The Greater Manchester Combined Authority (Respondent) has successfully defended a challenge in the Competition Appeal Tribunal (CAT), brought by a developer (Appellant) against its decision to award around £120m of loans to a competing developer.
The challenge was brought under the Subsidy Control Act 2022 asserting that the loan arrangements gave rise to an impermissible subsidy.
Case background
The Respondent had loaned sums of around £120m to one of the Appellant’s competitors, to support the delivery of a high-quality housing project within the area covered by the local authority (the Loans).
The Appellant claimed that the Loans were in breach of section 3(2) of the Act on the basis they had been granted on non-commercial, "non-market terms", amounting to a subsidy which “distorted the proper and fair operation of the relevant market” in and around the area.
The Respondent argued the decision to make the Loans did not amount to an unlawful subsidy at the time of the Appellant’s application in June 2024, as the decision was still in principle and not yet formally executed, which could not amount to a subsidy decision capable of being challenged under section 70(1)).
Upon execution of the Loans, the Respondent maintained that they did not amount to financial assistance conferring an economic advantage for the purposes of the Act, because they had been made on commercial terms that were in line with the market.
The judgment
The Appellant criticised the conduct of the Respondent, claiming that the in-principle decision to make the Loans in March 2024 had been the point at which a subsidy decision had been made, and so its decision-making process had fallen foul of the Act.
While the CAT agreed that the timing of the decision to award the purported subsidy was determinative for the purposes of the Act, it considered that discussing indicative rates with the Recipient was standard practice in the lending decision-making process, even prior to any formal market analysis or due diligence being conducted.
The CAT considered that the Respondent’s funding team possessed the expertise to have been aware of commercially available rates upon which the indicative rates were based, and that the Loan proposal had been overseen by individuals with considerable lending experience within the Gateway Panel and Credit Committee. They were satisfied the risk profile was consistent with what would have been deemed acceptable by a Commercial Market Operator (CMO), without having particular a focus on the Statutory Guidance.
In particular, the CAT agreed that the Loan terms were such that even in the event of a default, “it was most probable that the Respondent would recover the full amount of the loans plus interest” due to the low loan-to-value ratios, which, in addition to the reasonable interest rates, were consistent with what a commercial lender would have offered.
Furthermore, the CAT was of the view that while The Subsidy Control (Gross Cash Amount and Gross Cash Equivalent) Regulations 2022 are a useful indicator in setting rates, they were not determinative of whether the Loans conferred an economic advantage where the Respondent’s funding team had considered various factors to justify the rates they had adopted.
As such, the CAT deemed the Respondent’s decision-making process to be “perfectly rational” and that its committee, with their lending expertise, had approved the Loans on terms which “cannot be fairly categorised as low or obviously below market or commercial rates, bearing in mind the level of sick and security”.
Therefore, the CAT did not consider the Loans had amounted to a subsidy that offered an economic advantage under section 3(2) of the Act.
Key lessons learnt for local authorities on subsidy control
This case offers clarity for local authorities making lending decisions on the definition of a subsidy under the Act and how a CMO principle may be applied. In particular:
- the judgment demonstrates a broad interpretation of what constitutes a subsidy decision under the Act, since the CAT deemed the Appellant entitled to challenge the Respondent’s in principle decision to make the loans ahead of them being formally binding on the recipient;
- the judgment did not hinge on whether or not the Respondent had taken the approaches in the statutory guidance, because it had demonstrated the relevant expertise and followed the processes necessary to carry out the same level of assessment that a CMO would when making its lending decision. Sub-central authorities should take care in relying on this permissive approach, as few sub-central authorities will have this level of expertise in-house;
- although the CAT acknowledged the significance of the 2022 Regulations, they merely bolstered the Respondent’s lending decision and the CAT did not consider them to be a determinative factor in the adoption of rates. Similarly the relevance of the EU reference rates was limited to the Respondent’s funding agreement with central government, so this would not usually be relevant to a CMO assessment; and
- the Tribunal referenced the judgments of Sky Blue Sports & Leisure Limited v Coventry City Council 2014, and R (Sky Blue Sports) v Coventry City Council 2016 in its justification for applying the CMO principle when considering whether the Loans were unlawful subsidies. This suggests that (despite being a domestic judgment under the preceding EU State Aid law) the principles continue to be relevant under the new subsidy regime.
Contact

Alex Kynoch
Partner
alex.kynoch@brownejacobson.com
+44 (0)115 976 6511
Discover more
You may be interested in
Legal Update
Greater Manchester Combined Authority v developer: Key lessons on subsidy control for local authorities
Legal Update
Subsidy control cases coming into land
Legal Update
Government publishes response to consultation on Subsidy Control Regime
Legal Update
Refining the UK subsidy control regime consultation
Legal Update
The housing benefit subsidy deficit: Strategies for funding temporary accommodation
Published Article
The legal and planning hurdles that must be overcome to get Great British Energy generating
Legal Update
Update on local authority owned companies: Part 1 subsidy control
Legal Update
Does the subsidy control regime already need changing for the government to kickstart economic growth?
