CAAD 107/2018-T: VAT on Compensation for Contract Termination - Taxable Services Ruling

ARBITRAL DECISION (consult full version in PDF)

The arbitrators Fernanda Maçãs (arbitrator-president), João Taborda da Gama and Nuno Cunha Rodrigues (arbitrators-members), appointed by the Deontological Council of the Administrative Arbitration Center ("CAAD") to form the Arbitral Tribunal, agree as follows:

I. Report

1. A..., S.A. (hereinafter, "A..." or "Claimant"), holder of the corporate identification number ..., with registered office at ..., n.º..., in Lisbon (company formerly designated as B..., S.A., and which succeeded, as a result of a merger by incorporation operation, to C..., S.A., holder of the corporate identification number ...) submitted a Request for Arbitral Opinion (hereinafter "PPA") under the terms and for the purposes of article 2, no. 1, al. a) and articles 10, 15 and following of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters (hereinafter, "RJAT"), of the decision dismissing the hierarchical appeal, delivered by the Deputy Director-General of the VAT Services Directorate, of the Tax and Customs Authority (hereinafter, "AT" or "Respondent"), on 20 December 2017, as well as of assessments nos. 2015..., 2015... and 2015..., concerning Value Added Tax (hereinafter, "VAT"), relating to the periods of January, February and March 2013, in the total amount of € 520,423.37, and of the decision dismissing the complaint for review, delivered by the Director of the Major Taxpayers Unit of the AT, on 6 December 2017, which had been filed against assessments nos. 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., all of them relating to VAT and compensatory interest, relating to the periods from January to December 2014, in the total amount of € 7,677,183.94.

As a subsidiary basis, the Claimant requested the partial annulment of the aforementioned assessment acts, on the basis of the value of indemnities actually paid by the customers, with the VAT considered to be included in the value already debited and effectively collected, or, alternatively, to ensure that the Claimant has effective recourse to the mechanism of regularization of the tax deemed to apply to invoiced and unpaid indemnities.

The Claimant further requested that compensation for unduly provided guarantee be fixed.

1. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Respondent.

2.1. The Claimant did not appoint an arbitrator, and therefore, under article 6, no. 2, al. a) of RJAT, the President of the Deontological Council of CAAD appointed the signatories as arbitrators of the collective arbitral tribunal, all of whom communicated acceptance of the appointment within the applicable time limit.

2.2. The parties were duly notified of this appointment and did not express their willingness to refuse the appointment of the arbitrators, in accordance with the combined provisions of article 11, no. 1, als. a) and b), of RJAT and articles 6 and 7 of the Deontological Code.

2.3. Thus, in accordance with the provisions of article 11, no. 1, al. c) of RJAT, the Arbitral Tribunal was constituted on 24 May 2018.

1. To support the request, the Claimant attached two Expert Opinions (one by Professor MENEZES LEITÃO and another by Professor JOACHIM ENGLISCH) and argued essentially that the amounts debited to its customers who failed to fulfill the loyalty contracts concluded with it constituted indemnities for breach, not payments for the provision of services, and were therefore exempt from VAT.

The legal argumentation of the Claimant, after being presented and a Preliminary Issue on the cumulation of claims being overcome, with the Facts being set out, and after presenting the grounds invoked by the AT to sustain the contested assessments, was, in summary, the following (as appears from articles 125 et seq. of the PPA):

a) The procedures adopted by A... to resolve the contracts followed the rules of article 52-A of the Electronic Communications Law (hereinafter, "LCE") as written at the date of the facts;

b) Under these provisions, A... has the obligation, in case of repeated and continued breach of obligations over time by its (still) customers, to consider the service provision contract previously concluded as "automatically terminated", that is, it is deemed to cease to exist in the legal order;

c) It is the LCE itself that stipulates the "obligation" of such termination, under penalty of the impossibility of demanding any consideration due for service provision after the moment when the suspension and subsequent termination of service provision should, legally, occur;

d) The LCE also provides that, should this (automatic and mandatory) termination of the contract occur during the loyalty period, telecommunications operators (such as A...) may charge a consideration of an indemnificatory nature to their (former) customers (article 52-A, nos. 8 and 11 of LCE);

e) The amount as indemnity (i.e., aiming at compensation for damage suffered by telecommunications operators) provided for in these rules is only capable of being charged by A... (or by any other operator in equal circumstances) after the termination of the service provision contract that linked it to its (former) customer, that is, at a moment when it is legally prevented from providing any service to that (former) customer;

f) In Decree-Law no. 56/2010, of 1 June, a distinction is made between:

(i) The consideration due for the provision of the service (and only this) of unblocking equipment intended for access to electronic communications services; and

(ii) Indemnities due by virtue of termination of contracts during the loyalty period.

g) The admissibility of the charging, by electronic communications operators (for example, the Claimant and others), of indemnity for termination of contracts during the loyalty period has been the subject of multiple judgments, for example, from the Court of Appeal of Porto (hereinafter, "TRP"), namely those delivered on 28 April 2015, in case no. 95926/13.0YIPRT.P1; on 16 September 2014, in case no. 27076/13.8YIPRT.P1; on 26 June 2014, in case no. 28496/12.0YIPRT.P1; on 20 May 2014, in case no. 83925/13.6YIPRT.P1; and on 1 April 2014, in case no. 82657/13.0YIPRT.P1;

h) Thus, no doubts can exist regarding the legality of the procedure adopted by A... to be able to and intend to charge, from its (former) customers, indemnity in case of breach of the loyalty period, after extinction or, if preferred, termination of the service provision contract, due to a cause attributable to them;

i) As appears from articles 562 and 566 of the Civil Code, the civil legislator understood that the wrongdoer should proceed to natural restitution, as it is the most perfect form – provided it is possible – of compensating the injured party and, by removing the damage, restoring them to the situation they would have been in had the injury to their protected right or interest not occurred;

j) When natural restitution is not possible, as stated in article 566, no. 1 of the Civil Code, for reasons of a material or legal nature, or, although possible, it is insufficient to cover all damages or to encompass all aspects in which the damage manifests itself or is still excessively burdensome for the debtor, indemnity or restitution shall operate by equivalent, that is, by the delivery of a certain sum of money;

k) In that case, indemnity must be calculated, using as measure the difference between the patrimonial situation of the injured party, on the most recent date that may be considered, and what it would have been on that date if no damages existed;

l) In certain situations, due to the characteristics of the business or merely as a precaution, the ascertainment of the indemnity owed emerges before the verification of the (eventual) damage, as occurs in contracts where the parties agree on that measure, in accordance with the provisions of article 810, no. 1, of the Civil Code, which provides that "[t]he parties may, however, fix by agreement the amount of indemnity required: this is called a penalty clause";

