Subsidy Control Bill – a new set of challenges?
The Subsidy Control Bill is expected to come into force in 2022 and as currently drafted, this could mean new avenues for private parties to challenge public authorities.
Now we have left the EU State Aid framework, we are transitioning to a new set of rules for financial assistance from the state.
The regime agreed under the Trade and Cooperation Agreement (TCA) with the EU strikes a balance between the existing EU State Aid structure and the UK Government's desire for a less restricted approach to assist businesses. The TCA requirements relating to subsidies are already enshrined in law via the European Union (Future Relationship) Act 2020.
The concept of subsidy is now wider though still a sibling to the EU's state aid rules. This is where financial assistance is provided on terms more favourable that those that could be obtained in the market. There also needs to be a specific target and the funding cannot be widely available to all those in the market.
A set of exempted subsidies will be deemed compliant pursuant to the new Streamlined Subsidy Schemes. These include minimal financial assistance of less than £315,000 over a three year period or in some instances £715,000 for Services of Public Economic Interest (those which would not be supplied by the market without state intervention). In addition there will be exemptions for situations including natural disasters or other exceptional circumstances (one can assume another pandemic would be covered here), national or global economic emergencies and national security. Where the Government seeks to operate outside of subsidy rules by relying on an exemption, this could become a contentious area and where those in the market miss out on assistance they could be tempted to challenge the process.
An interested party who is aggrieved by the making of a subsidy decision can apply to the Competition Appeals Tribunal (CAT) for a review of the decision. Claims must be made within one month which starts to run from either the transparency date or the date that the post-award referral report is published. Depending on the circumstances, the transparency date is either the date on which the interested party first knew or ought to have known of the making of the subsidy decision or when an entry was made on the subsidy database. The CAT will be able to make orders for recovery of subsidies by public authorities and can annul subsidy decisions.
The changing role of the CMA is an area which could bring further challenge. Previously as a member of the EU, government subsidies would require approval from the European Commission. Now, some subsidies may be required to be referred to the CMA, but in other cases this will be optional. In any event, the CMA's assessment will not be binding and the subsidy can proceed without CMA approval. This could potentially give grounds for judicial review for example on the basis of irrationality in that the awarding authority failed to consider relevant matters i.e. the CMA's report where it considers the subsidy to not be complaint.
It is for the Secretary of State to define what subsidies are Subsidies of Particular Interest or Subsidies of Interest (which have mandatory and voluntary referral requirements respectively). As a result, could these definitions also be subject to challenge? They will not require Parliamentary scrutiny yet could have significant impacts on competition in the market. In is foreseeable that there will be a number of private players who will not agree that a particular subsidy should not warrant a CMA referral.
Historically the European Commission would have up to 10 years to investigate unlawful subsidies whereas now neither the CMA nor any other body will have this role. It is possible that it becomes a matter for private individuals and entities to litigate to ensure good practice is maintained. Therefore the role of the CAT may be more important than ever.