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It is an area of competition law, but the application of the rules also serves to ensure that the public purse is protected from excessive and unnecessary subsidies.
Typically, Subsidy Control compliance is assessed when a public authority is considering whether to enter into a transaction, for example offering a grant or renegotiating a loan. It is also assessed when public funded projects are audited.
Where a breach of Subsidy Control law occurs, the consequences can be serious. An award that is successfully challenged in the Competition Appeal Tribunal will usually be recovered with compound interest backdated to the point of award.
What is classed as a ‘Subsidy’ under the Subsidy Control Act 2022?
A ‘subsidy’ is defined under Section 2(1) of the Subsidy Control Act 2022 as any financial assistance with the following characteristics:
(a) given, directly or indirectly, from public resources by a public authority;
(b) conferring an economic advantage on one or more enterprises;
(c) is specific in that it benefits one or more enterprises over one or more other enterprises with respect to the production of goods or the provision of services; and
(d) has, or is capable of having, an effect on:
(i) competition or investment within the UK;
(ii) trade between the UK and a country or territory outside the United Kingdom; or
(iii) investment as between the UK and a country or territory outside the UK.
The meaning of the terms within this definition is further clarified through developing case law and the Subsidy Control Statutory Guidance.
When can a ‘Subsidy’ be lawfully awarded?
When a subsidy is present, this may still be committed under the Subsidy Control regime, provided that particular requirements are satisfied. This includes there having been a comprehensive review of the relevant sections of the Subsidy Control Act 2022 that relate to prohibited categories and satisfying one of six routes, these being:
- Minimal Financial Assistance;
- the Subsidy Control Principles;
- Streamlined Routes;
- existing schemes;
- Services of Public Economic Interest Assistance; and
- Services of Public Economic Interest.
It is also necessary to assess the applicability of trade agreements, in particular the Windsor Framework upon the proposed transaction.
There is a legal duty under Section 52 to refer a Subsidy of Particular Interest (“SoPI”) to the Subsidy Advice Unit within the Competition and Markets Authority for review. What constitutes a subsidy includes a relocation award with a value of over £1m, as well as a subsidy that means over £25m of subsidy has been awarded to the recipient enterprise for a related project within the current and two previous financial years.
How can decisions be challenged under Subsidy Control law?
Any decision to award a subsidy is capable of being challenged by an interested party (the definition of which includes a competitor of the recipient of financial assistance) in the Competition Appeal Tribunal. Two cases have been heard so far (The Durham Company Limited v Durham County Council and Aubrey Weis v Greater Manchester Combined Authority). A further two are listed to be heard in the coming months (Bristol Airport v Welsh Ministers and (the New Lottery Company Ltd and Others v The Gambling Commission).
Why should you choose to instruct Ward Hadaway for Subsidy Control advice?
Ward Hadaway has Subsidy Control lawyers with market leading expertise, that approach matters in a personable and client focussed manner.
For example, Alexander Rose was invited to be a Parliamentary Expert Witness to the Select Committee designing the UK Subsidy Control regime, worked on the UK’s first case under the Subsidy Control Act 2022 and has advised upon over 15 matters that have been reviewed by the Competition and Markets Authority.
His involvement in matters provides public authorities with credible assurance that the rules will be satisfied and can therefore help decisions around public funding to be made quickly and efficiently.