BAA and the European State aid rules

Whether a specific tax regime is compatible with European state aid rules turns on the question of whether it is ‘selective’: does it favour certain undertakings or products over comparable undertakings or products, in a way that is not justified by the nature of scheme? That question can be difficult to answer in practice. After ten years of litigation, during which the General Court of the European Union has itself misinterpreted selectivity, the General Court (in its judgment in British Aggregates Association v Commission Case T-210/02) has outlined a staged analysis that should be undertaken, which focuses heavily on the effects that the tax has and will have in practice.