m) In this way, it is possible to avoid the difficulties inherent in the process of liquidation of damages and quantification of indemnity, with the injured party having the right to receive the indemnity beforehand;

n) Agreed upon with the wrongdoer, it is, as a rule, a fixed monetary value;

o) In this sense, there is no doubt that the compensatory function constitutes an essential function of the penalty clause;

p) Although the parties may resort to the penalty clause in order to pressure the debtor to perform, with the coercive function being the one that is, even historically (it owes its name to the stipulatio poenae of Roman law), closest to the penalty clause;

q) The penalty clause constitutes a vector that introduces (at the moment it is provided for) and restores (at the moment it is activated) equilibrium in relations that are being initiated and developed by different actors in commerce (whether national or international);

r) The clause contained in the service provision contracts that A... concludes with its customers, in which it is established, in case of breach by the customer or due to a cause attributable to the customer, an obligation to indemnify damages (and therefore it is manifestly limited the view of the AT that only and solely a logic of repair of one type of possible damages is at issue, namely lost profits) caused in the sphere of the Claimant, having regard to a calculation formula previously established and agreed between both parties, constitutes an unequivocal "penalty clause", under the terms and for the purposes of article 810 of the Civil Code;

s) Thus, the amounts debited by the Claimant under the penalty clause in question undoubtedly assume – alongside its coercive function – a markedly indemnificatory nature, of compensation for damages (which are not limited – as the AT wrongly alleges – to lost profits);

t) VAT, in turn, is a general consumption tax that aims to tax transfers of goods and provision of services carried out in the national territory, on an onerous basis, by a taxable person acting as such;

u) It is noted that the concept of "provision of services" for VAT purposes does not resemble, for being broader, the concept of "service provision contract" adopted in civil law (see article 1154 of the Civil Code), in which it is stated that it is "one in which one of the parties undertakes to provide to the other a certain result of its intellectual or manual work, with or without consideration";

v) In this sense, the appreciation of the legality of the decision dismissing the hierarchical appeal, as well as of the VAT and compensatory interest assessment acts that preceded it, will always depend on the verification and proof that there was, on the part of A..., provision of a service to its (former) customers, at a moment after the termination of the contract that linked it to them, due to breach of the loyalty period;

w) The objective scope of VAT incidence and, consequently of the "provisions of services" considered relevant, is delimited by its nature as a consumption tax, which implies, in particular, the provision of a service for consumption by identifiable consumers, in exchange for a price to be paid by the customer/consumer or by a third party (see, in this sense, conclusions of the Advocate General presented on 23 November 1995, before the Court of Justice of the European Union (hereinafter, "CJEU"), in the case Jürgen Mohr, corresponding to case C-215/94);

x) In this sense, the non-existence of an "act of consumption" (regardless of whether or not there is some nexus between two provisions made within the scope of a reciprocal relationship) will inevitably lead to the exclusion of a given operation from the field of subjection to this tax;

y) Furthermore, "provisions of services" will only have relevance in the context of VAT to the extent that they are carried out by a "taxable person" of this tax, acting in that capacity;

z) In the present case, it is unequivocal that A... is a taxable person for VAT, as it develops, with regular character and in an intentional manner, an economic activity that consists, mostly, of provisions of electronic communications services, which are subject to taxation under this tax;

aa) Prof. JOACHIM ENGLISCH, in an opinion requested by A..., entitled "Opinion on the treatment of VAT in the EU of fees for early termination", details that "[a]ccording to settled case law of the Court of Justice, a taxable provision of services is only made on an onerous basis if there is between the provider of an individualizable service, on the one hand, and the respective beneficiary, on the other, a legal relationship during which reciprocal provisions are transacted, with the consideration received by the provider constituting the actual consideration of the service provided to the beneficiary within this legal relationship";

bb) "[i]t is therefore necessary, in the first place, that the taxable person carries out a specific act – or refrains from or tolerates an act (Article 25, point b) of the VAT Directive) – that may be qualified as a service provided for the benefit of an identifiable recipient. Secondly, the service must be provided on the basis of a legal relationship with the recipient that directly relates to the payment obligation of this recipient that is at issue. The payment to be made must therefore reflect the value that the parties attributed to a service provided by the taxable person";

cc) That is, for there to be an "economic activity" taxable under VAT, there must be consideration due by the part benefiting from a provision of services (or transfer of goods);

dd) In addition to the need for consideration to exist in exchange for the transfer of goods or provision of services, between the value of the provision and the value of the consideration there must be correspondence, or, if preferred, a direct nexus deliberately agreed upon between both provisions (i.e., between the service provided and the consideration received) and it will only be onerous if there is a genuine legal relationship in which reciprocal provisions are transacted, i.e., the consideration received by the provider corresponds to the countervalue of the service provided to the acquirer;

ee) Thus, the main question to ascertain whether a given operation falls within an "economic activity", for purposes of subjection to VAT, is whether "by virtue of the service provided is any remuneration required" and whether that remuneration can be considered as "the actual countervalue of the service provided to the beneficiary";

ff) That is, the onerous character of a given transaction is a fundamental characteristic for purposes of determining its subjection to VAT, since taxation applies precisely to the consideration or, if preferred, the counterpart inherent in transfers of goods or provisions of services, as a reflection of the pursuit of an economic activity;

gg) In these terms, the evaluation of the legality of the decisions dismissing the hierarchical appeal and dismissing the complaint for review, as well as of the VAT and compensatory interest assessment acts that preceded them, in the present case, is unequivocally dependent on verifying that the indemnities that the (former) customers of A... have (the duty to) pay, as a result of breach of the contractually stipulated loyalty period, are the direct and immediate counterparts of a (supposed) provision of services carried out by the Claimant, since only if that direct and causal nexus exists is it possible to state that such amounts owed to it are the result of the pursuit, in that particular case, of an economic activity;

hh) The only express reference in the VAT Code to the figure of "indemnities" is found in article 16, no. 6, al. a), a norm that provides that "from the taxable amount referred to in the previous number are excluded (...) amounts received as indemnity declared judicially, for total or partial breach of obligations";

ii) Having regard to the scope of a tax such as VAT, it is evident that that norm could not have intended to assume a purely prescriptive effect of providing only for the exclusion from taxation of indemnities determined or arbitrated by a judge.

