Beyond Brexit: Preparing For Changes To The Treatment Of UK State Aid

• Published date: 07 August 2020
• Subject Matter: Anti-trust/Competition Law, Government, Public Sector, Antitrust, EU Competition , Constitutional & Administrative Law
• Law Firm: Mayer Brown
• Author: Mr David Harrison and Julian Ellison

The deadline for the UK government to make a request to extend the Brexit transition period under the Withdrawal Agreement has now passed. While it may technically be possible for an alternative form of extension to be negotiated later in the year, this would present significant legal and practical challenges, and would involve agreement on a continuing UK contribution to the EU budget. It is therefore prudent for businesses to assume that the transition period will end on 31 December 2020 (Completion Day).

The interface between the EU and UK competition law regimes may therefore present businesses with significant challenges in the coming months. This update outlines the transitional arrangements for 'live' State aid notifications at the end of the year. It also examines the extent to which the EU State aid rules will continue to be relevant to, and in, the United Kingdom in the future.

EU State aid rules

The European Union operates a system of State aid (subsidy) control which applies when financial support is given to an economic entity by an EU Member State, leading to a selective advantage which is liable to distort competition. The rules apply to the extent that there is an effect on trade between Member States. State aid can take many forms, for example direct grants, tax advantages (such as exemptions or deferrals) and State guarantees. Any aid not falling within existing EU exemptions or pre-approved schemes must be notified to, and approved, by the European Commission (Commission). If the Commission finds that unlawful State aid has been granted, it may order that the aid be recovered from the recipient. This order can only be suspended by an application to the Court of Justice of the European Union (CJEU). However, EU national courts also have an important role to play, particularly for complainants, as they are able to rule on the illegality of aid and require its repayment.

The transition period, and beyond

During the transition period, the EU State aid rules will continue to apply to financial support granted by the United Kingdom; the Commission will therefore receive and assess notifications as before. The Commission will continue to investigate 'live' cases initiated (i.e. given a case number) before 31 December 2020 and will remain entitled to initiate new investigations into UK aid measures granted before 31 December 2020. This latter provision will apply until 31 December 2024 and the Commission will continue to review cases after the...