Five things that are new under the Subsidy Control Act

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On 28 April 2022, the Subsidy Control Bill received Royal Assent and became the Subsidy Control Act 2022. The Act is expected to come into force in autumn 2022. Until then, the provisions of the Subsidy Control Chapter of the Trade and Cooperation Agreement between the UK and EU will continue to apply. This article highlights five things that will change when the Act comes into force.

1. Definition of “subsidy”

The definition of “subsidy” under the Act now includes any financial assistance having, or potentially having, an effect on competition or investment within the UK, as well as between the UK and another territory (including the EU). This is to prevent subsidies being used to move investment and jobs around the UK; the aim of subsidies should be to grow the UK economy as a whole. 

2. Seven Principles 

There will now be seven principles that any subsidy must meet for it to be awarded, rather than the current six. The extra principle requires that any subsidy must be designed to achieve its policy objective while minimising any negative effects on competition or investment within the UK. This follows the same policy on intra-UK trade and investment as above. 

3. £315,000 ‘de minimis’ limit

Financial assistance given to an enterprise will not be subject to the subsidy control regime if the total amount of minimal financial assistance given to that enterprise over the last three financial years is less than or equal to £315,000. Whilst this is a higher threshold than the €200,000 de minimis limit under the EU’s state aid regime, it does represent a slightly lower threshold than the Subsidy Control Chapter’s minimal amount of 325,000 special drawing rights.

4. The role of the CMA

The Act appoints the Competition and Markets Authority (CMA) as the “independent authority” of the subsidy control regime. The CMA will not have the same extensive powers as the EU Commission has under the EU State aid regime. The CMA will have no powers to make investigations or deal with challenges on its own initiative, prohibit or approve subsidies or examine complaints. It will instead offer non-binding advice to public authorities regarding subsidies. It will be for public authorities to decide whether a subsidy complies with the seven principles or not, and that decision will be subject to challenge through judicial review (see below).

The CMA will be the body to which “mandatory referrals” of certain subsidies are made by public authorities. Mandatory referrals will be required by public authorities where:

  • the subsidy is of “particular interest”; or
  • the Secretary of State has directed a public authority to refer a subsidy to the CMA

5. Enforcement by the CAT

Challenges to the award of a subsidy must be brought as a judicial review in the Competition Appeal Tribunal (CAT). The CAT will consider whether a public authority acted procedurally fairly, rationally and within its powers in granting the subsidy. It will not, however, review whether the public authority came to a ‘correct’ decision. As well as the usual judicial review remedies, the CAT will be able to order the subsidy is recovered.

The time frames for any challenge remain the same as now under the Subsidy Control Chapter. Any challenger must bring an application within one month of:

  • publication of information following a pre-action information request (see below),
  • the publication of a post-award referral report,
  • or the “transparency date” for the subsidy (the date the challenger first knew or ought to have known of the making of the subsidy decision or the date of publication on the database).

An interested party may request the information about a subsidy for the purpose of deciding whether to apply to the CAT for a review. The public authority must respond to a request within 28 days.

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