Online Gambling Special Tax (IEJO) - Arbitral Tribunal Incompetence Ruling | CAAD 255/2017-T

ARBITRAL DECISION (consult full version in PDF)

The arbitrators Counselor Doctor Fernanda Maçãs, arbitrator president, Professor Doctor Clotilde Celorico Palma and João Menezes Leitão, arbitrators members, who constitute this Arbitral Court, agree:

I. Report[1]

1. A…, operating under the brand B…, taxpayer no. …, with registered office in …, Malta, and with a branch in Portugal at …, …, no.…, …, …-… … (hereinafter the Claimant), presented on 7.4.2017, based on the provisions of article 2, no. 1, lit. a) and article 10, no. 1, lit. a) and no. 2 of Decree-Law no. 10/2011, of 20 January, as amended (Legal Regime of Tax Arbitration, hereinafter LRTA), a request for arbitral decision on tax matters, with a view to declaring the illegality of the special tax on online gaming (IEJO) assessments no. …, of 04.01.2017, relating to December 2016, which determined an amount payable of €729,980.14 and no. …, of 13.01.2017, which determined an amount payable of €5,945,192.04, relating to the remaining IEJO owed in the year 2016.

2. In the request for arbitral decision (hereinafter initial petition or IP), the Claimant, after referring to the contested acts being special tax on online gaming assessments issued by Tourism Portugal, I.P. under the Legal Regime of Online Games and Betting (RJO), approved by Decree-Law no. 66/2015, of 29.04 (article 2 of the IP), requests that the Court consider that, in the present case, Tourism Portugal I.P., assuming the nature of tax administration in the assessment of IEJO, is bound by the "jurisdiction of the Administrative Arbitration Centre" (CAAD), by virtue of the provisions of article 1 of Ordinance no. 112-A/2011, of 22.3, and is therefore a legitimate party in the present proceedings (articles 73, 75, 76 and 80 of the IP), or, if not so understood, that Tourism Portugal, as a tax administration, in the present case, be bound by the "jurisdiction of the CAAD", being able to do so via an arbitration agreement (articles 82, 87 and 88 of the IP).

3. In the request for arbitral decision, based on articles 5, no. 3, lit. b), 6, no. 2, lit. b) and 10, no. 2, lit. g) of the LRTA, the Claimant designated as arbitrator Professor Doctor Clotilde Celorico Palma.

4. Although in the request for arbitral decision (cf. articles 1 to 620 of the IP) there is no reference to the Tax and Customs Authority as a defendant entity, in the electronic request for constitution of Arbitral Court filed by the Claimant, with registration number …, the following was entered in the "observations" field: "Notification for Tourism Portugal to be sued jointly with the AT".

5. The CAAD notified the request for arbitral decision on 10.4.2017 to the President of the Board of Directors of the Tourism Institute of Portugal, I.P., Games Regulation and Inspection Service (hereinafter, TP or Tourism Portugal) and to the Tax and Customs Authority (hereinafter, AT), in the capacity of Defendant entities, which, as mentioned in the letter of 16.6.2017 from the CAAD President indicated below, by communications dated respectively 26.5.2017 and 8.6.2017, each proceeded to designate an arbitrator.

6. Tourism Portugal, in its communication of 26.5.2017, after referencing the provisions of articles 1 and 2 of Ordinance no. 112-A/2011, of 22.3, regarding binding to the jurisdiction of the arbitral courts of the Directorate-General for Tax and the Directorate-General for Customs and Special Consumption Taxes, set forth, as a preliminary matter, the following (with the designation of the respective arbitrator thus made "under reserve and without conceding"):

"4. The Tourism Institute of Portugal, I.P., is a public institute of special regime and is manifestly not within the scope of those services and organisms, being represented in court, or in the performance of juridical acts, by the president of the board of directors, by two of its members, or by specially designated attorneys (cf. Law no. 3/2014, of 3 January).

1. Moreover, the assessment acts which are the object of the present proceedings are excluded from the scope of activity of the aforesaid services and organisms which are bound by this jurisdiction.

2. So that there is no doubt whatsoever and even if it is understood that it is not legally possible, the Tourism Institute of Portugal, I.P. expressly declares that it does not intend to bind itself or in any manner to adhere, via arbitration agreement, to the jurisdiction of the CAAD".

3. The President of the Administrative Arbitration Centre, by letter of 16.6.2017, addressed to the Representatives of the AT and the Attorney for TP, under the heading "Proceeding no. 255/2017-T – designation of arbitrators in case of plurality of defendant entities", transmitted the following:

"In the context of the present proceeding, the Claimant exercised the faculty provided for in article 6, no. 2, subsection a) [sic] of the Legal Regime of Tax Arbitration, with the Court to be constituted, ope legis, as a collective of three arbitrators.

Under the same legal provision, "[w]hen the Court functions with the intervention of the collective, arbitrators are designated: (...) b) by the parties, with the designation of the third arbitrator, who exercises the functions of president arbitrator, falling to the arbitrators designated or, in the absence of agreement, to the Deontological Council".

Accordingly, to each party – Claimant and Defendant – shall fall the designation of an arbitrator, with the third arbitrator, who shall assume the functions of president, to be co-opted by the two arbitrators designated by the parties.

In the context of the present proceeding, the Claimant exercised the faculty of designating an arbitrator with the filing of the request for arbitral decision.

On 26 May 2017 the Tourism Institute of Portugal notified the CAAD of the designation of an arbitrator.

And on 8 June 2017 the Tax and Customs Authority also notified the CAAD of the designation of an arbitrator, distinct from the arbitrator designated by the Tourism Institute of Portugal.

In light of the foregoing, verifying in Proceeding no. 255/2017-T a plurality of defendant entities, and the Arbitral Court being to be composed of three arbitrators, the defendant entities – Tourism Institute of Portugal and Tax and Customs Authority – must jointly designate an arbitrator, or remit such designation to the Deontological Council of the CAAD.

In the event of failure to make such designation the Deontological Council of the CAAD shall substitute itself for the Defendant entities in the designation of the arbitrator, having a period of five days to notify [sic], via electronic means, of the appointed arbitrator, under the terms and for the purposes of the provisions of article 11, no. 4 of the Legal Regime of Tax Arbitration, with the appropriate adaptations".

