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Iberdrola and Telefónica Win Appeal Against the European Commission in the Last Case of the Spanish Financial Goodwill Saga

September 27, 2023
Latham represents Iberdrola and Telefónica in a landmark litigation victory against the European Commission before the General Court of the European Union.

Latham & Watkins successfully defended Spanish multinational energy and telecommunications giants Iberdrola and Telefónica before the General Court, obtaining the annulment of the European Commission’s latest State aid decision of a 20-year trilogy that declared incompatible with the internal market a Spanish tax scheme that allowed national undertakings the amortization of financial goodwill in shareholding acquisitions in foreign companies.

In the decision — now quashed by the General Court — the European Commission illegally departed from its prior State aid decisions from 2009 and 2011, which declared the tax scheme was illegal state aid but recognised that certain companies that had benefitted from this tax scheme before December 2007 were covered by the principle of legitimate expectations. In that decision, adopted in 2014, the European Commission required the recovery of the amortised amounts in application of the tax scheme to indirect shareholding acquisitions in foreign undertakings.

Both Iberdrola and Telefónica benefited from the Spanish legal regime following a series of indirect acquisitions of foreign undertakings carried out within the legitimate expectations period but following the 2014 decision had to pay back all the financial goodwill amortized until then. After today’s ruling of the General Court, not only Iberdrola’s and Telefónica’s financial goodwill amortisations are declared covered by the principle of legitimate expectations recognised in the European Commission’s 2009 and 2011 State aid decisions, but also are entitled to recover from the Spanish Government any pay-back made as a result of the annulled decision.


Latham argued before the General Court that the European Commission’s 2009 and 2011 State aid decisions conferred on the undertakings benefiting from the Spanish tax scheme a subjective right not to have to repay certain unlawful aid and that, by withdrawing such right with the 2014 State aid decision as regards indirect shareholding acquisitions in foreign companies, the European Commission infringed the principles of legal certainty and the protection of legitimate expectations.

Today’s General Court ruling concludes that the European Commission could not revoke or narrow the scope of its 2009 and 2011 State aid decisions, which already covered both direct and indirect shareholding acquisitions in foreign companies. The case raises issues regarding the application of foundational principles of EU law, namely the protection of legitimate expectations and ne bis in idem principles.


The Latham team was led by Brussels Antitrust & Competition partner Javier Ruiz Calzado and Madrid Tax partner Jordi Domínguez, with support from associates Laia Marco Perpiñà, Álvaro López Usatorre, and Almudena Chiesa Jiménez-Becerril in Brussels, and associate, Ana Serrano in Madrid.