jj) Indeed, it is in this sense that the AT itself has been successively advocating, by defending that "it is today a settled understanding that (...) there are many indemnities not declared judicially that should not be taxed" (see decision in case no. 1675, disclosed through information of 20 September 2002, from the VAT Services Directorate);

kk) In another equally clarifying decision, the AT stated that "if indemnities merely sanction the injury to any interest and do not remunerate any operation, rather being intended to repair damage, they are not taxable under VAT, to the extent that they do not have underlying a transfer of goods or provision of services" (see decision in case P I090 2002007 of 29 July 2005, issued by the Deputy Director-General of Taxes);

ll) It is the impossibility (even from a legal point of view, given in particular the provisions of LCE) for A... to continue to provide services (or, indeed, supply goods) to its (former) customers as a result of the termination of the contract that linked them to it and the breach of the minimum loyalty period by them that gives rise to the payment of indemnity;

mm) Thus, the customer, in paying this indemnity (or, at least, in having it charged to them), is not acquiring, from A..., any benefit or patrimonial advantage that would allow it to be characterized as being a true consumer of any hypothetically provided service (and much less of a good supplied) by the Claimant;

nn) As such, there is no concrete act of consumption by the (former) customers of A... underlying the indemnities in question and of which these constitute the counterpart;

oo) Now, if what is at issue is a penalty that presents an indemnificatory or compensatory nature, it then becomes clear that it cannot have – by contrast of concepts – a remunerative character.

pp) And, after invoking case law and doctrine in the same sense, cites the Director-General of Taxes in the decision of 10 May 2012, in case no. 3079, referring that "[f]or the classification of the issue of whether or not amounts as indemnity or penalty are subject to tax, account must be taken of the underlying principle of VAT, as a consumption tax, and which corresponds to the provisions of the VAT Directive - Directive 2006/112/EC, aiming to tax the consideration of taxable operations and not the indemnification of damages, which do not have a remunerative character";

qq) In another decision, the AT clarifies this understanding by stating that "indemnities that sanction the delay in execution of a contractual obligation or, in general, the injury to any interest, are not taxable under VAT, to the extent that they do not have underlying a transfer of goods or provision of services" (see decision of the Deputy Director-General of VAT, of 13 December 1989, in case no. 2274);

rr) The AT further stated that "because what is at issue is the value of taxable operations, indemnities should not be taxed, even if resulting from contractual liability, when no operation has taken place" (see decision of the Deputy Director-General of Contributions and Taxes, of 24 May 1989, in case no. 524);

ss) Regardless of whether, in a given particular case, it may be a matter of reparation of "lost profits" or "actual damages", this does not invalidate that, after all, it is always a matter of the obligation of a wrongdoer to indemnify an injured party, within the legal framework in which that obligation is fixed in the Civil Code, and, as such, that distinction between these two types of damages does not remove the non-remunerative character of that obligation;

tt) It cannot create confusion the fact that the amount of indemnity to which customers are contractually bound, as a result of the occurrence of a contractual breach of their strict liability, is expressed by reference to the minimum amounts (i.e., excluding additional values charged as a result of the provision of additional services) that A... would receive from them if the terminated service provision contract remained in force until the end of the loyalty period;

uu) It is true that A... could have agreed on any other criterion (which could be better or worse for each of the contracting parties), but it cannot be inferred from the method actually employed by it and the equivalence between the two aforementioned amounts that the indemnities owed by its (former) customers are intended to remunerate any "provision of services" (or even, a "transfer of goods");

vv) Furthermore, for purposes of determining the objective incidence of VAT, it is not even relevant to know whether, in concrete terms, the indemnity is or is not excessive in relation to the damages generated by the wrongdoer to the injured party;

ww) The interpretation already conveyed by the CJEU in several judgments proves to be decisive, not only in the specific cases in which it was called upon to decide on the taxation under VAT of operations of a nature similar to indemnities, but mainly in the definition of the base concepts decisive for purposes of framing operations under this tax, in particular, regarding the requirements necessary to meet the concept of onerous and taxable "provision of services";

xx) Also on the matter of indemnities, the European Commission has likewise had the opportunity to pronounce itself to the effect that "indemnities paid by insurers following the realization of the risk which is the subject matter of the insurance cannot be considered as remuneration of a provision of services, and therefore are not covered by the field of application of VAT" (see Response to Written Question no. E-2431/98, presented by Françoise Grossetête, of 30 July 1998, regarding the interpretation of article 4 of the then Sixth VAT Directive);

yy) Community case law and doctrine confirm that the central question at issue in these proceedings and which appears decisive for analyzing the legality of the acts now challenged concerns the non-existence of an "act of consumption" underlying the payment of indemnities for breach of the loyalty period by the (former) customers to the Claimant, with the result that its subjection to tax is prejudiced for this reason alone;

zz) Under the general rules and principles of VAT and in line with the case law of the CJEU on this matter, the indemnities debited by A... aim to sanction the injury to a concrete interest and, as such, do not reflect any remunerative character of a virtual and unidentified "provision of services" (or even, of a "transfer of goods"), and therefore are not covered by the scope of application of VAT;

aaa) The position adopted by the AT, throughout both tax procedures, in clearly disregarding the provisions contained in the VAT Directive governing the common system of VAT, clearly violates the provisions of article 8, no. 4, of the Constitution of the Portuguese Republic (hereinafter, "CRP"), which determines that "[t]he provisions of the treaties governing the European Union and the norms emanated from its institutions, in the exercise of their respective competencies, are applicable in the internal order, in the terms defined by the law of the Union, with respect for the fundamental principles of the democratic rule of law";

bbb) It concludes by requesting:

i) annulment of the decision dismissing the hierarchical appeal, delivered by the Deputy Director-General of the AT, on 20.12.2017, as well as of assessments nos. 2015..., 2015... and 2015..., all of them concerning VAT for the periods of January, February and March 2013, in the total amount of € 520,423.37 and annulment of the decision dismissing the complaint for review, delivered by the Director of the Major Taxpayers Unit of the AT, on 06.12.2017, as well as of assessments nos. 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., 2017..., all of them concerning VAT and compensatory interest relating to the periods from January to December 2014, in the total amount of € 7,677,183.94;

ii) as a subsidiary basis, should the request previously presented not be granted, there should nevertheless be annulment of the decisions dismissing the hierarchical appeal and the complaint for review and the VAT and compensatory interest assessments relating to the periods of January, February and March 2013 and from January to December 2014 better identified above, in the part corresponding to the amount of indemnities that were invoiced by the Claimant and that never came to be actually paid by its (former) customers or, alternatively, to ensure that the Claimant has effective recourse to the mechanism of regularization of tax deemed to apply to invoiced and unpaid indemnities;

iii) in any event, in the eventuality of it being considered that the Claimant is in the right in this case, compensation for guarantee unduly provided shall be fixed, under the terms of article 53 of LGT, and article 171 of CPPT.

ccc) It called 5 witnesses, attached 33 documents and requested additional evidence.

