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MFZ Regime III comprises a regime of existing aid (and not new aid), authorised by the Commission in its Decisions of 2007 and 2013. The General Court erred in law by relieving the Commission of the requirement of submitting MFZ Regime III to a review of existing aid, to which Article 108(1) TFEU and Articles 21 to 23 of Regulation (EU) 2015/1589 refer.

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The requirement that profits be the result of activities effectively and materially performed in Madeira should not be interpreted as meaning that only the additional costs incurred by undertakings registered in the MFZ associated with remoteness are to be taken into consideration, that the tax benefits are to apply solely to profits derived from transactions directly subject to those additional costs, or that activities performed outside Madeira by MFZ licensed undertakings engaged in international activities are to be excluded.

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The General Court erred by failing to explain the consistency between the OECD’s (and the European Union’s) international legal requirements in tax matters and the interpretation given to the concept of ‘activities effectively and materially [performed] in the region’ in the context of the State aid scheme.

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The General Court erred in law by disregarding the case-law of the Court of Justice on the ‘centre of main interests’ of an undertaking in its interpretation of ‘activities effectively and materially [performed] in the region’. The General Court erred in its interpretation of EU rules, which interpretation conflicts with the fundamental principles of EU law, specifically freedom of establishment and free movement of persons, services and capital, under Article 45 TFEU et seq., and the Commission’s decision-making practice in matters of State aid for outermost regions.

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The General Court erred in finding that the Commission did not impose the use of the full-time equivalent (‘FTE’) and annual labour unit (‘ALU’) methods on the Portuguese authorities. The contested decision and the preliminary decision to open the formal investigation procedure directly contradict that interpretation.

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For the purposes of assessing the job creation or maintenance criterion under MFZ Regime III, the contested decision errs in law by applying the methodology for defining jobs as ‘FTE’ or ‘ALU’, since the concept of ‘job’ applicable to the MFZ Regime is that under national employment legislation.

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The judgment under appeal is vitiated by an error of law, in that the General Court found that the Commission merely claimed that the national authorities had failed to adopt a method allowing the reality and permanence of the jobs declared by the beneficiaries of Regime II to be checked, whereas the Commission concluded that there had been a failure to comply with the job creation/maintenance criterion through the uncritical application of the concepts of FTE and ALU.

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The General Court reversed the burden of proof, in so far as it was for the Commission to prove that the Portuguese authorities were not in a position to check the reality or the permanence of the jobs declared. It was for the Commission to identify which MFZ licensed undertakings benefitted from the allegedly misused aid.

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The judgment under appeal infringes the rights of defence of the Portuguese Republic and the general principles of EU law of legal certainty, legitimate expectations and sound administration.