In this post, Ben Rayment of Monckton Chambers analyses the role of domestic courts in the new subsidy control regime under the Trade and Cooperation Agreement (the “TCA”).
The TCA provides for the establishment by each party of an independent authority with an appropriate role in its subsidy control regime. The UK has yet to establish this body (although it is widely assumed it will be the Competition and Markets Authority). Until that event occurs the only domestic enforcement body that exists under the new regime is the ordinary courts, specifically the Administrative Court. It is also possible that in the future the Competition Appeal Tribunal as a specialist economic tribunal with pan-UK jurisdiction may assume a role.
This note only covers changes under the TCA. It does not address the position in Northern Ireland under the Northern Ireland Protocol, which establishes the continued role for the EU State Aid rules in relation to trade in goods.
Domestic Court jurisdiction?
Domestic Courts under the TCA are required to have the power to review:
- subsidy decisions by a granting authority or, where relevant, the independent authority, for compliance with either the UK’s or EU’s laws implementing the Article 3.4 principles. Due to the UK’s direct implementation of the subsidy control provisions by means of section 29 of the EU (Future Relationship) Act 2020, the relevant law means the TCA itself; and
- any other relevant decisions of the independent authority (including a failure to act)
The precise role of the courts in relation to the independent authority that must be established under the TCA is unclear at the moment. This is because the independent authority and the functions it will exercise have yet to be determined. For example, it is not clear if the authority will have the power to make legally binding decisions in relation to the approval of subsidies.
Ordinary judicial review standards of review apply – so decision makers will enjoy some margin of appreciation in respect of the economic assessments that may be involved in determining whether a particular grant or measure is a subsidy and in applying policy based approval of subsidies. In this regard the current absence of block exemptions or guidance as to how the rules will be applied in particular sectors may cause some uncertainty. Rigorous scrutiny from the Courts can be expected, including on procedure, levels of reasoning and the meaning of some of the new terminology employed in the TCA.
Standing rights to challenge subsidy decision?
First, domestic courts must be able to hear claims by “interested parties”.
Second, minimum requirements for standing are set out in Art 3.7.6 (Transparency) not Article 3.10 (Courts and Tribunals):
“interested party” means any natural or legal person, economic actor or association of economic actors whose interest might be affected by the granting of a subsidy, in particular the beneficiary, economic actors competing with the beneficiary or relevant trade associations.”
Third, the EU and UK have an automatic right to intervene in subsidy proceedings in each other’s domestic courts.
Finally, there are wide rights for competitors and trade associations. The interested party test looks at least as wide as the domestic “sufficient interest” test under CPR 54. So parties with a wider interest than those mentioned “in particular” such as campaign groups are not necessarily excluded and may well be able to challenge subsidy decisions.
Remedies
Generally, the TCA says that there must be effective remedies for breaches of domestic law. Prohibition, suspension, damages and recovery are all referred to. Art 3.10(3) – a ‘for avoidance of doubt’ provision – provides a general rule that there is nothing in this Article which requires the UK and EU to introduce new rights and remedies, procedures or widen grounds or scope of review (although that is subject to the provisions that do create rights of intervention and limitation rules).
There are a number of further points that arise in connection with remedies:
First, remedies are only required if the remedies were available on the entry into force of the TCA (but on the UK side you do not count any remedy that was only available as a result of the ECA 1972, which suggests damages may not be available in the UK because this remedy was arguably only available in EU law).
Second, irrespective of the position upon the entry into force of the TCA, there is an absolute requirement to introduce a recovery remedy. Article 3.11 (Recovery) sets out requirements for an effective remedy of recovery, including in Art 3.11(3) the (minimum) limitation period for bringing a recovery claim.
The recovery of a subsidy is not required, however, where a subsidy is granted on the basis of an Act of the Parliament of the UK, or an act of the EU Parliament and the of the EU Council, or the EU Council. This will remove the availability of the recovery remedy, but it does not mean that no subsidy has been granted, merely that there are questions of enforcement which will arise as between the EU and UK at the international level.
Third, there is provision in 3.11(7) for the Partnership Council to consider additional or alternative mechanisms proposed by the other party and amend Article 3.11 accordingly if it considers that proposal is at least as effective a means of delivering recovery as existing mechanisms.
Limitation periods
Domestic rules are modified by the TCA (for recovery claims). This is very important because only once these have expired are you “safe” from challenge as a grantor or recovery as a recipient.
The period is one month from date that information in Article 3.7(1) and (2) is “made available” on the official website/public database. Basic information regarding subsidies granted should be “made available” within 6 months. For tax measures information should be made public within one year of tax declaration showing the relevant “advantage” conferred.
For the UK, the one month period is extended if the interested party requests the fuller information in Art 3.7(5)(b) by a further month from the date on which the information is (certified by the granting authority) as having been provided. This information is the information that justified the grant of the subsidy by the granting authority.
In relation to subsidy schemes (rather than a specific grant) the one month time starts to run from the publication of the basic information regarding the scheme, provided that the grant is ostensibly in accordance with the scheme and the information published allows the interested party to determine whether they “may” be affected. Provided these conditions are observed specific payments under the scheme will not create a fresh limitation period.
If publication is not made on the official website (e.g. because grant not considered to be a subsidy) there is an implied ability to challenge may remain open for a significant period. Arrangements have not been finalised but there may need to be some kind of voluntary means of publication in cases of doubt as to whether a grant is a subsidy in order to try to provide certainty that a measure can be safely implemented.
There may also be issues with the Interaction of the TCA limitation rules with other limitation rules under other legislation e.g. public procurement rules where decisions may involve the grant of a subsidy.
BEIS Technical Guidance on the UK’s international subsidy control commitments (31 December 2020)
This in fact offers no clarification on the role of the Courts other than to repeat the same warning in two different places in the Guidance that granting authorities should be mindful of the fact that challenges under the TCA provisions are now possible:
“The UK government will consider legislating in due course to give clarity on the role of the courts in subsidy cases (including as regards recovery of subsidies) but public authorities should be mindful of the possibility that some complainants may already seek to challenge subsidy awards by reference to the principles and their effect in domestic law by virtue of provisions in the European Union (Future Relationship) Act 2020. The UK and EU have also agreed that, in certain circumstances, domestic courts should have the power to order the recovery of subsidies that have been improperly granted under domestic law (e.g. a subsidy that was in scope of, but did not comply with the principles). Recovery could follow from a successful judicial review of the decision to grant the subsidy,provided that the judicial review was commenced within the time periods specified in the TCA.”
No doubt the future role of the Courts is bound up with the decisions that are to be taken in relation to future architecture of the subsidy control system, including the establishment of the independent authority, which is required under the TCA but which is yet to be established. Also expected are guidance documents and/or block exemption type instruments that will put ‘flesh’ on the bare bones of the TCA in relation to a new UK policy framework within which the assessment of subsidies is to take place. Future developments in this area are keenly anticipated.
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