Conservative party plans to move to a WTO-inspired regime for controlling state subsidies

Conservative party plans to move to a WTO-inspired regime for controlling state subsidies

The Conservative party has released its proposals to replace the EU state aid regime with one based on World Trade Organisation (WTO) rules on the restriction of harmful state subsidies.

The plans released on 29 November appear to represent a major shift from the previous UK policy.  Under that policy, the UK framework would replicate the existing EU state aid rules, with only technical modifications to correct deficiencies with the transposed EU law to ensure the regime operates effectively in a domestic context after exit.   This raises a question as to how different a WTO-inspired approach would be in practice? 

There are some differences between the formal scope of WTO rules on subsidies and EU state aid rules, but they do cover similar concepts.   Over the years, a large body of case law has developed on the state aid regime, with comparatively less on WTO rules.  While state aid rules effectively apply an ex ante approach to legality - in that state aid generally needs to be notified to and approved by the Commission before it can be put into effect - the general starting point under WTO rules is that a subsidy is permitted unless challenged.

The only clear point of distinction is that WTO rules apply only to goods, whereas the state aid regime also applies to services.   It is not clear that the plans would necessarily exempt services.

The proposals are not clear on how Northern Ireland would be treated.  Presumably it would have to follow EU state aid rules if a hard border on the island of Ireland is to be avoided.

It seems that the thrust of the proposals is to allow for quick implementation of short-term measures to rescue a failing company before restructuring.  If that is indeed the driver, then it would be possible within the existing EU state aid regime.  This begs the question as to how far a UK government would depart from that regime, at least in the immediate stages post-withdrawal.