Beyond Brexit: Understanding the Rationale of the EU-UK TCA's Subsidy Control Regime

WORKING PAPER N. 02 - 2025 Beyond Brexit: Understanding the Rationale of the EU-UK TCA’s Subsidy Control Regime Elettra Bargellini* Abstract: The issue of subsidy control was one of the major points of contention during Brexit negotiations. The United Kingdom (UK) adopted a minimalist approach, seeking to align its post-Brexit framework with WTO rules. The European Union (EU), instead, insisted on preserving the level playing field through the continued application of its State aid regime to the UK. The article argues that, given the high degree of economic interdependence between the two economies, a system based on WTO subsidy disciplines would not have been sufficient to safeguard the level playing field between the EU and the UK. Thus, the article maintains that the EU–UK Trade and Cooperation Agreement (TCA) is unprecedented in the landscape of international trade agreements, as a consequence of the rationale underpinning it. It also contends that this rationale has shaped all the substantive and procedural elements of its subsidy control regime. Keywords: EU State aid; EU-UK TCA; SCM Agreement; FTA; level playing field; Brexit. I. Introduction The United Kingdom (UK) fully left the European Union (EU) regulatory system on 1 January 2021. One of the key consequences of Brexit is that EU State aid rules no longer apply in the UK, meaning that public authorities are no longer bound by EU constraints when granting funding and other forms of support to businesses.1 During the negotiations on the future EU-UK relationship, the positions of the parties on State aid control (since Brexit this has been referred to as ‘subsidy’ control by the UK government) could not have been further apart.2 The EU, concerned about the 2 George Peretz, ‘A Star Is Torn: Brexit and State Aid’ (2016) 15 European State Aid Law Quarterly 334, 337. 1*Elettra Bargellini is a Max Weber Fellow in the Department of Law at the European University Institute. The article is based on her PhD thesis, which was defended in May 2025 at Dublin City University before a committee composed of Professor Andrea Biondi (King’s College London) and Dr Niall Moran (Dublin City University). For correspondence: <elettra.bar[email protected]>. State Aid (Revocation and Amendments) (EU Exit) Regulations 2020, SI 2020/1470; The only exceptions to this are set out in the Ireland/Northern Ireland Protocol. potential for UK firms to gain an unfair competitive advantage because of state support, insisted on maintaining the core principles of its State aid system as a precondition for any future agreement with the UK. Conversely, those in favour of leaving the EU argued that, without the constraints imposed by the EU State aid framework, the UK would have greater freedom to invest in its industries and businesses, allowing it to gain a competitive advantage over the EU.3 They supported the adoption of a subsidy control regime aligned with World Trade Organization (WTO) rules, as it is inherently less restrictive and more conducive to national economic policy. This created a serious dilemma for the EU, caught between its interest in maintaining a close economic partnership with the UK and its need to safeguard the integrity of its internal market by avoiding an imbalance between market access rights and regulatory obligations.4 Given the UK’s firm stance of leaving the EU internal market and retaining full regulatory autonomy over subsidies, the EU made the establishment of subsidy control rules a prerequisite for granting zero-tariff and zero-quota access to its market. These rules, designed to preserve a level playing field between the two parties, are set out in Chapter 3, Title XI, Heading One, Part Two of the EU-UK Trade and Cooperation Agreement (TCA).5 Interestingly, the TCA subsidy regime is not only is the most detailed area devoted to maintaining a level playing field between the EU and the UK across the entire agreement, it also represents the most extensive discipline on subsidies ever seen in any Free Trade Agreement (FTA) to date.6 This article explores the rationale that guided EU and UK negotiators’ approach to the design of the post-Brexit subsidy control framework. It considers the implications for the UK of moving away from EU State aid control and adopting a subsidy regime aligned with WTO rules, as well as the reasons behind the EU’s insistence on preserving strict State aid disciplines despite the UK’s new status as a third country. To provide a foundation for this analysis, the article first offers an introductory overview of the WTO and EU subsidy control systems, given their pivotal role in both the negotiations and the drafting of the TCA’s subsidy provisions. I adopt a methodology that extends beyond a pure legal analysis, acknowledging that law emerges