1. Regarding this communication from the CAAD President, the AT and TP pronounced themselves by requests of 31.7.2017.

In its request, the AT considered the aforesaid order of the CAAD President as "completely devoid of legal basis to sustain it", for which it invoked the following:

• "The AT, in its capacity as defendant entity by "A…", operating under the brand "B…", and within the scope of an arbitral proceeding with designation of arbitrator by the parties, under article 6, no. 2, subsection b) of the [LRTA], has the legal right (and indeed constitutional) to designate an arbitrator freely and unconditionally";

• "the LRTA only provides for the possibility of the Deontological Council of the CAAD substituting itself for the Defendant entity in the designation of arbitrator in a single situation: that of the Defendant failing to proceed with the designation of arbitrator within the legally prescribed period for such, under the terms expressly provided in article 11, no. 4 of the LRTA (in conjunction with no. 3)" and "clearly, we are not, in the present case, in a situation of failure of designation of arbitrator by the AT";

• any other position "would constitute a flagrant violation of the most elementary legal and constitutional rights of defence of the defendant, AT, insofar as it would restrict it of its legal right to designate an arbitrator, within an arbitral proceeding with designation of arbitrator by the parties, under article 6, no. 2, subsection b) of the LRTA";

• "Considering that it is the AT alone which is bound to the jurisdiction of tax arbitration, the learned Order would also embody a manifest violation of the Principle of Equality of the Parties", because "The Claimant exercised its right to designate an arbitrator, indicating freely and unconditionally, the arbitrator it saw fit; while the AT, being compelled to jointly designate a single arbitrator or to renounce that prerogative by remitting such designation to the Deontological Council of the CAAD is merely being prevented from exercising its right to designate an arbitrator, in full equality or that is, in the same terms in which the Claimant did", which "proves even more serious if we take into account that this restriction of the legal status of the AT is the fruit of the filing of the request for arbitral decision, by the Claimant, in passive joinder, against two different entities, one of which, knowingly has no legal binding to the jurisdiction of the tax arbitral courts operating at the CAAD (cf. articles 1 and 2 of Ordinance no. 112-A, of 22 March)";

• "any other solution, other than the one here defended, would configure a serious limitation of the legal status of the AT, sole entity subject to the jurisdiction of tax arbitration, for which reason it could never be admitted that the AT would have to reconcile its will in the designation of arbitrator with any other entity, or entities, that might be sued, in passive joinder, by the Claimant, notwithstanding that such entities are not bound by the aforesaid jurisdiction (as occurs in the present case)";

• the aforesaid order "embodies a flagrant and manifest violation of various legal and constitutional principles as explained above, such as the Principle of Legality, the Principle of Effective Judicial Protection, the Principle of Equality of the Parties, compromising, at the outset and ultimately, the Principles of Good Adjudication of the Cause and Fair Composition of the Dispute".

Consequently, the AT declared it not renouncing "the exercise of its right of designation of arbitrator, as it timely and legally did", maintaining the designation timely made, as arbitrator, of João Menezes Leitão.

For its part, Tourism Portugal, in its request, set forth the following:

• "The tax arbitral proceeding is not a means of voluntary resolution of disputes, it is rather an alternative means of dispute resolution in which the activation of arbitral justice depends on the will of taxpayers who choose it, with the Tax Authority being bound to accept, within certain limits, such choice";

• "These rules contained in the LRTA and Ordinance no. 112-A/2011, of 22 March, are not applicable to Tourism Portugal which, by letter addressed to the CAAD, dated 26.05.2017 (...) made clear that it does not intend to bind itself or in any manner to adhere, via arbitration agreement, if such were possible, to the jurisdiction of the CAAD", a circumstance which "should have prevented the CAAD from notifying Tourism Portugal again as a party to this proceeding";

• "Furthermore, the CAAD, with the present notification, limits ab initio the participation of Tourism Portugal in this proceeding, imposing an inadmissible restriction on the choice of arbitrator, which, thus, ceases to be free and voluntary" and "places yet another filter" by referring to "in case the defendant entities do not reach an agreement, the Deontological Council of the CAAD substitutes itself for them";

• "This set of restrictions imposed on the rights of Tourism Portugal has as a consequence a fundamental deviation from the rules provided in the LRTA which aim at granting a status of substantive equality to both parties", inasmuch as "by imposing on the defendant entities the obligation to jointly designate a single arbitrator and, simultaneously, warning them that, in case they do not reach a single designation of arbitrator, the Deontological Council would not only resolve the conflict between the defendant entities but also substitute itself for them in the indication of the arbitrator, the CAAD is acting without any legal basis and is applying "with the appropriate adaptations" a provision of the LRTA that manifestly cannot be applied in this case", since "the provision of article 11, no. 4, of the LRTA applies to cases in which the notified party to indicate an arbitrator within the legally prescribed period does not do so, then that designation passing to the Deontological Council of the CAAD, which substitutes itself for the tax administration", providing "a solution for cases in which the defendant entity does not designate an arbitrator voluntarily, allowing the proceeding to follow its course, without prejudicing the rights of the claiming entity";

• "in the case of the present proceeding, it is not a case of voluntary failure to indicate an arbitrator", because "faced with the notification by the CAAD of the obligation to jointly designate a single arbitrator by the defendant entities, Tourism Portugal becomes dependent, in the designation of an arbitrator, on the will of a third entity, for which the aforesaid provision, nor even with the appropriate adaptations, could be applicable to it, since it is not due to its fault the impossibility of indicating an arbitrator";

• "Furthermore, it is manifestly not a case that the law does not provide for and which should be regulated according to the provision applicable to an analogous case", since the "preamble of the LRTA and its operative part reveal to the interpreter that it was never the legislator's intention to regulate the plurality of defendant entities, precisely because the LRTA does not intend to admit them, only being admissible the joinder of claims and joinder of plaintiff entities", for which "in the absence of any lacuna, no provision shall apply to the present case" and "even if the law provided for, which it does not, plurality of defendant entities within the scope of the tax arbitral proceeding and provided for the need for joint indication of an arbitrator by the defendant entities, it would always have to do so in a manner to guarantee substantive equality of the parties in the proceeding, so as not to impair the fundamental right of access to the courts and to effective judicial protection";

• "Confronted with this ablation of its rights and with the firm intention manifested by the defendant entity Tax Authority to maintain the arbitrator previously designated by it, Tourism Portugal has no alternative but to designate the same arbitrator indicated by the Tax Authority or, otherwise, to see that designation be made by the Deontological Council";

• "Either way, at this moment Tourism Portugal could not designate an arbitrator voluntarily, becoming conditioned that its arbitrator results from a choice by a third party", for which the CAAD "thus allows, the claiming entity to freely indicate its arbitrator, but does not allow Tourism Portugal to do so either, which results in a violation of the constitutional principle of equality"

after which it announced that: "In this context, because the final solution will always be the designation of arbitrator by someone other than Tourism Portugal, Tourism Portugal, merely as a matter of procedural celerity, accepts the designation of the arbitrator indicated by the defendant entity Tax Authority, and which is on the list of arbitrators of the CAAD, João Sérgio Teles de Menezes Correia Leitão", albeit "reserving Tourism Portugal the right to impugn all acts performed in this phase of the proceeding".

1. The arbitrators thus designated by the parties, under the provisions of articles 6, no. 2, lit. b) and 11, no. 6 of the LRTA, in compliance with the prescription of article 3, no. 2, lit. b) of Ordinance no. 112-A/2011, of 22 March, designated, by agreement, Counselor Doctor Fernanda Maçãs as President-Arbitrator.

