Post-Brexit, challenges to the grant of a subsidy can be made to the Competition Appeal Tribunal (CAT). Since the Subsidy Control Act 2022 (SCA) came into force on 4 January 2023, there have only two legal challenges determined by the CAT. However, since May of this year, two new cases have been commenced, suggesting potential appellants are becoming more open to legally challenging subsidies (or alleged subsidies). 

In light of this uptick, this article examines:

• What we have seen under the regime so far
• The CAT’s approach to challenges
• How this role may evolve going forward

These new cases may demonstrate some of the attractive features of the regime for claimants and pave the way for a further increase in cases. 

A more flexible approach to granting subsidies

The SCA marked a significant shift in the way subsidies granted by public authorities are controlled in the UK, certainly when compared to its predecessor, the EU’s State aid regime. The SCA takes a more flexible approach than under EU state aid rules, allowing public authorities to self-assess subsidies against a set of principles, with referral to the Competition and Markets Authority’s Subsidy Advice Unit (SAU) only required in limited circumstances. Those include large subsidies (>£25m) in any sector, those in a ‘sensitive sector’ (e.g. electricity generation) which exceed a lower threshold (>£5m) and restructuring subsidies.

Where the SAU accepts a referral, it scrutinises the authority’s subsidy assessment and provides non-binding advice as to how the assessment or subsidy mechanism may be improved to better ensure compliance with the subsidy control principles. Depending on how the public authority responds, the advice could present an opportunity, to improve the design of a subsidy, or a potential risk: a failure to address any weaknesses could play out badly in a subsequent challenge in the CAT. 

Public authorities can also ensure compliance by using ‘streamlined routes’. These are made by the UK government, and can be used by public authorities for subsidies that align with the government’s strategic priorities (such as promoting innovation). They avoid the need for detailed self-assessments and offer pre-assessed routes for public authorities to award subsidies more quickly.

Increased activity and legal challenges

Challenges to the grant of a subsidy can be made to the CAT. In addition to dealing with standalone and follow-on claims for breaches of competition law and determining full merits appeals from competition law decisions made by the CMA (and other sector regulators), the CAT also deals with appeals (normally on judicial review grounds) from a range of regulators. This includes determining appeals from some of OFCOM’s regulatory decisions. The CAT has been entrusted with a similar role here, but with specific features for the subsidy control regime. 

For example, a shorter limitation period for starting an appeal applies compared to standard judicial review in the Administrative Court, 1 month vs. up to 3 months for standard judicial review. The SCA provides for the possibility of extending this period through the use of pre-action information requests – a feature not seen in standard judicial reviews subject to the pre-action protocol for judicial review under the Civil Procedure Rules. The CAT also has the power to make a recovery order, requiring a public authority to recover an amount awarded from the recipient of a subsidy. This is a novel power, not seen in other forms of judicial review, and is similar to powers existing under EU state aid. 

As at the start of this year, nearly 13,000 subsidies had been recorded on the ‘transparency database’, with 75 referrals to the SAU and only two challenges brought before the CAT. After two cases in two years, another two have been commenced since May.

Key takeaways from recent cases

Given it is early days, every new case will provide some insights - both as to how the new regime will be applied, and the CAT’s approach to challenges. 

The Durham Company Limited v Durham County Council

A commercial waste company challenged the local council’s practice of sharing costs between its free household waste collection and its fee-based commercial waste services. The appellant argued that this allowed the council’s commercial arm to benefit from economies of scale, effectively subsidising its operations. The CAT dismissed the appeal, holding that a public authority cannot grant a subsidy to itself.

Mr Aubrey Weis v Greater Manchester Combined Authority (GMCA)

The GMCA provided two loans totalling £140m for housing development. Another property developer argued that the loans were not made on market terms and therefore amounted to a subsidy (and one that did not adhere to the subsidy control principles). The CAT held that the low interest rates were rational given the low risks and strong covenants and security under the loans. The authority was likely to recover the amount of loan plus interest even in the unlikely event of default

The New Lottery Company Ltd and Others v The Gambling Commission

Several lottery operators have challenged a £70 million award by the Gambling Commission from the National Lottery Distribution Fund (NLDF) to Camelot for marketing purposes. The appellants argued that the funds conferred an economic advantage, improving Camelot’s competitive position without proper subsidy analysis. Funds in the NLDF, prescribed by law to be used for 'good causes,' were allegedly awarded in a manner that distorted competition. This case could answer a question left unanswered by the outcome of the GCMA case, namely: what happens when an amount meeting the SSoPI threshold is awarded without a subsidy assessment or referral, and is later deemed to be a subsidy?

Bristol Airport v Welsh Ministers

Bristol Airport has challenged a £205 million subsidy granted to Cardiff Airport. Unlike the cases above, this is the first under the SCA which does not require a determination as to whether a subsidy was granted. The Welsh Government had prepared a subsidy assessment and made the mandatory referral to the SAU, where the SAU identified several areas of weakness in the assessment. Following the decision being made to award the subsidy, Bristol Airport has appealed, alleging that Cardiff Airport was ailing or insolvent and that the subsidy constituted rescue aid disguised to circumvent the SCA’s restrictions. This case, set for hearing in February 2026, could provide clarity on the treatment of subsidies to (allegedly) financially distressed entities.

An increasingly attractive option for challenging public authorities?

Despite the slow start under the SCA, the next six to nine months is likely to give us a better understanding of the role that subsidy control challenges can play. Will it become a more popular basis for challenging public authorities and, by extension, will it become a risk that public authorities need to consider more carefully in their decision-making? 

The ability to extend limitation periods by using pre-action information requests together with (i) possible use of SAU reports (see Bristol Airport v Welsh Ministers) and (ii) threat of repayment orders (see New Lottery Company v Gambling Commission) are matters on which we should get more clarity in the coming months. Similarly, we would expect to get greater insight on how the CAT will, if at all, leverage its experience of dealing with economic evidence (from its other roles) into this new role. 

For those with a choice, these factors together with the relatively efficient and speedy nature of the CAT procedures might make it an attractive option, particularly when compared to a standard judicial review in the Administrative Court.