1. As later summarized in the Conclusions of its arguments, the position of the Claimant is, in summary, the following:

A. The primary question at issue in these proceedings, notwithstanding the involvement of several complex legal issues, is but one: are the indemnities invoiced by the Claimant to its former customers for breach of the contractually established loyalty period subject to VAT or not?

B. It is broadly demonstrated from the proceedings that the Claimant, in good faith and convinced of the non-subjection to VAT of those indemnification amounts, had as a procedure not to levy VAT on invoices issued for breach of the minimum loyalty period contractually established by its former customers.

C. As the Claimant had the opportunity to expose in these proceedings, that was always the interpretation of national case law, accompanied by the best doctrine, adopted by tax authorities in other Member States of the European Union and repeated practice in the national and European industry.

D. Possibly for this set of reasons, the treatment under VAT of the indemnification amounts in question remained unquestioned by the Respondent over many years, despite the permanent tax monitoring that this public entity carries out of the Claimant.

E. It may be said, therefore, that the additional assessments challenged in these proceedings result from a true paradigm shift as regards the treatment, under VAT, of these indemnities.

F. This new paradigm is not free from doubts and divergences, so much so that, in case no. 282/2016-T, in which the Claimant was in the same capacity, the Arbitral Tribunal agreed that there were pertinent questions that justified their referral to the CJEU.

G. In the context of the referral, the CJEU concluded that, according to its understanding of the VAT Directive, the subjection to VAT of the aforementioned indemnities is dependent on the verification, in each case, of a double condition without which it should be concluded that those amounts are not subject to VAT:

a. On the one hand, it is necessary that there be correspondence between the amount that the taxable person would have received as remuneration for services that it undertook to provide if the customer had not terminated the contract and the amount that is charged to that former customer as indemnity for termination of the contract before the end of the minimum period of validity;

b. On the other hand, it is necessary that the early termination of the contract does not alter the economic reality of the relationship between the taxable person and its customer.

H. Now, with all due respect for a different opinion, and with the awareness that it is to this Venerable Tribunal that it falls to apply to the case the interpretation declared by the CJEU, the Claimant understands that it is crystal clear from the evidence produced in these proceedings that neither of the two premises listed by the CJEU for concluding that the amounts in question are subject to VAT is verified.

I. In truth, there is no correspondence between the value that the Claimant would have received if the former customer had not breached the loyalty period and the value that it invoiced as indemnity for breach of the minimum period of contractual validity!

J. And this lack of correspondence stems from:

a. On the one hand, the amount of indemnity is calculated with reference to the values of the basic monthly fees which represent, in more than 80% of cases, only a part of the total price of the service that is provided monthly by the Claimant to its customers, since there are additional services or extra-threshold consumption that are invoiced separately.

b. On the other, we are dealing with successive or continuous execution contracts, with an indeterminate duration and which do not cease their effects at the end of the loyalty period, on the contrary, such contracts end up extending for lengthy periods of time (approximately 5 years, according to the churn rate recorded by the Claimant at the time), and therefore the Claimant had and has the legitimate expectation that any contract concluded with its customers would extend for periods of time that far exceed the minimum period of contractual validity stipulated and, with that, come to earn revenues that bear no resemblance to any amount of indemnity owed for breach of the aforementioned loyalty period by the former customer or due to a cause attributable to it.

K. It further appears that, with the termination of the contract, in violation of the loyalty period, by the former customer or due to a cause attributable to it, and the consequent extinction of that former customer's right to benefit from the provision of any of the services initially contracted with the Claimant, there is an effective alteration of the economic reality (and the legal reality by imposition of article 52-A of the Electronic Communications Law) of the relationship that had been established between the Claimant and its former customer.

L. In that sense, the decision of the former customer to make or not to terminate the contract is a decision that is substantively, legally and economically distinct from the decision to exercise or not to exercise the right to benefit from the services that the contract concluded with the Claimant would provide.

M. It is therefore the case that, if the former customer makes the electronic communications service provision contract that links it to the Claimant cease, such cessation extinguishes both the obligation of the Claimant to provide the services and the right of the former customer itself to benefit from the provision of services contractually fixed and agreed, which is moreover proven in these proceedings.

O. Indeed, the cessation of the electronic communications service provision contract, in violation of the loyalty period contractually fixed and agreed, always implies (if only because the cessation of the contract is a legal imperative, in accordance in particular with article 52-A of the Electronic Communications Law) the extinction of the former customer's right to benefit from the provision of the contracted service.

P. Accordingly, the indemnity owed by the former customer in case of breach of the minimum loyalty period contractualized constitutes itself in a moment logically subsequent to that of the extinction of the contract concluded with the Claimant and, therefore, of the very right of the former customer to enjoy any provision of services that had initially been contracted.

Q. Subsidiarily, should this Arbitral Tribunal come to conclude (a scenario that is inconceivable and mentioned only out of exclusive duties of representation), that the indemnities subject to analysis in these proceedings are subject to VAT (a scenario that is not conceded and only admitted for exclusive duties of representation), it should nevertheless conclude that the assessments challenged are illegal for applying to all invoiced amounts, and not only to the amounts effectively collected, as would result from the application of the rules enshrined in the VAT Directive and the general principles forming the common system of this tax.

R. Indeed, having regard to those normative provisions and principles and in light of the judgment of the CJEU of 22.11.2018 in case C-295/17, and the conclusions of Advocate General JULIANE KOKOTT in the same case, the value contained in the VAT assessment acts and interest now contested should be adjusted accordingly, purging for this purpose the values of indemnities that, although invoiced, were not the subject of collection by the Claimant.

S. It should be emphasized that, as stated above, and in line with what was dictated by the judgment of the CJEU and the conclusions of Advocate General JULIANE KOKOTT in the aforementioned case, there is not the slightest possibility – at least, within the dictates of the Law – of imposing on the Claimant the obligation or burden of (attempting to) proceed with any regularization processes, within the channels provided in articles 78, nos. 7 and 8, 78-A, 78-B, of the VAT Code (which were not designed to respond to cases such as those the Claimant places before this Tribunal for consideration), with a view to achieving the subsidiary objective sought by the Claimant of delivering to the State the VAT incurred only on the amounts of indemnities invoiced and received from its former customers.