from the interplay of political decisions, competing ideologies, and economic considerations, which are ultimately crystallized into formal structures. Therefore, I employ a law-in-context approach, analysing how geopolitical and market dynamics have influenced the drafting of the TCA subsidy control provisions. Section 1 of the article examines the objectives pursued by the WTO subsidy discipline. It then provides an overview of the WTO subsidy control mechanisms, primarily contained in the Subsidies and Countervailing Measures (SCM) Agreement. Section 2 focuses on EU State aid rules, outlining their role as a fundamental pillar of the EU internal market. It also briefly touches on the main features of the EU State aid control system. Last, Section 3 examines the justification for the EU’s need to oversee UK public spending post-Brexit to prevent market distortions, and concludes with an analysis of the main features of Chapter 3, Title XI of the TCA. 6 Andrea Biondi and Anneli Howard, ‘Levelling up a Level Playing Field: Competition and Subsidies in Post-Brexit Britain’ in Adam Lazowski and Adam Cygan (eds), Research Handbook on Legal Aspects of Brexit (Edward Elgar Publishing 2022) 392. 5 Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part (TCA) (signed 30 December 2020, provisionally applied from 1 January 2021, entered into force 1 May 2021) [2021] OJ L149/10. 4 Jose Luis Buendìa Sierra, ‘“Brexit”, a Stress Test for State Aid Control?’ (2016) 15 European State Aid Law Quarterly 331. 3 Andrea Biondi, ‘Subsidies control and enforcement’ in Federico Fabbrini (ed), The Law & Politics of Brexit. Volume V: The Trade & Cooperation Agreement (Oxford University Press 2024) 219. I argue that while the WTO, EU, and TCA subsidy control regimes formally pursue the same goal of controlling the granting of subsidies, they all act as distinct mechanisms because of the different contexts in which they operate. Each regime is underpinned by distinct economic, legal, and political rationales, which in turn shape the specific regulatory mechanisms it employs. II. WTO This section offers an overview of the WTO’s discipline on subsidies. It begins by examining the legal and political-economy justification underpinning this framework, then outlines its key normative and institutional features. By analysing its rationale and operational mechanisms, this section identifies the principles that shaped the UK’s approach to negotiating subsidy control after Brexit. Objectives The analysis of the objectives of international control on subsidies can be approached from the perspectives of trade, competition, and welfare.7 Subsidies can distort international trade by creating barriers to imports or artificially enhancing exports. In particular, they create issues when they either restrict market access for foreign competitors (whether in the subsidizing country or third markets) or increase subsidized imports in other countries’ markets.8 As a result, subsidies can act as government-induced trade barriers, much like import tariffs. In other words, they can undermine the market access expectations established through tariff concessions under the WTO framework. This concern was the driving force behind the introduction of subsidy disciplines into the General Agreement on Tariffs and Trade (GATT), particularly under Articles VI and XVI.9 Furthermore, subsidies often trigger retaliatory measures. When one country subsidizes its industries, others frequently respond by introducing their own subsidies to protect their domestic producers, triggering a subsidy ‘war’ among countries. This escalation leads to inefficient global resource allocation and heightened trade tensions.10 However, the impact of subsidies extends beyond trade as they may also influence the behaviour of economic actors, including both the recipients of subsidies and their competitors. Thus, in turn, subsidies can distort the competitive dynamics within the market, potentially affecting overall economic efficiency.11 It is important to note here that international subsidy laws do not delve into a comprehensive competition analysis of all the negative and positive effects of subsidies, nor do they explicitly provide mechanisms for balancing these effects.12 While it is well recognized that markets often fail to achieve optimal outcomes due to inefficiencies or inequalities, 12 Luca Rubini, ‘State Aid and International Trade Law’ in Leigh Hancher and Juan Piernas López (eds), Research Handbook on European State Aid Law (Edward Elgar Publishing 2021) 104. 11 Rubini (n 7) 58-59. 10 Douglas A Irwin, Free Trade Under Fire (5th edn Princeton University Press 2020) 257. 9 Alan O Sykes, ‘The Questionable Case for Subsidies Regulation: A Comparative Perspective’ (2010) 2 Journal of Legal Analysis 473, 496497. 8 See Steve Suranovic, International Economics: Theory and Policy (Saylor Foundation 2012) ch 7. 