Subsidy Control Act 2022 is now in force!

We have waited a few months, but it is finally here. As of today (4 January 2023), the Subsidy Control Act 2022 (the “Act”) comes fully into force.

Prior to Brexit, subsidies were governed by EU State Aid law. Brexit led to the disapplication of EU State Aid law in the UK (except where the Northern Ireland Protocol applied). Since 1 January 2021, public bodies have been required to comply with the UK’s international obligations on subsidy control when awarding subsidies, most prominently the subsidy control rules in the Trade and Cooperation Agreement between the UK and EU.

The Act is the final piece in the jigsaw of the most significant reform to UK subsidy law in decades. It is important legislation for both public bodies and those involved in projects which receive financial support from the public purse.

What is a subsidy? 

A subsidy may arise where a public body provides financial assistance (e.g. a grant, loan, tax-break, guarantee or investment) to an enterprise that gives the entity an advantage over its competitors. Subsidies are permitted provided they comply with the detailed rules contained within the Act.  

What does the Act do?

The key takeaways from the new Act are:

• Greater flexibility: The Act creates a new UK-wide subsidy regime which will enable public authorities to grant subsidies and create subsidy schemes by self-assessing proposed subsidies and schemes against a set of prescribed Subsidy Control Principles to satisfy themselves that the subsidies are compliant with the Act. In contrast to the position under EU State Aid law, the authority does not need to obtain permission from a regulator (e.g. the European Commission) before granting the subsidy. In theory, the Act should enable authorities to award subsidies more quickly. However, subsides which pose a higher risk of adversely impacting domestic or international competition and investment – labelled in the Act as “Subsidies of Interest” and “Subsidies of Particular Interest” - are subject to an enhanced level of scrutiny from the newly formed Subsidy Advice Unit (part of the Competition and Markets Authority). Subsidies of Particular Interest (in general, these are subsidies over £10 million or over £5 million in sensitive sectors) must be referred to the SAU for assessment before being awarded. Referral of Subsidies of Interest (subsidies between £5 million to £10 million) to the SAU is voluntary.
• Transparency: Public authorities will be required to disclose certain information regarding subsidies granted and subsidy schemes created on the Government’s Subsidy Control Database. Authorities will also be under a duty to provide “pre-action information” where this is requested by third parties to demonstrate the lawfulness of the subsidy.
• Minimal Financial Assistance: Similar to the de minimis exemption under the State Aid rules, the above requirement to assess against the Subsidy Control Principles and the transparency obligation do not apply where the subsidies to an enterprise do not exceed £315,000 over a rolling three year period.
• Enforcement: In the first instance, interested parties can apply to the Competition Appeal Tribunal (CAT) for a review of a subsidy decision. Appeals to a CAT ruling can be made to the Court of Appeal for awards in England, Wales and Northern Ireland and the Court of Session for awards in Scotland (provided permission to appeal has been granted by the CAT or the relevant appellate court).

Government Guidance

BEIS has published detailed guidance on the requirements contained in the Act. The guidance is available here.

Future articles

Over the coming weeks, we will be publishing additional briefings which will go in more detail on the key aspects of the Act. In the meantime, if you have any questions on the requirements of the Act, please do get in touch with Punim Anda or John Houlden, both members of our Subsidy team.