Subsidy Control Bill (HL Bill 84)

Part 1 Overview and key interpretation

Overview etc

1 Overview and application of Act

(1)5This Part defines “subsidy” and other key terms used in this Act.

(2)Part 2 imposes requirements that apply to the giving of subsidies or the making
of subsidy schemes (referred to in this Act as “the subsidy control
requirements”)—

(a)Chapter 1 imposes duties to apply the subsidy control principles and
10energy and environment principles;

(b)Chapter 2 imposes prohibitions and other requirements;

(c)Chapter 3 provides for transparency requirements.

(3)Part 3 contains exemptions from the subsidy control requirements—

(a)Chapter 2 contains exemptions relating to small amounts of assistance;

(b)15Chapter 3 contains exemptions for natural disasters and other
exceptional circumstances and emergencies;

(c)Chapter 4 contains other miscellaneous exemptions.

(4)Part 4 provides for the functions of the CMA in relation to the application of
the subsidy control requirements.

(5)20Part 5 contains provisions relating to the enforcement of the subsidy control
requirements.

(6)Part 6 contains miscellaneous and final provisions.

(7)The exercise of any power conferred by legislation (whenever passed or made)
is to be read as subject to the subsidy control requirements (except so far as a
contrary intention appears in the case of an Act of Parliament).

(8)5In subsection (7) “legislation” means primary legislation or subordinate
legislation.

“Subsidy”

2 “Subsidy”

(1)In this Act, “subsidy” means financial assistance which—

(a)10is given, directly or indirectly, from public resources by a public
authority,

(b)confers an economic advantage on one or more enterprises,

(c)is specific, that is, is such that it benefits one or more enterprises over
one or more other enterprises with respect to the production of goods
15or the provision of services, and

(d)has, or is capable of having, an effect on—

(i)competition or investment within the United Kingdom,

(ii)trade between the United Kingdom and a country or territory
outside the United Kingdom, or

(iii)20investment as between the United Kingdom and a country or
territory outside the United Kingdom.

(2)For the purposes of this Act, the means by which financial assistance may be
given include—

(a)a direct transfer of funds (such as grants or loans);

(b)25a contingent transfer of funds (such as guarantees);

(c)the forgoing of revenue that is otherwise due;

(d)the provision of goods or services;

(e)the purchase of goods or services.

(3)Financial assistance given from the person’s resources by a person who is not
30a public authority is to be treated for the purposes of subsection (1)(a) as
financial assistance given from public resources by a public authority if the
involvement of a public authority in the decision to give financial assistance is
such that the decision is, in substance, the decision of the public authority.

(4)For the purposes of subsection (3), the factors which may be taken into account
35when considering the involvement of a public authority in the decision of a
person to give financial assistance include, in particular, factors relating to—

(a)the control exercised over that person by that public authority, or

(b)the relationship between that person and that public authority.

(5)For the purposes of this Act, financial assistance is to be treated as given to an
40enterprise if the enterprise has an enforceable right to the financial assistance.

(6)For further provision relevant to the interpretation of this section, see—

(a)section 3 (financial assistance which confers an economic advantage);

(b)section 4 (financial assistance which is specific);

(c)section 5 (modification for air carriers);

(d)section 6 (meaning of “public authority”);

(e)sections 7 and 8 (meaning of “enterprise”).

3 Financial assistance which confers an economic advantage

(1)This section makes provision about determining whether financial assistance
5confers an economic advantage on an enterprise for the purposes of section
2(1)(b).

(2)Financial assistance is not to be treated as conferring an economic advantage
on an enterprise unless the benefit to the enterprise is provided on terms that
are more favourable to the enterprise than the terms that might reasonably
10have been expected to have been available on the market to the enterprise.

4 Financial assistance which is specific

(1)This section makes provision about determining whether financial assistance
is specific for the purposes of section 2(1)(c).

(2)Financial assistance is not to be regarded as being specific if the distinction in
15the treatment of enterprises is justified by principles inherent to the design of
the arrangements of which that financial assistance is part.

