The UK has a number of international obligations in relation to subsidies[footnote 1]:
there are also commitments on subsidies arising from the UK’s continued membership of the World Trade Organization (WTO). These are primarily set out in the Agreement on Subsidies and Countervailing Measures (ASCM) and the Agreement on Agriculture (AoA). [footnote 2]. Further commitments are contained in the General Agreement on Tariffs and Trade (GATT), the Agreement on Trade-Related Investment Measures (TRIMs) and the General Agreement on Trade in Services (GATS) [footnote 3] [footnote 4]. These are not new commitments – the UK was subject to the WTO rules when it was a Member State of the EU.
the UK-EU Trade and Cooperation Agreement (TCA) is a Free Trade Agreement (FTA) containing a chapter on subsidies which is aimed at ensuring the granting of subsidies does not have a detrimental effect on trade and investment between the UK and the EU. The requirements of the TCA, including the six TCA subsidy control principles are incorporated into the UK’s Subsidy Control Act. The Subsidy Control Act also adds a further principle that subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition and investment within the UK. The Act also sets up the Subsidy Advice Unit (SAU) in line with our commitment, made in the TCA, to establish an independent body with an appropriate role.
Whilst compliance with the Subsidy Control Act should result in compliance with the TCA, public authorities should be aware of the specific requirement under the TCA of ensuring that the negative effects on trade and investment between the UK and EU of a subsidy are outweighed by the positive effects of the subsidy. If the EU considers there is clear evidence that a subsidy has or could have a negative effect on trade or investment between the UK and EU, it may request a consultation to explain how the principles have been met. If, following consultation, the EU considers there to be a serious risk of significant negative effect on trade or investment, it may ultimately instigate remedial measures against the UK.
the UK also has specific obligations arising under Article 10 of the Windsor Framework where a subsidy has an effect on trade in goods or wholesale electricity between Northern Ireland and the EU. Public authorities must have regard to guidance on Article 10 of the Windsor Framework, which is published by the Secretary of State under section 48 of the United Kingdom Internal Market Act 2020
the UK has also signed further Free Trade Agreements (FTAs) with other countries and some of these agreements contain provisions on subsidies. Future FTAs that the UK agrees with trade partners may likewise include obligations relating to subsidies
Public authorities need to determine whether their subsidy is in scope of one of the UK’s international obligations, and if so, ensure that their subsidy complies with the relevant agreements. This is in addition to assessing whether the proposed subsidy falls within scope of domestic law obligations relevant to subsidy control and, where relevant, assessing compliance with EU State aid rules applicable under Article 10 of the Windsor Framework.