK subject to the Court of Justice in respect of certain transitional matters.

Gibraltar completed recovery of the outstanding amount by 14 July 2021. As a result, the Commission has dropped the case.