(3)For the purposes of subsection (2) as it applies to financial assistance given in
the form of a tax measure, the following are examples of the principles that
may be relevant in a particular case—

(a)20the need to fight fraud or tax evasion;

(b)administrative manageability;

(c)the avoidance of double taxation;

(d)the principle of tax neutrality;

(e)the progressive nature of income tax and its redistributive purpose;

(f)25the need to respect taxpayers’ ability to pay.

(4)Financial assistance given by a public authority in the form of a tax measure is
not to be regarded as being specific unless—

(a)one or more enterprises obtain a reduction in the tax liability that it or
they would otherwise have borne under the normal taxation regime,
30and

(b)that enterprise or those enterprises are treated more advantageously
than one or more other enterprises in a comparable position under the
normal taxation regime.

(5)For the purposes of subsection (4), the normal taxation regime is to be
35identified from—

(a)the internal objective of the regime,

(b)the features of the regime (such as the tax base, the taxable person, the
taxable event or the tax rate), and

(c)the fact that the public authority whose regime it is—

(i)40is autonomous institutionally, procedurally, economically and
financially as regards the regime, and

(ii)has the competence to design the features of the regime.

(6)A special purpose levy is not to be regarded as being specific if—

(a)its design is determined by non-economic public policy objectives (such
as the need to limit the negative impacts of certain activities or products
on the environment or human health), and

(b)the public policy objectives are not discriminatory.

(7)5The forgoing of an amount of special purpose levy which is otherwise due is
not be to regarded as being specific if the provision enabling the forgoing of
that amount satisfies the conditions in subsection (6)(a) and (b).

5 Section 2: modification for air carriers

(1)For the purposes of this Act as it applies in relation to enterprises which are air
10carriers providing air transport services, section 2(1) is to be read as if for
paragraph (d) there were substituted—

“(d)has, or is capable of having, an effect on—

(i)competition between air carriers in the provision of air
transport services within the United Kingdom, or

(ii)15competition between air carriers of the United Kingdom
and air carriers of a country or territory outside the
United Kingdom in the provision of air transport
services.”

(2)In this section, “air transport services” includes air transport services not
20covered under Title I (Air transport) of Heading Two (Aviation) of Part Two of
the Trade and Cooperation Agreement.

“Public authority”

6 “Public authority”

(1)For the purposes of this Act, “public authority” means a person who exercises
25functions of a public nature, but does not include—

(a)either House of Parliament,

(b)the Scottish Parliament,

(c)Senedd Cymru, or

(d)the Northern Ireland Assembly.

(2)30Subsection (1)(a) is not to be taken as applying to—

(a)the Corporate Officer of the House of Commons,

(b)the Corporate Officer of the House of Lords,

(c)the House of Commons Commission, or

(d)any other person who acts on behalf of either or both of the Houses of
35Parliament.

(3)Subsection (1)(b) is not to be taken as applying to—

(a)the Scottish Parliamentary Corporate Body, or

(b)any other person who acts on behalf of the Scottish Parliament.

(4)Subsection (1)(c) is not to be taken as applying to—

(a)40the Senedd Commission, or

(b)any other person who acts on behalf of Senedd Cymru.

(5)Subsection (1)(d) is not to be taken as applying to—

(a)the Northern Ireland Assembly Commission, or

(b)any other person who acts on behalf of the Northern Ireland Assembly.

“Enterprise”

7 “Enterprise”

(1)5In this Act, “enterprise” means (subject to subsections (2) and (3))—

(a)a person who is engaged in an economic activity that entails offering
goods or services on a market, to the extent that the person is engaged
in such an activity, or

(b)a group of persons under common ownership or common control
10which is engaged in an economic activity that entails offering goods or
services on a market, to the extent that the group is engaged in such an
activity.

(2)For the purposes of this section, an activity is not to be regarded as an economic
activity if or to the extent that it is carried out for a purpose that is not
15economic.

(3)For the purposes of this section, a person or group of persons is not to be
regarded as an enterprise by virtue only of being a shareholder or shareholders
in a body corporate which is to any extent an enterprise.

(4)In this section, “person” includes a body corporate, a partnership and an
20unincorporated association.

(5)For further provision relevant to the interpretation of this section, see section 8
(persons under common control).

