The position on UK public sector subsidy and support has changed. In high-level terms, the changes are as follows:
(Click within the image to see the changes)
The previous EU State Aid legal regime is replaced with a new UK subsidies regime, details of which can be found here.
The new arrangements are likely to be subject to further legal/judicial clarification. The TCA permits the UK to introduce its own “modern” subsidy system in place of the EU State Aid regime. Once that is in place, the UK (and the EU) will each have their own independent system of subsidy control and neither Party will be bound to follow the other’s rules. The TCA includes a reciprocal mechanism allowing each Party (i.e. the EU and UK) to take prompt action where a subsidy granted by the other is causing or is at serious risk of causing significant harm to its industries. These measures can be challenged using an accelerated arbitration procedure with the possibility of compensation if the EU or UK has used these measures in an unnecessary or disproportionate manner.
UK Government online Guidance – high level points
- EU State Aid rules will no longer apply to subsidies granted in the UK as at 11pm on 31 December 2020.
- There are commitments on subsidies arising from the UK’s continued membership of the World Trade Organisation (WTO). These are primarily set out in the Agreement on Subsidies and Countervailing Measures (ASCM) as well as the Agreement on Trade-Related Investment Measures (TRIMS).
- The TCA chapter on Subsidy Control provides that each Party will have in place its own independent system of subsidy control and that neither Party is bound to follow the rules of the other. The subsidy-specific elements of the Withdrawal Agreement are incorporated in UK law through the Withdrawal Act.
- The UK has signed Free Trade Agreements (FTAs) with other countries and some of these agreements contain provisions on subsidies.
- The European Union (Future Relationship) Act 2020 will implement elements of the TCA. The subsidies chapter of the TCA provides that it is for each Party to determine how the agreed principles will be implemented in its domestic law, but that they must be implemented in a way that they are respected when granting individual subsidies.
It is notable that Article 3.2 of the TCA includes a de minimis provision:
“This Chapter does not apply to subsidies where the total amount granted to a single economic actor is below 325,000 Special Drawing Rights over any period of three fiscal years. The Partnership Council may amend that threshold.”
Special Drawing Rights (SDR) are an IMF currency instrument used in the GPA, 325,000 SDR converting (at a variable rate) to around £344,000.
This article was co-written by Maya Allen, Trainee Solicitor.