T. It further appears that, should it be understood (which the Claimant does not accept and only admits out of duty of representation) that the indemnities invoiced to its former customers, after all, correspond to provisions of services, in view of the content of the Consumer Protection Law approved by Law no. 24/96, of 31 July, article 11, no. 1, al. b), Decree-Law no. 138/90, of 26 April, and the Electronic Communications Law approved by Law no. 5/2004, of 10 February, article 4 of Decree-Law no. 57/2008, of 26 March, and the Law on Essential Public Services approved by Law no. 23/96, of 26 July, it is not legally feasible for the Claimant to issue any type of corrective or replacement invoices of those previously issued, since:

a. The right to receipt of the price (in its entirety) prescribes within a period of 6 months from the moment when the defaulting event occurred, and it is now impossible, with reference to the months of January to March 2013 and the year 2014, that the Claimant – with the intention of passing on to its former customers any VAT eventually owed – could issue new invoices and expect any minimally positive result from them;

b. The Claimant could still incur in an illegal trading practice, by practicing unfair commercial conduct of imputing to consumers an additional charge that had not been fully informed to them, at the stage of contract formation and subsequently, in the context of execution of that same contract (especially at its termination and the original invoicing of the respective indemnity); and

U. Since it is certain that it does not fall to this Tribunal to "adjust" the value of the assessments in question to the amount that, in obedience to article 90 of the VAT Directive, would be owed (something that shall fall to be ascertained in the context of a process of execution of judgments), it will always be said that a decision of partial dismissal is the only one that, should this Arbitral Tribunal conclude that the amounts collected are subject to VAT, will have the virtue of ensuring, under the terms of the CRP and the Charter of Fundamental Rights of the European Union, full, effective and actual protection of the legally protected rights and interests of the Claimant.

(...)

V. Finally, without prejudice to all the above, as a complementary and necessarily subsidiary matter, it is considered important here to bear in mind that the tax (allegedly) owed with reference to the indemnities in question here, to be debited by the Claimant to its customers, would always have to constitute a component of the amount debited, and never an element to be added to it.

W. This very much follows from the mandatory rules of economic and legal passing on of VAT (as a consumption tax), inherent in the mechanics underlying the functioning of this tax, which should produce the same fiscal results as a single tax applied at the final stage of the supply chain, and it is certain that only with this mechanism of passing on and deduction is the desired neutrality of VAT achieved.

X. In this sense, a taxable person cannot refrain from charging tax on the respective invoices, even if they intended to bear it economically.

Y. In light of the foregoing, should this Arbitral Tribunal come to consider that the indemnities subject to analysis in these proceedings are subject to VAT (a scenario that is not conceded and only admitted for exclusive duties of representation), the amount of tax to be delivered to the State, with reference to the months of January to March 2013 and the year 2014, should be considered to be included in the value already debited and collected from its customers.

1. The Respondent replied, defending, in summary, after reiterating the Facts, their tax treatment, and the applicable legislation, that:

a) This instance should be suspended, under the terms of article 272, no. 1, of the Code of Civil Procedure (hereinafter, "CCP"), applicable ex vi article 29, no. 1, al. e), of RJAT, until the decision to be handed down by the CJEU in the preliminary reference case C-295/17, raised in the context of case no. 282/2016-T, of 19 February 2019, of CAAD, regarding the interpretation to be given to the relevant norms of European Union Law;

b) It should be dismissed, as unnecessary and untimely, the request of the Claimant for formulation of new questions as a preliminary reference, under the terms of article 267 of the Treaty on the Functioning of the European Union ("TFEU");

c) The main request of the Claimant should be dismissed, specifically because:

i) The existence of an economic activity is always subject to taxation and the taxation of a given operation, under VAT, is carried out on the basis of the existence of consideration associated with a transfer of goods or provision of services, as an expression of the economic activity of each agent.

ii) By virtue of the nature and generalist calling of this tax, the conceptualization of taxable operations (transfers of goods, provisions of services or operations that may be assimilated to it) is carried out using definitions of broad scope, and VAT should be levied on any provision of services carried out on an onerous basis by a taxable person;

iii) It is common to use the term "indemnity" to designate operations such as payments for transfer of contractual position, for early termination of a contract or for price revision, which, as a rule, are taxable operations;

iv) In cases where the so-called "indemnity" has underlying consideration, a counterpart, by reason of which a given entity obtains economic gains associated with the development of an economic activity, the subjection to VAT cannot be excluded without violating the common system of VAT;

v) The existence of a merely eventual nexus between the amounts received and an actual loss suffered by the service provider seriously questions whether the disputed amounts can have an indemnificatory nature, in the sense of the common system of VAT;

vi) Thus, only the payment of indemnity in a non-reciprocal context, without any interdependence between the indemnificatory provision and another provision relating to the exercise of an economic activity, should be considered for purposes of non-subjection to taxation under VAT;

vii) A remunerative character must be attributed to the so-called "indemnity", namely since it also constitutes an identifiable counterpart of the operator's commitment to guarantee to the customer certain contractual conditions, and is therefore taxable;

viii) It must be noted, and this fact is of paramount importance in view of the aforementioned community harmonization under VAT, that the case law of the CJEU has understood that these situations should follow the regime of the main contract;

ix) Even if indemnities could contain a part of its value intended to repair a loss, this was not presented or proven by the Claimant, but rather the classification of the amounts as having the nature of compensation for lost profits, and therefore remunerative, is required;

x) In the context of Case C-289/14, what was at issue was the amount paid, for the title of tickets sold but not used, whether by non-appearance of the passenger at the moment of boarding or by expiration of the ticket, by Air France-KLM to Brit-Air, which consisted of a fixed annual compensation calculated as a percentage (2%) of the annual turnover (with VAT included) of the lines operated under the franchising contract.

xi) The decision handed down by the CJEU considered that articles 2, no. 1, and 10, no. 2, of the Sixth Directive and the Sixth Directive as amended must be interpreted to the effect that the issuance of tickets by an airline is subject to VAT, in cases where the tickets issued are not used by passengers and these latter cannot obtain their reimbursement;

xii) In the case of (now) A..., consumers were, by force of the conclusion of the service provision contract, enabled to enjoy the services provided by the Claimant, under the contracted conditions, for the entire initially contracted period;

xiii) If they choose to enjoy the services, the consideration is undoubtedly subject. If they choose to withdraw before the end of the loyalty period, the amount that is invoiced to them is exactly the same that they would pay as consideration for the enjoyment of the services;

xiv) It is undeniable, therefore, that such amount should be considered as a consideration – contractually fixed – relating to the availability of the consumer to access the services provided by the operator, for the entire contracted loyalty period, under the contracted conditions – called "promotional" by the Claimant itself, as contained in the Tax Inspection Report (hereinafter, "RIT").

d) The subsidiary request of the Claimant should be dismissed, specifically because:

i) The VAT Code provides for the need to comply with various legal requirements for the regularization of VAT regarding credits, with it always being a prerequisite that the VAT has been assessed before the regularization request, a situation that in the case under analysis does not exist.

