In poker negotiations, on December 24, 2020, the British “Cut their cards at the very last moment”, confides a European source. If their “joker” was fishing, the questions of State aid, subsidies to companies and, more broadly, fair competition were at the center of the game. The Europeans were keen to avoid a race for dumping via public subsidies to companies which would distort competition on the European market. “The United Kingdom is a very integrated partner in the European economy with a declared appetite for divergence and competition”, recalls Elvire Fabry, of the Jacques-Delors Institute.
In February 2020, at the start of negotiations, the European Union (EU) wanted the British state aid regime to be fully aligned with the European regime. It was out of the question for the government of Boris Johnson, eager to regain its sovereignty and fearing, moreover, that such a request would allow the Court of Justice of the EU, via the agreement, to indirectly influence the British law. Navigating between the red lines, the negotiators eventually found common ground. Each party will be able to decide on its state aid regime, but by agreeing on some major principles and definitions in common.
The UK will need to establish an independent authority to monitor public subsidies. It will be possible to challenge the merits of state aid before national courts. But, if the UK or EU considers that the other party is giving subsidies that distort competition, it will be possible to initiate a process of consultation and mediation through one of the twenty-three joint sub-committees. which will give birth to the agreement.
Crucial point: unilateral retaliatory measures, such as tariffs, may be taken if either party has evidence that a subsidy will disrupt ” significantly “ trade and investment. The British put water in their wine because they did not want sanctions to be so easy to draw. These retaliatory measures may in turn be challenged before an arbitral tribunal.
“The deal does not look like our initial offer, recognizes a European source, but it is more than what can be found in other free trade agreements with Canada or Japan. “ For Aurélien Antoine, professor of public law at the Jean-Monnet University of Saint-Etienne, “The agreement is a good example of a balance on state aid. There is no legislative alignment imposed on the UK. But there is an alignment of legal concepts, definitions ”. The British will not have free rein to diverge their rules on granting state aid. “The UK will be in a position to retain regulatory autonomy, but will not be able to afford divergence significant without losing the negotiated advantages ”, adds Elvire Fabry.
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