Navigating the Brave New World of Subsidy Control

by Kate Hiller, Legal Services Team Manager

At NWL Legal we’ve been looking at how we ensure that our council is compliant with the new Subsidy Control Act 2022 provisions that came into force this month.  Although a lot of it has not come as a surprise, getting your head around the new rules and what you do and don’t need to think about is a big task.  We have been focusing on the following:

  • Projects in the pipeline and whether they have subsidy control considerations;
  • Projects already begun and whether a subsidy has been given yet or not; and
  • Regular grants and smaller subsidies that were previously justified on de minimis grounds.

New projects

With new projects coming up in the near future which may involve giving subsidies, there was always going to be a need to consider the new subsidy control rules – even if just to rule something out as a subsidy at all – however, we are now thinking more carefully about how we do that.  It is not simply the case of giving some legal advice and holding that on a file somewhere.  The new rules require clear audit trails for sharing with potential challengers, notification in certain circumstances and referrals to the Competition Markets Authority when specific criteria are met.  The steps to go through to assess whether a subsidy is lawful or not are also far more detailed than we have seen before.

At NWL Legal we have pulled together a single Subsidy Control Assessment Form that can be used to assess potential subsidies when they come up.  It walks you through the steps of assessing whether something is a subsidy, deciding whether any of the permitted routes apply and if not, determining whether the proposed subsidy would comply with the subsidy control principles.  It also takes you through the requirements around notification and referral to be clear what next steps need to be taken in cases where a subsidy has been deemed to be lawful.  Having a framework like this in place sets us up for when our next subsidy control query comes through rather than waiting for a project to come up where a subsidy may be given and trying to work out what to do next.

Existing Projects

It is not just upcoming projects that we have been thinking about but also those that are already in train.  The new rules apply to subsidies that haven’t yet been given and therefore it is important to understand whether a subsidy decision was made before or after the provisions came into force.

The timing of a subsidy is therefore key.  It is easy to think that advice may already have been given on a particular subsidy so it is ok to proceed but that advice may be out-of-date if the subsidy has not yet been awarded.  With the rules changing and new requirements introduced, it is also not just a case of taking the view that it was compliant before so it is likely to be compliant again, as the groundwork needs to be done to confirm that it fits within the new rules.  We would recommend reviewing any projects ongoing where a subsidy may be about to be given to make sure you are still compliant.

Smaller subsidies

The de minimis rules under state aid were relatively straightforward and it was easy to take the view that: if aid had been granted under de minimis before; nothing had changed; and the value was still below the threshold; then it would be fine to keep giving similar aid (e.g. repeated smaller value grants to support community benefits).  Now there are the new minimal financial assistance provisions to consider though and other considerations to think about, for example, are they one off subsidies or do you want to set up a scheme?  Or even are they still a subsidy caught by the rules?  As it has now been made clear that if the recipient is engaged in both economic and non-economic activity, it should be considered an enterprise only in relation to its economic activity, it has made it potentially easier to give subsidies to charities.  Consequently, subsidies that were once the subject of the old state aid regime may no longer be a concern under the new Act, so it is worth looking into that, particularly if you give regular grants to community organisations.

At NWL Legal we are also looking at the templates we need in place to notify and confirm minimal financial aid to ensure compliance.  These requirements mean that even if the subsidy is justifiable on the same basis under the new rules, there are more steps to take to document it, as well as considering the notification requirements too.

All in all it seems like we now have a clear framework for what the subsidy control rules look like for the foreseeable future and now is the time to work out how that fits in your organisation, so that you can be compliant going forward and make this part of business as usual.  If there is anything we can help you with in navigating your way through this, do get in touch.