State-aid handcuffs in Brexit backstop?

Lewis Crofts and Matthew Holehouse from MLex have written an interesting article about the State aid provisions in the Brexit backstop, which can be read here: MLex_Content

For further discussion on this hot topic of State aid after Brexit, we hope to see some of you at the Shearman & Sterling/UKSALA seminar on Monday evening, full details here.

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STATE AID AND THE WITHDRAWAL AGREEMENT: KEY POINTS

The UK Government’s intention to maintain the EU State aid rules has been clear for some time.  I briefly discussed the reasons why it has taken that view – and done so without significant opposition – in a piece I wrote here.  The intention to hold onto the State aid rules was strong enough for the Government to commit to maintaining them even on a “no deal” Brexit.  But we now have a deal, subject to the vagaries of UK politics (which I shall not attempt to predict).  What has it got to say about State aid?

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Court of Appeal rules on State aid in Sky Blue No. 2

Today’s blog post has been sent to UKSALA by James Goudie QC and Ronnie Dennis of 11KBW, who acted for Coventry City Council in both Sky Blue cases.

On 12 October 2018 the Court of Appeal handed down judgment in the latest State aid challenge brought by the owners of Coventry City Football Club against Coventry City Council: R (Sky Blue Sports & Leisure Ltd) v Coventry City Council [2018] EWCA Civ 2252 (Sky Blue No. 2).

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Stay of Micula brothers’ ICSID award upheld by Court of Appeal

Today’s blog post has been sent to UKSALA by Emily MacKenzie, Brick Court Chambers, who appeared as junior counsel for Romania in the latest instalment of the Micula saga.

On 27 July 2018, the Court of Appeal (Arden, Hamblen and Leggatt LLJ) handed down its judgment in Micula and others v Romania [2018] EWCA Civ 1801, a case concerning the intersection of international law rules for investment arbitration with EU law rules on State aid.

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State aid and tax settlement cases

Thank you to all who came to last week’s lecture by Max Lienemeyer on State aid and tax settlement cases. Here is the information pack prepared for the lecture (with thanks to Michael Papadakis for putting this together).

Seminar on Tax rulings – KCL 31.1.2018 information pack_

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CMA evidence to House of Lords Internal Market Sub-Committee

The House of Lords has published a transcript of the oral evidence given to it by the Competition and Markets Authority here.

State aid is raised at Question 8.

In summary, the CMA states that it has no position on whether it should take on State aid responsibilities after Brexit, but sees that the “job might have its name on it”. It further notes that it would be likely to need to recruit State aid expertise at official and panel level, but is confident of its ability to do so.

George Peretz QC

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Written evidence to House of Lords Internal Market Sub-Committee’s Inquiry into Competition Policy and Brexit

HOUSE OF LORDS EU INTERNAL SUB-COMMITTEE

INQUIRY INTO UK COMPETITION POLICY AFTER BREXIT

WRITTEN EVIDENCE OF THE UK STATE AID LAW ASSOCIATION

1. This paper has been prepared by the Joint Convenors of the UK State Aid Law Association (UKSALA), together with Isabel Taylor.  UKSALA was formed in 2012 to provide a forum for lawyers, economists, academics, businesses and the public sector to discuss State aid issues.  It has around 300 members on its mailing list. It operates a website (www.uksala.org).  For the avoidance of doubt, it should be noted that the views expressed in this paper are those of its authors, and do not necessarily represent the views of any other member of UKSALA.

2. Given its remit, this paper comments only on the State aid aspects of the Committee’s Inquiry.

3. The present authors have prepared two detailed papers on State aid and Brexit, which can be found at https://uksala.org/paper-on-post-brexit-options-for-state-aid/ and https://uksala.org/bringing-state-aid-home-could-an-effective-domestic-state-aid-regime-be-devised-for-the-uk/ . As the Committee will see, many of the questions that it raises are covered in those papers.  This written evidence aims to summarise and update what was said in those papers.

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EU (Withdrawal) Bill and State aid: a note

The EU (Withdrawal) Bill, published last week, has already attracted much comment.

One feature of it that has not been mentioned, however, is a State aid aspect that emerges from the Explanatory Notes to the Bill.

Clause 4 of the Bill provides for EU rights and obligations which are currently recognised in domestic law as a result of section 2(1) of the European Communities Act 1972 to continue being recognised in domestic law after exit.  As paragraph 87 of the Explanatory Notes explains, that provision will mean that directly effective rights contained within EU treaties continue to be law (unless something is done to stop them being law).

