New Insights Into Legal Challenges Under The Subsidy Control Act 2022

Introduction

In Weis v Greater Manchester Combined Authority [2025] CAT 41, the Competition Appeal Tribunal (CAT) dismissed an application for review brought under section 70 of the Subsidy Control Act 2022 (SCA). This is only the second subsidy control case brought to the CAT since the introduction of the SCA, and provides valuable guidance on how matters under the SCA will be dealt with by the CAT (see our previous blog post for further background).

In particular, the case provides guidance on the application of the so-called Commercial Market Operator (CMO) principle, which was considered by the CAT for the first time under the new regime, and clarifies timing issues for challenges going forward.

Key points

• The SCA provides for a challenge to be brought against a subsidy 'decision' rather than the actual giving of a subsidy. The CAT has confirmed that challenges to alleged subsidies may therefore be brought before the point at which legal entitlement to the financial assistance arises.
• The CAT will apply the normal judicial review standard to the application of the CMO test, meaning public authorities will have a "wide margin of judgment".
• Building on indications in The Durham Company Limited v Durham County Council [2023] CAT 50, the CAT commented that EU State aid materials may be a useful cross-check for a public authority to consider, without being bound to follow them.
• The Statutory Guidance under the SCA may be departed from where the reasons for doing so are justified and the approach taken is rational, particularly if the public authority has significant expertise and experience in the relevant area.

Background

Mr Weis (the Appellant), a Manchester-based property developer, asked the CAT to review the Greater Manchester Combined Authority's (GMCA) decision to grant £120 million worth of loans to the Renaker Group (the Renaker Loans). The Appellant alleged that the loans were not made on commercial terms and would not have been granted by a commercial operator, placing the beneficiary companies at a competitive advantage and thus amounting to unlawful subsidies and distorting the relevant market.

Judgment

The key issues considered by the CAT were as follows:

1. Whether a subsidy 'decision' had been made within the meaning of the SCA, and if so, when; and
2. Whether the Renaker Loans had been granted on commercial terms in line with the CMO principle.

Subsidy decision

The CAT emphasised that section 70 of the SCA provides for an interested party (such as the Appellant) to challenge a subsidy 'decision', ie the decisionto give a subsidy, as compared to the actual givingof asubsidy. This means a subsidy 'decision' capable of challenge may arise before a borrower has a legal entitlement to the financial assistance. On the facts, the CAT accepted the Appellant's submissions that the subsidy 'decision' was the decision of the GMCA Committee to approve the loans in March 2024, which was still subject to confirmatory due diligence and other steps, rather than the date on which the Renaker Loans were entered into on 22 November 2024.

The CAT's clarification of the proper interpretation of when a subsidy 'decision' is made has significant implications for potential applicants considering challenges to alleged subsidies under the SCA, ie alleged subsidies where the normal one-month statutory time limit does not apply because there is no relevant publication on the subsidy transparency database. On one view this may expand the scope for challenges by allowing them to be brought at an earlier stage in the process, but it also creates risk for interested parties with any relevant time period (which is yet to be determined under the SCA regime) potentially starting to run significantly earlier.

CMO principle

On the facts, the CAT found that no subsidies had been granted. In coming to this conclusion, the CAT set out the relevant statutory framework, highlighting that under section 2(1) of the SCA, a subsidy involves financial assistance being given by a public authority to confer an economic advantage on one or more enterprises. However, under the CMO principle, financial assistance will not be treated as conferring an economic advantage if it is provided on terms no more favourable than might reasonably be expected to be available on the market (section 3(2) of the SCA). The key issue identified by the CAT was therefore whether the Renaker Loans would have been approved by a CMO.

Approach to review

In addressing such a question, the CAT made clear that it will consider the "whole process" in the granting of the financial assistance, including the various stages leading up to a decision and internal records, with the judgment itself conducting a thorough review of the detailed process undertaken by the GMCA in awarding the Renaker Loans.

The CAT also reiterated that subsidy decisions will be reviewed by the application of ordinary judicial review principles, despite the CAT's specialist composition. A "wide margin of judgment" will be granted to public authorities when assessing whether financial assistance is provided on commercial terms, with the CAT endorsing caselaw on this point under the preceding EU State aid regime and the interim subsidy control regime before the SCA came into force (R (Sky Blue Sports) v Coventry City Council (No 1) [2016] EWCA Civ 453 and British Gas Trading v Secretary of State for Energy Security and Net Zero [2025] EWCA Civ 209).

The terms of the Renaker Loans

On the facts, the CAT found the process followed by the GMCA to be a "perfectly rational one and not inherently defective". It could not fairly categorise the rates granted as being "low or obviously below market or commercial rates". The CAT emphasised the GMCA's significant experience and understanding of the lending market, the structure of the loans and the substantial security provided in concluding that other commercial lenders would have been willing to lend on the same terms.

In doing so, the CAT illustrated that a failure to strictly follow the Statutory Guidance or guidance from relevant regulations will not in and of itself invalidate a public authority's decision, even though it acknowledged the GMCA was under a duty to have regard to the Statutory Guidance and apply it unless there was good reason to depart. The Appellant contended that the GMCA failed to consider the Guidance, which sets out various ways in which a public authority may satisfy itself that any lending complies with the CMO principle, and recommends obtaining third party expert advice where this is not clear. Whilst the CAT noted that the GMCA "could have done more", the approach taken was rational and the rates adopted were justified, with the GMCA being aware of the need to ensure its lending was on CMO terms. This was further reiterated in the CAT's approach to the Subsidy Control (Gross Cash Amount and Gross Cash Equivalent) Regulations 2022, which set out a method for determining a market rate for loans against which public authorities can determine the amount of subsidy in subsidised loans for various purposes under the SCA regime. The CAT explained that although the Regulations were a useful check on the justifiability of the rates adopted, they were ultimately not determinative of whether the rates adopted complied with the CMO principle. The CAT instead took a broader view, holistically considering a range of other factors which ultimately justified the terms adopted.

Comment

Whilst a wide margin of discretion is given to public authorities in the application of the CMO principle, it is clear that the relevant authority will still need to conduct a thorough review in assessing the terms of any financial assistance for economic advantage, with a decision-making process that can withstand the scrutiny of the CAT.

The clarification around the timing of a subsidy decision also has significant implications for the scope for challenge, with the possibility of challenges being brought at an earlier stage in the process. It remains to be seen whether this leads to more appeals reaching the CAT to allow it to build up a body of caselaw providing further guidance on the SCA's application.

There has been a reasonably slow start to the regime from this perspective, with this being only the second decision, but we can expect the body of caselaw to double before too long as the CAT is considering a couple of additional appeals, including one against the Gambling Commission by the New Lottery Company. Of particular note is the other appeal currently before the CAT brought by Bristol Airport Limited, who is seeking a review of the Welsh Government's decision to grant a subsidy package of up to £205 million to Cardiff International Airport Limited over a period of 10 years. This is the first time a decision to grant financial assistance, which has been acknowledged as a subsidy and reviewed by the CMA's subsidy advice unit, has been challenged in the CAT under the current regime, and will therefore provide further insight into the CAT's approach to reviewing compliance with the subsidy control requirements and the subsidy control principles under the SCA.