After much anticipation, the Subsidy Control Act 2022 received Royal Assent on 28 April 2022 with some key aspects taking immediate effect.
After 16 months since Brexit, the new Act marks a major new piece of legislation applying across the UK through which the Government exercises its retrenched sovereignty to implement its own, bespoke, subsidy control regime.
General thoughts on the new Act
The Subsidy Control Act is altogether a 'good read' and is a coherent piece of legislation such that, provided it is considered by grant funders and recipients before funds are administered, it ought not to prevent good administration of public funding. The new regime shares much in common with both the State aid regime that preceded it in the UK and the definition of what is a subsidy remains largely the same, subject to our comments below.
Arguably the biggest change is that, unlike the previous interim rules, the Subsidy Control Act applies both to measures having an international impact and also ones with only a domestic effect. This is because the Act’s definition of a subsidy includes measures having or capable of having an effect 'within the United Kingdom' and between 'the United Kingdom and a country or territory outside of the United Kingdom' (subject to other relevant criteria such as the measure needs to involve public resources).
This will significantly increase the remit of the regime and the instances in which it applies, increasing the administrative burden on the public sector, and the likelihood of funding recipients inadvertently falling foul of the rules. Public policy adopted by state bodies and local authorities will be of greater significance and have to be rewritten with the subsidy control rules in mind.
The new Act also brings heightened reporting requirements, particularly around Subsidies of Interest and Subsidies of Particular Interest. Consequently, good administration is just as important as it was under State aid because subsidies granted without following the reporting requirements, will fundamentally undermine any effort to comply with the regime.
Also of interest is the introduction of the right for parties that are 'aggrieved' by a subsidy to apply to the Competition Appeal Tribunal to review the decision – this will arguably result in greater accountability for the public sector when awarding subsidies than under State aid, under which regime reviews by the EU Commission were relatively rare. The flip side is this will also likely heighten the administrative burden for the public sector to comply with the rules, particularly if challenges become more commonplace.
How ACS can help
Altogether this is a major change in the regulatory environment for the public sector with real and practical implications, applying to a highly complex and nuanced area of law. ACS have an unusually large team of subsidy control lawyers and would be happy to discuss the new regime with affected clients, whether those clients have a specific subsidy in mind or would like a broader conversation.
Local authorities will have to ensure they are properly supported in respect to this major legislative change. We are developing products and tools to help our clients get to grips with the new regime in a cost-effective way. If you are interested in either hearing about these products and tools or having a broader conversation with us about your organisation’s particular concerns do get in touch.
A Bill to make provision regulating the giving of subsidies out of public resources; and for connected purposes.