Introduction

Subsidies remain one of the most contentious issues in international trade law. When governments provide financial support to businesses, they can distort competition, undermine market dynamics, and spark trade disputes. Following Brexit, the United Kingdom now operates within a complex web of overlapping subsidy disciplines under three distinct legal frameworks: the World Trade Organization's Agreement on Subsidies and Countervailing Measures (WTO SCM Agreement), the EU-UK Trade and Cooperation Agreement (TCA), and the domestic UK Subsidy Control Act 2022.

For businesses and public authorities in the United Kingdom, the landscape of subsidy control has undergone a complete transformation. The UK's exit from the European Union replaced the stringent EU State aid regime with a new, multi-layered system. Today, any subsidy granted in the UK must navigate three distinct but interconnected legal frameworks:

• The WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement): The global baseline that applies to over 160 countries.
• The EU-UK Trade and Cooperation Agreement (TCA): A specific bilateral treaty creating a "level playing field" for trade between the UK and the EU.
• The UK Subsidy Control Act 2022 (SCA): The UK's domestic law which implements its TCA obligations and, crucially, also regulates subsidies that only affect competition within the UK.

Understanding how these regimes interact is essential for businesses, public authorities, and policymakers. Each framework establishes different prohibited categories, substantive requirements, enforcement mechanisms, and remedies. While they share common objectives—preventing distortive subsidies and ensuring fair competition—their approaches and legal consequences differ significantly. This article provides a comparative analysis of their core disciplines and, most importantly, their different remedies.

The Multilateral Baseline: the WTO SCM Agreement

Core Disciplines

The WTO SCM Agreement, which has been in force since 1995, establishes the foundational international rules on subsidies. The Agreement defines a subsidy as a financial contribution by a government that confers a benefit and is specific to certain enterprises or industries.

The SCM Agreement distinguishes between two main categories:

• Prohibited subsidies (the "red light") are illegal per se and include (Article 3 of the SCM Agreement):

• Actionable subsidies (the "yellow light") are permitted but challengeable if they cause adverse effects to another WTO Member's interests (Article 5 of the SCM Agreement). Adverse effects include material injury to a domestic industry, serious prejudice (such as market displacement, price suppression, or lost sales), or nullification of tariff concessions. Crucially, the complaining Member must demonstrate that the subsidy genuinely and substantially caused these harmful effects.

Remedies and enforcement under the SCM Agreement

If a WTO member believes another member is using a prohibited or actionable subsidy, it has two primary remedies:

1. Multilateral dispute settlement: the member can take the subsidising country to the WTO Dispute Settlement Body. If the panel agrees, it will recommend the subsidy be withdrawn or its adverse effects removed (Articles 4 & 7, SCM Agreement).
2. Countervailing duties (CVDs): an importing country can launch its own domestic investigation. If it determines that subsidized imports are causing "injury" to its domestic industry, it can unilaterally impose tariffs—known as countervailing duties—on those imports to offset the subsidy (Part V of the SCM Agreement).

Multilateral dispute settlement

The SCM Agreement provides state-to-state enforcement only—private parties cannot directly challenge subsidies under WTO rules. When a prohibited subsidy is found, the subsidizing Member must withdraw it immediately, typically within 90 days, with no implementation period granted due to their per se illegality.

For actionable subsidies, the respondent has greater flexibility: either withdraw the subsidy completely or eliminate its adverse effects, with 6-15 months typically granted for complex restructuring. If the violating Member fails to comply, the complaining Member may seek authorization to impose countermeasures—retaliatory tariffs commensurate with the subsidy's value.

The Boeing-Airbus disputes illustrate the SCM Agreement's power and limitations. In 2019, the WTO authorized the United States to impose $7.5 billion in tariffs on EU imports after finding that launch aid and other measures for Airbus constituted illegal subsidies causing serious prejudice. Similarly, the EU secured authorization for $4 billion in countermeasures against the United States for subsidies to Boeing. Both disputes eventually resulted in a negotiated five-year tariff moratorium in 2021.