2. As per communication from the President of the CAAD, under the terms prescribed in no. 7 of article 11 of the LRTA, the Arbitral Court was constituted on 29.8.2017.

3. In the IP, the Claimant petitioned, ultimately, the following:

"A) The statement of IEJO assessment no. …, of 01.04.2017, relating to December 2016, in the total amount of €729,980.14 shall be annulled;

B) The statement of IEJO assessment no. …, of 13.01.2017, relating to January 2017, in the total amount of €5,945,192.04 shall be annulled;

C) The unconstitutionality of the provisions in numbers 1, 3 to 8 of article 90 of Decree-Law no. 66/2015, of 29.04.2015, shall be judged, for violation of the constitutional principles of taxation on real income and of contributory capacity (articles 103 and 104), of the principle of equality (article 13), of efficient market functioning (first part of subsection f) of article 81) and of fiscal neutrality (articles 61 no. 1, 80 subsection c) and 86)".

For the substantiation of the petition, the Claimant alleged that, constituting IEJO a tax on companies positioned as a special tax on income resulting from the activity of exploiting online gaming, the illegality of the contested assessments results from the manifest unconstitutionality of article 90 of the RJO, in attention, in summary, to the following:

• the real income of the activity of exploiting online games and betting has direct translation in the concept of gross revenue of games and betting, that is, in the total amount of bets deducted from prizes owed to players, and not in the concept of total amount of bets, not constituting prizes owed to players resulting from winning bets available revenue of B… (articles 165 to 169 of the IP); "also for accounting purposes, the notion of profit or gain from the activity of exploiting online gaming coincides with the concept of gross revenue (and not with the total volume of bets, which includes prizes owed to players)" (articles 171 to 178); "a concept of income based on the criterion of the amount of bets (or volume of business of exploiting entities) allows, in the absurd, that taxation exists in the context of IEJO even in cases in which no taxable profit is determined", because "by completely ignoring the costs or margins of exploiting entities, IEJO is owed regardless of whether the entities exploiting bets at the non-crossed rate have, or not, actual profit" (articles 182 to 187 of the IP) – thus, "the provision of article 90 no. 1 of the RJO, in the part in which it determines the incidence of IEJO on revenues resulting from the amount of bets made, is unconstitutional, for direct violation of the principles of taxation on real income and of contributory capacity (article 104 of the CRP), and of equality (article 13 of the CRP), inasmuch as it wrongly includes the costs incurred by exploiting entities with prizes owed to players with winning bets, which are not an integral part of the concept of taxable profit (real income), there being no rational justification whatsoever, in particular at the level of combating fraud and tax evasion, to justify that violation of the constitutional precepts referred to above" (article 192 of the IP);

• "the Portuguese fiscal regime of IEJO applicable to straight betting creates a blatant discrimination between exploiting entities of smaller size (revenues up to €30 million), larger size (revenues equal to or greater than €60 million) and exploiting entities that only receive crossed bets" (articles 196 to 219 of the IP); the additional progressive rate applied to exploiting entities of straight bets non-crossed that record a volume of bets greater than €30,000,000 applied to the excess and calculated according to the formula provided in number 4 of article 90 of the RJO, up to the maximum limit of 16%, "is only calculated and assessed by the SRIJ up to the 15th day of the month of January of the year following the one to which they relate, with the respective payment being made by the exploiting entities up to the 31st of the same month", which means "that, in practice, exploiting entities, not only do not know (as long as the aforementioned limit of €30 million is not exceeded) whether or not they will be subject to this additional rate of tax" as "they also cannot advance calculate the tax rate that will be applicable to them in January of the following year (given that its application depends on a formula calculated on the annual amount of bets), thus being unable to reflect (and, ideally, pass on) this value in the preceding year" (articles 226 to 230 of the IP); "the subjection of online betting companies that record a volume of bets greater than €30,000,000 to a variable additional tax rate, of which they will only become aware – both of the subjection thereto and its value – in the following year, constitutes an evident contradiction to the guarantee of balanced competition" (article 250 of the IP); "the ignorance, by some companies, of the tax rate to which they will be subject, as opposed to companies that are aware of it, prevents the former from reflecting these expenses in the bets of the preceding year or, ultimately, from taking them into account in the forecasts (particularly accounting-fiscal) they make, placing them in an evident inequality in the management of their business, competing in the same market, and with the same potential customers, as the exploiting entities with volumes of bets not exceeding €30,000,000" (article 265 of the IP) – thus, "the provisions of numbers 4, 5 and 6 of article 90 of the RJO, which establish an additional tax rate, variable according to the annual volume of bets above a certain amount (€30,000,000), only knowable in January of the following year, are unconstitutional, for violation of the provision in the first part of subsection f) of article 81, combined with the principle of equality contained in article 13, both of the CRP, as they place serious obstacles to balanced competition among companies operating in the same market" (article 284 of the IP);

• "the choice of the RJO legislator, in the provisions contained in numbers 1 and 7 of article 90, to consider radically different bases of incidence (commissions vs. total amount of bets) for bets, depending on whether they are crossed or not, does not seem credible or logical" (articles 298 to 303 of the IP), being that, "from the perspective of the principle of fiscal neutrality, no element characterizing straight betting online does not allow a distinction, in its fiscal treatment, between crossed and non-crossed bets", "[b]ecause it is not credible that players, placed before the two scenarios (both easily achievable, in the same manner, via the internet), opt for one or the other type of bet, for the same events, based on criteria other than the odds offered by the exploiting entities", for which "assumes particular relevance the differentiation in the basis of incidence of IEJO: for the same bet values, the odds that the different exploiting entities can offer – depending on whether they are taxed under numbers 1 to 4 (non-crossed bets) or no. 7 (crossed bets), all of article 90 of the RJO – are substantially different, leaning, without a shadow of a doubt, to the side of the exploiting entities that only engage in crossed bets" (articles 304 to 307 of the IP) – whence it is concluded that "the provisions of numbers 1 and 7 of article 90 of the RJO, insofar as they establish a differentiation, without legal justification, at the level of fiscal treatment (in particular, for purposes of calculating the basis of incidence of IEJO), between crossed and non-crossed bets, are unconstitutional for violation of the constitutional principle of fiscal neutrality" (articles 308 and 309 of the IP);

