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CMA to get state aid 'dawn raid' powers in no-deal Brexit

Out-Law News | 24 Jan 2019 | 2:24 pm | 3 min. read

The Competition and Markets Authority (CMA) will be given 'dawn raid' powers of entry during future investigations into misuse of state aid as part of its new role as state aid regulator in the event of a 'no deal' Brexit.

New regulations currently before the UK parliament give the CMA powers of entry into the premises of a state aid beneficiary where misuse of aid is suspected. The CMA would be able to enter the business premises of a state aid beneficiary either with or without a warrant from the court. Where no court warrant is issued, the CMA must provide two working days' written notice of its visit and conduct the search "only at a reasonable hour".

The regulations also propose allowing any public body which grants state aid to notify the CMA of its intention to do so and to seek approval. They also provide for deemed approval of the notified state aid measure if the CMA does not issue a decision within 40 working days of receipt of the notification.

State aid expert Caroline Ramsay of Pinsent Masons, the law firm behind Out-Law.com, said that the proposed regime set out in the regulations and related CMA guidance would be more accessible to aid-granters than the current regime, which is overseen by the European Commission.

"The proposals open up significant opportunities to local authorities and other non-departmental public bodies (NDPBs) when considering how to provide public finance support to projects," she said.

"Previously aid granting authorities needed Westminster agreement and support in order to apply to the European Commission for bespoke approval for an aid measure. The reality was that the UK could only push a handful of cases a year through to Brussels. Now, all aid-granting authorities have the autonomy to decide whether to notify an aid measure for approval or to use a pre-existing block exemption. It is likely that this new avenue for approval will prove popular with aid-granting authorities, and it is unclear whether the CMA is prepared for the potential tsunami of applications it could receive from 30 March, should the UK exit the EU without a deal in place."

"While the content is mostly as expected, the regulations are extremely helpful as they codify existing state aid principles and procedures into a single document. And whilst the new regulations contain seemingly good news for aid-granting authorities, the news is less positive for aid recipients. The new 'dawn raid' powers are likely to be disconcerting to many aid recipients who will not be used to this level of oversight and supervision," she said.

The regulations transpose the existing EU state aid regime into UK law and, should the UK leave the EU without a deal, they give the CMA the function of UK state aid enforcement authority from the date of exit. The regulations also require the CMA to adopt existing EU state aid guidelines as statements of policy, and to publish them by day one of EU exit with only any minimal changes needed to ensure that they remain operable.

The CMA intends to keep its state aid procedures "as similar to the European Commission's current procedural rules as possible to ensure certainty and continuity for business", according to its guidance. It will publish notices ahead of exit day specifying the form and content of future notifications and complaints, as well as details of exemptions from the state aid rules.

New state aid cases will initially be considered by a dedicated CMA team, recruitment for which is "already at an advanced stage", according to the guidance. Decisions will be taken by senior CMA officials. The CMA will publish further details of the decision-making processes and structures it will adopt for more complex cases ahead of exit day, but states that these will be designed to offer "the best guarantee of impartiality, independence and robustness".

State aid approved by the European Commission in advance of exit, or that was covered by an existing EU block exemption, will not need to be reapproved by the CMA. However, the CMA will have powers to investigate cases where aid approved or exempted from approval prior to exit is "misused". Cases notified to the European Commission ahead of exit day on which the European Commission has not yet made a decision will need to be re-notified to the CMA.

The CMA has already begun informal 'pre-notification' discussions with public bodies expecting to notify state aid cases in the first three months following the UK's exit from the EU. The regulations define an 'aid grantor' as "a person who plans to grant, or who has granted, aid". Any aid grantor will be able to use a new CMA state aid online notification system to notify the CMA of state aid. The CMA will provide further guidance on this system, and training on how to use it, in advance of exit day.