The WTO dispute settlement timeline is lengthy—typically 2-3 years from filing to retaliation authorization. Both the UK and EU are members of the Multi-Party Interim Appeal Arbitration Arrangement (MPIA), which provides appellate review pending reform of the WTO Appellate Body.

Countervailing duties

This second track provides a more direct and unilateral remedy for an industry facing unfair competition. Governed by Part V of the SCM Agreement, this process does not require the importing country to file a WTO dispute. Instead, it allows a WTO Member to launch its own domestic investigation into subsidized imports.

This quasi-judicial investigation is typically initiated after a formal complaint from a domestic industry. To impose countervailing duties (CVDs), the Member's investigating authority (such as the UK's Trade Remedies Authority) must make three positive determinations:

1. Existence of a subsidy: It must find that the imported goods benefit from a specific, countervailable subsidy (as defined in the SCM Agreement).
2. Material injury: It must determine that its domestic industry producing the "like product" is suffering "material injury" or is threatened with material injury. This involves a detailed analysis of import volumes, their effect on domestic prices, and the consequent impact on domestic producers.
3. Causal link: Critically, a causal link must be established between the subsidized imports and the injury. The injury must be a direct result of the subsidies, not other factors like a recession or poor management.

If all three conditions are met, the importing country can impose a special tariff—a countervailing duty—on the specific goods from the specific country. The purpose of this duty is not to be punitive, but to "offset" the unfair advantage, and the duty level is generally limited to the calculated value of the subsidy. This remedy is often preferred by industries seeking immediate import relief, as it neutralizes the subsidy's distortive effect at the border, running in parallel to the slower, state-to-state multilateral dispute which seeks to have the subsidy withdrawn at its source.

Subsidy disciplines under the EU-UK Trade and Cooperation Agreement (TCA)

Six cumulative principles

Unlike the old EU State aid regime, which banned all aid unless exempted, the TCA introduces a "principles-based" system. A subsidy is generally allowed, but the granting authority must ensure it respects the collowing six cumulative principles (Article 366 of the TCA).

1. Policy objective: The subsidy must aim to remedy a specific market failure or address an equity concern
2. Proportionality: Assistance must be limited to what is necessary to achieve the policy goal
3. Change in behaviour: The subsidy must induce the beneficiary to act differently than it otherwise would
4. No compensation for normal costs: Everyday business expenses must not be subsidized
5. Appropriate policy instrument: Alternative interventions should be considered first
6. Net positive effect: Benefits must outweigh negative impacts, particularly distortions to UK-EU trade or investment

Critically, unlike the WTO requirement to prove adverse effects, a TCA breach occurs if any one of these principles is violated, even without demonstrable trade harm.

Expanded subsidy categories

The TCA, which entered into force on 1 January 2021, goes significantly beyond WTO disciplines. While incorporating WTO prohibitions on export-contingent and domestic-content subsidies, the TCA adds two more categories unique to EU-UK relations (Article 367 of the TCA):

• Unlimited state guarantees that cover an unlimited amount of liabilities or debts, or guarantee debts over an indefinite period.

• Rescue and restructuring subsidies without a credible plan are severely restricted. The TCA requires that subsidies to ailing or insolvent enterprises meet stringent conditions, including credible restructuring plans based on realistic assumptions, significant own contributions from the beneficiary, and demonstration that the subsidy serves a public interest objective such as preventing social hardship or severe market failure.

Conditional exemptions

The TCA recognizes certain categories of subsidies as conditional—neither automatically prohibited nor freely permitted. These include Services of Public Economic Interest (SPEI), subsidies for air carriers' route operations, and energy and environment subsidies. Each category must meet specific substantive conditions to be lawful.

Dual-track remedies

The TCA provides two enforcement mechanisms not available under WTO rules:

• Unilateral remedial measures If one Party (e.g., the EU) believes a subsidy from the other Party (e.g., the UK) is causing or is at "serious risk" of causing a "significant negative effect" on trade or investment, it can unilaterally impose remedial measures, such as tariffs (Article 374 of the TCA). This is a rapid, state-to-state tool that bypasses the slower WTO process.

