Competition Appeal Tribunal dismisses second subsidy control challenge

On 24 July 2025, the Competition Appeal Tribunal (CAT) issued its substantive judgment in Weis v Greater Manchester Combined Authority [2025] CAT 41. This is the second subsidy control challenge brought to the CAT since the Subsidy Control Act 2022 (SCA) came into force. 

The case concerned loans comprising of £60.7m and £50.93 (the Loans) granted by the Respondent to Trinity Developments (Manchester) Limited and New Jackson (Contour) Investments Limited respectively. It is understood the purpose for the loans was “bringing forward the supply of new, high-quality housing required for Greater Manchester to realise its full economic potential; (ii) sustaining a significant number of jobs within the construction sector on-site and in the supply chain; and (iii) providing opportunities for apprenticeships in construction trades.”

The Appellant is a competitor of the two entities in receipt of the Loans and claimed that the Loans were concluded on “non-market terms and have distorted the proper and fair operation of the relevant market in and around Manchester”. The Respondent claimed that the Loans were on market terms, and therefore did not amount to a subsidy. In other words, the Loans were, according to the Respondent, in compliance with the Commercial Market Operator (CMO) Principle. For financial assistance to satisfy the CMO Principle, the assistance must be provided on terms akin to those available on the market, by a private operator, at the time the assistance was granted. If the CMO Principle is satisfied, arguably the assistance does not confer an economic advantage because it mirrors commercial terms available on the market at the time, which means the assistance would not amount to a subsidy.

In its judgment, the CAT accepted that the Loans were made on commercial terms and therefore could not constitute a measure conferring any economic advantage on the loan recipients within the meaning of the SCA.

The case is of particular interest as this is the first time the CAT has considered the approach taken to demonstrating compliance with the CMO Principle. In doing so, the Tribunal found that the decision to give the subsidy was a “perfectly rational one and not inherently defective”. To support this finding, the CAT noted that the Loans’ rates could not be fairly categorised as low or obviously below market or commercial rates, the covenants and conditions for drawdown substantially protected the Respondent from the risk of default or shortfall, and the security provided was substantial. In addition, the Tribunal had “no doubt” that a commercial lender would regard the Loans as relatively low risk where there was only a minimal risk of loss even in the event of a default.

The CAT noted that there were routes of analysis the Respondent did not take to satisfy itself that the Loans were compliant with the CMO Principle, such as profitability or benchmarking analysis, or obtaining a third-party report. However, the CAT still found that even in the absence of these steps it was satisfied the Respondent could reasonably conclude there was no subsidy. A key reason for this finding was the fact that in determining the terms of the Loans, the Respondent used minimum interest rate margins stipulated in EU State Aid rules, cross-checked against the Subsidy Control (Gross Cash Amount and Gross Cash Equivalent) Regulations 2022 SI 2022 No 1186) to ensure that the subsidy control rules are adhered to. The CAT’s findings on the CMO Principle provides useful clarity on the steps public authorities are expected to take to satisfy themselves that loan funding is not a subsidy under the SCA. The Appellant has since sought permission to appeal the Tribunal’s judgment on these points, but this application was dismissed on the basis of the arguments having no merit.

The CAT also addressed the question of when a “decision” is made for the purposes of bringing a challenge under the SCA. In this case, the application for review was filed after a decision in principle to grant the Loans was made, but before the Loans had been finalised or entered into. The Respondent denied that any “subsidy decision” had been made that was capable of challenge, on the basis that no decision to grant the Loans had yet been completed and no enforceable right to the financial assistance was in place. The CAT held that it was not a requirement for the borrowers to have an enforceable right to financial assistance  before a subsidy decision can be challenged.  On the facts, the CAT found that the relevant subsidy decision occurred when there was a meeting of the Respondent authority where the Loans were approved and authority to sign the Loans was delegated. Further, the CAT found that in determining whether the Loans conferred an economic advantage, it did not simply look at the terms of this decision, but instead considered the whole process including the various stages leading up to that decision as well as the due diligence and final terms of the Loans. This finding makes it clear that the point at which a subsidy could be challenged is not when the recipient obtains an enforceable right to financial assistance; it can be much earlier than that. However, when it comes to assessing whether financial assistance meets the test for a subsidy under the SCA, the CAT’s examination of the assistance will not be limited to the facts only present at the time of the decision itself. It is likely to look at the wider facts when ascertaining the relevant terms for its analysis.

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