• "from the analysis of some of the banked games (e.g., blackjack, French banking) it results that in these, like straight bets non-crossed, players play against the banker, i.e., against the exploiting entity; however, while these are subject to tax in a combination of initial working capital and gross profit of the banks, concepts which refer, with due changes, to the notion of gross revenue or GGR, straight bets online are subject to IEJO by the total amount of bets" for which "[i]t cannot be seen that the IEJO rules result from the maintenance of consistency with the territorial base regime, notwithstanding the specificities of online games and betting" (articles 312 to 319 of the IP); "while the games (banked) made available by physical casinos take into account, for purposes of the basis of incidence of the tax, the gross profit of the banks (a concept that finds reflection in the gross revenue of online games), the games made available online are subject to tax on the total amount of bets by players, substantially aggravating the taxation of licensed exploiting entities under IEJO" (article 323 of the IP); "it cannot be agreed that the legislator has made this choice, which ignores the materiality and substance of the gaming activity and makes fiscal-legal treatment depend on the form it takes (physical vs. online), affecting the fiscal management freedom constitutionally recognized to economic agents, as well as the principle of fiscal neutrality" and "[t]he principle of contributory capacity also suffers in this analysis of legislative frameworks, insofar as the criterion or measure of the contributory capacity of exploiting entities differs depending on whether we are under the legislative framework of games of chance and betting of territorial base or the RJO (in this case, as we have seen, excluding accounting-fiscal costs necessary for the development of licensed activity)" (articles 324 to 325 of the IP) – constitutes itself, thus, "an excessive and unjustified interference of the RJO legislator against the constitutional framework of the taxation of companies, in clear violation, once again, of the principles of equality (article 13 of the CRP), contributory capacity (article 104 no. 2 of the CRP) and fiscal neutrality constitutionally foreseen (cf. articles 61 no. 1, 80 subsection c), 81 subsection f), and 86, all of the CRP) (article 326 of the IP).

The Claimant further alleged, in its IP (articles 328 to 579), that the special tax on online gaming on straight bets, as configured in article 90 of Decree-Law no. 66/2015, constitutes an illegal state aid, under the terms and for the purposes of the provision of no. 1 of article 107 of the Treaty on the Functioning of the European Union (TFEU), and incompatible with the common market, for non-application of the respective numbers 2 and 3, and, therefore, illicit, having specifically requested (article 579 of the IP): "the contested decision to be annulled and ordered immediately the full recovery of illegal state aid, by means of an order for full recovery of all sums paid by the now Claimant" (sic). For such, the Claimant invoked and requested, in summary, the following:

• "we are before measures that establish a differentiated tax rate for certain online gaming exploiting entities, on one hand, by reason of their respective volume of business (nos. 1 to 5 of article 90 of Decree-Law no. 66/2015 and nos. 1 to 4 of article 90 of Decree-Law no. 66/2015); and furthermore, and on the other hand, among the exploiting entities of straight bets whose commissions charged are the only income directly resulting from the exploitation of straight bets in which bettors play against each other (no. 7 article 90 of Decree-Law no. 66/2015) and those whose commissions charged are not the only income directly resulting from the exploitation of straight bets in which bettors play against each other (nos. 1 to 5 and 7 of article 90 of Decree-Law no. 66/2015)", being that "[s]uch differentiation in treatment embodies an award of tax benefits, in the form of reduction of taxes, since the exploiting entities of straight bets with amounts of bets up to €30 million and those whose commissions charged are the only income directly resulting from the exploitation of straight bets in which bettors play against each other, benefit from a reduction of the tax rate applicable compared to the rules in force for the remaining exploiting entities", for which there are no doubts that "the measures in question, resulting from the application of the provision of article 90 of the RJO fall within the notion of "aid", under the terms and for the purposes of the provision of article 107 no. 1 of the TFEU" (articles 334 to 336 of the IP); aid which is granted by the State or through state resources, because "it is directly the Portuguese State that foregoes tax revenues which, otherwise, it would receive, being, for this purpose, irrelevant whether it does so directly or through another entity", "[s]ince the measures in question result in the collection of lower tax rates and amounts of taxes for the Portuguese State, as compared to the situation that would be applicable without such measures (articles 337 to 349 of the IP); which is selective, because "such provisions and their respective application introduce a differentiation among economic operators, in that they clearly distinguish among exploiting entities which, regarding the logic underlying the taxation in question, are in a comparable factual and legal situation" since "any exploiting entities of online gambling on straight bets, regardless of their size (i.e., larger or smaller volume of business), are in a comparable factual and legal situation, offering both the same type of activities and games, regardless of their respective size in terms of amounts of bets that any bettors choose to make, being capable of generating revenue for the State", being, however, that "the taxation of exploiting entities that have amounts of bets (or commissions on bet amounts) up to €30 million annually is significantly lower than the taxation of exploiting entities with amounts of bets (or commissions on bet amounts) greater than such value", as well as "exploiting entities that only obtain revenues from crossed bets the fiscal regime provided for the remaining exploiting entities does not apply, with IEJO incurring, in these cases, at a rate of 15% on the amount of commissions", with "clear benefit to the exploiting entities of crossed bets, who thus end up paying substantially lower taxes" (articles 350 to 460 of the IP); which is devoid of any justification by the nature or structure of the reference tax system of which it is part (articles 461 to 500 of the IP); and which entails the affectation of competition and trade among Member States (articles 501 to 531 of the IP);

• "The Portuguese fiscal regime, resulting from the provisions of nos. 4 and 5 of article 90 of the RJO, constitutes a true "state aid", under the terms and for the purposes of article 107 no. 1 of the TFEU, embodied in the tax benefits resulting therefrom for the respective beneficiaries – exploiting entities of straight bets with annual amounts of bets up to €30 million and exploiting entities of straight bets with exclusively crossed bets" (article 533 of the IP), being that "the measures now in question, resulting from the application of article 90 of the RJO, are incapable of pursuing any of the objectives provided for in nos. 2 or 3 of article 107 of the TFEU" (articles 534 to 558 of the IP);

• "if a national court is submitted a request to the effect that it draw the consequences of the violation of article 108 no. 3, whether or not the case has been in parallel submitted to the Commission and the latter has not yet decided on the question of whether the state measures in question constitute state aids compatible with the common market, national courts are not (...) obliged to declare themselves incompetent or to suspend the proceeding until the Commission takes a position on the measures in question"; "to the extent of the Claimant's knowledge, there shall not have been until now any notification to the European Commission of the legal regime established by article 90 of the RJO, on the part of the Portuguese Republic, so that the latter could pronounce itself on the qualification thereof as a regime of "state aids" and/or on its compatibility with the TFEU rules on the said regime, in particular the respective article 107 nos. 2 and/or 3", for which "this Learned Court is requested, within the framework of the relationship of cooperation between national courts and the European Commission, under article 29 no. 1 of Regulation (EU) 2015/1589, to contact the latter for confirmation of the non-existence of the aforesaid notification – in which case, necessarily and ope legis, the Portuguese fiscal system applicable to straight bets will automatically be illegal, as it constitutes an unnotified state aid –, [and], as well, so that it confirms the existence of any proceeding opened, in this regard, against the Portuguese Republic, officially or following any complaint from an interested party, relating to state aid, [and] so that the Commission confirms, ultimately, the non-compatibility of the Portuguese fiscal regime of straight bets with the provision of nos. 2 and 3 of article 107 of the TFEU and, therefore, the illicity thereof under the provision of no. 1 of the same article 107 of the TFEU", with the Court, "[o]n confirmation of the existence of aid granted illegally – i.e., that the fiscal regime of article 90 of the RJO was not notified to the European Commission, under the terms and for the purposes of the provision of article 108 no. 3 of the TFEU", extracting "all legal consequences of this illegality under national legislation, regardless of its compatibility with the common market, which is part of the obligation incumbent upon it, by virtue of no. 3 of article 108 of the TFEU, to protect the individual rights of those affected by illegal aid" (articles 560 to 579 of the IP).

