Public authorities should note that in some cases both the UK Subsidy Control Regime and the EU State aid rules could apply to a scheme if beneficiary companies are from sectors both within and outside the scope of Article 10 of the Northern Ireland Protocol. In this circumstance public authorities should consider contacting DfE Subsidy Control Advice unit before proceeding.
The EU State aid rules, and Article 10 of the Northern Ireland Protocol
Article 10 of the Northern Ireland Protocol provides that the State aid rules will continue to apply to the UK in respect of measures which affect trade in goods between NI and the EU (including the production of and trade in agricultural products) and the production of wholesale electricity in NI (i.e. measures impacting on the Single Electricity Market).
For the State aid rules to apply, the effect on trade between Northern Ireland and the European Union cannot be merely hypothetical, presumed, or without a genuine and direct link to Northern Ireland. It must be established why the measure is liable to have such an effect on trade between Northern Ireland and the European Union, based on the real foreseeable effects of the measure.
Further information on the State aid rules:
- State aid rules, regulations and guidance
- De minimis aid
- General Block Exemption Regulation
- Horizontal and Sectoral State aid rules
The UK Subsidy Control Regime
Until the UK left the European Union, the EU's State aid rules controlled how UK and discretionary EU funding was provided to enterprises and entities that engage in economic activities. Now the UK has left the EU, it is no longer bound by the State aid rules (except when Article 10 of the Northern Ireland Protocol applies) and is developing its own domestic subsidy control regime.
The UK-EU Trade and Cooperation Agreement
The UK and EU agreed to terms on a Comprehensive Free Trade Agreement and Chapter 3 of Title XI of this agreement contains provisions related to subsidy control.
SInce 1 January 2021, aid providers have had to comply with the provisions set out in the agreement, except on the occasions where the aid falls within the scope of Article 10 of the Northern Ireland Protocol.
Aid providers also have to comply with World Trade Organisation (WTO) subsidy rules in respect of 'goods based' activities and the other international commitments.
Guidance for public authorities on the subsidy control chapter of the UK-EU Trade and Cooperation Agreement
The Department for Business Energy and Industrial Strategy (BEIS) has provided guidance - gov.uk website on the subsidies chapter of the UK-EU Trade and Cooperation Agreement (TCA), WTO rules on subsidies, and other international subsidy commitments.
The guidance has been drafted to assist public authorities assess whether or not a subsidy is present and how individual subsidies can comply with the subsidy control chapter of the TCA. The guidance also covers the interpretation of Article 10 of the Northern Ireland Protocol on the EU State aid rules
Subsidies within the scope of the subsidy control chapter of the TCA
If a subsidy has been deemed to be present and it is within the scope of the subsidy control chapter of the TCA, public authorities must complete an assessment against the principles set out in Article 366 of the TCA and outlined at Annex 2 of the BEIS guidance and retain for their records, as this information could be requested by the EU or by an interested party considering a domestic challenge. The information should record how the public authority has complied with the principles in designing their subsidy.
Subsidies which are exempt from the subsidy control chapter of the TCA
The subsidy control requirements do not apply if the total amount of assistance given to the enterprise within 3 fiscal years does not exceed £315,000. However, there are certain procedural requirements which need to be followed and public authorities should contact DfE Subsidy Control Advice Unit for further information.
The Subsidy Control Bill
The Subsidy Control Bill was introduced to Parliament on 30 June 2021. It set out the government’s legislative proposal for a new UK subsidy control regime.
Further information about the Bill:
- Subsidy Control: Designing a new approach for the UK
- Subsidy control policy papers
- Subsidy Control Bill 2021: bill documents
The Subsidy Control Act 2022
The Subsidy Control Bill received Royal Assent on 28 April 2022 and became the Subsidy Control Act. BEIS will be taking forward legislation to bring the main elements of the Act into force and this is expected to be in Autumn 2022.
The Subsidy Control Act 2022 provides a new framework for the provision of subsidies which will build on the provisions in the subsidy control chapters of the Trade and Co-operation Agreement, which have applied in the interim of the UK’s exit from the EU.
Please note that the UK subsidy control regime does not replace the State aid rules in respect of measures which affect trade in goods between Northern Ireland and the European Union which will still have to follow the State aid rules.
Current BEIS consultations on the UK Subsidy Control Regime
On 1 July 2022 BEIS launched a consultation seeking views on the draft statutory guidance for the Subsidy Control Act 2022. The consultation closes on 10 August 2022.
The aim of the guidance is to explain the provisions of the Act and help public authorities navigate the new Subsidy Control regime. It will provide advice to help public authorities to develop subsidies and subsidy schemes that are appropriate, well-designed, and in compliance with the Act. It will also support subsidy recipients and wider stakeholders to understand the new requirements.
The BEIS consultation to seek views on proposed regulations under the Subsidy Control Act that define criteria for potentially distortive categories of subsidies, and views more generally on the categories that are included in Subsidies or Schemes of Interest/Particular Interest closed on 6 May 2022. BEIS has now published the Government’s response.
The Competition and Markets Authority (CMA)
The Subsidy Control Act 2022 sets out in Chapter 3 that the CMA must establish a Subsidy Advice Unit (SAU).
The SAU will be responsible for discharging the CMA's functions and powers under Part 4 of the Act.
CMA consultation on the operation of the SAU
- The SAU role will be to assist public authorities in awarding subsidies that comply with the requirements set out in the Act
- It will provide advice in respect of certain subsidies or subsidy schemes (known as subsidies or schemes of interest and subsidies or schemes of particular interest), that public authorities refer to it, evaluating their assessment of compliance with the requirements of the Act
The CMA is also seeking views on the Statement of Policy in relation to the enforcement by the SAU of its information-gathering powers.
The consultation closes on 10 August 2022.
Role of the DfE Subsidy Control Advice Unit
The DfE Subsidy Control Advice Unit (SCAU) provides advice and assistance to Northern Ireland government departments and their arm's length bodies on the application of the State aid rules, the Subsidy Control Act, the TCA and WTO rules on subsidies, and other international subsidy commitments.
If you have any questions on any aspect of the arrangements please contact the SCAU by e-mailing email@example.com