7 This analytical framework was developed by Rubini; see Luca Rubini, The Definition of Subsidy and State Aid: WTO and EC Law in Comparative Perspective (Oxford University Press 2010) 38. and that subsidies can serve important policy objectives, such as the reduction of greenhouse gas emissions, the international subsidy discipline does not formally acknowledge these benefits as normative justifications for subsidy use.13 Key elements The international discipline on subsidies is primarily regulated under the SCM Agreement, which applies exclusively to trade in goods and does not extend to trade in services.14 Under Article XV of the General Agreement on Trade in Services (GATS), Members agreed that they ‘shall enter into negotiation with a view to developing the necessary multilateral disciplines to avoid (...) trade-distortive effects’.15 Negotiations occurred but have not been completed. However, subsidies are already regulated under some provisions of the GATS, such as paragraph 1 of the same article, which states that ‘Members recognize that, in certain circumstances, subsidies may have distorting effects on trade in services.’16 In such situations, the GATS envisages a consultation obligation between the granting and the affected Members, but it does not impose any substantive prohibitions or limitations on subsidies.17 Subsidies granted by a WTO Member can only be challenged if they cause one or more of the adverse effects as described in Articles 5, 6, and 15 of the SCM Agreement.18 Further, pursuant to Article 3 of the SCM Agreement, subsidies which require the use of domestic rather than imported goods, or that are contingent on export performance, are prohibited without the need to show adverse effects. If a subsidy is prohibited, it must be withdrawn.19 If it is not prohibited, the subsidizing Member can eliminate the negative effects without the need to withdraw the subsidy(ies).20 As highlighted above, the SCM Agreement fails to consider the possible beneficial effects of the subsidies. Article 8 of the SCM Agreement, which expired by its own terms after five years, included as non-actionable subsidies those related to research and development (R&D), regional development, and environmental protection. 21 The Subsidies and Countervailing Measure Committee is the body entrusted with the surveillance and notification processes under the SCM Agreement, but the effectiveness of the 21 Alan O Sykes, ‘The Economics of WTO Rules on Subsidies and Countervailing Measures’ (2003) Working Paper, p. 15 http://www.ssrn.com/abstract=415780. 20 Art 7(8) SCM Agreement. 19 Art 4(7) SCM Agreement. 18 This section is based in part on research conducted for a book chapter: see Elettra Bargellini, ‘Climate Change and Subsidies: Possible Options for Change’ in Elisa Baroncini (ed), The WTO as Major Driver of Sustainable Development and its Reform Process (Dipartimento di Scienze Giuridiche, Università di Bologna 2025) 43-45 10.6092/unibo/amsacta/8513. 17 Rubini (n 12) 124. 16 Ibid. 15 Art XV(1) GATS. 14 For a general overview of the subsidy discipline under the SCM Agreement see Wolfgang Müller, WTO Agreement on Subsidies and Countervailing Measures: A Commentary (Cambridge University Press 2017) 1-50. 13 Petros C Mavroidis, ‘Come Together? Producer Welfare, Consumer Welfare, and WTO Rules’ in James Harrison and Ernst-Ulrich Petersmann (eds), Reforming the World Trading System: Legitimacy, Efficiency, and Democratic Governance (Oxford University Press 2005) 277; Marco M Slotboom, ‘Do Different Treaty Purposes Matter for Treaty Interpretation?: The Elimination of Discriminatory Internal Taxes in EC and WTO Law’ (2001) 4 Journal of International Economic Law 557, 579. Committee has been reduced by WTO Members’ failure to fulfil their notification obligations.22 Furthermore, Articles 24(3) of the SCM Agreement establish another body, the Permanent Group of Experts (PGE), which is ‘composed of five independent persons, highly qualified in the fields of subsidies and trade relations’.23 The PGE may be requested to assist a panel according to Article 4(5) of the SCM Agreement. Moreover, the PGE may be consulted by any Member and may give advisory opinions on the nature of any subsidy proposed to be introduced or currently maintained by that Member. Such advisory opinions will be ‘confidential and may not be invoked in proceedings under Article 7 of the SCM Agreement’.24 To counteract the adverse effects of subsidies and subsidized imports on domestic industries, WTO Members can adopt unilateral countervailing duty (CVD) measures.25 These measures are governed by the provisions of Article 15 of the SCM Agreement, including definitions of subsidized imports, injury and causation. Another possibility is that Members can invoke the WTO’s Dispute Settlement Mechanisms (DSM).26 The reason