Subsidy Control Bill (HL Bill 84)

Part 2 continued    

18 Relocation of activities

(1)A subsidy is prohibited by this section if—

(a)it is given to an enterprise subject to a condition that the enterprise
relocates all or part of its existing economic activities, and

(b)5the relocation of those activities would not occur but for the giving of
the subsidy.

(2)For the purpose of subsection (1), an enterprise relocates existing activities if—

(a)it is carrying on activities in an area of the United Kingdom before the
subsidy is given, and

(b)10it ceases to carry on those activities in that area after the subsidy is given
and instead carries them on in another area of the United Kingdom.

(3)The reference in subsection (1) to economic activities is a reference to any
economic activity that entails offering goods or services on a market.

Ailing or insolvent enterprises

19 15Rescuing

(1)A subsidy for rescuing an ailing or insolvent enterprise is prohibited by this
section unless the conditions in subsections (2) to (4) are met.

(2)The condition in this subsection is that the subsidy is given during the
preparation by the enterprise of a restructuring plan for the purposes of section
2020(2).

(3)The condition in this subsection is that the subsidy consists of temporary
liquidity support in the form of a loan or loan guarantee.

(4)The condition in this subsection is that the public authority giving the subsidy
is satisfied that—

(a)25the subsidy contributes to an objective of public interest by avoiding
social hardship or preventing a severe market failure, in particular with
regard to job losses or disruption of an important service that is difficult
to replicate, or

(b)there are exceptional circumstances that justify the subsidy being given
30despite its not contributing as mentioned in paragraph (a).

(5)This section does not apply to a subsidy for rescuing an ailing or insolvent
enterprise that is a deposit taker or insurance company.

20 Restructuring

(1)A subsidy for restructuring an ailing or insolvent enterprise is prohibited by
35this section unless the conditions in subsections (2) to (6) are met.

(2)The condition in this subsection is that the enterprise has prepared a
restructuring plan.

(3)The condition in this subsection is that the public authority giving the subsidy
is satisfied that the restructuring plan—

(a)40is credible,

(b)is based on realistic assumptions, and

(c)is prepared with a view to ensuring the return to long-term viability of
the enterprise within a reasonable time period.

(4)The condition in this subsection is that—

(a)the enterprise is a small or medium-sized enterprise, or

(b)5the enterprise or its owners, creditors or new investors—

(i)have contributed significant funds or assets to the cost of the
restructuring, or

(ii)have a contractual obligation to do so.

(5)The condition in this subsection is that the public authority giving the subsidy
10is satisfied that—

(a)the subsidy contributes to an objective of public interest by avoiding
social hardship or preventing a severe market failure, in particular with
regard to job losses or disruption of an important service that is difficult
to replicate, or

(b)15there are exceptional circumstances that justify the subsidy being given
despite its not contributing as mentioned in paragraph (a).

(6)The condition in this subsection is that—

(a)a subsidy has not previously been given for restructuring the
enterprise, or

(b)20five years have passed since the last time a subsidy was given for
restructuring the enterprise.

(7)But a subsidy is not prohibited by reason only of the condition in subsection (6)
not being met if the public authority giving the subsidy is satisfied that the
circumstances that have given rise to the need for the subsidy were—

(a)25unforeseeable, and

(b)not caused by the beneficiary of the subsidy.

(8)This section does not apply to a subsidy for restructuring an ailing or insolvent
enterprise that is a deposit taker or insurance company.

21 Restructuring deposit takers or insurance companies

(1)30A subsidy for restructuring an ailing or insolvent deposit taker or insurance
company is prohibited by this section unless the conditions in subsections (2)
to (4) are met.

(2)The condition in this subsection is that—

(a)the subsidy is given on the basis of a restructuring plan, and

(b)35the public authority giving the subsidy is satisfied that the
restructuring plan—

(i)is credible, and

(ii)is likely to restore long-term viability.

(3)The condition in this subsection is that the beneficiary of the subsidy, its
40shareholders, its creditors or the business group to which the beneficiary
belongs—

(a)have contributed significantly to the restructuring costs from their own
resources, or

(b)have a contractual obligation to do so.

