SBUX Starbucks Corporation

By Valentina Pop 

Margrethe Vestager, the European Union's competition czar, suffered a setback Tuesday after the bloc's second-highest court said Starbucks Corp. didn't benefit from illegal state aid in its tax dealings in the Netherlands.

In a highly anticipated ruling the Luxembourg-based General Court said that Ms. Vestager's office had failed to demonstrate that Starbucks had benefited from illegal state subsidies.

In a 2015 decision, Ms. Vestager had ordered the Netherlands to recoup millions of euro in unpaid taxes. The Netherlands has recovered EUR25.7 million ($28.3 million) as a result of that decision, which the court annulled.

The court, however, maintained a second decision issued in 2015, that led to Luxembourg recovering EUR23.1 million from Fiat Chrysler. Both judgments can be appealed to the European Court of Justice, the EU's highest court.

These were the first two big decisions Ms. Vestager took against multinational companies after the Washington-based International Consortium of Investigative Journalists reported in 2014 about Luxembourg's tax dealings with big corporations. Ms. Vestager's office investigated all the tax dealings in the so-called LuxLeaks files and hundreds more from other countries, resulting in 50 investigations, most of which are still ongoing.

"Winning or losing cases is a fact of life in my job," Ms. Vestager said in a recent interview. "You can do your best, but you cannot take it for granted that the court will agree with you."

In 2016, Ireland was ordered to recover from Apple a record of $14.5 billion in allegedly unpaid taxes, which earned Ms. Vestager the nickname "tax lady" from President Trump. Ms. Vestager disputes that she is targeting U.S. companies, given that European companies such as France's ENGIE SA have also been ordered to repay millions of euros in allegedly unpaid taxes.

However, in 2017 Amazon.com Inc. was found owing Luxembourg nearly $300 million in allegedly unpaid taxes. Both companies have appeals pending at the General Court. Lawyers for Apple appeared in court just last week for a two-day hearing in which they disputed the commission's arguments and calculations. A verdict is expected next year.

Other U.S. companies under investigation in the EU include Nike Inc. over its tax dealings in the Netherlands, Anheuser-Busch InBev NV and a branch of Pfizer Inc. for their tax arrangements in Belgium. A case against McDonald's Corp. fell apart last year after the commission's found no evidence of illegal state aid.

"This is very good news for all European transfer pricing cases that are coming or currently pending at the European courts," said Paulus Merks, a partner at the Dutch law firm Houthoff. "The European Commission will become more reluctant in chasing other rulings -- new and old," he said.

(END) Dow Jones Newswires

September 24, 2019 05:01 ET (09:01 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.