28/08/2018

The publication on 23 August of a guidance note in connection with the possibility of a 'no-deal' Brexit in March 2019 has not only given some guidance as to what the position in relation to State aid will be if no deal is reached, but also indicates the Government's approach to State aid post Brexit in any event.

The announcement makes it clear that the Government "will replicate the existing state aid framework, with only technical modifications to correct deficiencies with the transposed EU law to ensure the regime operates effectively in a domestic context". By which it is to be presumed they mean adjusting for the obvious difficulties in merely copying EU legislation where there is no UK equivalent to reflect the absence of any role for the Commission or the European courts post Brexit. 

As previously indicated, the CMA will take over the role of the Commission as primary enforcer of the rules, and also to deal with applications for approval, and receive notifications of aid granted under the existing and transposed block exemptions. 

At first reading this makes sense; there is no time to rewrite the code, and this can be addressed over time to reflect the UK's needs in the future. It does however raise some interesting if slightly awkward points. State aid law does not control all public support, and one of the criteria is that it affects trade between Member States. This is given a generally wide interpretation, particularly by the European Courts, but it is to say the least odd that the CMA would in the event of a no deal Brexit be enforcing complaints about subsidies to UK businesses, which might affect trade with the EU when we are no longer a member of it. The implication is that the Government sees State aid (or a modified form of it) as an important part of its wider trade policy, and will extend it beyond the EU. This builds on current rules under the WTO which seek to prevent subsidies for goods traded overseas, but for which the enforcement is limited to countervailing tariffs. 

Further areas which will need to be resolved include the appellate system, which could be the Competition Appeal Tribunal or the ordinary civil courts. If the former, there may need to be some thought given to the relationship between the two jurisdictions. 

A further area where some clarity has been given is over transitional arrangements. Any applications for approval for aid already referred to the European institutions stay there but anything arising after exit goes to the CMA. Although not stated it appears likely that the CMA will assert jurisdiction over complaints made after the departure date, in relation to allegedly unlawful aid granted before that date. It is unclear if the European institutions will take the same view. 

It is therefore clear that State aid law will remain a feature of UK law for some time to come, although there may well be some modifications in the legislation. The CMA will it appears publish guidance on its approach to enforcement and interpretation of the rules, and it remains to be seen how far and when divergences creep in.