(4)The condition in this subsection is that the public authority giving the subsidy
has been or reasonably expects to be properly remunerated for the subsidy.

22 Liquidating deposit takers or insurance companies

(1)A subsidy to an ailing or insolvent deposit taker or insurance company within
5subsection (2) is prohibited by this section unless the conditions in subsections
(3) to (5) are met.

(2)A deposit taker or insurance company is within this subsection if it cannot be
credibly demonstrated that it is capable of being returned to long-term
viability.

(3)10The condition in this subsection is that the subsidy is given to the deposit taker
or insurance company for the purpose of ensuring its orderly liquidation and
exit from the market.

(4)The condition in this subsection is that the public authority giving the subsidy
is satisfied that—

(a)15the subsidy is limited to what is needed for the purpose mentioned in
subsection (3), and

(b)the subsidy is limited so as to minimise its negative effect on—

(i)competition or investment within the United Kingdom,

(ii)trade between the United Kingdom and countries and
20territories outside the United Kingdom, and

(iii)investment as between the United Kingdom and countries and
territories outside the United Kingdom.

(5)The condition in this subsection is that the beneficiary of the subsidy, its
shareholders, its creditors or the business group to which the beneficiary
25belongs—

(a)have contributed significantly to the liquidation costs from their own
resources, or

(b)have a contractual obligation to do so.

23 Liquidity provision for deposit takers or insurance companies

(1)30A subsidy to support liquidity provision for an ailing or insolvent deposit taker
or insurance company is prohibited by this section unless the conditions in
subsections (2) to (4) are met.

(2)The condition in this subsection is that the subsidy is temporary.

(3)The condition in this subsection is that it is a condition of the giving of the
35subsidy that it is not used to absorb losses and does not become capital
support.

(4)The condition in this subsection is that the public authority giving the subsidy
has been or reasonably expects to be properly remunerated for the subsidy.

24 Meaning of “ailing or insolvent”

(1)40For the purposes of sections 19 to 23, a deposit taker, insurance company or
other enterprise is “ailing or insolvent” if—

(a)it would almost certainly go out of business in the short to medium
term without subsidies,

(b)it is unable to pay its debts as they fall due, or

(c)the value of its assets is less than the amount of its liabilities, taking into
account its contingent and prospective liabilities.

(2)The Secretary of State may by regulations make provision as to when a deposit
5taker, insurance company or other enterprise is, or is not, to be regarded as
meeting the condition in paragraph (a) of subsection (1).

(3)Regulations under subsection (2) are subject to the affirmative procedure.

25 Meaning of “deposit taker”

(1)In sections 19 to 24, “deposit taker” means a person who has permission to
10carry on the regulated activity of accepting deposits under—

(a)Part 4A of the Financial Services and Markets Act 2000 (permission to
carry on regulated activities), or

(b)paragraph 15 of Schedule 3 to that Act (EEA passport rights), as it has
effect as a result of section 409 of that Act (Gibraltar).

(2)15But “deposit taker” does not include a person who has permission to carry on
the regulated activity of accepting deposits only for the purposes of, or in the
course of, carrying on another regulated activity.

(3)In this section “regulated activity” has the meaning given by section 22 of the
Financial Services and Markets Act 2000, taken with Schedule 2 to that Act and
20any order under that section.

(4)The Treasury may by regulations amend this section so as to alter the meaning
of “deposit taker”.

(5)Before making regulations under subsection (4) the Treasury must consult the
Financial Conduct Authority and the Prudential Regulation Authority.

(6)25Regulations under subsection (4) are subject to the affirmative procedure.

26 Meaning of “insurance company”

(1)In sections 19 to 24, “insurance company” means a body corporate that has
permission to carry on the regulated activity of effecting or carrying out
contracts of insurance under—

(a)30Part 4A of the Financial Services and Markets Act 2000 (permission to
carry on regulated activities), or

(b)paragraph 15 of Schedule 3 to that Act (EEA passport rights), as it has
effect as a result of section 409 of that Act (Gibraltar).