for recourse to the DSM is that while CVD only applies to imports into the complaining Members’ territory, the DSM also address the exporters’ competing sales into the complaining Members’ territory (similarly to CVD), into third countries, or within the exporters’ own territory. The DSM sets procedures for resolving disputes through consultations, possibly mediation, and binding decisions by a WTO dispute settlement panel and, if applicable, the WTO Appellate Body (AB), which is currently not operational.27 It is worth noting that a panel decision, once adopted – mostly automatically – by the Dispute Settlement Body (DSB), made up of all WTO Members, is binding on all the parties. For example, a recent panel ruling on the highly controversial question of ‘cross-border’ subsidies, once adopted, has the same force as an AB opinion would have had.28 Private operators are forced to rely on individual WTO Members because they have no rights to contest the measures. In theory, they can file an amicus curiae brief, although in practice this has not had much impact.29 Another important aspect is that neither the DSM nor CVD measures require the repayment of past subsidies.30 30 Panel Report, Australia – Subsidies Provided to Producers and Exporters of Automotive Leather – Recourse to Article 21.5 of the DSU by the United States, WT/DS126/RW, adopted 11 February 2000. 29 With some exceptions, such as the AB report in EU-Sardines, see European Communities – Trade Description of Sardines (26 September 2002) Report of the Appellate Body, AB-2002-3, para. 315 (b). 28 European Union - Countervailing Duties on Imports of Biodiesel from Indonesia - Notification of an appeal by the European Union under article 16.4 and article 17.1 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and under Rule 20(1) of the working procedures for appellate review. 27 Based on the arbitration provision in Article 25 of the DSU, a group of WTO Members are parties to the Multi-Party Interim Appeal Arbitration Arrangement (MPIA), an alternative appeal mechanism with a view to providing for review of panel reports in the absence of a functioning AB. The MPIA was agreed upon among its original 18 participating Members in April 2020. Currently 57/166 WTO members are parties to the MPIA; see Joost Pauwelyn, ‘The WTO’s Multi-Party Interim Appeal Arbitration Arrangement (MPIA): What’s New?’ (2023) 22(5) World Trade Review 693. 26 See Art 30 of the Dispute Settlement Understanding (DSU). 25 See Arts 10-23 SCM Agreement; Art VI GATT. 24 Art 24(4) SCM Agreement; see Elettra Bargellini, ‘The impact of the Subsidy Control Act 2022 on the Effectiveness of the TCA: Lessons from EU State aid and WTO’ (2025) 59(2) Journal of World Trade 213, 220. 23 Art 24(3) SCM Agreement. 22 See Luca Rubini, ‘The International Context of EC State Aid Law and Policy: The Regulation of Subsidies in the WTO’ in Andrea Biondi, Piet Eeckhout and James Flynn (eds), The Law of State Aid in the European Union (Oxford University Press 2004) 149–188; WTO, Procedures to Enhance Transparency and Strengthen Notification Requirements under WTO Agreements, WTO Doc JOB/GC/204/Rev.2 (27 June 2019). III. EU State Aid EU State aid law is the most advanced and comprehensive subsidy control system in existence. It applies exclusively to EU Member States and is justified by the need to preserve the integrity of the EU internal market (the world’s most advanced free trade area). This section, after explaining the role of EU State aid in safeguarding competition and trade among EU Member States, examines its main substantive and procedural aspects. While the previous section examined the features (and weaknesses) of the WTO discipline in regulating subsidies, which the UK aimed to adhere to post-Brexit, this section shifts to the EU perspective. It highlights the effective enforcement mechanisms that define the EU system and which the EU sought to have the UK maintain after its withdrawal. Objectives Given the high degree of integration within the EU internal market, EU legislation focuses on ensuring its effective functioning by prohibiting measures that distort competition and trade.31 State aid measures, in particular, have emerged as a critical concern because EU Member States possess differing financial capacities to support their domestic businesses, potentially creating market imbalances that undermine the free movement of goods, services, capital, and people. There is a debate over whether EU State aid should be interpreted primarily through an economic-oriented competition lens or an integration-focused internal market perspective.32 Proponents of the competition perspective advocate for an increased infusion of economic analysis into EU State aid law. This perspective considers State aid to be a barrier to competition within the internal market and argue that its regulation should