The New EU/UK Subsidy Control Measures

• Published date: 18 February 2021
• Subject Matter: Corporate/Commercial Law, Anti-trust/Competition Law, International Law, Charities & Non-Profits , Antitrust, EU Competition , International Trade & Investment
• Law Firm: Wrigleys Solicitors
• Author: Mr Peter Parker and Charlotte Nutt

Out with the old and in with the new.Brexit, the new subsidy control measures, and what they mean for your charity.

It seems longer than a few weeks ago that we were told issues around fishing and state aid were the remaining sticking points to any post Brexit transition period free trade agreement between the UK and the EU. Well, those issues having been unlocked through the EU/UK Trade and Cooperation Agreement ("TCA"), the rules governing state aid between the UK and EU member states were replaced on 31 December 2020 by "subsidy control measures". This article aims to provide an overview of the subsidy control measures brought into effect by the TCA on 31 December 2020 and what this means for charities, particularly those which are publicly funded, or those which disburse public funding (e.g. through grants).

Out with the old...state aid rules (pre 31 December 2020) - Article 107 - 109 of the Treaty of the Functioning of the European Union ("TFEU")

Under the previous regime applicable in the UK (and which continues to apply across the EU), the TFEU prohibits public authorities within member states from granting "state aid" that may distort competition and trade in the EU.

State aid, in this sense, refers to any advantage granted by public authorities through state resources, on a selective basis, to any organisations that could potentially distort competition and trade in the EU.

'Advantage' is broad and can include anything which an organisation engaged in economic activity could not get on the open market. This includes grants, loans, tax breaks, and the use or sale of a state asset for free or at less than market price.

The previous regime applicable in the UK could therefore capture public funding given to UK charities and other non-profit making bodies.

What did the old regime require?

Where the above applied, the 'giving' body had to seek approval from the European Commission to proceed unless the proposed aid fell within an exemption which was automatically deemed compatible with the Treaty and therefore could be lawfully given. The exemptions included:

1. De minimis aid - being aid equal to not more than EUR 200,000 given to an organisation over any three year period; and
2. The General Block Exemptions - being 26 measures which can be used to provide lawful state aid without going through the normal notification and approval processes with the European Commission.

Clawback provisions under the TFEU

Under Article 108 of the TFEU, if following...