The Claimant finally invoked, in its IP (articles 580 to 619), that "a tax whose basis of incidence is the amount of bets received by exploiting entities and which imposes the progressivity resulting from nos. 4 and 5 of article 90 of the RJO, infringes the fundamental freedoms of the TFEU, namely the freedom of establishment (article 49 of the TFEU) and the freedom to provide services (article 56 of the TFEU)", inasmuch as:

• "a tax based on a criterion relating to the volume of business, as is the case of IEJO applicable to exploiting entities of straight bets, despite being applicable indistinctly to all passive subjects of the type referred to" "[e]nds up, in fact, taxing more obviously and heavily the exploiting entities that have their registered office in other Member States, which are, invariably, exploiting entities of larger size than national ones", for which "the form of taxation provided for in nos. 4 and 5 of article 90 of the RJO is, therefore, capable of prejudicing, in particular, the passive subjects that have their registered office in another Member State", "[c]onstituting, therefore, an indirect (de facto) discrimination by reason of the location of the registered offices of the companies exploiting entities, within the meaning of articles 49 of the TFEU and 56 of the TFEU" (articles 580 to 587 of the IP);

• "exploiting entities of larger size generally have a business model based on high volumes of bets, whose functioning typically requires substantial initial investments"; "the progressive taxation of the amount of bets, as provided for in nos. 4 and 5 of article 90 of the RJO, does not allow such exploiting entities to amortize such investments, by virtue of them not being able to dispose of sufficient profit margins for such", and "[i]n this measure, such taxation introduces yet a further discriminatory factor indirectly, by reason of the location of the registered office of exploiting entities, given that the incumbent operator Santa Casa da Misericórdia, which for many years has exploited games of chance and betting in Portugal, does not have to face such costs related to initial investments", for which "although it does not constitute a direct discrimination but rather a measure indistinctly applicable to national and non-national exploiting entities, the differentiation of incidence and tax rates applicable constitutes a restriction on the freedom of establishment and of provision of services by nationals of other Member States, within the meaning of the provision of articles 49 and 56 of the TFEU", there being no "any potential alleged reasons of overriding reasons of public interest that, in concrete, could justify the restrictions on the aforesaid freedoms or which, in any case, are adequate and proportionate to pursue the objectives of any potential or alleged reasons" (articles 588 to 608 of the IP).

1. Tourism Portugal presented on 3.10.2017, under article 17 of the LRTA, a Response, in which it defended itself by exception and by impugnation, requesting, ultimately, of the Court that:

"a) It declare itself absolutely incompetent, in reason of subject matter and, in consequence, absolve the Respondent from the instance;

b) Declare the Respondent a party lacking legitimate standing, with the consequent absolution from the instance;

c) Declare itself materially incompetent to appreciate the claim insofar as it relates to state aids, as well as to their recovery;

d) Declare null all proceedings subsequent to the filing of the request for constitution of the arbitral court, due to defects committed in the procedural phase;

e) Judge the present action unfounded, as unproven, and, in consequence, absolve the Respondent from the claim".

In support of the thus requested, Tourism Portugal alleged, in summary, the following:

I. By exception: lack of material competence (articles 1 to 15 of the Response)

• "the disputes susceptible to be submitted to the jurisdiction of the CAAD are only and solely those pertaining to questions on the illegality of the types of acts referred to in subsections a) and b) of no. 1 of article 2 of the LRTA and which are covered by the binding made in Ordinance no. 112-A/2011, of 22 March", for which "being in question the appreciation of claims relating to the legality of tax acts, there is still to verify whether the defendant entity is one of the entities necessarily bound to the jurisdiction of this Court, as well as whether the type and maximum value of the disputes respect the provision of the Ordinance to which article 4 of the LRTA refers";

• Ordinance no. 112-A/2011, in its article 1, only refers to the services of the Ministry of Finance and Public Administration of the Directorate-General for Tax (DGCI) and the Directorate-General for Customs and Special Consumption Taxes (DGAIEC), for which "only these, and only these services, are bound to the jurisdiction of this Court"; given that "in the present proceedings a claim is in question relating to a tax – special tax on online gaming (IEJO) – which is not administered by the services and organisms mentioned in the aforesaid Ordinance (cf. subsection g) of no. 2 of article 9 of Decree-Law no. 129/2012, of 22 June, in the version given by Decree-Law no. 66/2015, of 29 April)", it results that "under the terms in which the action is brought and considering the manner in which the Claimant structures the claim and the respective grounds, there is verified an absolute incompetence, in reason of subject matter, of this Court to appreciate the claims for annulment of the special tax on gaming assessments inasmuch as this tax, as referred to, is not administered by any service of the Tax Authority (but by the Respondent)", for which "this Court should declare itself materially incompetent in reason of subject matter, with the consequent absolution of the Respondent from the instance, under the terms of the provision of subsection a) of no. 1 of article 278 of the Code of Civil Procedure (CCP), ex vi subsection e) of article 29 of the LRTA".

II. By exception: lack of passive legitimacy (articles 16 to 37 of the Response)

• "the Respondent does not integrate the services and organisms of the Ministry of Finance and Public Administration, now Ministry of Finance, listed in article 1 of Ordinance no. 112-A/2011, [references which are now considered made to the Tax and Customs Authority (Tax Authority), by force of the reorganization in the structure of the State by Decree-Law no. 118/2011, of 15 December, which determined the merger of the two directorates-general], sole ones which are bound to the jurisdiction of this Court";

• as referred to in the Decision rendered in Proceeding no. 547/2015-T, of 17.02.2016, «clearly, there are legislative provisions that define the passive legitimacy for intervention in tax arbitral proceedings. Indeed, the legitimacy for intervention in tax arbitral proceedings always falls to the «highest managing officer of the service of the tax administration», as results from articles 11 no. 3, 13 nos. 1 and 2, 17 no. 1, and 20 no. 2, of the LRTA and is in harmony with the prescription of article 9 nos. 1 and 4, of the CPPT. There is no legal support whatsoever to attribute passive legitimacy in tax arbitral proceedings to any other entity»;

• "It results from what precedes that the Respondent Tourism Portugal is a party lacking legitimate standing for the present action, as is also the Tax Authority - which was not even indicated by the Claimant as a party -, since it only bound itself to this jurisdiction as to the taxes administered by it" - The lack of passive legitimacy embodies an exception that impedes knowledge of the merits of the case, which gives rise to the absolution of the Respondent from the instance (subsection d) of no. 1 of article 278 of the CCP).

