State aid should be an important element in the Brexit negotiations

Addressing the annual Competition Law and Transport Conference in Amsterdam recently, EU Law expert and Partner in A&L Goodbody, Dr Vincent Power, called for State Aid to be a key consideration in the forthcoming Brexit negotiations.

In recent years, the EU has increased its supervision of State Aid in sectors as diverse as banking, airports and tax rulings. Since her appointment, EU Competition Commissioner Margrethe Vestager has taken a tough stance on State aid - the recent Apple case being a notable example.  State aid ensures fairness in the market place by curbing unfair and discriminatory State subsidies and support for businesses.

According to Dr Power, "in the Brexit negotiations, the remaining EU Member States need to ensure that there are effective controls post-Brexit on State Aid being provided by the UK.  Otherwise, the UK could give aid which would then damage EU businesses without any of the current effective controls being applied to the UK.  The UK would have a near-blank cheque to support their businesses to the prejudice of businesses in the remaining Member States."

Dr Power warns that "If this loophole is not closed off then a UK business could not only receive State Aid but could also complain to the European Commission about aid provided to, say, an Irish, French or German business by their Governments. However, none of them could complain to the Commission about UK aid because the UK would be outside the rules, unless the matter is addressed in the negotiations."

The UK has a strong track record of giving significant State Aid, which is permitted where it is, on balance, beneficial to the economy, but prohibited where it is damaging to the economy. The UK gave at least €7.8 billion of State Aid in 2014 – up 45% over 2009 – and there could be more aid to deal with the Brexit fallout which could damage certain businesses in Ireland.

"This issue is all the more important if the UK were to opt for a low-tax model post-Brexit with high subsidies for UK businesses. Those States which remain could have their tax and subsidy regimes regulated but the UK would be immune from the State Aid rules. It is imperative that post-Brexit State Aid controls need to be built into the negotiation agenda and final arrangements," Dr Power concluded.

For more information or to request a copy of Vincent's slides please contact Dr Vincent Power.

Date published: 23 February 2016