• Domestic court recovery provides a novel remedy: any interested party—competitors, trade associations, or even the subsidy beneficiary itself—may challenge a subsidy before UK or EU national courts. If a court finds that the granting authority failed to treat financial assistance as a subsidy, ignored or misapplied the six principles, or acted beyond its legal authority, it may order the beneficiary to repay the subsidy plus interest and potentially damages. No government backing is required; private parties can directly enforce subsidy disciplines. In other words, interested parties (like competitors) can challenge a subsidy and, crucially, the court can order the recovery (payback) of an unlawful subsidy. This provides a direct legal avenue for businesses.

Strategic implications

The TCA's "fork in the road" provision in Article 737 requires parties to choose between TCA arbitration and WTO dispute settlement when a measure breaches substantially equivalent obligations under both agreements. The choice locks in when requesting establishment of a tribunal or panel. However, this restriction applies only to formal dispute settlement—not to unilateral remedial measures, which may be imposed while simultaneously pursuing WTO proceedings.

UK Subsidy Control Act 2022: the domestic regime

Principles-based framework

The Subsidy Control Act, which received Royal Assent on 28 April 2022, implements a distinctly British approach emphasizing flexibility and devolved decision-making. Rather than ex-ante approval requirements, the Act establishes seven subsidy control principles that public authorities must assess before granting subsidies.

Six principles mirror the TCA requirements, while Principle F adds a unique domestic dimension: public authorities must design subsidies to minimize impacts on competition and investment within the UK's internal market. This principle addresses the risk of subsidy races between different parts of the UK and protects against measures that unduly favour one firm over competitors or reduce competition domestically.

These principles, set out in Schedule 1 of the Act, mirror the TCA's principles almost exactly. They require a documented assessment to ensure the subsidy is:

• For a specific public policy objective (Principle A).
• Proportionate and necessary (Principle B).
• Designed to change the beneficiary's economic behaviour (Principle C).
• The least distortive means of achieving the objective (Principle E).
• Minimises negative effects on competition or investment within the United Kingdom (Principle F).

For subsidies relating to energy and the environment, nine additional principles apply, derived from Annex 27 of the TCA. These address matters such as ensuring subsidies do not relieve polluters from their liabilities, requiring competitive processes for renewable energy subsidies (with narrow exceptions), and restricting compensation to sectors at significant risk of carbon leakage.

Transparency and CMA oversight

All subsidies exceeding £100,000 and all subsidy schemes must be uploaded to a public database within three months (one year for tax measures). Subsidies under £315,000 over three years qualify as "minimal financial assistance" and are exempt from subsidy control requirements, though transparency obligations apply above £100,000.

The Competition and Markets Authority (CMA) operates a Subsidy Advice Unit that reviews "Subsidies or Schemes of Particular Interest"—a category defined by regulations to capture measures more likely to be inconsistent with subsidy control requirements or cause significant distortive effects. Public authorities must refer these subsidies to the CMA before granting them and wait for the CMA's report plus a cooling-off period. The Secretary of State may also make post-award referrals within 20 working days of database publication.

Critically, the CMA's reports are non-binding. Public authorities must consider the CMA's assessment but retain ultimate decision-making authority. This "comply or explain" approach reflects the UK's preference for flexibility over rigid approval requirements.

Enforcement through the Competition Appeal Tribunal

The SCA creates the domestic enforcement mechanism required by the TCA. The Competition Appeal Tribunal (CAT) is the specialist body with jurisdiction to review subsidy decisions.