align with the economic principles governing competition law. A stronger reliance would clarify the assessment of the positive and negative impacts of State aid, as economic indicators (such as market failures and distortions of competition) could be applied more rigorously.33 Accordingly, this approach would shift the focus from legal disputes to debates about the impacts of an aid on the market, increasing awareness of its costs and benefits at both EU and Member State levels while enabling a more systematic approach to balancing these effects.34 The supporters of the internal market perspective perceive State aid as an obstacle to intra-community trade rather than primarily distorting competition.35 They argue that State aid control is designed to mitigate negative spillover effects on other EU Member States affected by the aid, ultimately aiming to prevent Member States from retaliating with their own aid in response to 35 See e.g. Case 173/73 Italian Republic v Commission of the European Communities ECLI:EU:C:1974:71 para 13; Case C-39/94 Syndicat français de l'Express international (SFEI) and others v La Poste and others ECLI:EU:C:1996:285 para 58. 34 Hans W Friederiszick, Lars-Hendrik Röller and Vincent Verouden, ‘European State Aid Control: An Economic Framework’ in P Buccirossi (ed), Handbook of Antitrust Economics (MIT Press 2007) 53-54; see Jose Luis Buendía Sierra, ‘The Limited Role of the “Refined Economic Approach” in Achieving the Objectives of State Aid Control: Time for Some Realism’ in EC State Aid Law. Liber Amicorum in Honour of Francisco Santaolalla, vol 36 (Kluwer Law International 2008). 33 Claus-Dieter Ehlermann and Michelle Everson (eds), European Competition Law Annual 1999: Selected Issues in the Field of State Aids (Hart Publishing 2001) 55-56. 32 Andrea Biondi and Martin Farley, ‘The Relationship between State Aid and the Single Market’ in Erika Szyszczak (ed), Research Handbook on European State Aid Law (Edward Elgar Publishing 2011) ch 12; Rubini (n 7) 60-61. 31 Catherine Barnard, The Substantive Law of the EU – The Four Freedoms (7th edition, Oxford University Press 2022). impacts on their domestic industries.36 This approach underscores the distinction between competition rules, which concentrate on the competition among undertakings, and State aid rules, which take into account the macroeconomic rivalries among EU Member States.37 According to this perspective, there is no need for a more refined economic analysis within EU State aid law. For instance, the presumption of a ‘distortion of competition’ should automatically arise as a necessary consequence of a measure meeting the other requirements of the definition of State aid; at the same time the de minimis rule should not apply, aligning with the principles of the internal market.38A clarification on how to interpret EU State aid law’s objectives comes from Biondi and Eeckhout, who explain that trade and competition rules share a common goal: ensuring the free movement of goods under normal conditions of competition.39 It is crucial to recognize the existence of policy space within EU State aid law, which acknowledges that State aid can serve legitimate policy objectives despite its potential to distort competition and affect trade within the EU internal market. This perspective considers the aid’s positive impacts beyond domestic concerns, situating it within the broader framework of the EU.40 In line with this principle, the Commission has, in recent years, revitalized the approach it first adopted during the 2008 financial crisis, using State aid rules to assist EU Member States address unprecedented global challenges. Crises such as the Covid-19 and the war in Ukraine – combined with the need to achieve climate and technological transitions – have put significant pressure on EU Member States, underscoring the need for the EU to adapt its State aid policies to better address these economic and health challenges.41 The Commission has acted as a de facto crisis-management authority, demonstrating how a dynamic interpretation of State aid rules better reflects their ability to adapt as the priorities in the EU internal market change.42 42 Juan Jorge Piernas López and Michelle Cini, ‘State Aid Control: Rule Making and Rule Change in Response to Crises’ in Diane Fromage, Adrienne Héritier and Paul Weismann (eds), EU Regulatory Responses to Crises: Adaptation or Transformation? (Oxford University Press 2025) 92-114; László Szegedi and Bálint Teleki, ‘EU Law Chapter on EU State Aid Rules: The Bumpy Ride from “Subsidy Control” to “Subsidy Governance”’ in Zoltán Nagy (ed), Economic Governance: The Impact of the European Union on the Regulation of Fiscal and Monetary Policy in Central European Countries (Central European Academic Publishing 2024) 235238. 