The European Court of Justice has found in favour of the Commission in the joined Cases C-106/09 and C-107/09 Commission and Spain v Government of Gibraltar and United Kingdom. The case centred on tax rules proposed by the UK for Gibraltar in 2002.

In 2004, the Commission decided that the proposals notified for the reform of the system of corporate taxation in Gibraltar constituted a scheme of State Aid that was incompatible with the internal market and accordingly that those proposals could not be implemented. However, the Court of First Instance (now “the General Court”) annulled the Commission's decision in 2008 on foot of action brought by the Government of Gibraltar and the United Kingdom. The Commission and Spain accordingly brought an appeal before the Court of Justice in order to have the General Court's judgment set aside. In its judgment, the Court of Justice held that the General Court erred in law in finding that the proposed tax reform does not confer selective advantages on offshore companies and accordingly set aside that judgment to uphold the decision of the Commission.

The case may have reduced precedent value, as the Court found that the proposed tax regime for Gibraltar was materially selective; in other words by virtue of its structure, offshore companies were favoured. The Court does not seem to have examined whether or not the State Aid rules were contravened through one territory within the United Kingdom having a more lenient regime than another.

For full details see: http://curia.europa.eu/jcms/upload/docs/application/pdf/2011-11/cp110120en.pdf