ii) For this purpose, the regulations contained in articles 78 and following of CIVA must be complied with, specifically presenting the due certificates from the Official Auditor, in accordance with article 78, nos. 9 and 10 of CIVA, for credits that became due up to 1 January 2013 and in accordance with article 78-D, for credits that became due after 1 January 2013, containing in particular the amount of tax to be regularized/deducted and confirmation that the taxable person carried out the necessary measures for recovery of the credits in question, with this certification being made for each of the periods to which the regularization/deduction refers.

iii) Still regarding credits that became due after 1 January 2013, article 78-A, no. 1 of CIVA establishes as a requirement for the regularization/deduction of tax, the evidencing of credits in the accounts as credits considered of doubtful collection or as credits considered uncollectible.

iv) Also for credits that became due after 1 January 2013, article 78-B, no. 1 of CIVA requires that for doubtful collection credits contained in article 78-A, no. 2, al. a) of CIVA, that is, credits in arrears for more than 24 months and greater than 750 euros, the deduction of tax is effected by means of a prior authorization request to be presented by electronic means, within six months counted from the date on which the credits are considered of doubtful collection.

v) In the case in question, neither was VAT assessed nor are the conditions for regularization/deduction minimally proven.

vi) What the Claimant cannot do is conclude that it was legitimized not to levy – when the law of the European Union and national law obligates it to do so – on the basis of the argument that a high percentage would – only alleged and not provably – be regularizable because it corresponds to uncollectible credits.

e) The request for compensation for unduly provided guarantee should be dismissed, by failure of the main request;

f) The request for the production of witness evidence should be dismissed, as such witnesses have already been questioned in the context of case no. 282/2016-T, of 19 February 2019.

1. The position of the Respondent, as later summarized in its arguments, can be thus summarized:

A. The Respondent alleges that the Claimant never attached to the proceedings any of the evidence elements provided for in article 78 of CIVA, specifically nos. 7 to 11 and 16 of that article, especially since it never alleged the facts relevant for this;

B. On one hand, the Excel file that the Claimant later attached does not prove that only the amounts contained therein were collected, and, on the other, the witness evidence unequivocally demonstrated that the amounts possibly not yet collected may still come to be;

C. The Respondent also warns that "It should not be taken as proven that:

a) the majority (or part) of the amounts invoiced as indemnity are uncollectible;

b) the Respondent followed a different practice in relation to other similar cases;

c) that the Respondent accepted that there would only be an additional VAT assessment on the amounts actually received by the Claimant, as regards the year 2015, to the detriment of what is provided in article 78 of CIVA."

D. "There is agreement between the parties regarding the fact that the subject of case no. 282/2016-T, in the context of which the preliminary reference was made, is in all respects identical to what is here under discussion."

E. And the Respondent adds that, given that the decision of the CJEU delivered in that preliminary reference case was unequivocal – to the effect that the amounts disputed invoiced by the Claimant are subject to VAT – it is necessary to apply such doctrine, as was indeed decided in case 22/2017-T, of 16 November 2017.

F. To the decision delivered by the CJEU in the preliminary reference case, the Claimant seeks to oppose through the invocation of:

"a) Alleged lack of correspondence between the amounts that the Claimant is entitled to receive and the amounts to which the CJEU judgment refers;

b) Alleged relevance of being possibly in question payments on an indemnificatory basis;

c) Alleged subordination of the preliminary reference mechanism;

d) Alleged relationship established by the CJEU with the subject matter on which its Air France-KLM and Hop! Brit-Air judgment was based (C-250/14 and C-289/14);

e) As a subsidiary basis, alleged need to take into account, in the process a part of the amounts in question that has allegedly not yet been (collected);

f) As a subsidiary basis, alleged deficiency in the calculation of the amounts of VAT missing assessed by the AT."

G. In response to each of these allegations, the Respondent referred, as to the first, that, having regard to the agreement of the Parties regarding the identity of facts of this case with those of the case in which the preliminary reference occurred, "the characterization of the formula for calculating by the Claimant the value of the invoices whose taxation under VAT is disputed is evidenced, among other passages, in the matter of fact given as proven, particularly in chapter II, section A.1, nos. 18 and 25, of the CAAD preliminary reference decision, transcribing this, moreover, in said no. 25, a characterization of the formula for calculating authored by the Claimant itself."

H. The Respondent also states that "the CJEU centered its analysis on determining "whether the amount owed by failure to observe the minimum contract binding period, as stipulated in the contracts in question in the main proceedings, corresponds to the remuneration of a service", in a context in which "the amount owed, by force of the said contracts, by failure to observe the minimum contract binding period is constituted by the amount of the subscription fee, multiplied by the difference between the duration of the minimum contract binding period and the number of months in which the service was provided"."

I. And the Respondent adds that "The core of the CJEU's response, to the effect that the payments in question form part of the actual consideration of an individualizable provision of services, resided in the following essential aspects, highlighted in nos. 49 to 55 of the «A...» judgment:

a) The services to be provided and the total value invoiced in the calculation of each contract are determined at the moment of conclusion of the contract;

b) The amount owed for failure to observe the minimum contract binding period forms an integral part of the total price paid for the provision of services, divided into monthly payments, which becomes immediately exigible in case of failure to comply with the payment obligation;

c) When such occurs, the said exigibility acceleration does not prevent the incidence of the tax from taking place in the terms provided in point c) of no. 1 of article 2 of the VAT Directive;

d) The amount owed for failure to observe the minimum contract binding period constitutes the consideration of an individualizable provision of services, whose taxable value comprises everything that constitutes the consideration that the service provider has received or is to receive from its customer."

J. As to the second allegation of the Claimant, the Respondent understands that "What the CJEU decided was that – regardless of the designation, the nature under internal law and the justification that the Claimant wishes to give for the imputation to customers of the amounts here in question – the agreement made between the two parties stipulates the total value of the contract to be mandatorily paid by the customer, with that value being entirely subject to VAT taxation."

K. As to the third allegation of the Claimant, the Respondent understands that the sense of intervention of the CJEU in preliminary reference cases is consolidated and took into account the pronouncement of the Claimant, and therefore "it is not minimally reasonable for the Claimant to seek to minimize the meaning and effects of the preliminary reference mechanism, when the very subject matter to be decided by CAAD was by it submitted to the CJEU and was the subject of a judgment that specifically addressed that same subject matter."

L. As to the fourth allegation of the Claimant, the Respondent understands, specifically, that "the references made by the CJEU to the judgment Air France-KLM and Hop! Brit-Air (C-250/14 and C-289/14) appear only as general and preliminary considerations, with the sole purpose of recalling generic principles relating to the common system of VAT already evidenced in other decisions, among which that prior judgment of theirs."

