Update on the Subsidy Control Act

The regime in Northern Ireland

The previously applicable EU State Aid rules will continue to apply to any aid granted in the UK which may affect trade in goods or electricity between Northern Ireland and the EU (including the Republic of Ireland) in accordance with Article 10(1) of the NI Protocol.

Public authorities will also continue to be bound by international subsidy control obligations, specifically those set out in the UK-EU Trade and Co-operation Agreement (TCA), the WTO Agreement on Subsidies and Countervailing Measures, and relevant provisions contained in free trade agreements (FTAs).

The key features of the new regime to be aware of are:

1. Definition of subsidy

The Act sets out a four-limbed test to determine if assistance amounts to a subsidy. Public bodies must now assess whether the financial assistance to be granted is capable of influencing “competition or investment within the United Kingdom”. This contrasts with the definition of State Aid which involves only an effect on trade between member states.

2. Subsidy control principles

Proposed subsidies must be assessed against seven subsidy control principles set out in the Act (an additional nine principles apply only to energy and environment subsidies). A new UK-focussed principle requires any negative effects on competition or investment within the United Kingdom to be minimised.

3. Subsidy advice unit (SAU)

A key difference with the new subsidy control regime is that it is now the public authorities themselves that are responsible for subsidy control decisions. Generally, any subsidy with a value of over £10m will need to be referred to the SAU. The referral system is a procedural change that should be factored in when assessing timelines.

Since its commencement in 2023, the SAU has dealt with an increasing number of referrals; 22 in 2023 and 30 so far in 2024, including by way of example, the referral of the Mourne Mountain Gateway Project subsidy in November 2023 from Belfast City Council. The SAU published its report on this subsidy on 12 January 2024.

4. Transparency database

Any awarded subsidy that has a value of over £100,000 must be entered into the subsidy transparency database, usually within three months of award. This includes subsidies classed as SPEI and minimal financial assistance.

5. Minimal financial assistance

There is an exemption from the majority of the subsidy control requirements where the subsidy amount awarded is less than £315,000 over a period of three years and less than £725,000 for subsidies granted for services of public economic interest (SPEI).

6. Streamlined routes

Streamlined Routes are a new feature of the regime allowing public authorities to provide subsidies without the need to assess against the subsidy control principles for such things as research, development and innovation, energy usage and local growth.

7. Subsidy control challenges before the CAT

An interested party must challenge a decision to grant a subsidy, by appealing to the Competition Appeal Tribunal (CAT) within one month of when the details of the award became public.

Caselaw is slowly developing under the Act with the CAT handing down its first decision in mid-2023 in the case of Durham County Council v The Durham Company Limited [2023] CAT 50.

Ensuring compliance with the Act

Thinking about subsidy control requirements early on will help minimise the legal risks attaching to financial assistance. Public authorities should check their subsidy or scheme complies with the subsidy control requirements before paying out any money or giving other assistance. This will help protect against legal challenges, which could lead to the suspension of policy measures and recovery of money from recipients.

ALG’s subsidy control team is fully conversant with the requirements and procedures of the new regime and advise both authorities and beneficiaries across a wide variety of subsidy control matters, ranging from MFA awards in the low thousands to subsidies of particular interest.

For more information, please contact Micaela Diver, Partner, Kathy Regan, Senior Associate, or your usual Litigation contact.

Date published: 19 August 2024