Paragraph 89 goes on to list the provisions of the Treaties that the Government considers will be preserved as a result of clause 4.

That list of “preserved Articles” includes Article 108(3) TFEU: the “standstill” provision that precludes a Member State from implementing State aid unless and until it is notified to an approved by the Commission.  That provision has direct effect: so, for example, a third party affected by the implementation of a non-notified State aid has the right to obtain relief from the UK courts.

In other words, the Government’s position is that (absent some other measure), Article 108(3) will, under clause 4, continue to be law the day after Brexit.

That would, however, be a very odd result.  Article 108(3) makes no sense in a context where, out of the EU, the UK is unable to notify a State aid to the Commission and the Commission has no power to approve it.

It is therefore practically certain that the Government will need to address the matter by statutory instrument: depending on the decisions it takes about a State aid regime after Brexit it will either need to modify Article 108(3) to make it operable or provide that it lapses on Brexit day.  So far, the Government has said nothing about its intentions in that regard.

 

George Peretz QC

 

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House of Lords EU Market Sub-Committee calls for evidence on impact of Brexit on State aid

The House of Lords EU Internal Market Sub-Committee, chaired by Lord Whitty, has decided to launch an inquiry into the impact of Brexit on UK competition policy. The inquiry will explore the opportunities and challenges of leaving the EU for antitrust rules, merger control and state aid, as well as considering the potential future relationship between UK and EU competition authorities. See here.

On State aid, the Committee has said it would like to hear evidence on the following issues: –

 (1) Are state aid provisions likely to form an essential component of any future trade agreement between the UK and EU? Do any existing trade agreements between the EU and third countries provide a useful precedent for future UK-EU state aid arrangements?

 (2) Will the UK require a domestic state aid authority after Brexit?

 (3) What would be the opportunities and challenges for state aid or subsidy controls in the UK if no trade agreement were to be reached with the EU? Would WTO anti-subsidy rules restrict the UK’s ability to support industries, or individual companies, through favourable tax arrangements?

 (4) How will the Government’s industrial strategy shape its approach to state aid after Brexit? To what extent has the European Commission’s state aid policy limited interventions that the UK Government may have otherwise pursued?

 (5) What, if any role, might the devolved institutions play in UK state aid control post-Brexit? Are there any potential implications for the UK internal market?

 (6) Will it be necessary for the UK and EU to agree a transitional arrangement for state aid matters after the UK’s withdrawal from the EU? If so, what transitional issues would such an arrangement need to address?

 

The UK State Aid Law Association has already prepared papers (available on this website here and here) on possible State aid regimes post-Brexit that address many of these issues.  But we shall be submitting further evidence to the inquiry.

Any members who would like to contribute to that process should either post a blog in response or send me comments by e-mail (gperetz@monckton.com).  As the submission deadline is 15 September, any thoughts by 6 September, please.

GEORGE PERETZ QC

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BRINGING STATE AID HOME: COULD AN EFFECTIVE DOMESTIC STATE AID REGIME BE DEVISED FOR THE UK?

BRINGING STATE AID HOME: COULD AN EFFECTIVE DOMESTIC STATE AID REGIME BE DEVISED FOR THE UK?

 GEORGE PERETZ QC, KELYN BACON QC, AND ISABEL TAYLOR

 Introduction

  1. In an earlier paper published at the end of 2016, two of us (George Peretz QC and Kelyn Bacon QC) suggested that the EU was likely to make control of State aid a condition of any type of trade arrangement with the UK after Brexit.  The paper also argued that some form of anti-subsidy control was likely in any event to be needed in order to secure UK compliance with anti-subsidy provisions in the WTO agreement and other free trade agreements.  It also pointed out that there was a strong policy interest, in the era of devolution, in preventing “subsidy races” and other distortions of competition between the various nations of the United Kingdom – an aim currently secured, without any need to deal with the point in the various devolution Acts, by the fact that EU State aid rules apply to the devolved governments.

2. The paper contemplated both an “EEA model” (under which, at least for this purpose, the UK would accept the institutions of the EEA, namely the EFTA Surveillance Authority (“ESA”) and the EFTA Court) and a “domestic” model under which State aid would be regulated purely by domestic bodies and under domestic law.

3. Since that paper, the Government has made it clear that it does not intend to join the EEA.  Although we do not understand that the option of limited participation in EEA institutions has been ruled out, and we refer to it below, the purpose of the present paper is to look in more detail at the “domestic option”.

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