III. By exception: intervention in the matter of state aids (articles 38 to 48 of the Response):

• The Arbitral Court "would always be incompetent to order "that the contested decision be annulled and ordered immediately the full recovery of illegal state aids, by means of an order for full recovery of all sums paid by the Claimant» (cf. article 579 of the request for constitution of arbitral court)", inasmuch as "the verification of the eventual incompatibility of the measures provided for in article 90 of the RJO with nos. 2 and 3 of article 107 of the [TFEU] is a matter of the competence of the European Commission", being that "even if the court had competence to analyze the state aid within the framework of the appreciation of the legality of the assessments sub judice, which (...) is not accepted, it would always be limited by the provision of article 2 of the LRTA and could not go beyond the declaration of illegality of the IEJO assessments, based on violation of article 107 of the TFEU", for which the arbitral court should judge itself incompetent in this part of the request for arbitral decision and, in consequence, absolve the Respondent from the instance under the terms of subsection a) of no. 1 of article 278 of the CCP;

• "In any case, it will always be said that an order could never be made for the recovery of any "aid", insofar as all licensed exploiting entities in Portugal had in the year 2016 (the year to which the assessments in question in this proceeding relate) amounts of bets exceeding €30,000,000.00".

IV. By exception, under reserve and subsidiarily: defects committed in the phase of the arbitral procedure (articles 49 to 75 of the Response):

• "considering that the CAAD that Tourism Portugal should be a defendant entity in these proceedings, as such results from the request for constitution of arbitral court and being the entity that administers and assesses IEJO, it could not have notified the Tax Authority as a claimant, and, in so doing, the President of the Management Committee of the CAAD acted without legal basis and clearly exceeding its competences and attributions, which resulted in the performance of a null act"; "in all communications that the CAAD addressed to the Respondent, prior to the constitution of the Arbitral Court, referred that the Claimant entities in this proceeding were the Tax Authority and the now Respondent, being that, read the request for constitution of the Arbitral Court, it is not seen where the Claimant sues the Tax Authority";

• "That act had consequences, since, from that moment on, there came to be two defendant entities in the present proceeding, which the LRTA does not admit"; "Another consequence was that the CAAD limited ab initio the participation of Tourism Portugal in this proceeding, imposing an inadmissible restriction on the choice of arbitrator, which, thus, ceased to be free and voluntary"; "Practicing the President of the Management Committee of the CAAD yet another defect when he referred that, should the defendant entities not reach an agreement, the Deontological Council of the CAAD would substitute itself for them";

• "in imposing on the defendant entities the obligation to jointly designate a single arbitrator and simultaneously warning them that, in the event they did not reach a single designation of arbitrator, the Deontological Council would not only resolve the conflict between the defendant entities but also substitute itself for them in the indication of the arbitrator, the CAAD acted without any legal basis and ventured to apply "with the appropriate adaptations" a provision of the LRTA that manifestly cannot be applied in this case";

• "the CAAD allowed the claiming entity to freely indicate its arbitrator, but did not allow the Respondent Tourism Portugal to do so either, which resulted in a violation of the constitutional principle of equality";

• "Having the President of the Management Committee of the CAAD imposed on the Respondents the obligation to jointly designate a single arbitrator or remit such designation to the Deontological Council of the CAAD performed a null act, which influences in a determinative manner the course of the proceeding, requesting, as a consequence, of the Court that it declare null all proceedings subsequent to the filing of the request for arbitral decision".

V. Refutation of the violation of the principles of taxation on real income and of contributory capacity (articles 86 to 109 of the Response):

• "IEJO is not a general tax on company income, but a special tax with extra-fiscal characteristics, not being applicable the principle of taxation on real income in the manner it is for companies in general"; IEJO is "applicable exclusively to exploiting entities of online games and betting and on revenues directly resulting from such activity, not having the character of generality of a tax on company income" and "its revenue is earmarked namely to tourism, culture, sport, the equestrian sector and the prevention of addictive and dependent behaviors, as provided for in articles 89 to 91 of the RJO, which is not the case with general taxes on income, whose revenues are not earmarkable, in obedience to the principle of non-earmarking provided for in article 16 of the Budget Framework Law"; "IEJO, which incurs on gross amounts, does not violate the constitutional provision of no. 2 of article 104 of the CRP, which only refers to taxation "[f]undamentally" on real income of companies, being that the specificity of taxation is not by itself sufficient to say that the aforesaid principle or that of contributory capacity is violated";

• "the principle of contributory capacity will have a delimiting role of situations in which there is no connection whatsoever between the economic performance and the presupposition selected as the object of the tax, which would be unconstitutional"; "Now, in the case of exploiting entities of online gaming, this element of connection exists, both when the tax incurs on the amount of bets received, and when it incurs on gross revenue (amount of bets received deducted from prizes paid)"; "contributory capacity is personalizable and must be viewed according to the economic strength of the Claimant and the latter makes no proof nor indicates any fact capable of evidencing that IEJO, as provided for in the RJO, calls into question its economic strength to pay it";

• "As the Claimant herself admits this legislative choice to make IEJO incur on the volume of bets rather than on gross revenue could be justified by extra-fiscal reasons that the provision intends to achieve, namely the fight against fraud and tax evasion, but also "to guarantee the protection of minors and the most vulnerable persons, prevent fraud and money laundering, prevent criminal conduct in online gaming and safeguard the integrity of sport, preventing and combating match-fixing and result-fixing»".

VI. Refutation of the violation of the principle of fiscal neutrality (articles 110 to 120 of the Response):

• "the Claimant, in order to be able to compare crossed bets and non-crossed ones and to be able to argue that it is the same activity, alleges that exploiting entities of crossed bets have participation in the activity they exploit when in reality they do not"; "Had the Claimant explicitly stated correctly the manner of functioning of straight bets and crossed bets, it would be easily concluded that one is dealing with realities that are not susceptible to being compared, either from the perspective of players, or of the exploiting entities themselves, for which it would never result in affectation of the constitutional principle of fiscal management and neutrality"; "But even if one could consider that this difference in incidence could affect the constitutional principle of fiscal management and neutrality, which only under reserve and by duty of representation it is admitted and referred to, the same would not be unconstitutional if it is not shown to be excessive, disproportionate or unreasonable to achieve the purposes pursued with the tax".