• Who can challenge? An "interested party," defined as someone whose interests "may be affected" by the subsidy or the Secretary of State. This explicitly includes competitors of the subsidy recipient.
• What is the standard? The CAT reviews the decision based on UK judicial review principles. The Tribunal does not substitute its own view but assesses the legality and rationality of the public authority's decision.
• Real-World Cases: The CAT is already actively hearing challenges.
  • In The Durham Company v Durham County Council, the Tribunal examined whether a council's pricing for commercial waste collection constituted a subsidy to its own "enterprise". The case highlighted the complex legal question of when a public body is also acting as an "enterprise" and the distinction between a single "subsidy" and a "subsidy scheme".
  • In Mr Aubrey Weis v Greater Manchester Combined Authority, the CAT reviewed a challenge against loans provided for a property development, examining the process and rationale behind the public authority's decision.

• Remedies: The CAT's powers are significant. It can issue a recovery order (Section 74, SCA), compelling the beneficiary to pay back the unlawful subsidy in full, with interest.

Notably, the Subsidy Control Act does not provide for damages. Remedies are corrective—ensuring public authorities comply with subsidy control principles—not compensatory. This distinguishes UK domestic enforcement from TCA domestic court recovery, where damages may be available.

Comparative analysis: three regimes in dialogue

Overlapping but not identical prohibitions

While all three regimes prohibit export-contingent and domestic-content subsidies, the TCA and UK Act add further categorical prohibitions absent from the WTO framework. Unlimited guarantees and rescue/restructuring subsidies without credible plans are uniquely prohibited under the TCA and mirrored in the UK Subsidy Control Act. The UK Act additionally prohibits subsidies explicitly requiring enterprises to relocate within the UK where relocation would not otherwise occur—a purely domestic concern.

Different standards for "distortive" subsidies

The WTO requires proof of adverse effects—actual or threatened material injury, serious prejudice, or nullification of benefits—before an actionable subsidy becomes illegal. This places a significant evidentiary burden on complaining Members.

The TCA dispenses with this requirement entirely for subsidies breaching any of its six principles. A subsidy violates the TCA if it fails to meet the principle conditions, regardless of whether it causes demonstrable trade harm. This dramatically lowers the bar for establishing a violation.

The UK Act similarly requires public authorities to assess consistency with principles before granting subsidies but does not mandate proof of actual distortive effects. However, enforcement is reactive—challenges arise only if interested parties bring CAT applications demonstrating that the public authority failed to properly apply the principles.

Speed and accessibility of remedies

Timing differences are stark. WTO dispute settlement typically requires 2-3 years from consultations to authorized retaliation. TCA unilateral remedial measures can be imposed in as little as 60 days, with arbitration adding only 30 days if challenged. UK domestic CAT proceedings must be initiated within one month of the relevant date, with resolution times varying but generally measured in months rather than years.

The TCA and UK Act also democratize enforcement. Unlike the state-to-state monopoly under WTO rules, both regimes allow private parties to directly challenge subsidies—through domestic courts under the TCA, and through the CAT under the UK Act. This creates multiple pressure points and increases the likelihood that problematic subsidies will face scrutiny.

Parallel proceedings and forum shopping

The three regimes can operate simultaneously. A single UK subsidy potentially violates WTO obligations, TCA commitments, and domestic UK law. Challengers can pursue multiple avenues:

• EU Member States may request the European Commission to initiate WTO proceedings against the UK
• Either the UK or EU may invoke TCA unilateral remedial measures (subject to arbitration)
• Any interested party may bring a TCA domestic court challenge
• Any interested party may apply to the UK Competition Appeal Tribunal for judicial review

The TCA's fork-in-the-road provision prevents pursuing both TCA arbitration and WTO panels for the same substantially equivalent obligation, but this restriction does not apply to unilateral remedial measures or domestic court proceedings. Thus, strategic litigants can combine TCA remedial measures with WTO disputes or domestic challenges.