(2)But “insurance company” does not include—

(a)35a registered society within the meaning of the Co-operative and
Community Benefit Societies Act (Northern Ireland) 1969 (c. 24 (N.I.)),

(b)a friendly society within the meaning of the Friendly Societies Act 1992,

(c)a registered society within the meaning of the Co-operative and
Community Benefit Societies Act 2014, or

(d)40a member of Lloyd’s that is not a company within the meaning of the
Companies Acts (see sections 1(1) and 2(1) of the Companies Act 2006).

(3)In this section “regulated activity” has the meaning given by section 22 of the
Financial Services and Markets Act 2000, taken with Schedule 2 to that Act and
any order under that section.

(4)The Treasury may by regulations amend this section so as to alter the meaning
5of “insurance company”.

(5)Before making regulations under subsection (4) the Treasury must consult the
Financial Conduct Authority and the Prudential Regulation Authority.

(6)Regulations under subsection (4) are subject to the affirmative procedure.

Other specific prohibitions and requirements

27 10Subsidies for insurers that provide export credit insurance

(1)A subsidy to an insurer that provides export credit insurance is prohibited by
this section unless the subsidy is given subject to a condition that—

(a)any export credit insurance provided by the insurer against marketable
risks is provided on a commercial basis, and

(b)15the subsidy is not used to directly or indirectly benefit so much of the
insurer’s business as consists of providing export credit insurance
against marketable risks.

(2)In this section—

• “export credit insurance” has the same meaning as in section 16;

• 20“insurer” means a person who has permission to carry on the regulated
  activity of effecting or carrying out contracts of insurance under—

  (a)

  Part 4A of the Financial Services and Markets Act 2000
  (permission to carry on regulated activities), or

  (b)

  paragraph 15 of Schedule 3 to that Act (EEA passport rights), as
  25it has effect as a result of section 409 of that Act (Gibraltar);

• “marketable risks” has the same meaning as in section 16;

• “regulated activity” has the meaning given by section 22 of the Financial
  Services and Markets Act 2000, taken with Schedule 2 to that Act and
  any order under that section.

(3)30The Treasury may by regulations amend this section so as to alter the meaning
of “insurer”.

(4)Before making regulations under subsection (3) the Treasury must consult the
Financial Conduct Authority and the Prudential Regulation Authority.

(5)Regulations under subsection (3) are subject to the affirmative procedure.

28 35Subsidies for air carriers for the operation of routes

(1)A subsidy to an air carrier for the operation of a route is prohibited by this
section unless the condition in subsection (2), (3) or (4) is met.

(2)The condition in this subsection is that operating the route is a public service
obligation of the air carrier imposed under—

(a)40Regulation (EC) No 1008/2008 of the European Parliament and of the
Council of 24 September 2008 on common rules for the operation of air
services in the United Kingdom, or

(b)Regulation (EC) No 1008/2008 of the European Parliament and of the
Council of 24 September 2008 on common rules for the operation of air
services in the Community (as it has effect in EU law).

(3)The condition in this subsection is that the public authority giving the subsidy
5is satisfied that the subsidy will provide benefits for society at large.

(4)The condition in this subsection is that—

(a)the subsidy is a start-up subsidy for opening a new route to a regional
airport, and

(b)the public authority giving the subsidy is satisfied that the new route
10will increase the mobility of citizens and stimulate regional
development.

29 Services of public economic interest

(1)The requirements in subsections (2) and (3) apply in relation to the giving of a
subsidy to a SPEI enterprise for the purpose of the provision of SPEI services.

(2)15The public authority giving the subsidy must be satisfied that the amount of
the subsidy is limited to what is necessary to deliver the SPEI services, having
regard to—

(a)costs in delivering the SPEI services, and

(b)reasonable profits to be made in doing so.

(3)20The subsidy must be given in a transparent manner.

(4)For the purposes of subsection (3), a subsidy is given in a “transparent manner”
only if—

(a)the subsidy is given in accordance with a written contract or other
legally enforceable arrangement in writing,

(b)25the terms on which the subsidy is given are set out in the contract or
arrangement, and

(c)the contract or arrangement includes the information in subsection (5).

