After what has seemed for many of us to be a ‘long haul’ (no mean feat in lawyerly terms), as of 4 January 2023 we have a fully-fledged subsidy control regime in the UK with the now in-force Subsidy Control Act 2022 (the Act) and corresponding secondary legislation and guidance. The double-prize goes to Northern Ireland where EU State aid law continues to apply as well as UK subsidy control.

Our previous update on the new regime, which effectively replaces the EU State Aid regime in England, Scotland and Wales, sets out the key features which are unchanged. Otherwise, a quick reminder is that ‘subsidy control’ regulates the giving of subsidies – such as grants – out of public resources. It captures ‘financial assistance’ to organisations which offer goods and services whether commercial businesses, social enterprises, charities or not for profits.

The new regime has been introduced to meet the UK’s international trade obligations – principally under the UK/EU Trade and Cooperation Agreement which came into effect upon Brexit – but also as a domestic regime in respect of protecting competition and investment within the UK itself and to ensure effective trade with countries in the EU and beyond.

In the lead up to the Act ‘going live’, the Government published in November 2022 not just statutory guidance on the regime which runs to over 200 pages, but also a quick guide for public authorities to help them understand the key requirements of the new regime and how it is to be applied in practice, and an assessment template to assist public authorities in ensuring that a subsidy is consistent with the principles of compliant subsidy design. On top of that, the Competition and Markets Authority (CMA) and its Subsidy Advice Unit (SAU) published guidance on how SAU will carry out its subsidy control functions.

On 9 January 2023, the Government published three hotly-anticipated streamlined routes in the fields of Research, Development and Innovation, Energy Usage, Local Growth and corresponding guidance. These streamlined schemes effectively fall outside the assessment requirements of the Act, and can be used by any public authority, although there are still eligibility and financial restrictions such as subsidy ratios and maximum award values attached to each.

Much of this will be of significant interest to those who intend to give or receive subsidies. For some, there will be recognition of EU State aid principles and concepts in terms of what is or isn’t a subsidy but, procedurally, much has changed. In the various guidance, the Government is keen to distance itself from EU State Aid. SAU is now on hand to express its (non-binding) views on pre-notified subsidies and our very own Competition Appeal Tribunal is waiting in the wings for the first judicial review of a public authority award.

The need for awarding bodies to comply with enhanced transparency obligations also means that the risk of challenge is heightened. The new Government subsidy database must be populated with details of subsidies which can then be searched by the public. The majority of subsidy schemes i.e. schemes available to eligible applicants and standalone awards to individual organisations must be detailed on the database. However, Minimal Financial Assistance (MFA) subsidies and Services of Public Economic Interest Assistance (or SPEIA) subsidies do not need to be recorded unless they exceed £100,000. MFA and SPEIA will also be important exemption routes from much of the Act’s reach for subsidies which should not distort competition or trade. So, a glimmer of light at the end of the legislative tunnel.

It’s certainly a lot to take in but please do get in touch with Lindsay Draffan or your usual Bates Wells contact if you’d like to find out more.