Two more court decisions provide further insight into the UK’s new subsidy control regime and the standards for decision making by Scottish local authorities

Two recent decisions, one by the Competition Appeal Tribunal (“CAT”) and the other by the Court of Session, have added to the small but growing body of case law on the Subsidy Control Act 2022 (the “SCA”). The decision of the Court of Session also holds significant lessons for Scottish local authorities in terms of what precisely must be before a council when it makes a decision.

Both decisions emphasise the discretion available to public authorities and the difficulty that businesses will have in challenging those decisions, whether to give or refuse public financial support.

Bristol Airport v Welsh Ministers [2026] CAT 30

This case (which we previously wrote about here) concerned a challenge by Bristol Airport to a £205 million subsidy provided by the Welsh Government to Cardiff International Airport Limited. Whilst all other cases brought under the SCA to date have concerned support provided on the basis it was not a subsidy (and in all of those cases the CAT agreed it was not), this was the first to be brought against support that the giving authority conceded was a subsidy. It therefore concerned not the definition of what a subsidy is, but how the Welsh Ministers had (or had not) complied with their obligations under the SCA when giving a subsidy.

Bristol Airport presented three grounds of challenge: that the Welsh Government had not properly addressed whether Cardiff Airport’s financial position meant that the subsidy was being given to an ailing or insolvent business (which may, in some circumstances, be prohibited under the SCA), that the Welsh Government had not properly applied the subsidy control principles in order to satisfy itself that the subsidy was consistent with them, and that the Welsh Government had not had due regard to the requirements of the SCA concerning subsidies to air carriers.

The CAT rejected every part of the challenge. First it held that the Welsh Government had been entitled to conclude that the availability of a credit facility to Cardiff Airport meant that it was not ailing or insolvent. The CAT rejected the argument of Bristol Airport that the credit facility should not be taken into account because it was the Welsh Government that had provided it. The CAT however saw no reason to exclude it from the “counterfactual”: the fact was that the credit facility was there, had been provided on “commercial market” terms (i.e. not on a “subsidy” basis), and there was no basis to conclude that this was itself unlawful. In essence Bristol’s argument failed because it had not discharged the onus that fell on it to demonstrate that the Welsh Government was obviously wrong to conclude that Cardiff Airport was not ailing or insolvent. The CAT went on to point out that the SCA does not as such prohibit subsidies to ailing or insolvent enterprises, only those which are intended to rescue or restructure them, which was not the case here.

Second the CAT rejected Bristol’s arguments concerning the Welsh Government’s conclusion that the subsidy was consistent with the subsidy control principles. The CAT applied the “Wednesbury unreasonableness” standard of irrationality – that is, was the Welsh Government’s conclusion on each principle so unreasonable that no reasonable decision maker could have concluded the same way. The CAT determined the answer to that to be “no”. Increasing regional economic activity associated with the airport rationally pursued an equity-based objective (note, not a market failure). The Welsh Government had considered and rationally rejected alternative approaches to achieving this. It had concluded based on evidence that the subsidy would allow for route developments that would otherwise not happen. It had properly assessed the competitive impact including on Bristol and had concluded that the balance favoured giving the subsidy anyway, as the SCA entitled it to do.

Finally the CAT rejected the challenge based on section 28 of the SCA on the basis that it is only applicable where subsidies are given directly to carriers. Any assistance that the subsidy allowed Cardiff to give to carriers was itself required to be on commercial market terms.

Comment

In many ways the outcome here was not particularly surprising. While special provisions concerning subsidies to ailing or insolvent enterprises and air carriers are often seen as complete barriers to subsidies, they are not that. Most significantly, the CAT has underlined that the SCA is a ‘self-policing’ regime: it is for a public authority to decide whether a subsidy is consistent with the principles that are set out, and a court will not lightly interfere with that assessment. In particular the CAT was not prepared to second-guess the Welsh Government’s stated objective for providing the subsidy. The level of judicial deference here may be in line with what Parliament intended, but it does seem to render the substantive duties imposed by the SCA something of a dead letter in reality, if only a subsidy which is patently not consistent with the principles is liable to successful challenge.

The Welsh Government was probably also wise to respond to earlier criticisms by the Subsidy Advice Unit within the Competition and Markets Authority in its assessment of the original principles assessment, by supplementing that original assessment with additional analysis and expert input.

Allanvale Homes (Prestwick) Ltd v South Ayrshire Council [2026] CSOH 25

This case concerned a challenge brought by a developer against a decision by a Scottish local authority to refuse to provide financial assistance to support the provision of roads and other infrastructure in order to unlock a development site owned by that developer. The authority had determined, on legal advice, that there was a risk that the provision of that assistance would qualify as a subsidy under the SCA. Having undertaken a subsidy control principles assessment and concluded that the provision of the subsidy would not be consistent with those principles, if it was indeed a subsidy it would on its face be an unlawful one. The authority declined to provide the assistance requested.

The petitioner challenged that on several grounds, including that the authority had been wrong to proceed on the basis that the assistance was capable of being a subsidy, and that councillors had not had the legal advice concerning that matter in front of them when the decision was taken.

Because the decision here had been to refuse to provide a subsidy, it was not a challenge to a subsidy which required to be brought in the CAT, but rather a judicial review which required to be brought in the Court of Session.

Lord Lake accepted that the decision was one that was subject to judicial review, on the basis that what the authority was deciding was whether to exercise (or not exercise) statutory functions to provide such assistance. However Lord Lake proceeded to reject all of the substantive arguments made by the petitioners.

On the SCA points, Lord Lake considered that the petitioner had focused on whether the assistance would be a subsidy rather than whether there was a risk that it would be, which was the question that officers had putto senior counsel and the basis on which they had recommended refusing the assistance requested. The Council was entitled to determine the level of risk it was prepared to take and therefore the question that it wished to put to senior counsel, and it was not the place of the court to find that the Council ought to have been prepared to simply take the risk that the assistance would later be found unlawful. On the substantive question Lord Lake concluded that:

“The question of whether the funding for infrastructure is a subsidy does not have a simple clear answer. It would depend on the view taken of whether the funding constituted a benefit specifically to the petitioners.”

The position on infrastructure funding as subsidy has perhaps been made clearer since this case was brought, with the publication of a new streamlined route for support to regeneration, including infrastructure works. