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Agility and Flexibility – The Promises of the New Subsidy Control Regime

On the 30th of June 2021 it was announced that a new Subsidy Control Bill had been introduced in the UK Parliament. This comes after a period of consultation undertaken by the Department for Business, Energy and Industrial Strategy (BEIS) on the proposals for a new subsidy control framework. Overall, the consultation received 234 responses from a range of stakeholders, including among others, business representatives, academics, private individuals and devolved administrations.

Prior to UK’s exit from the EU, public authorities had to follow the EU State Aid rules which regulated the award of subsidies. Under the EU regime all subsidies that were not covered by the General Block Exemption Regulation (or otherwise exempt), had to be notified to, and approved by, the European Commission.  The UK government has described this process as “bureaucratic”, and hopes that under the new regime “flexibility will allow authorities to deliver subsidies where they are needed to support economic growth and recovery without facing excessive bureaucracy or lengthy pre-approval processes.”

The Subsidy Control Bill builds upon the international treaty commitments on subsidy control entered into by the UK and EU as part of the UK-EU Trade and Co-operation Agreement (“the TCA”). In fact these commitments have governed subsidy awards within the UK since the late hours of 31 December 2020. Therefore, rather than being a radical new step, the introduction of the Subsidy Control Bill clarifies how the existing regime will be formalised and will operate in practice, and as such provides greater certainty to public authorities.

Importantly, the Bill sets out the definitions of a “subsidy” and other key terms. For the purposes of the Bill, the interpretation of a “subsidy” is expanded from the current interim definition, to include reference to the potential negative impact of a subsidy on the UK internal market.

The Bill also sets out “subsidy control requirements”. These are seven key principles, set out in Schedule 1, which the public authority need to consider and satisfy when evaluating the award of subsidies. These closely mirror the six “common principles” contained within the TCA, and add a further principle aiming to minimise the negative effects of subsidies on the UK internal market. Further, the second part of the Bill, also sets out a number of restrictions on certain subsidies, which again largely derive from those set out in the TCA. These prohibitions include, among others:

  • Unlimited guarantees
  • Subsidies contingent on export performance
  • Subsidies contingent on the use of domestic goods or services
  • Subsidies contingent on the relocation of activities
  • Subsidies aimed at rescuing ailing or insolvent enterprises

On the other hand, the Subsidy Control Bill also contains a number of exemptions from the requirements of the scheme, namely for minimal financial assistance of £315,000 over a three year period, and Service of Public Economic Interest assistance of £715,000 over a three year period. There are also further exceptions to assistance provided in exceptional circumstances.

A new and independent body will also be created under the Bill, as is required by the terms of the UK-EU TCA. The Bill provides that a Subsidy Advice Unit is to be created as part of the Competition and Markets Authority. The Unit will provide and publish advice to public authorities in relation to subsidies which may be voluntarily referred for consideration, or are mandatory to refer as Subsidies of Particular Interest.

Lastly, the Subsidy Control Bill sets out that an aggrieved party may refer a Judicial Review challenge of a subsidy award decision to the Competition Appeal Tribunal.

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