41 These crises coincided with an acute crisis in the multilateral trading system (marked by the paralysis of the AB and the failure of the WTO framework to discipline subsidies effectively), and with an escalating competitiveness crisis, as highlighted in the Draghi report; Mario Draghi, The future of European competitiveness – In-depth analysis and recommendations (2024); See also Enrico Letta, Much More Than A Market (2024); Andrea Biondi, ‘Did the NextGenEU Change State Aid Control?’ (2024) 23 European State Aid Law Quarterly 99. 40 Hussein Kassim and Bruce Lyons, ‘The New Political Economy of EU State Aid Policy’ (2013) 13 Journal of Industry, Competition and Trade 1; Michelle Cini and Erika Szyszcak, ‘State Aid Control from a Political Science Perspective’ in Erika Szyszcak (ed), Research Handbook on European State Aid Law (Edward Elgar Publishing 2021); Andrea Biondi, Luca Rubini and Marta Andhov, Regulating for a Sustainable and Resilient Single Market (ETUI 2023) https://www.etui.org/publications/regulating-sustainable-and-resilient-single-market. 39 Andrea Biondi, Piet Eeckhout and James Flynn (eds), The Law of State Aid in the European Union (Oxford University Press 2004) 108; Andrea Biondi, ‘State Aid and Free Movement’ in Leigh Hancher and Juan Piernas López (eds), Research Handbook on European State Aid Law (Edward Elgar Publishing 2021). 38 Paris Anestis, ‘State Aid and Antitrust Remedies: Anything in Common’ (2012) 11 European State Aid Law Quarterly 551. 37 Richard Whish and David Bailey, Competition Law (10th edition Oxford University Press 2021) 256; Andrea Biondi and Elisabetta Righini, ‘An Evolutionary Theory of EU State Aid Control’ in Anthony Arnull and Damian Chalmers (eds), The Oxford Handbook of European Union Law (Oxford University Press 2015). 36 Leigh Hancher, Yvo de Vries and Francesco Maria Salerno, EU State Aids (6th edn, Sweet & Maxwell 2021) 34-35; Morris Schonberg, ‘Continuity or Change? State Aid Control in a Post-Brexit United Kingdom’ (2017) 16 Competition Law Journal 47, 51; Andrea Biondi, ‘The Rationale of State Aid Control: A Return to Orthodoxy’ in Catherine Barnard and Okeoghene Odudu (eds), Cambridge Yearbook of European Legal Studies, vol 12 (Cambridge University Press 2010) 35-52. Key elements The discipline of State aid is founded upon the provisions set forth in Articles 107 and 108 of the Treaty on the Functioning of the European Union (TFEU). Article 107(1) of the TFEU establishes that State aid is, in principle, incompatible with the internal market. However, this principle is not absolute. Paragraphs 2 and 3 of Article 107 provide some exemptions according to which State aid is, or may be considered, compatible with the EU internal market. These exemptions include: aid to promote economic development, aid for important European projects of common interest, aid to remedy severe disturbances in the economy of a Member State, aid to facilitate the development of specific economic activities or regions, and aid for cultural promotion and heritage preservation.43 In addition, Article 106(2) of the TFEU complements this framework by establishing that ‘Undertakings entrusted with the operation of services of general economic interest (...) shall be subject to the rules contained in the Treaties (...) in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them.’44 These exemptions acknowledge that, under certain circumstances, State aid can contribute positively to the functioning of the EU internal market and serve important public policy objectives. The EU State aid discipline provides robust enforcement mechanisms. Article 108 of the TFEU states that EU Member States must notify the Commission of any new aid, or alteration of existing aid, prior to implementation (ex ante notification).45 The Commission has exclusive authority to determine whether the aid (which, in principle, is prohibited) pursues a legitimate objective and can therefore be deemed compatible with the EU internal market. The Member State concerned shall not put into effect the planned measure until the Commission has completed its assessment (standstill obligation). In addition, according to Article 108(1) of the TFEU, the Commission carries out a regular examination of all existing aid schemes granted by EU Member States, which have an obligation to provide reports on existing aid. The Commission’s authority in enforcing State aid rules is complemented by the role of national courts, which are also responsible for ensuring that EU Member States fulfil their notification obligations. To reduce the burden on both EU Member States and the Commission, the General Block Exemption Regulation (GBER) exempts certain categories of aid from the notification requirement by automatically declaring them compatible with the internal market.46 The GBER focuses on aid that is unlikely to cause significant distortions of competition, such as support for small and medium-sized enterprises (SMEs), aid targeted at R&D, aid dealing with natural disasters, key infrastructure, and the conservation of cultural assets. Moreover, the de minimis rule set a threshold of € 300,000 per undertaking over a three-year period below which aid is considered too small to significantly affect competition in the internal market and is thus exempt from State aid control.47 47 European Commission, Press release ‘Commission adopts new general rules for small amounts of State aid and for services of general economic interest’ https://ec.europa.eu/commission/presscorner/detail/en/ip_23_6567. 