Antitrust

1 3 2 This article considers some of the implications of Brexit under the Draft Withdrawal Agreement on State aid. It outlines key aspects of EU State aid rules, describes the current state of play with regard to a future U.K. State aid regime, and explores some of the issues that may arise with its implementation, in particular, in the event the controversial backstop comes into play. THE CURRENT STATE AID LEGAL FRAMEWORK The EU State aid rules prohibit public authorities from granting subsidies (in any form) that selectively advantage a business in a way that could potentially distort competition and trade in the EU. The prohibition was originally designed to ensure a level playing field for trade in the internal market and to prevent a company from gaining an unfair competitive advantage through government subsidies. Despite the general prohibition, the rules do enable aid to be granted lawfully in certain circumstances in order to benefit the economy and to support other important policy objectives (e.g., in areas involving research, development, innovation, the environment, etc.). The State aid legal framework only exists at the EU level. Unlike in antitrust and merger control there is no national law equivalent — nor is State aid control common internationally. State aid is defined in the Treaty on the Functioning of the European Union, which is interpreted by the European Courts and enforced by the European Commission (EC). Aid measures must be block exempted or notified to and approved by the EC before being implemented. As with other Member States, there was previously no U.K.-specific legislation relating to State aid and the U.K. did not have a national agency for State aid enforcement. STATE AID IN A POST-BREXIT ENVIRONMENT While it is unclear whether the U.K. and EU will agree on an all-encompassing deal for a future relationship, it is clear that the U.K.'s future arrangements relating to State aid will be an important part of the discussion, and inextricably linked with the terms of any future trade deal. The U.K. government's stated policy is that "the UK strongly supports a rigorous state aid system — this is good for taxpayers, consumers, and for businesses," and in a guidance paper on State aid published in August 2018, committed to incorporating the existing EU State aid framework, rules and guidance into U.K. law, even in the event of a no-deal Brexit. The Draft Withdrawal Agreement reflects this, but also provides that the EC and EU institutions will remain competent to handle State aid procedures concerning the U.K. during the transition period (and in respect of aid granted and procedures initiated during the transition period). Introducing The State Aid (EU Exit) Regulations 2019 into Parliament in January 2019, the U.K. government has confirmed that the Competition and Markets Authority (CMA) will take on the EC's monitoring and enforcement functions in respect of State aid and will have powers equivalent to the existing powers of the EC. The Regulations "transpose [ ] the EU State aid regime into domestic law and, in the event of no STATE AID 25 T H E P R O H I B I T I O N I S D E S I G N E D T O E N S U R E A L E V E L P L A Y I N G F I E L D F O R T R A D E I N T H E I N T E R N A L M A R K E T U.K. State Aid in a Post-Brexit World

• Cover