UK subsidy control: Key features of the new regime

On 28 April 2022, the Subsidy Control Act 2022 (the "Act") received Royal Assent.

The Act is expected to enter into full force in Autumn 2022, with the relevant date to be confirmed by the UK Government in due course.^[1]

The Act is intended to consolidate and build upon the UK's existing international subsidy control commitments, ^[2] while providing public authorities with the flexibility to grant subsidies at a local level by reference to UK-specific principles (including principles for subsidies in relation to energy and the environment).

Prior to the Act entering into full force, the UK Government is expected to (i) enact secondary legislation to enable the effective implementation of the Act; and (ii) publish further guidance addressing the practical application of the Act and its implications.

Significantly, key features of the new UK subsidy control regime introduced by the Act include:

1. Focus upon self-assessment: Public authorities will generally be able to self-assess by reference to the relevant principles, and decide whether to (i) grant subsidies; and/or (ii) establish schemes to enable the grant of subsidies.
2. Subsidies and subsidy schemes "of interest": Where a public authority intends to grant a subsidy or subsidy scheme "of interest", it may request the UK's Competition and Markets Authority (the "CMA") to review the intended grant, and report upon this (as considered below). The UK Government may also direct a public authority to request the CMA to review and report upon a subsidy or subsidy scheme which is either "of interest", or which risks non-compliance with the Act.
3. Subsidies and subsidy schemes "of particular interest": Where a public authority intends to grant a subsidy or subsidy scheme "of particular interest", it must request the CMA to review this before the intended grant is made. What constitutes a subsidy or subsidy scheme "of interest", or "of particular interest", presently remains to be determined, with the UK Government consulting upon draft definitions under the draft Subsidy Control (Subsidies and Schemes of Interest or Particular Interest) Regulations 2022 (with the consultation due to end on 6 May 2022).
4. CMA's reporting upon subsidies and subsidy schemes: Where the CMA reviews subsidies and subsidy schemes, it will evaluate the relevant public authority's self-assessment of the intended grant by reference to the UK-specific principles, and prepare a non-binding report detailing its findings, which may include advising upon:
   1. how the public authority's assessment may be improved; and/or
   2. how the intended subsidy or subsidy scheme may be modified to ensure compliance with the UK subsidy control regime.
5. Minimal financial assistance (i.e. a UK-specific de minimis threshold): In certain circumstances, the Act enables the grant of a subsidy where the total gross value of assistance provided to the enterprise in question does not exceed £315,000 over the elapsed period of the current financial year, and the two financial years immediately prior to this.
6. "Streamlined subsidy control schemes" (i.e. UK-specific "block exemptions"): The Act also provides for the possibility of so-called "streamlined subsidy control schemes" being made by the UK Government. Where such a scheme is established, the intention is that public authorities will then only need to ensure that they satisfy the applicable criteria of the relevant scheme in order to grant subsidies under this.^[3] The use of streamlined subsidy control schemes is expected to provide public authorities with greater clarity and certainty when granting targeted subsidies.
7. Challenging decisions to grant subsidies and subsidy schemes: An interested party aggrieved by a decision is able to apply to the Competition Appeal Tribunal ("CAT") for the decision to be reviewed. When determining an application, the CAT must apply the same principles as would be applied (i) by the High Court when determining proceedings on judicial review (in the case of proceedings in England and Wales, or Northern Ireland); and (ii) by the Court of Session on an application to the supervisory jurisdiction of that Court (in the case of proceedings in Scotland). The CAT is able to grant different forms of relief, including making a recovery order if a subsidy breaches the Act. Where a recovery order is made, amongst aspects:
   1. the public authority that granted the subsidy can be required to recover the value of this from the beneficiary; and
   2. interest may be payable in relation to the subsidy to be recovered.

The new UK subsidy control regime is expected to afford greater flexibility to UK public authorities, enabling them to provide targeted support to beneficiaries, in order to deliver UK-specific outcomes. The regime marks an obvious departure from the EU State aid regime, which necessarily adopted a wider frame of reference. The effective implementation of the UK's new regime will be key to its success, and further legislation and guidance is keenly awaited.

In the interim, pending the new regime entering into full force, the UK's existing international subsidy control commitments will continue to apply.

If you have any questions regarding the UK's new subsidy control regime, or the UK's existing international subsidy control commitments, please contact Bernardine Adkins or Samuel Beighton.