M. As to the fifth allegation of the Claimant, the Respondent understands that, when the material and formal requirements provided for in articles 78 to 78-D of CIVA are proven, "the regularization of the corresponding VAT in favor of the taxable person is at the initiative of this latter in its own periodic tax returns, not falling within the scope of the present case running before CAAD an appreciation regarding whether or not the Claimant verified the conditions material and formal legally required for this purpose."

N. As this was not done in the present case, the decision made by the CJEU in Judgment C-295/17, A..., must be followed: "it shall be incumbent on the competent national authorities to proceed, in the conditions fixed by national law, to the correction of VAT accordingly, as provided for in article 90 of the VAT Directive, so that the VAT is deducted from the amount that the service provider actually received."

O. Whereby "to request as the Claimant requests that the additional tax assessment carried out by the SIT be reduced to the amount it entered in an Excel sheet, is nothing more than requesting that the Tribunal determine the regularization of tax, in breach of CIVA, the Directive and the decision of the CJEU to which, as we have already noted, it is bound."

P. Moreover, it continues, the fact that in the inspection report relating to the year 2015 "article 78 of CIVA was taken into account and the substitute returns presented by the Claimant, in no way collides with the fact that here one cannot assess the possible application of that norm, by total absence of facts allowing assessment of its requirements."

R. Finally, as to the sixth allegation of the Claimant, the Respondent understands that "it follows from what was decided in the judgment «A...» that, in relation to each contract, the charge to the customer of the disputed amount is inserted in an individualized provision of services that is subject to VAT taxation as a whole, so that, naturally accruing the VAT to the price of each monthly payment stipulated in the contract, the same procedure cannot fail to occur, when, instead of the monthly payment relating to services utilized by the customer during the month, the Claimant charges the customer the price of that same monthly payment multiplied by the number of months missing to complete the so-called «loyalty» period."

S. It being therefore inapplicable to the case of the proceedings the decision of the CJEU of 7 November 2013 (C-249/12 and C-250/12, Tulică and Plavoşin, ECLI:EU:C:2013:722), which concluded that "the price to be invoiced must be considered to already include VAT when the following is verified cumulatively:

– The price of the good or service has been determined by the parties without any reference to the exclusion or inclusion of VAT;

– The supplier of the good or service, in view of the internal legislation applicable, does not have the possibility of recovering the value of the VAT from the customer."

T. As the Respondent affirms that neither of the two aforementioned conditions, which are cumulative, applies to the case, it understands that this latter argument of the Claimant also fails.

In its Response to the PPA, the AT requested the benefit of the witness evidence produced in case no. 282/2016-T, of 8 January 2017, of CAAD, insofar as "not revealing the Claimant which facts these may prove further, in the context of the present case, it will suffice to benefit from the evidence then produced, which was recorded."

1. As we have seen, in the response the Respondent defended that, as it is the same legal question, the suspension of the instance until decision in the preliminary reference case no. C-295/17, running before the CJEU, under the terms of article 272, no. 1, of the Code of Civil Procedure, applicable by force of article 29, no. 1, al. e) of RJAT, as the Claimant itself warned in its PPA.

The request formulated in that other case involved the following questions:

"1) Articles 2, no. 1, point c), 64, no. 1, 66/1/a), and 73, all of Directive 2006/112/EC, must be interpreted to the effect that Value Added Tax is owed by a telecommunications operator (television, internet, mobile network and fixed network) for charging its customers, in the event of termination of contract with an obligation to remain for a determined duration (loyalty period), due to a cause attributable to the customer, before completion of such duration, of a predetermined value, equivalent to the value of the basic monthly fee owed by the customer under the contract, multiplied by the number of monthly fees missing until the end of the loyalty period, and that when such value is invoiced, and regardless of its effective collection, the provision of services by the operator has already ceased, and provided:

a. the invoiced value has as contractual purposes to dissuade the customer from breaching the loyalty period to which they undertook and to compensate the loss that the operator suffered, with the breach of the loyalty period, namely by deprivation of the profit it would earn if the contract remained in force until the end of that period, as well as by contracting lower rates, by supply of equipment or other offers, free or at reduced price, as well as by advertising and customer acquisition expenses;

b. the contracts with loyalty period that were sold have remuneration, for the sales agents, superior to that of contracts without loyalty sold by them, with the value of the remuneration of the sales agents, in one and the other case (that is, in contracts with and without loyalty) being calculated on the basis of the value of the monthly fees fixed in the contracts sold;

c. the invoiced value is qualifiable, under national law, as a penalty clause [?]

1. The eventual non-verification of some, or some, of the points of the first question, is capable of altering the answer to it?"

1. In the arbitral request relating to the present case, the Claimant alleged that the requests transcribed above "do not exhaust all the essential questions for the proper resolution of this cause", "subsisting other doubts regarding the interpretation of the above-mentioned rules of the VAT Directive that must also be submitted for consideration of that CJEU", and therefore immediately requested the arbitral tribunal to raise new questions, whose wording it suggested should be as follows:

"1. Is it admissible to interpret articles 2, no. 1, point c), 9, 24, 72 and 73, all of Directive 2006/112/EC of the Council, of 28 November, concerning the common system of Value Added Tax ("VAT Directive"), to the effect that there can be a provision of services subject to this tax in cases where an electronic communications operator charges its former customers a certain amount to be compensated for the losses it incurred as a result of an early termination (i.e., before the end of the contractually agreed loyalty period) of the electronic communications service provision contract that existed between both parties, due to a cause attributable to those former customers, at a moment (after that termination) when – for legal and sectoral regulatory reasons – the electronic communications operator is prevented from providing any electronic communications service to those former customers?";

"2. In case of an affirmative answer to the previous question, is it admissible to interpret the articles of the VAT Directive mentioned above, to the effect that the amount charged by the electronic communications operator to its former customers cannot correspond to the consideration for any provision of services taxable under VAT as long as it is not possible to identify a concrete act of consumption that allows qualifying the former customers of the electronic communications operator as actual consumers of advantages conferred by the electronic communications operator as a result of the said payment?";

"3. For purposes of good interpretation of the articles of the VAT Directive mentioned above and of the subjection or not to tax of the situation better described above in 1., is it or is it not relevant that it be concretely ascertained by the tax authorities and/or national courts whether the amount charged by the electronic communications operator to its former customers is intended to repair its actual damages and/or its lost profits?";

