The UK's post-Brexit subsidies and tariff regime enters the dock

The UK government is facing its first legal test of its post-Brexit subsidy control and global tariff regime after a High Court judge ruled that a decision by the Department of International Trade to waive import tariffs on 260,000 tonnes of raw cane sugar in 2021, can be subjected to judicial review.

The case, first reported in the Financial Times, is being brought by British Sugar plc against Liz Truss MP as the international trade secretary, relates to her decision in December 2020 to allow the importation of 260,000 tonnes of raw sugar cane from 12 months from 1st January 2021 without levying import tariffs.

British Sugar, which refines sugar from sugar beet in the UK, in papers before the Court argues that the government’s decision amounts to an undeclared illegal financial subsidy worth £12M for its commercial rival, US owned Tate & Lyle. Adding that it also undercuts EU sugar producers, who themselves import half a million tonnes of sugar to the UK each year.

Under Article 10 of the Northern Ireland Protocol within the EU-UK Trade and Cooperation Agreement, any UK decisions on subsidies which have the potential to distort the trade of goods between Northern Ireland and the remainder of the European Union must be referred to the European Commission for approval under the EU’s state aid legal regime, as opposed to being decided in London under the UK’s independent subsidy control mechanisms.

In this case, the decision to allow the importation of 260,000 tonnes of raw cane sugar tariff-free was taken by the UK unilaterally, without reference to the European Union.

British Sugar contend that this decision by the UK’s Department of International Trade undermines the so-called ‘level playing field’ of a set of common rules and standards that prevent businesses in one country gaining a competitive advantage over those operating in other countries that was enshrined in the EU and UK’s Trade and Cooperation [Withdrawal] Agreement of 24 December 2020.

Accordingly the case, which will come before the High Court later this year for a full hearing, is being keenly watched by both ministers and industry as the first legal test of the Northern Ireland Protocol’s provisions on the UK’s post Brexit subsidy control regime and international trade policy more generally.

Meanwhile the Business Secretary, Kwasi Kwarteng MP, introduced the Subsidy Control Bill to Parliament on 30th June which replaces the EU’s former State Aid regime in the UK with principles based approach to awarding subsidies, providing such subsidy decisions, providing they achieve value for money for the British taxpayer while being awarded in a timely and effective way.

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