Future Regulation of State Aid in the event of No Deal Brexit

06 March 2019

Author: Niamh Magee
Practice Area: EU and Competition
Sector: Brexit

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The Government has published draft regulations and guidance on the future regulation of state aid in the event of a No Deal Brexit.

For those who are perhaps not familiar with the concept, “state aid” regulates the Government’s ability to (directly or indirectly) grant “aid” or “assistance” to a business, which may potentially give that business an advantage over its competitors, thereby affecting trade. Currently regulated on an EU wide basis, the UK’s competition law watchdog, the Competition & Markets Authority (CMA) will take over the role of UK state aid enforcement from the European Commission in the event that the UK leaves the European Union without a deal.

The State Aid (EU Exit) Regulations 2019, which transfer the current EU state aid regime into domestic law, were placed before Parliament on 21 January 2019 to ensure a domestic regime can be put in place by 29 March 2019, if required. The draft regulations were approved by the House of Commons on 22 January 2019 and are currently being considered by the House of Lords.

Under the proposed Regulations, the CMA’s rules on state aid procedures will be kept as similar as possible to those currently in place with the European Commission.The CMA will be required to publish a notice, in advance of exit day, that will clearly explain its proposed procedures for notifications and complaints in relation to state aid.

Whilst the CMA is still finalising its structures and processes, the current proposal is for all state aid cases to be considered by a dedicated CMA state aid team, supported by experienced professionals from across the CMA. For more complex cases which warrant further investigation, the CMA is working to ensure it has decision making structures and processes in place to ensure impartiality, independence and robustness for these cases.

The CMA is currently consulting on draft procedural guidance which provides general information on the processes it intends to use when examining and investigating notified aid measures in the event of a No Deal Brexit. The guidance also sets out what information is to be submitted to the CMA for aid benefiting from a state aid block exemption; the transparency and annual reporting requirements for notified aid; and aid exempt from notification. The draft guidance is available at https://bit.ly/2HgtmYk and the consultation period ends on 18 March 2019.

In accordance with the draft guidance, the following will apply in the event of a No Deal Brexit:

  • State aid which has been approved or exempted by the European Commission will not need to be approved again by the CMA, as will aid permitted by a Block Exemption Regulation.
  • Aid which is notified to the Commission before 29 March but which has not been approved, must be re-notified to the CMA after exit day.
  • The CMA will accept notifications of state aid from exit day, and will engage in informal pre-notification discussions with aid grantors expecting to notify aid in the first 3 months following the UK’s exit from the EU.

Whilst the CMA has a lot of work to do in getting to grips with its new role, this does not mean that Northern Ireland will be escaping its attention. Having attended the CMA’s recent consultation on its Annual Plan in Belfast, it is clear that the CMA is working hard to ensure it is more visible across the UK and, in particular, within Northern Ireland where it is currently engaging in a recruitment campaign.

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