UK State Aid regime in the event of ‘No Deal’ Brexit revealed

The UK Government has today, 23rd August, published the first of an anticipated three tranches of technical notes for businesses and individuals about the impact of the UK leaving the EU at the end of March 2019 without a withdrawal agreement in place (a ‘no deal’ scenario).

Whilst the official Civil Service guidance is that a scenario in which the UK leaves the EU without an agreement “remains unlikely”, the political mood music from both London and Brussels has been far less optimistic of late with both the DExEU Secretary Dominic Raab and the International Trade Secretary Liam Fox having both made public statements that such a ‘no deal’ scenario is possible.

Amidst the 24 technical notes, which cover industries including medicine, finance and farming, is a technical note on how the UK will implement a State Aid regime in the United Kingdom post March 2019 in the absence of an over-arching deal with the EU on the UK’s withdrawal from the Union.

Before March 29 2019

Highlighting that the UK “strongly supports a rigorous state aid system”, as long as the UK is part of the EU, TFEU’s general prohibition on state aid continues to be in direct effect without the need for domestic implementing legislation.

Claimants, be they aggregived competitors or those with similar standing, will still be able bring a claim in the UK courts to force public bodies who have not notified aid (to the European Commission) to stop giving aid until they have done so.

After 29 March 2019 if there’s ‘no deal’

Confirming that the government will create a UK-wide subsidy control framework to ensure the continuing control of anti-competitive subsidies, the casual observer might be forgiven for thinking plus c’est la même chose (“the more it changes, the more it’s the same thing”) as far as State Aid compliance is concerned.

The EU’s state aid rules will be transposed into UK domestic legislation under the provisions of the recently passed European Union (Withdrawal) Act 2018. This will apply to all sectors; and will mirror existing block exemptions as allowed under the current rules, including the Agricultural, Fisheries and General Block Exemption Regulations.

The Competition and Markets Authority will take on the role of enforcement and supervision for the whole of the UK (Author’s note, a statement that is likely to further strain already testy relations between the UK government and the devolved administrations of Scotland, Wales and Northern Ireland who currently enjoy autonomy in this policy area).

From this point onwards:

  • UK public authorities will need to notify state aid to any undertaking, through either the block exemption or through a full notification to the Competition and Markets Authority instead of the European Commission
  • Existing approvals of state aid, including block exemption approvals, will remain valid and will be carried over into UK law under the Withdrawal Act
  • Any full notifications not yet approved by the Commission should be submitted to the Competition and Markets Authority.

Implications

The technical note reassures UK businesses and EU businesses with operations in the UK that they will still be able to receive state aid from UK public authorities in accordance with the UK state aid rules, even in the event of a ‘no deal’ Brexit on 29 March 2019.

Any complaints from businesses about unlawful aid or the misuse of aid should be made to the Competition and Markets Authority the note confirms, with further guidance to be published by the Competition and Markets Authority in early 2019.

The technical note also confirms that the UK government intends to pass secondary legislation under the European Union Withdrawal Act later in autumn 2018 to replicate the existing state aid framework, with only minor “technical modifications” to correct deficiencies with the transposed EU law to ensure the the EU state aid regime operates effectively in a domestic context.

After legislation has passed, the Competition and Markets Authority will publish its own guidance explaining in more detail how it will operate its newly acquired state aid regulatory function.

Image credit: TeroVesalainen/Pixaby.