EU sues UK over Gibraltar state aid

The European Commission alleges that while it was still an EU member, Britain failed to recover €100 million in state aid given by the UK territory to multinationals.

The European Commission on Friday launched legal action to force the United Kingdom to recover €100 million ($119 million) in tax exemptions awarded to multinational firms operating in its territory of Gibraltar.

The case, which will go before the European Court of Justice, comes amid increasing tensions between London and Brussels since the end of the Brexit transition period in December.

What has the UK allegedly failed to do?

European Commission vicepresident Margrethe Vestager said the UK had failed to claw back the sum despite the EU deeming the tax breaks "illegal state aid."

Vestager said Britain had not recovered the money from two of the four companies concerned, more than two years after a relevant commission ruling.

"That is why we have decided to refer the United Kingdom to the Court of Justice for failing to implement this decision," she added.

The demand from Brussels was originally made in December 2018, while the UK was still an EU member.

How much state aid is outstanding?

Since the ruling, less than 20% of the total aid had been repaid by the companies, the Commission said.

EU rules prescribe that illegal state aid has to be recovered to offset potential unfair advantages created by such aid.

Gibraltar, a British overseas territory, lies on the southern tip of Spain.

The 6.7 square kilometer (2.6 square mile) territory has long faced criticism from European member states over its competitive corporate tax regime.

What else is straining EU-UK ties?

The Gibraltar legal action is the latest in a string of spats between the EU and post-Brexit Britain.

Brussels has also denounced the UK's unilateral decision to extend a grace period easing the flow of exports from the rest of Britain to its territory of North

ern Ireland.

The decision by London follows a slowing of exports of food and other key goods from the UK mainland due to complications linked to its new trade deal with the EU.

The EU said it will take legal action over the UK's move.

London and Brussels have also been sparring over production delays to the AstraZeneca coronavirus vaccine. The EU has threatened to block vaccine exports to Britain to safeguard doses for the bloc.

Some British politicians have accused EU countries of mounting a smear campaign against the British-produced vaccine, first by questioning its efficacy in the over 65s and then by playing up concerns over blood clots in a small number of people.

UK-EU ties became strained during the messy divorce negotiations following the 2016 referendum to end Britain's membership of the bloc.

mm/rs (AFP, dpa)

The EU says that the UK never recovered 100 million in illegal state aid given to multinationals based in Gibraltar