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Slaughter and May

| 2 minutes read

The Subsidy Control Act comes into effect today

Today the Subsidy Control Act 2022 comes into full effect. The Act represents a development of the UK subsidy control regime that was put in place at the end of 2020 as part of the implementation of the UK’s commitments in the EU-UK Trade and Cooperation Agreement (TCA). It builds on the new procedural regime for the assessment of subsidies, with the introduction of a new Subsidy Control Unit at the Competition and Markets Authority (CMA) that will be able to review and issue opinions on certain types of subsidy.

What do the TCA and Subsidy Control Act do?

The TCA requires both the UK and the EU to operate and maintain “an effective system of subsidy control” that ensures that the granting of subsidies adheres to certain core principles. The main elements of this regime have been in effect in the UK since the end of the transition period (by virtue of the European Union (Future Relationship) Act 2020). The Subsidy Control Act expands the operation of this regime in certain respects and elaborates on how those provisions will operate in practice.

The key changes that are introduced by the Subsidy Control Act include:

  • Widening the definition of a subsidy to include measures that have a (potential) effect on competition or investment within the UK as well as on trade or investment between the UK and other countries (which is the focus of the TCA regime). 
  • Introducing a new, seventh, principle that public authorities must have regard to when evaluating possible subsidies. This again extends the focus of the regime to include intra-UK effects that are outside the scope of the TCA.
  • Empowering the CMA to perform the functions of the “operationally independent authority” that is required by the terms of the TCA. The Subsidy Control Act creates a role for the CMA to review and give a (non-binding) opinion on certain types of subsidies that have been identified as having greater potential to lead to negative effects on competition, trade or investment: Subsidies of Particular Interest (SoPI) and Subsidies of Interest (SoI).

How different in practice is the UK regime compared to EU State aid law?

The key difference between the UK subsidy control regime and EU State aid law is procedural. The UK regime is to a large extent based on self-assessment by the entity that is giving a subsidy. It has no equivalent to the mandatory pre-notification and approval requirements of EU State aid law, with the new role of the CMA, whilst public, being advisory. Enforcement of the UK subsidy control rules is therefore largely a matter for the courts.

By contrast, the substantive subsidy rules under the new UK regime remain similar in scope and intent to the EU rules. 

What next and where to find guidance?

As mentioned, the main parts of the UK Subsidy Control Act come into full effect today.

In addition to the statutory guidance on the operation of the regime, the Government has published a subsidy assessment template to assist public bodies in applying the subsidy control principles. Meanwhile, the CMA published the final version of its guidance on the operation of the subsidy control functions of its Subsidy Advice Unit (SAU).

For a more detailed discussion of the new UK subsidy control regime, check out our briefing here.