8 Persons under common control

(1)For the purposes of section 7, a group of persons is to be treated as being under
25common control if the group—

(a)is a group of interconnected bodies corporate,

(b)consists of bodies corporate of which one and the same person or group
of persons has control, or

(c)consists of one or more bodies corporate and a person who, or a group
30of persons which, has control of that or those bodies corporate.

(2)A person or group of persons able, directly or indirectly, to control or
materially to influence the policy of a body corporate as regards carrying on an
economic activity that entails offering goods or services on a market is to be
treated as having control of that body corporate for the purposes of subsection
35(1)(b) and (c), even if the person or group of persons does not have a controlling
interest in that body.

(3)For the purposes of this section, “group of interconnected bodies corporate”
means a group consisting of two or more bodies corporate all of which are
interconnected with each other.

(4)40For the purposes of this section, any two bodies corporate are interconnected
if—

(a)one of them is a body corporate of which the other is a subsidiary, or

(b)both of them are subsidiaries of one and the same body corporate;

and “interconnected bodies corporate” is to be construed accordingly.

(5)In this section—

• “person” includes a body corporate, a partnership and an unincorporated
  association;

• 5“subsidiary” has the meaning given by section 1159 of the Companies Act
  2006.

Other key terms

9 The subsidy control principles and the energy and environment principles

(1)Schedule 1 sets out the subsidy control principles.

(2)10Schedule 2 sets out further principles for subsidies in relation to energy and
environment.

10 Subsidy schemes and streamlined subsidy schemes

(1)In this Act, “subsidy scheme” means a scheme made by a public authority
providing for the giving of subsidies under the scheme.

(2)15A subsidy scheme may be made—

(a)by a public authority that is not a primary public authority only for the
giving of subsidies by that public authority;

(b)by a public authority that is a primary public authority for the giving of
subsidies by other public authorities (in addition to the primary public
20authority so far as the scheme may provide).

(3)In subsection (2), “primary public authority” means a public authority of any
of the following descriptions—

(a)a Minister of the Crown;

(b)the Scottish Ministers;

(c)25the Welsh Ministers;

(d)a Northern Ireland department;

(e)any other public authority which, in the exercise of its functions, makes
a scheme for the giving of subsidies by other public authorities.

(4)In this Act, “streamlined subsidy scheme” means a subsidy scheme which—

(a)30is made by a Minister of the Crown, and

(b)specifies it is made for the purposes of this Act as a streamlined subsidy
scheme.

(5)A streamlined subsidy scheme must be laid before Parliament after it is made.

(6)If a streamlined subsidy scheme is modified after it is laid, the scheme as
35modified must also be laid before Parliament.

11 Subsidies and schemes of interest or particular interest

(1)In this Act—

(a)“subsidy, or subsidy scheme, of interest”, and

(b)“subsidy, or subsidy scheme, of particular interest”,

40have the meanings given in regulations made by the Secretary of State.

(2)Regulations under this section defining “subsidy, or subsidy scheme, of
interest” or “subsidy, or subsidy scheme, of particular interest” may make
provision by reference to—

(a)the value of the subsidy or the value of the subsidies given under the
5subsidy scheme, and

(b)the sector in which the expected beneficiaries of the subsidy or subsidy
scheme operate, and any characteristics of that sector.

(3)Regulations under this section are subject to the affirmative procedure.

Part 2 10Subsidy control requirements

Chapter 1 Principles

12 Application of the subsidy control principles

(1)A public authority—

(a)15must consider the subsidy control principles before deciding to give a
subsidy, and

(b)must not give the subsidy unless it is of the view that the subsidy is
consistent with those principles.

(2)In subsection (1) “subsidy” does not include a subsidy given under a subsidy
20scheme.

(3)A public authority—

(a)must consider the subsidy control principles before making a subsidy
scheme, and

(b)must not make the scheme unless it is of the view that the subsidies
25provided for by the scheme will be consistent with those principles.

13 Application of the energy and environment principles

(1)A public authority—

(a)must consider the energy and environment principles before deciding
30to give a subsidy in relation to energy and environment, and

(b)must not give the subsidy unless it is of the view that the subsidy is
consistent with those principles.

