Even future EU state aid laws would in principle apply to the UK. The UK could refuse to apply them, but would face sanctions if it did. It is also not very close to the political statement, because the declaration does not refer to the British courts that ask questions of the EU courts. State aid is not normally allowed in the EU. However, some state aid is good for the economy and supports growth and other policy objectives. State aid can be provided to support a wide range of activities, including research and development, environmental protection and aid to small and medium-sized enterprises. State aid rules allow for quality aid needed to achieve growth and other important goals. On the basis of the latter proposal, a possible compromise could consist of the adoption by the United Kingdom of a national framework for state aid, with effective application and dispute resolution, which is not subject to EU law but to international law in the form of the World Trade Organisation subsidy code. The Think tank Institute For Government has put forward detailed proposals on how this might work. „Under the proposed legislation, the UK Government would be free to ignore the Commission`s existing decisions to the UK after the end of the transition period. However, at least under international law, the United Kingdom would also be required to take, after the end of the transitional period, new decisions by the Commission or the Court of Justice on aid granted by the United Kingdom before the end of the transitional period, if these investigations/cases are ongoing on 31 December 2020 or if they are the result of an open Commission investigation within four years of the end of the transition period,“ said Mr Kotsonis.
For its part, the EU proposal provides that EU state aid rules will continue to apply the content of EU state aid legislation in the UK. While the rules are now applied by a British authority and not by the Commission, British courts could nevertheless ask the EU Court of Justice to interpret them in accordance with the proposal. In addition, Article 93 provides that the Commission remains responsible for opening new state aid procedures up to four years after the end of the transitional period. These will probably only cover aid granted before the end of the transition (post-transition aid is not covered by EU rules, subject to backstop) and will therefore be investigations for illegal aid or aid abuse. State aid expert Dr Totis Kotsonis of Pinsent Masons, the law firm behind Out-Law, said: „With regard to the revocation of the general ban on state aid and the requirement for prior notification as well as other related provisions in the Treaty on the Functioning of the EU, it is particularly interesting to decide to repeal the existing decisions of the European Commission on state aid, so that they have no legal effect in the United Kingdom at the end of the transition period. Accordingly, the UK Government would be free to ignore all the conditions associated with the Commission`s authorisation decisions, without this leading to commitments or the creation of rights or remedies under national law.“ The Commission`s database on the transparency of state aid provides detailed information on individual aid amounting to more than 500,000 euros, „While the companies affected by the aid granted by the UK government may have room to challenge these decisions through judicial review, the new position in the draft regulations would allow the government to benefit from much greater flexibility in subsidies to industries and businesses that are not affected by all considerations relating to the distorting effect of competition on competition in the internal market,“