VII. Refutation of the violation of European rules on state aids (articles 121 to 190 of the Response):

• "contrary to what is alleged by the Claimant, in the case sub judice, the reference system cannot be the maximum rate of online gaming in straight bets applicable to the respective exploiting entities"; "the RJO came for the first time to regulate the activity of online gaming in Portugal, for which the regime therein provided is the mandatory starting point for the definition of the reference system, not being imputable to it contrary to what is alleged any positive discrimination in favor of a determined group of exploiting entities"; "The rule that is drawn from the RJO, which is for these purposes the only reference system, is one that results from the RJO having opted to treat differently what is different and took into account, for that reason, the different nature of revenues";

• "the system of taxation of online games and betting does not emerge as a set of loose and disjointed provisions nor even subsidiary provisions relative to a general taxation regime that is established in Portuguese law, but rather as a regime created ex novo for online gaming, embodied in the RJO, which aims to regulate this market in Portugal, for the first time, and to do so in a general manner"; "even in the context of the new regime created by the RJO, a rule regarding the taxation of online games and betting was not defined – rather several levels of tax rates and different assessment methodologies were defined, in adequacy to the type of game or betting and the business model underlying it"; "Thus, considering that the taxation in the case of straight bets (non-crossed) incurs on the volume of business in a progressive manner, the truth is that the foundation thereof is found in the specificities referred to above, constituting such taxation the rule system";

• "there is an express intention of the Portuguese legislator to establish a normal rate of IEJO of 8% and not 16%, as the Claimant alleges"; "The letter of the law and its interpretation cannot fail to be relevant, which allow concluding, without margin for doubt, that, at no point, in the provision of the taxation of exploiting entities in IEJO there was the intention to benefit some entities to the detriment of others"; "On the other hand, in article 90 of the RJO there is no distinction made among exploiting entities, being the fiscal regime therein provided equal for all those who might be licensed in Portugal to exploit that type of bet";

• "There is not, thus, contrary to what is said in the request for arbitral decision, any deviation to the reference system of the taxation of straight non-crossed bets, nor is it possible to identify ex ante any determined group of exploiting entities allegedly beneficiaries of state aid"; "On the contrary, the regime of no. 4 of article 90 of the RJO applies indistinctly to all exploiting entities that might obtain a license in Portugal to exploit that type of betting";

• "The amount of bets that each exploiting entity is capable of capturing and whether or not it exceeds €30,000,000.00 is the result of the market, with the specific framework that results from the characteristics of the same, there being no fiscal measure here susceptible of being viewed as an aid to a determined or determinable group of companies to the detriment of others";

• "it is verified that exploiting entities with greater volume of bets are able, in a determined economic exercise, to obtain higher margins and support the gaming tax without having to pass on the tax in the bet, albeit in one or another event they may have lower profit or even a loss"; "Consequently, the RJO and particularly article 90 of the RJO gives no advantage to a determined group of exploiting entities relative to the "normal" rate of IEJO, nor provides any deviation to the reference system therein provided for any group of passive subjects of that tax";

• "The progressive rates provided for the taxation of the activity of exploiting companies do not constitute state aid, insofar as they do not bring about an affectation, even if indirect, of State resources to a determined group of companies"; "Although the fiscal measures in the case sub judice could be considered selective prima facie, which by mere hypothesis is put forward, the same could not be considered state aids, given that such selectivity is justified by the nature or structure of the fiscal system of which they are part" and "such measures are proportionate, not exceeding what is necessary to achieve the legitimate objectives pursued, which could not be achieved by less comprehensive measures";

• "As to straight bets in which bettors play against each other (crossed bets), provided for in no. 7 of article 90 of the RJO, the taxation of exploiting companies cannot be understood as embodying state aid", because "the solutions adopted in the RJO, regarding the taxation of the activities in question, are based on the principle that the activities are not comparable or equivalent, not seeking with this to grant benefits to categories of companies";

• "The various references and attempts at approximation among the activities, do not allow overcoming the inevitable difference in the exploitation model, in which the operator merely makes available a platform for players to play among themselves, not actively participating in the bets made on its platform, as it is the players who define the odds at which they want to bet, being that the exploiting entity has, for that reason, only commissions it collects from players as revenues", for which "it does not make sense the comparison among taxes on exploiting companies of crossed bets and non-crossed ones, and much less the attempt to establish a "competitive" comparison among the odds set by exploiting entities and the odds that players establish among themselves in crossed bets"; "Being further unacceptable the conclusion that the Claimant draws in articles 459 and 460 of that the fiscal treatment given to crossed bets allows the exploiting entity to offer more attractive bets, since these are not even offered by exploiting entities, but rather freely chosen by players";

• "it is not by the fact that the provisions resulting from article 90 of the RJO are applicable to all those companies that exploit or come to exploit activities of straight bets in Portugal, that they will have to pay IEJO in Portugal at the rates provided in that provision, that therefrom results an influence on their respective competitive situation and on commercial exchanges among the various Member States";

• "it cannot proceed that the Portuguese fiscal regime resulting from the provisions of nos. 4 and 5 of article 90 of the RJO constitutes a true state aid, under the terms and for the purposes of no. 1 of article 107 of the TFEU, embodied in tax benefits resulting therefrom for the beneficiaries, which would be exploiting entities of straight bets with amount of bets up to €30,000,000.00 and exploiting entities of straight bets that only receive [crossed] bets".

1. The AT presented on 10.10.2017, under the provision of article 17 of the LRTA, a Response, in which it defended itself by exception, invoking that, as the Special Tax on Online Gaming "is not administered by any service of the Tax and Customs Authority, but by the Tourism Institute of Portugal, I.P" (articles 9, 10, 12 and 15 of the respective Response), "there are no doubts whatsoever that the disputed tax legal relationship on which the intervention of the arbitral court is requested is not covered by the delimitation of competence of tax arbitral courts made by the LRTA and by the binding Ordinance" (article 13 of the Response), for which "the invoked exception of absolute incompetence of the Arbitral Court should be judged as upheld, with this Court declaring itself materially incompetent in reason of subject matter, with the consequent absolution of the Respondent AT from the instance, under the terms of the provisions in articles 577, lit. a) and 576 no. 1 and in subsection a) of no. 1 of article 278, all of the CCP, ex vi subsection e) of article 29 of the LRTA" (final petition of the Response).

As to the defence by impugnation, the AT limited itself to referring that: "it being not the responsibility of the Tax and Customs Authority any competence within the scope of the administration of the Special Tax on Online Gaming, both as to assessment, as to "control, inspection and regulation", and of "collection and management of revenues", the Respondent AT has no knowledge whatsoever of the facts alleged by the Claimant in its request for arbitral decision, reason for which there is an impossibility, in fact and, consequently, in law, of presenting any defense by Impugnation", but "by mere caution, the defense by impugnation is remitted to the Response presented by the Tourism Institute of Portugal, I.P." (articles 19 and 20 of the Response).

