All change or no change? The Windsor Framework's impact on State aid and subsidy control in Northern Ireland
All change or no change? The Windsor Framework’s impact on State aid and subsidy control in Northern Ireland
Whilst online shoppers and horticultural enthusiasts were welcoming the news of an agreement between the UK and EU on the Northern Ireland Protocol (the Protocol) – competition lawyers and business leaders have been picking through finer details of the multitude of joint declarations that have since been released. Included amongst these is one concerning the application of Article 10(1).
The first point to make is the Windsor Framework, and associated documents, do not replace the Protocol. Instead, the EU and the UK have utilised the provisions under the Trade and Cooperation Agreement to provide negotiations on points of concerns during UK transition period of leaving the EU.
Under Article 10(1) of the Protocol the EU's State aid rules continued to apply in relation to goods, wholesale electricity and/or agri-food. As we reported in December 2022, the position for businesses wishing to take advantage of government grants was confusing. Free of EU rules, the UK introduced the Subsidy Control Act which came into full force in January 2023. This left the question for Northern Irish businesses - would they be subject to EU or UK rules for any grants they received? Or even possibly both?
Understandably, this has led to concerns within the business community that Northern Irish businesses would not be beneficiaries of UK government grants because the rules surrounding their provision would be too complicated to operate in practice. As such, it is unsurprising that the UK and EU have tried to provide some clarity to this as part of the Windsor Framework.
The solution? Article 10(1) continues to apply to all goods and sectors that it had previously. As such there is no change. However, the EU and UK have clarified when an assessment for the application of Article 10 needs to be applied. They have emphasised the need for there to be a "real direct link" and a "foreseeable effect on trade". Such phrasing should avoid scenarios detailed in the British Sugar case when the issue of whether a raw sugar cane tariff could have triggered Article 10 even though the measure did not directly apply to Northern Ireland.
What this means in practice is that a UK wide scheme (such as a tax rebate) which only has a hypothetical or potential impact in Northern Ireland will not be caught by the Protocol. The joint declaration does, however, note that "measures that are granted to beneficiaries located in Northern Ireland are more likely to have material effects". Therefore, when a grant affects certain markets in Northern Ireland it will still need to be assessed for State aid compliance.
Whilst Article 10 appears to be around for the foreseeable future and Northern Irish businesses will have to continue to consider its application if they operate in one of the markets it governs – it is clear that the EU and UK are saying it should only apply in very limited circumstances. Further, even when it does apply, the EU and UK have emphasised that a range of exemptions already exist when a grant is deemed to fall under EU State aid rules. Both parties have committed to producing guidance as to when they see Article 10 applying. This welcome development will go some way in providing much needed clarity and certainty to Northern Irish businesses. As part of the guidance that surrounded the introduction of the Subsidy Control Act the UK government produced a number of example scenarios when subsidy control principles would need to be considered. Armed with this experience, it is hoped that clear criteria for when Article 10 applies will be established.