UK subsidy control – challenge and complaints
Following the conclusion of the EU-UK Trade and Cooperation Agreement (TCA) and the passing of the European Union (Future Relationship) Act 2020 (EUFRA), from 1 January Great Britain said goodbye to the concept of "State aid" (for new public sector support) and hello to the new concept of "Subsidy Control". This insight reviews the current state of play for challenges/complaints under the EUFRA and TCA for organisations/people (at home and abroad) and how might this change in the coming months.
Subsidy control is a system which will evolve. The future independent subsidy body/regulator and possible future UK subsidy regulations will involve further changes. The TCA acknowledges that subject to its TCA obligations the UK will determine how to implement its own subsidy control rules/system.
The TCA requires both the EU and UK to each have in place an "effective system of subsidy control" in compliance with the principles set out in the TCA. It is implied that the EU's current state aid framework satisfies this obligation. The UK has not had time to set out the details of its own approach; instead the EUFRA effectively incorporates the TCA's subsidy control provisions (with 'such modification as required') and its principles into UK domestic law until such time as domestic rules/regulations are adopted.
Importantly the TCA sets out a role for an independent subsidy body/authority (which does not yet exist) and the right of 'interested parties' to challenge subsidy awards in domestic courts. The effect of EUFRA is to incorporate a right of judicial challenge for subsidy decisions to satisfy the TCA. The UK has some scope to determine the exact role of the independent subsidy body/authority. This is likely to include reviewing subsidy decisions, will probably extend to 'regulating' bodies awarding subsidy and to reduce 'red tape' should include setting out pre-approved subsidy 'block exemptions/conditions' for public bodies to comply with.
Though the EUFRA approach of incorporating a modified form of the TCA into domestic law works as a temporary measure it does create a degree of uncertainty for both business and public bodies. Not least because of the temporary incorporation of TCA subsidy requirements/principles into domestic law. The creation of the independent subsidy body/authority and the adoption of domestic rules/procedures is likely to provide greater certainty as 2021 progresses.
Judicial and other challenges
The TCA mandates that the UK and EU ensure that their respective courts are able to review a subsidy decision (by a granting authority or the independent subsidy body/authority) and impose remedies including in relation to subsidy: its suspension, prohibition or order of repayment, damages, or other action.
Presently judicial review appears to be the only route for challenge/complaint for unlawful public subsidy in the UK. However, when the Independent subsidy body/authority becomes operational it is possible that it will become the first port of call for challenges/complaints. The consequence of that might be that the UK public sector is subject to far more regulatory scrutiny of subsidy/aid decisions than it was previously from the EU Commission.
The limitation period for claims under the TCA is at least one month, and may well in practice be longer, depending on how the UK Government implements the subsidy control regime. That period commences from the date the granting authority publishes its transparency notice (as referred above). The month shall be extended by short time period if an interested party requests further information. This appears to represent a divergence from state aid where the EU Commission had 10 years to investigate. It will be interesting to know what time periods the government give the UK's future independent subsidy body/authority to investigate subsidy decisions.
The TCA requires that public subsidies in the UK must be published on a website (which, understandably is not yet operational) within 6 months of subsidy being granted which must include: the legal basis and policy objective or purpose of the subsidy; the name of the recipient of the subsidy when available; the date and duration of the grant of the subsidy; and the amount of the subsidy or amount budgeted for it. UK public bodies should record that information so that they are able to upload it when the UK subsidy database becomes operational. In the meantime they should promptly publish that information on their own websites.
If following that publication an "interested party" notifies either or both the granting authority and/or the 'independent subsidy body/authority of the interested party's intention to apply for a judicial review of a decision to allow the grant of subsidy then the relevant public body must provide the interested party with sufficient information to enable them to assess whether the subsidy is in compliance with TCA or domestic subsidy principles and requirements.
An "interested party" means any "natural or legal person, economic actor or association or economic actors whose interest might be affected by the granting of a subsidy, in particular the beneficiary, economic actors competing with the beneficiary or relevant trade associations". The EU Commission, as arbiter of State aid rules in the EU had generally interpreted this quite broadly, so it will be interesting to see if the UK implementation takes a narrower approach which may limit who can complain/challenge a subsidy.