(5)The information is—

(a)the SPEI services in respect of which the subsidy is given;

(b)30the SPEI enterprise that is tasked with providing the SPEI services;

(c)the period for which the SPEI services are to be provided (“the delivery
period”);

(d)the geographic area in which the SPEI services are to be provided;

(e)how the amount of subsidy given in respect of the SPEI services is
35determined;

(f)arrangements for the purposes of subsection (6) in respect of reviews
and steps that may be taken for recovery.

(6)Where a subsidy is given to a SPEI enterprise, the public authority giving the
subsidy—

(a)40must, during the delivery period, keep under regular review the use of
the subsidy to ensure that the condition in subsection (2) continues to
be met, and

(b)must take steps, in accordance with its rights under the contract or
arrangement mentioned in subsection (4), to recover a subsidy to the
45extent that the condition in subsection (2) ceases to be met.

(7)For the purposes of the duty in subsection (6)(a), checks must be carried out as
to the use of a subsidy—

(a)at least once every 3 years beginning with the day when the delivery
period begins, and

(b)5at the end of the delivery period.

(8)The duties under section 12(1) apply to the giving of a subsidy in accordance
with this section to a SPEI enterprise for the provision of SPEI services only so
far as the carrying out of that duty does not obstruct the carrying out of those
services.

(9)10In this Act—

• “SPEI enterprise” means an enterprise that is assigned with particular
  tasks in the public interest (including public service obligations);

• “SPEI services” means services provided in the carrying out of those tasks.

Subsidy schemes

30 15Effect of prohibitions etc in relation to subsidy schemes

(1)The preceding provisions of this Chapter relating to subsidies do not apply to
a subsidy given under a subsidy scheme.

(2)A subsidy scheme is prohibited by this section to the extent that it provides for
the giving of a subsidy that would, but for subsection (1), be prohibited by, or
20in contravention of, a requirement imposed by any preceding provision of this
Chapter.

Subsidies or schemes subject to mandatory referral

31 Subsidies or schemes subject to mandatory referral

(1)A subsidy, or subsidy scheme, in respect of which a public authority must
25request a report from the CMA under section 52(1), is prohibited if—

(a)a mandatory referral request has not been submitted in relation to it,

(b)a mandatory referral request has been submitted, but the CMA has
given a notice under section 53(1)(b) that the request does not comply
with the requirements under section 52,

(c)30a mandatory referral request has been submitted, the CMA report has
not been published but the reporting period has not expired, or

(d)a mandatory referral request has been submitted, the CMA report has
been published but the cooling off period has not expired.

(2)References in subsection (1) to publication of the CMA report are references to
35the report required under section 53 to be published by the CMA in response
to a mandatory referral request.

(3)In subsection (1)—

• “cooling off period” has the meaning given by section 54(2);

• “mandatory referral request” means a request made under section 52;

• 40“reporting period” has the meaning given by section 53(3).

Chapter 3 Transparency

32 Subsidy database

(1)The Secretary of State must make arrangements for the provision of a database
5of subsidies and subsidy schemes for the purposes of this Part (“the subsidy
database”).

(2)The Secretary of State must ensure that—

(a)the subsidy database is accessible to the public free of charge, and

(b)public authorities are able to edit the subsidy database for the purpose
10of carrying out their duties under section 33.

(3)The Secretary of State may direct the CMA to perform on behalf of the
Secretary of State the duties under this section.

33 Duty to include information in the subsidy database

(1)A public authority must ensure that an entry in the subsidy database is made
15in respect of—

(a)a subsidy given by the authority (subject to subsection (2)), and

(b)a subsidy scheme made by the authority.

(2)Subsection (1)(a) does not apply to a subsidy if—

(a)it is given under a subsidy scheme,

(b)20an entry is made in the subsidy database in respect of the scheme, and

(c)the amount of the subsidy is no more than £500,000.

(3)An entry in the subsidy database must be made in respect of a subsidy or
scheme—

(a)if given in the form of a tax measure, within one year beginning with
25the date of the tax declaration, or

(b)if given in any other form, within six months of confirmation of the
decision to give the subsidy or make the subsidy scheme.

