State Aid and Brexit April 2018

23/04/2018

The position regarding the State aid rules and Brexit is gradually becoming clearer.  Although much work remains to be done, we have summarised below the key points as we see them.

  1. The State aid regime is established in Articles 107 to 108 of the Treaty on the Functioning of the European Union.  It prohibits the State from using its resources to provide selective financial support that may distort competition and affect trade between Member States.  In other words, it prohibits subsidies.  There are a wide number of exceptions that mean in many cases aid can be provided lawfully, but subject to meeting certain conditions.  For example, under the General Block Exemption Regulation (1) or the De Minimis Regulation (2).

  2. There has been a lack of clarity about what regime will apply after Brexit or during the two-year transition period.  The EU withdrawal bill does not currently address this in any detail.  The House of Lords EU Committee published (see here) "Brexit: competition and State aid" on 2 February 2018, raising a number of fundamental questions.  For example, what will happen during and after the transition period.  The report noted that the European Council’s guidelines for negotiating withdrawal from, and future relationship with, the EU specify:

    "Any future free trade agreement must ensure a level playing field, notably in terms of competition and state aid, and in this regard encompass safeguards against unfair competitive advantages through, inter alia, tax, social, environmental and regulatory measures and practices”.

  3. In broad terms, the Committee called for more clarity from the Government.  This has been provided to a certain extent in letter dated 28 March 2018 from Andrew Griffiths MP, Minister for Small Business, Consumers & Corporate Responsibility (see here).  This explains that:

    a. there will be a transition period based on the existing structure of EU rules and regulations, including State aid;

    b. during this period, the European Commission will continue to be responsible for approving and monitoring aid;

    c. what regime will be in place after then remains the subject of further discussion with the EU, but the Prime Minister has said that, "the UK has much to gain from maintaining proper disciplines on the use of subsidies and anti-competitive practices";

    d. the Government's view is that the UK should be prepared to establish a full, UK-wide subsidy control framework with a single body for enforcement and supervision, which would be the Competition and Markets Authority;

    e. the current EU regime will therefore be transposed under the EU (Withdrawal) Bill.

  4. Against this context, we note the subsequent appointment of two senior State aid officers at the CMA who "will lead the CMA’s work on state aid following the government’s announcement that [it is] to be the UK’s State aid regulator after the UK leaves the EU."

  5. Once the full EU withdrawal agreement has been agreed (by October, it is intended), we should be able to consider what form the new regime will take.  It is likely that the post transition arrangements will require further legislation, which opens up questions of how far the regime may actually change.

 

If you would like to discuss anything in this article, please contact a member of our State Aid Team.

 

1. Commission Regulation 651/2014 OJ 2014 L187/1.
2. Commission Regulation 1407/2013 OJ 2013 L352/1.

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