1. By order of the Arbitral Court of 10.10.2017, the Claimant was notified to respond regarding the matter of exception raised by Tourism Portugal and by the AT, which was done by the response petition of 12.10.2017, in which it sustained the unfoundedness of the exceptions raised based on the following:

I. Of material incompetence (articles 4 to 43):

• "The Claimant does not ignore that the tax assessments in analysis (i) refer to IEJO and (ii) were issued by Tourism Portugal and not by the AT", which "results from the fact that Tourism Portugal, as to IEJO assessments, assumes the nature of tax administration, in the same terms in which the AT, as to the remaining taxes, assumes a tax legal relationship with taxpayers" and does so "with the legal support that is conferred to it, among others, by no. 3 of article 1 of the LGT, which clarifies in a clear manner that the concept of tax administration is not limited to the figure of the AT, covering any public entities legally entrusted with the assessment and collection of taxes, as is the case of Tourism Portugal";

• "it is true that no. 1 of Ordinance no. 112-A/2011 expressly binds the AT (at the time, DGCI and DGAIEC) to the jurisdiction of the arbitral courts, not referring, there, other services of the tax administration (and, as far as this analysis is concerned, not referring therein expressly Tourism Portugal)"; "Notwithstanding, it is important to emphasize that it results unequivocally from the preamble of this Ordinance the intention of the Government, following the introduction, in the Portuguese legal order, of arbitration on tax matters as an alternative form of jurisdictional resolution of conflicts in the fiscal domain, expressly to bind the tax administration (a concept that, as we have seen, is not limited to the AT) to the jurisdiction of the CAAD";

• "What is in question is not, therefore, the mere verification of the non-existence of an express reference to Tourism Portugal in the aforementioned article 1 of Ordinance no. 112-A/2011 - a fact that deserves no discussion", but it is important rather "to assess whether the new factual situation (publication of the RJO, implementation of a new tax, legal assignment of competences of tax administration to Tourism Portugal as to IEJO) entails the need to proceed with an up-to-date reading of the referred list of bound entities, with a view, right away, to the full application of the principle of equality, in particular in its aspect of non-discrimination", because "the fact that article 1 of Ordinance no. 112-A/2011 has concretized, at the moment of its approval, the means of binding of the DGCI and the DGAIEC, does not mean, in the understanding of the Claimant, that such formulation has remained (forever) crystallized in time", "[n]or that the legislator intended, in this manner, to limit for the future the possibility of considering submitted to arbitral jurisdiction other services which, by force of legal assignment of competence to assess and collect other taxes, should, in that domain, be considered equivalent, for all legal purposes, to the AT";

• "the legislator, following the publication of the RJO, could, if it wished, have availed itself of the legislative mechanisms at its disposal, in particular through the publication of an extension ordinance, clarifying, in a peremptory manner, its intention to include Tourism Portugal in the roster of services bound to the discipline of the CAAD", but "such clarification, although certainly useful from the perspective of legal certainty, is not revealed to be necessary as to IEJO, for the reasons already adduced, in particular by the fact that it results clearly from the preamble of Ordinance no. 112-A/2011 the intention to bind to the CAAD the tax administration in its entirety (and not merely some of its services or entities)";

• "a reading of articles 1 and 2 of Ordinance no. 112-A/2011 crystallized in time brings, in the case of IEJO, a clear violation of various constitutional principles (...) inasmuch as IEJO constitutes a tax regime that is substitutive of CIT" and "[a]s such, the differentiation of procedures of assessment of IEJO from CIT (here embodied in the legal assignment of such administration to Tourism Portugal, rather than to the AT) is manifestly discriminatory, bringing, in consequence, a limitation on the right of access to courts of the tax acts in question", because "all taxes committed to the jurisdiction of the AT, as tax administration, are subject to review in all aspects of contestation - administrative, judicial and arbitral - being able the passive subject freely to choose between claiming graciously, impugning the tax act to the common tax court or appealing to the Arbitral Court (and made such choice, the AT cannot divest itself of such jurisdiction)" and "the possibility of recourse to this alternative judicial route is all the more useful and necessary as it is striking the temporal difference between the two judicial systems to obtain a merit decision, being in question the very right of access to justice, enshrined in article 20 of the CRP, which requires an effective judicial protection and, as such, timely, in order to provide such protection a truly useful effect";

• "Nothing justifies, in summary, in the understanding of the Claimant, that the act of assessment of IEJO cannot be subject to the same means of defence of acts subject to CIT, under penalty of an unjustified (and unjust) emptying of the constitutional guarantee of access to speedy justice, and a serious violation of the principle of equality among passive subjects subject to CIT and passive subjects subject to IEJO" which "means that in case the Arbitral Court understands to follow the invoked by Tourism Portugal and by the AT in this regard, it will be making an unconstitutional interpretation of the precepts of article 2 and 4 no. 1, of the LRTA and of articles 1 and 2 of Ordinance no. 112-A/2011, violating articles 13 and 20 of the Constitution - which is hereby expressly invoked for all legal purposes".

II. Of lack of passive legitimacy (articles 44 to 59):

• "the argument presented by Tourism Portugal does not result clearly that the discussion of the lack of passive legitimacy could be dissociated from the question of the incompetence of the Court, inasmuch as it is not understood in what manner this Court could be competent to judge a proceeding without such decision being able to have practical effects, by it not being understood to be bound the defendant entities..."; "also it is not accepted that Tourism Portugal, as a passive subject of the tax legal relationship in question, would come to allege lack of legitimate standing to intervene in a tax judicial proceeding that seeks the discussion of the legality of acts performed by it" – "concluding by the competence of the Arbitral Court to judge this case, Tourism Portugal, as the author of the acts in question, is not, nor could ever be, a party lacking legitimate standing in the same".

III. Of the intervention of the arbitral court in the matter of state aids (articles 60 to 76):

• "One must not (...) confuse an illegal state aid with an illicit state aid", which is "one which is not passible of being framed within nos. 2 or 3 of article 107 of the TFEU, being, therefore incompatible with the internal market" and as to which "only the European Commission had competence to proceed to this latter analysis of evaluation of compatibility with the internal market - and, therefore, to declare the existence or not of illicit state aid";

• "what the Claimant intends that the learned Arbitral Court declare is simply the existence of an illegal state aid, because not notified to the European Commission", which "has nothing to do with the appreciation of the illicity of the state aid in question (i.e., of its compatibility or not with the provision in nos. 2 or 3 of article 107 TFEU, which anyway the Claimant requested that the European Commission be contacted for such, in articles 573 to 576 of the IP)", and that it extract "all consequences that flow from such a declaration of illegality of state aid, under the terms of the jurisprudence of the courts of the EU";

• "thus, the exception invoked by Tourism Portugal (and the AT) as to the alleged lack of competence of this learned Arbitral Court to declare the illegality of the acts of assessment impugned and order the recovery of the sums resulting therefrom and of the sums paid by the Claimant, inasmuch as the same constitute acts of national implementation of illegal state aid and such declaration and orders of recovery are competences resulting from the terms and effects, in particular, of no. 1 of article 107 and of no.