46 Commission Regulation (EU) 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty [2014] OJ L 187/1. 45 The rationale of the system, originally foreseen in the Spaak Report, Report of the Heads of Delegation to the Ministers of Foreign Affairs (21 April 1956) 57-59. 44 Art 106(2) TFEU. 43 Massimo Merola, 'The Forces Shaping State Aid Control in the EU', in Luca Rubini and Jennifer Hawkins, What Shapes the Law?: Reflections on the History, Law, Politics and Economics of International and European Subsidy Disciplines (EUI/University of Birmingham, 2016) 101. If the Commission finds that aid is incompatible with the EU internal market, it must order its recovery.48 Moreover, since EU Member States cannot grant aid without approval from the Commission, any aid granted before obtaining such approval is automatically considered unlawful. The fact that the aid is procedurally unlawful does not necessarily mean that it is also incompatible with the internal market; the Commission may still decide that the aid in question is compatible and that its recovery is not necessary. In such cases, the beneficiary may be required to pay interests on the aid amount from the date it was granted until the date of the Commission’s approval.49 When a Member State fails to comply with a recovery decision within the specified deadline, Article 108(2) of the TFEU empowers the Commission to directly refer the matter to the Court of Justice of the European Union (CJEU).50 Decisions made by the Commission are subject to judicial review by the CJEU.51 It is important to note that the CJEU has increasingly recognized the right of private parties to challenge the Commission’s decisions. For example, in cases where negative decisions regarding incompatible aid schemes are challenged, the CJEU has long held that companies can be considered individually affected if they can demonstrate that they are actual beneficiaries of the aid. Moreover, private parties have legal avenues beyond the action for annulment to challenge potentially illegitimate actions by the Commission. The action for failure to act is a viable option when the Commission fails to take action despite its obligation to do so, given its exclusive competence in assessing the compatibility of State aid.52 Overall, the combination of the Commission’s power to refer cases to the CJEU and the judicial review of its decisions gives the CJEU a crucial role in safeguarding the adherence to EU legal principles and ensuring compliance with EU State aid rules. IV. TCA The circumstances of the TCA are unique, as it not only represents a trade agreement between two parties engaged in an enormous amount of trade but also introduces a new type of FTA. Unlike traditional negotiations that aim to build closer economic integration, the TCA negotiations were marked by a shift away from it. This fundamental tension shaped the parties’ opposing priorities for their future relationship: the UK prioritized sovereignty, rejecting regulatory alignment typically found in FTAs that facilitate reduced trade barriers, while the EU made the establishment of provisions for a strong level playing field a prerequisite for granting unprecedented zero-tariff, zero-quota market access. This section delves into what the EU-UK level playing field entails. Finally, this section briefly outlines the features of the TCA subsidy control regime. 52 Art 265 TFEU; Anthony M Collins and Damian Collins, ‘State Aid: The Effective Application of EU State Aid Procedures: From a Plan to Grant Aid to the Recovery of Illegal Aid - The Role of National Law and Practice’ (2006) 13 Irish Journal of European Law 175. 51 Art 263 TFEU. 50 Art 108(2) TFEU. 49 Jan Blockx, ‘New State aid Recovery Notice’ (2019) 18 European State aid Law Quarterly 540. 48 The TFEU does not contain any explicit provision on the recovery of illegal state aid; however, the CJEU has ruled that recovery is the result of the general prohibition of State aid established by Article 107(1) TFEU and protects the effectiveness of the 'standstill obligation' enshrined in Article 108(3) TFEU. The relevant rules on the recovery obligation's functioning are contained in Regulation 2015/1589 Article 16 of the Procedural Regulation, which is the reference rule in this regard.