Thread by @GeorgePeretzKC

Right. I’m going to try to live tweet this morning’s meeting of @LordsEUCom on #stateaid, taking evidence from Paul Scully (the relevant Minister at BEIS) and Jessica Blakely, Director of Subsidy Control and International Negotiations at BEIS.

Meeting starts at 1030. For those who have 10 minutes to kill and want some background, there are a number of blog posts at uksala.org/category/brexi….

On #stateaid I’d identify these key issues for the Committee to explore.

1. How does the current Govt view the EU’s negotiating position on subsidies? Does it accept that this is, genuinely and for good reason, a key red line for the EU?

2. What is going on with the current Govt’s proposals of a domestic anti-subsidy regime? Since it would need to be up and running by 1/1/2021, where is the legislation? What consultation is the Govt going to do?

3. What is the content of a UK regime going to be? If it is to be based on the WTO definition of “subsidy” and not the EU concept of “State aid”, what policy differences does the Govt see between them?

NB - most experts think the difference is marginal: the key difference between the regimes is that the WTO regime doesn’t apply to services, usually only bites where industry of another state is demonstrably harmed, gives rise to no domestic remedy, and has no regulator.

4. What is the government’s analysis of Article 10 of the NI Protocol and its effects after transition?

Right. We are off.

Paul Scully: the issue is incredibly important in our negotiations with the EU. Govt committed to a successful outcome. Won’t give up our rights as an independent state. Result has to reflect political realities on both sides.

Qs now on non-regression on labour/environment.

Scully - UK finds “ratchet” demand from EU unacceptable. FTA should be based on precedent.

Lord Turnbull - does non-regression commitment mean no amendment to working time directive? Blakely - if no intent to distort trade, should be permitted on UK proposal.

Scully - key issue on environment is that UK wants its own politicians and judges to decide its law: dispute resolution should be outside FTA dispute resolution procedures.

Blakely: on enforcement, agreement should not refer to EU standards so as to avoid CJEU jurisdiction.

Lord Turnbull - would non-regression agreement freeze UK rules on GMOs even if its scientific analysis changed? Blakely - UK should be free in its domestic regulation, subject to intent to distort trade test.

Good point here by @StateAidLaw

https://twitter.com/stateaidlaw/status/1277539887378546691?s=21

https://t.co/44zkyK1wRZ

Baroness Kramer - concerns that “intent to distort trade” test is hard to enforce - points to Californian regulation on cars. Scully - its hard to work out what comparable standards are. But our proposals allows both parties to maintain high levels of protection.

Baroness Kramer makes a good point on “precedent”: all agreements are different and have to be looked at as a whole. NB here that the UK wants “unprecedented” things on eg road haulage, financial services, qualifications. Language of “precedent” not very helpful.

Blakely - evolution of standards will happen as both UK and EU party to international agreements that will evolve over time.

Russell - why are there no dispute resolution provisions on subsidies. Scully - precedent. Should base disputes on WTO agreement on subsidies and countervailing measures (SCM Agreement).

Scully - WTO mechanisms should deal with subsidy disputes. (NB - the SCM agreement does not apply to services - and EU is very concerned by subsidies in services - see its recent White Paper).

(Given the volume of UK services exports to the EU and UK demands on services, that does not look like a sustainable position in our negotiations with the EU).

Lord Wood on State aid. Where is a landing strip for agreement?

Scully - can’t really comment on negotiations. Wood - is it realistic to expect EU to live with UK being able to subsidise when it can’t?

Scully - the WTO SCM agreement is enough. (NB my earlier point that that agreement does not apply to services.). Blakely - why should EU want more from UK than other countries? (Answer - services - and Wood rightly points to UK demands on services.)

Lord Turnbull - government policy on a domestic regime confused. Scully - will be able to say more when EU negotiations complete (NB that rather hints that the UK regime is on the table in those negotiations). No need for UK regulator. CMA is working with us on forward planning

Turnbull _ WTO model is State to State only - Scully: we’ll have to see what the negotiations produce.

Lamont - you can see why EU anxious about UK government subsidies. Scully: subsidy regimes are a reserved matter for UK government. Consultation with devolved governments.

Blakely - we are working on a UK domestic regime. (NB the timing of this is very tight in deed, as legislation will need to be in place and systems up and running by 1/1/21.)

Scully - we have been operating under EU State aid regime in transition. Covid-19 regime offered welcome flexibility.

Blakely - will be consulting on UK domestic regime (NB again, time is very limited).

Lilley asks about NI protocol - Scully repeats line on its effects set out in government paper on the protocol. Lilley asks about renegotiation of the protocol.

Scully - will speak to devolved administrations about UK domestic State aid regime - NI as well as Scotland and Wales. (NB no explanation of government position on extent of NI protocol or overlap between it an Article 10).

Chalker Asia bout domestic regulator. Scully: will consult and are thinking about enforcement. CMA have told us how long they would need to prepare and that is a factor in our thinking.

“Asks about” (spell check!)

On Covid-aid - Blakely - UK is asking now about further “easements” for small business under the temporary framework.

And that’s it.

Frankly, not much light cast on UK #stateaid policy. But if you give the EU negotiations as a reason for delaying publication of any details of the proposals for a UK domestic regime, you are effectively conceding that that regime is on the table in the negotiations.

Given the UK’s demands on services, its huge services exports to the EU, and the fact that the WTO regime offers no protection to the EU on services subsidies (as the EU white paper forcefully points out) the UK’s “WTO only” stance on subsidies is wholly unrealistic.

No enlightenment on the content, administration, or enforcement of a UK domestic regime, only 6 months before it needs to swing into action. That is not good government.

Finally, and interesting and controversial nugget: Scully was insistent that State aid is a reserved matter outside devolved competence.

That is a controversial position: competition (“regulation of anti-competitive practices and agreements, abuse of a dominant position, monopolies and mergers”) is a reserved matter (see eg para 69 of Schedule 7A to the Govt of Wales Act), but does that include subsidy control?

Given the potential of anti-subsidy control to interfere with the devolved governments’ exercise of their powers, expect 🧨.