On 1 February 2020, the UK left the EU and on the same day, the “Withdrawal Agreement” entered into force.
The Withdrawal Agreement provides that the Commission remains competent for administrative procedures concerning compliance with Union law relating to competition in the United Kingdom that have been initiated before the end of the transition period (i.e. before 31 December 2020), and it includes specific provisions that apply to these procedures.
The Notice on the consequences of the UK withdrawal on competition law, as published on 2 December 2020, illustrates the main implication of the withdrawal of the United Kingdom from the European Union on the enforcement of EU antitrust and merger control rules after the end of the transition period.
The Withdrawal Agreement also provides that the Commission remains competent for reviewing compliance with Union law relating to State aid in the United Kingdom granted before the end of the transition period (i.e. before 31 December 2020). The Commission can not only continue administrative procedures that have already been initiated, but also start before 31 December 2024 new investigations into any unlawful aid granted by the United Kingdom before the end of the transition period. Furthermore, there are dedicated State aid rules in the Protocol on Ireland/Northern Ireland.
The Notice on the consequences of the UK withdrawal on State aid, as published on 18 January 2021, illustrates the main implications of the withdrawal of the United Kingdom from the European Union on EU State aid rules after the end of the transition period, and describes the powers of the Commission under the Withdrawal Agreement as regards State aid granted by the United Kingdom.
Trade and Cooperation Agreement (TCA)
The Trade and Cooperation Agreement was signed on 30 December 2020, was applied provisionally as of 1 January 2021 and entered into force on 1 May 2021.
The TCA provides for a set of rules on subsidy control and competition policy. These rules are laid down in Chapters 2 and 3 of Title XI “Level Playing field for Open and Fair Competition and Sustainable Development”, Annex 2 of the Energy Title of the TCA, as well as in the EU-UK Joint Declaration on subsidy control policies.
On subsidy control, the EU and the UK agreed on two elements, which ensure that neither Party uses trade-distorting subsidies: substantive rules on the one hand and enforcement tools on the other hand.
Substantive rules contain general principles which subsidies must respect in order to be granted. These general principles are complemented by specific binding principles applicable to key sectors (e.g. air transport, energy, financial services) or types of aid (e.g. rescue and restructuring of ailing companies, unlimited guarantees, export subsidies, services of public economic interest, large cross-border projects).
The EU and UK have also agreed to make reference in a Joint Declaration to non-binding principles on other specific subsidies relating to research and development, the development of disadvantaged areas (the so-called regional subsidies) and subsidies to the transport sector (airports, ports, road transport). These principles would guide the two Parties in the implementation and development of their rules on subsidies.
Enforcement tools included in the TCA are the following:
- The respect of the principles can be challenged by competitors and verified by domestic courts. The courts will be empowered to order beneficiaries to pay back the subsidy if the court finds, for instance, that the principles were not correctly applied to that subsidy.
- A dispute settlement mechanism to deal with a conflict regarding the application of the provisions on subsidy control
- The possibility for both the EU and the UK to take unilateral remedial measures in case the other Party grants a subsidy in a way that leads to significant negative effects on trade or investment.
The TCA also contains provisions on competition (antitrust and mergers). It provides for the obligation of the Parties to have a competition law, which prohibits anticompetitive practices and to have an operationally independent competition authority. The Parties also must respect the principles of procedural fairness, no discrimination and transparency.
The competition rules in the TCA provide for the possibility for the Parties to cooperate between their respective competition authorities with regard to developments on competition policy as well as enforcement activities. In addition, the Parties may enter into a separate cooperation agreement, which may include the conditions for the exchange and use of confidential information.
The first meeting of the Trade Specialised Committee on Level Playing Field for Open and Fair Competition and Sustainable Development (LPFOFCSD) under the Agreement between the European Union and the United Kingdom (UK) for Trade and Cooperation Agreement took place on 12 October 2021. During the meeting, representatives from the European Union and the United Kingdom discussed points relating to subsidy control.
These are the joint minutes of the meeting.