Practical implications: what businesses and governments need to know

For public authorities

Public authorities granting subsidies must navigate a three-tier compliance framework:

1. WTO obligations: Avoid export-contingent and domestic-content subsidies; ensure actionable subsidies do not cause serious prejudice to competitors in international markets
2. TCA commitments: Apply the six principles cumulatively; adhere to categorical prohibitions on unlimited guarantees and inadequately planned rescue/restructuring subsidies; comply with conditional subsidy requirements for SPEI, air routes, and energy/environment
3. UK domestic law: Assess consistency with seven subsidy control principles (plus nine energy/environment principles where relevant); upload subsidies to the transparency database; refer Subsidies of Particular Interest to the CMA; respond to pre-action information requests

Failure at any tier creates legal exposure. Even if a subsidy complies with WTO rules, it may breach the TCA or UK Act. Authorities should conduct comprehensive assessments documenting how subsidies satisfy all applicable requirements.

For businesses granting subsidies

Subsidy recipients face different risks depending on the enforcement avenue:

• WTO disputes: No direct liability; remedies target the subsidizing government
• TCA unilateral remedies: Retaliatory measures may affect broader trade flows, indirectly impacting the beneficiary's business environment
• TCA domestic court recovery: Direct risk—courts may order repayment of subsidies plus interest and damages
• UK Competition Appeal Tribunal proceedings: Direct risk—recovery orders may require repayment, though damages are not available

Recipients should verify that grantors have properly assessed subsidy control requirements and maintain records demonstrating compliance. If a subsidy is challenged, beneficiaries may need to repay funds even if they acted in good faith.

For competitors and trade associations

The multi-forum architecture creates unprecedented opportunities for challenging distortive subsidies:

• Speed: TCA remedial measures can be implemented within 60 days
• Accessibility: Private parties can directly enforce TCA and UK domestic disciplines without government backing
• Complementarity: Pursue domestic remedies (recovery) while governments consider state-to-state proceedings (WTO or TCA arbitration)

Strategic challengers should assess which forum offers optimal advantages: TCA arbitration for speed and trade sanctions, TCA domestic courts for direct recovery, UK CAT for domestic competitors, or WTO for comprehensive multilateral enforcement with maximum retaliation potential.

Conclusion

The UK's post-Brexit subsidy landscape is complex, multilayered, and dynamic. The WTO SCM Agreement provides the multilateral foundation, prohibiting the most egregiously distortive subsidies and authorizing countermeasures when violations occur. The TCA supplements these rules with expanded prohibitions, cumulative principles, and innovative remedies including unilateral trade measures and private enforcement through domestic courts. The UK Subsidy Control Act implements these international commitments domestically while adding unique provisions to protect the UK's internal market.

Understanding how these regimes overlap, complement, and occasionally diverge is essential for navigating the modern subsidy control environment. Public authorities must ensure subsidies satisfy all three frameworks. Businesses must recognize exposure to multiple enforcement mechanisms. Competitors and stakeholders should leverage the expanded toolkit for challenging distortive measures.

As subsidy disciplines continue to evolve—particularly given ongoing WTO reform discussions and potential future amendments to the TCA—legal precision and strategic awareness will remain critical. The three-regime architecture represents both a constraint on government intervention and a safeguard for fair competition, balancing flexibility with accountability in the service of open, competitive markets.

How De Minimis Law can help

At De Minimis Law, our practice combines deep expertise in international trade and subsidy law with hands-on experience advising governments, public authorities and private sector clients. Whether you are designing a subsidy, assessing compliance with the EU–UK Trade and Cooperation Agreement or the UK Subsidy Control Act 2022, or facing a challenge under the WTO Agreement on Subsidies and Countervailing Measures, we provide tailored support—from risk-mapping and due diligence to enforcement strategy and cross-forum litigation planning. Our goal is to help clients navigate the overlapping UK, EU and WTO regimes with clarity, build the right documentation, and defend viable subsidy strategies in a rigorous legal environment.

Resources

- WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement) (available here)

- United Kingdom's Subsidy Control Act 2022 (available here)

- Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part (TCA) (available here)

Disclaimer: This article is provided for information purposes only and does not constitute legal advice. Specific advice should always be sought in light of the relevant facts and jurisdictions.