Emer Hunt

Emer Hunt

PhD Thesis Title: The Legal System as a Black Box: a Systems Theoretical Approach to the State Aid Enforcement Action taken by the European Commission in relation to Tax Rulings.

Supervisor: Professor Gerardine Doyle

External Examiners:
Professor Ana Paola Dourado
Professor of Tax Law and International & European Tax Law
School of Tax Law and International & European Tax Law
University of Lisbon

Professor Morten Knudsen
Copenhagen Business School


The objective of this study is to identify the boundary between the legal system and its environment.  This involves understanding how the legal system communicates in its exclusive code, and, on the other side of the boundary, discerning how these communications are encountered in the environment of the legal system.  The theoretical and methodological framework of this study is based on Niklas Luhmann’s theory of social systems.  The empirical context of this study is the state aid enforcement action taken by the European Commission in respect of tax rulings granted by Ireland to Apple in 1991 and 2007.

The internal perspective on the “black box” is achieved through a doctrinal analysis of the complex linkage of Irish law, EU law and international law relating to the attribution of profits to the Irish branches of Apple subsidiaries.  These fragments of law combine through autopoiesis to construct a tax relationship as one of state aid.  The location of IP is considered as are the temporal aspects of the application of the OECD TP Guidelines.

The external perspective on the legal system is observed in the press release issued by the European Commission in August 2016.  It is also constructed through second-order observation of 16 expert interviewees from the European Commission, former US and Irish officials, former judges and practising lawyers.  Three methods achieve this external perspective: a functional analysis juxtaposing problems and solutions within the area of tax; a semantic analysis of values observing state aid enforcement as replete with moral communication, notably fairness; and a structural coupling analysis identifying environmental noise (including the US Senate investigation in May 2013).  The silence of the legal system on values is compared to the proliferation of moral communication from the external perspective.

Enforcement action was observed from the external perspective as being a solution to a number of problems: tax avoidance by multinational enterprises, tax competition by states, national sovereignty within the EU and disguised tax harmonisation by the European Commission.  Practical lessons are drawn from the observed silo effect of viewing tax from only one perspective. 

This study contributes to empirical work engaging Luhmann’s systems theory in a novel empirical and methodological setting.  It seeks to make sense of a tax relationship between a state and a taxpayer in a functionally differentiated legal system which maintains its boundaries but is nonetheless influenced by its environment (media, political and economic observations of taxation).

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