(2)In subsection (1) “subsidy” does not include a subsidy given under a subsidy
scheme.

(3)35A public authority—

(a)must consider the energy and environment principles before making a
subsidy scheme that provides for the giving of subsidies in relation to
energy and environment, and

(b)must not make the scheme unless it is of the view that the subsidies
40provided for by the scheme will be consistent with those principles.

(4)A duty under this section applies in addition to the corresponding duty under
section 12.

Chapter 2 Prohibitions and other requirements

5Introductory

14 Introductory

This Chapter—

(a)prohibits the giving of certain subsidies, and

(b)imposes other requirements in relation to the giving of certain other
10subsidies.

General prohibitions

15 Unlimited guarantees

A subsidy in the form of a guarantee of the debts or liabilities of an enterprise
is prohibited by this section if—

(a)15there is no limit as to the amount of the debts or liabilities that are
guaranteed, or

(b)there is no limit as to the duration of the guarantee.

16 Export performance

(1)A subsidy that is contingent in law or in fact, whether solely or as one of several
20other conditions, upon export performance relating to goods or services is
prohibited by this section.

(2)But this section does not prohibit a subsidy in the form of—

(a)short-term export credit insurance against risks that are not marketable
risks, or

(b)25an export credit, export credit guarantee or insurance programme that
is permissible in accordance with the SCM Agreement.

(3)In this section—

• “export credit insurance” means insurance against commercial or political
  risks relating to the payment obligations of public or non-public
  30customers in export transactions;

• “marketable risks” means risks relating to the payment obligations of
  public or non-public customers in marketable risk countries;

• “marketable risk country” means (subject to subsection (4))—

  (a)

  the United Kingdom,

  (b)

  35a member State of the European Union,

  (c)

  Australia,

  (d)

  Canada,

  (e)

  Iceland,

  (f)

  Japan,

  Subsidy Control BillPage 9

  (g)

  New Zealand,

  (h)

  Norway,

  (i)

  Switzerland, and

  (j)

  the United States of America;

• 5“short-term export credit insurance” means export credit insurance with
  a risk period of less than two years;

• “the SCM Agreement” means the Agreement on Subsidies and
  Countervailing Measures, contained in Annex 1A to the Marrakesh
  Agreement Establishing the World Trade Organization, done at
  10Marrakesh on 15 April 1994 (read with any adjustments necessary for
  context).

(4)A marketable risk country is to be treated for the purposes of this section as not
being a marketable risk country if the Secretary of State gives a direction that
the marketable risk country is to be so treated.

(5)15The Secretary of State may give a direction under subsection (4) in respect of a
marketable risk country only if satisfied that there is a lack of sufficient private
market capacity because of—

(a)a significant contraction of private credit insurance capacity,

(b)a significant deterioration of sovereign sector rating, or

(c)20a significant deterioration of corporate sector performance.

(6)The Secretary of State must give a direction revoking a direction given under
subsection (4) in respect of a marketable risk country if the Secretary of State
ceases to be satisfied as mentioned in subsection (5).

(7)A direction given under subsection (4) or (6) must—

(a)25be laid before Parliament, and

(b)be published in whatever manner the Secretary of State considers
appropriate.

(8)For the purposes of this section, a subsidy is contingent in fact upon export
performance if the giving of the subsidy (without having been made legally
30contingent upon export performance) is in fact tied to actual or anticipated
exportation or export earnings.

(9)For the avoidance of doubt, a subsidy is not prohibited by this section by
reason only of the fact that it is given to an enterprise that is engaged in an
economic activity that entails exporting goods or services.

17 35Use of domestic goods or services

(1)A subsidy that is contingent, whether solely or as one of several other
conditions, upon the use of domestic over imported goods or services is
prohibited by this section.

(2)The prohibition in subsection (1) does not apply so far as relating to subsidies
40given in relation to the audiovisual sector.

(3)This section is without prejudice to—

(a)Article 132 of the Trade and Cooperation Agreement (investment
liberalisation: performance requirements), or

(b)Article 133 of that Agreement (investment liberalisation: non-
45conforming measures and exceptions).