(4)A public authority must ensure that an entry it makes under this section is
maintained on the subsidy database for six years beginning with the date on
30which the entry is made, or for the duration of the subsidy or scheme if longer.

(5)Where a subsidy or subsidy scheme is modified, the public authority must
ensure that the modification is entered in the subsidy database—

(a)within one year of the date of the modification, in respect of a subsidy
given, or a subsidy scheme made, in the form of a tax measure, or

(b)35within six months of the date of the modification, in respect of a subsidy
given, or subsidy scheme made, in any other form.

(6)Subsection (5) does not apply if the modification is only a permitted
modification within the meaning of section 81.

(7)For the purpose of subsection (2)(c)—

(a)40if the subsidy is provided in cash, the gross cash amount given is to be
used in determining the amount of the subsidy;

(b)if the subsidy is provided otherwise than in cash, the amount of the
subsidy given is to be determined by reference to the gross cash
equivalent of the subsidy.

(8)The Secretary of State may by regulations make provision for a different
5amount from that specified in subsection (2)(c) to apply to specified subsidies
or specified descriptions of subsidies.

(9)Regulations under subsection (8) are subject to the negative procedure.

34 Information to be included in the subsidy database

(1)The Secretary of State may by regulations make provision about the
10information that must be included in a public authority’s entry in the subsidy
database in relation to a subsidy or subsidy scheme.

(2)The regulations may, in particular, require a public authority’s entry to
include—

(a)the power under which the subsidy is given;

(b)15the policy objective of the subsidy or scheme;

(c)the name of the beneficiary to which the subsidy is given;

(d)the date the public authority confirms the decision to give the subsidy
or make the scheme;

(e)the duration of the subsidy or scheme;

(f)20any time limits or other conditions attached to the use of the subsidy or
scheme;

(g)the amount of the subsidy or scheme or the amount budgeted for the
subsidy or scheme;

(h)the location of any of the information mentioned in paragraphs (a) to
25(g) and subsection (3);

(i)the location of any other publicly available information relating to the
subsidy or scheme.

(3)In relation to subsidy schemes, the regulations may require a public authority’s
entry to include—

(a)30the categories of beneficiary eligible to receive subsidies under the
scheme;

(b)the terms and conditions for subsidy eligibility;

(c)the basis for the calculation of the subsidy including any relevant
conditions relating to subsidy ratios.

(4)35Regulations under this section are subject to the negative procedure.

Part 3 Exemptions

Chapter 1 Introductory

35 5Introductory

(1)This Part provides for cases in which the subsidy control requirements do not
apply to the giving of a subsidy.

(2)Where the subsidy control requirements do not apply to the giving of a
subsidy, those requirements are to be taken as not applying to the making of a
10subsidy scheme so far as it provides for the giving of such a subsidy.

(3)Subsection (2) is subject to express provision in this Part about the application
of the subsidy control requirements to subsidy schemes.

Chapter 2 Minimal or SPEI financial assistance

15Minimal financial assistance

36 Minimal financial assistance

(1)The subsidy control requirements do not apply to minimal financial assistance
given to an enterprise if the total amount of minimal or SPEI financial
assistance given to the enterprise within the applicable period does not exceed
20£315,000.

(2)The applicable period is the period comprising—

(a)the elapsed part of the current financial year, and

(b)the two financial years immediately preceding the current financial
year.

(3)25“Minimal financial assistance” means a subsidy given under this section, and
for this purpose a subsidy is given under this section if the authority that is
giving the subsidy provides to the enterprise that receives it a minimal
financial assistance confirmation (see section 37(5)).

(4)For the purposes of this section—

(a)30if minimal financial assistance is provided in cash, the gross cash
amount given is to be used in determining the amount of assistance;

(b)if minimal financial assistance is provided otherwise than in cash, the
amount of assistance given is to be determined by reference to the gross
cash equivalent of the assistance.

(5)35This section does not authorise the giving of a subsidy relating to goods that is
in contravention of section 16 (export performance) or 17 (use of domestic
goods or services).

(6)In subsection (2)—