Legal Update
The transparency regime under the Subsidy Control Act - how it could be improved
Legal Update
Subsidy control guidance update - welcome guidance on 'small subsidies' introduced
Legal Update
Subsidy control: Guide to streamlined routes for universities
Legal Update
Subsidy control - lessons learned in the first year
Legal Update
Review of a subsidy control decision: The Durham Company Ltd v Durham County Council, 27 July 2023
Press Release
Browne Jacobson advising the Welsh Government on the delivery of significant number of renewable energy projects
Legal Update
Subsidy control lessons to be learnt from Bulb
Legal Update - Public matters newsletter
Public matters - February 2023
Legal Update
Government introduces first Streamlined Subsidy Schemes under new regime
Legal Update - Public matters newsletter
Public matters - January 2023
On-Demand
The Subsidy Control Act 2022. Putting the new regime into practice
Legal Update
Government provides guidance on new Subsidy Control Database and the calculation of their value
Legal Update
The impact of the new Subsidy Control regime on public regeneration projects
Legal Update
Subsidy Control Act 2022: economic queries
In July, the long-awaited statutory guidance on the Subsidy Control Act 2022 (Act) was published in draft form (Draft Guidance). A consultation on the draft guidance has recently ended and the results have not yet been published – it may therefore change before the final version is published.
Legal Update
Economic activity for the purposes of the Subsidy Control Act 2022
When carrying out a mix of activities it can be less clear if it is 'economic'. We look at the impact on local authorities & charities.
Opinion
The UK’s first domestic subsidy control case
We waited more than a year for it, but the wait is over – we finally have a domestic case on the new subsidy control regime.
On-Demand
Subsidy control webinar - 30 March 2022
In this on-demand session, Alex Kynoch and Angelica Hymers explore the practicalities of complying with the new Subsidy Control Bill, and the impact of illustrative guidance and policy statements recently published by the Government.
Published Article
The Subsidy Control Bill – Illustrative Guidance and Regulations – legal certainty vs flexibility
It has been a turbulent couple of years for those involved in subsidy control, and 2022 will be equally challenging. The Subsidy Control Bill (Bill) will take effect in 2022.
Legal Update
Subsidy control regime: new Bill working its way through Parliament
2022 is the year in which the UK’s new post-Brexit subsidy control regime will take effect. The new Subsidy Control Bill will form the backbone of the UK’s new subsidy control regime. The new Bill will replace the EU’s state aid rules, which applied until the end of the Brexit transition period.
Legal Update
New Year, New Subsidy Control Regime Part 2: Schemes, enforcement and transparency under the Subsidy Control Bill
In the first part of this article, we discussed the application of the Subsidy Control Principles. In part 2, we look at how Streamlined Subsidy Schemes will be used to grant certain subsidies more quickly, and at the enforcement and transparency provisions of the Bill.
Legal Update
New Year, New Subsidy Control Regime Part 1: The principles, restrictions and exemptions under the Subsidy Control Bill
The repeal of the State aid rules and their replacement by the regime stemming from the UK-EU Trade and Co-operation Agreement (TCA) in 2021 meant that practitioners and public bodies had to acclimatise to a new, more flexible but less certain approach.
Press Release
Browne Jacobson’s government & infrastructure lawyers advise on first South West based green hydrogen production project
Browne Jacobson’s specialist government and infrastructure team have advised Canford Renewable Energy Ltd on the delivery of its Dorset Green H2 facility.
Published Article
Subsidy control after Brexit - a practitioner's perspective
Back in late 2020, we waited expectantly for news of what the rules on state aid were going to be when the Brexit transition period ended on 31 December.
Legal Update
Consultation on new UK subsidy control regime
It is vitally important that public bodies make use of this opportunity to have their views heard and to shape the future of the new subsidy control regime.
Opinion
Consultation launched on the future of subsidy control law
The Department for Business, Energy & Industrial Strategy has just launched its consultation on the future of subsidy control law (previously known as state aid) in the UK.
Legal Update
New year, new-ish state aid rules: the new subsidy control regime
Until a formal subsidy regime is put in place funding bodies must grapple with the complex and challenging exercise of legal obligations from the UK-EU TCA and numerous trade agreements to grant funding.
On-Demand
State aid and subsidy control - post Brexit
Opinion
New Year, new-ish state aid rules
From 1 January 2021 the state aid principles set out in the Trade and Co-Operation Agreement are incorporated into law by the EU (Future Relationship) Act 2020.
Legal Update
State aid - De Minimis Regulation - Article 3 and 6
The case of Istituto nazionale per l’assicurazione contro gli infortuni sul lavoro (INAIL) v Zennaro Giuseppe Legnami Sas di Zennaro Mauro & C concerns the application of the De Minimis Regulation.
Legal Update
Commission decisions reinforce the position on when measures adopted by publicly owned companies will be classed as state resources for the purposes of the state aid rules
Are measures adopted by publicly owned companies state resources for the purposes of state aid rules?
Legal Update
European Commission amends the Temporary Framework and prolongs existing state aid rules
The European Commission has taken this decision due to the effects of the current crisis and after consultation with member states.
On-Demand
COVID-19 for local authorities, arms length bodies and government - 30th April 2020
An update on current issues including avoiding legal challenge to procurement decisions, public decision making, state aid and commercial and supply chain.