"4. In case of an affirmative answer to the previous question, what is the influence – for purposes of good interpretation of the articles of the VAT Directive mentioned above and of the subjection or not to tax of the situation better described above in 1. – of, in the concrete case, that indemnity being required by the electronic communications operator to be compensated for the charges it incurred with the conclusion of the contract and provision of the corresponding services to its former customers, being, however, in practice impossible to quantify individually because of the legal requirement of enshrining in the contracts the charges resulting from early termination, which necessarily implies that there be a prior quantification and on the basis of estimates of such charges at the time of drafting the accession contract template intended for the whole universe of (potential) customers?";

"5. Still for purposes of good interpretation of the articles of the VAT Directive mentioned above and of the subjection or not to tax of the situation better described above in 1., is it or is it not relevant that the parties (the operator and its former customers), under the principle of contractual freedom, have in advance defined the formula for calculating the indemnification amount that would be owed by the former customers, should they breach the loyalty period stipulated in the service provision contract?";

"6. Still for purposes of good interpretation of the articles of the VAT Directive mentioned above and of the subjection or not to tax of the situation better described above in 1., the circumstance that the amount charged for breach of the contractually fixed loyalty period could be equivalent to the amount of the monthly fees owed if the contract remained until the end of the loyalty period determines, by itself, that such amount has a remunerative character?"

"7. Is the answer to the previous questions, in any way, influenced by the fact that the amounts required as indemnity for breach of the loyalty period, and its respective treatment under VAT, were defined by the electronic communications operators under a legal, case law, doctrinal and factual framework that substantiates the confidence and legitimate expectation of the electronic communications operators in the non-subjection to VAT of those amounts?"

1. Heard the Claimant on the suspension of the instance and the benefit of the witness evidence previously produced, the arbitral tribunal considered, by Decision of 10 August 2018, that no new referral was justified, and determined the suspension of the present case until CAAD was notified of the decision delivered by the CJEU in the said Case no. C-295/17, relegating to after that knowledge the production of evidence, so as to be able to adjust it to what would result from the decision to be handed down by the CJEU.

2. By order of 25 November 2018 the Respondent was notified to communicate to the proceedings whether the Decision of the CJEU in the preliminary reference request in Arbitral Case no. 282/2016-T had already been handed down.

3. By Request of 4 December 2018 the Respondent came to request the attachment to the proceedings of the Decision of the CJEU handed down in the preliminary reference in Arbitral Case no. 282/2016-T, the operative part of which was as follows:

"For the foregoing reasons, the Court of Justice (Fifth Chamber) declares:

1. Article 2, no. 1, point c), of Council Directive 2006/112/EC of 28 November 2006, on the common system of value added tax, must be interpreted to the effect that it must be considered that the predetermined amount, received by an economic operator in case of early termination of the contract by its customer, or by reason attributable to it, of a service provision contract that provides for a minimum period of contract binding, which amount corresponds to the amount that that operator would have received during the remainder of that period if that contract termination had not occurred, which is for the referring court to verify, is the remuneration of a provision of services made on an onerous basis and, as such, subject to that tax.

2. It is not determinative for the qualification of the predetermined amount in the service provision contract, which the customer owes in case of early termination of that contract, the fact that the fixed amount has as purpose to dissuade customers from breaching the minimum contract binding period and to compensate the loss that the operator suffers with the breach of that period, the fact that the remuneration received by a commercial agent for the conclusion of contracts that provide for a minimum contract binding period is higher than that provided for in the context of contracts that do not provide for that period and the fact that the said amount is qualifiable, in national law, as a penalty clause."

1. By Order of 10 December 2018 the date 16 January was set for the meeting provided for in article 18 of RJAT, in which the questioning of the witnesses would take place.

2. On 20 December, the Claimant presented a request asking for attachment of documents, requesting additional measures and alteration of the list of witnesses indicated in the PPA.

13.1. It justified the first request as follows:

"the Claimant has only received, up to the present moment, payment of a small part of the amounts invoiced to its (former) defaulting customers (the vast majority, private customers) as indemnity charged in situations of contractual breach, in the following manner (as per the information that had been promised in p.i. to attach to the proceedings and which is gathered in document no. 1 being now attached):

(i) In the period corresponding to the months of January, February and March 2013, the Claimant only received from its (former) customers the amount of € 177,455.25 (as compared to the total invoiced in the same period of € 2,262,707.26);

(ii) In the period between January and December 2014, the Claimant only received from its (former) customers the amount of € 3,894,784.31 (as compared to the total invoiced in the same period of € 30,648,301.34)".

It further invoked, for the attachment of other documents, that

"the Respondent has negotiated and reached agreements with the Claimant (for example, this occurred during tax inspections carried out by the Respondent in the context of VAT for the year 2015) and with other telecommunications operators who are its competitors, for quick and early resolution of disputes on questions identical to those that constitute the subject of the dispute in question, in which the Respondent accepted that there would only be an additional VAT assessment on the indemnification amounts associated with the violation of the loyalty period that were actually received from (former) private customers by the operators, including the Claimant (as per the tax inspection report relating to the year 2015, proof of substitution of the respective periodic return and proof of payment, which are attached as documents nos. 2 and 3, under the terms of article 423, no. 3, of CCP, applicable ex vi articles 1 and 79, no. 7, of CPTA, and article 29, no. 1, of RJAT)".

13.2. As for the additional measures requested, it alleged that

"the Claimant believes, with due respect, that this Learned Arbitral Tribunal is required to notify the Respondent, in accordance with articles 411 et seq. of the Code of Civil Procedure, and also of article 13 of CPPT, to present the agreements, tax assessments and/or any other documents resulting from the negotiations held with the other telecommunications operators, including the inspection report drafts and the inspection reports) around these facts alleged by it in its p.i. and which were frontally rejected by the Respondent, in its Response (see articles 236, 238 and 220)".

13.3. As to the substitution of witnesses, it considered that

"two new witnesses should be questioned below indicated whose testimony, as given the content of the CJEU judgment and the rejection by the Respondent of the facts invoked by the Claimant in p.i., appears of crucial importance to demonstrate before this Tribunal the truthfulness of the occurrence of negotiations held between the Claimant and the Respondent and which made possible, within the terms summarily set out above, the agreement reached relating to the year 2015".

1. In exercise of the right to reply, the Respondent came, on 15 January, to oppose the requested, asking for the benefit of the witness evidence produced in Case no. 589/2017-T:

14.1. As to the requested attachment of documents intended to prove the amounts actually received by the Claimant and, or, alleged divergent actions by the AT, stating that

(...) the document now attached proves to be totally irrelevant for evidentiary purposes, with no indication being drawn therefrom allowing conclusion as to the merits of the request in the terms that the Claimant wishes.

Especially because it cannot provide proof of any fact alleged in the PPA,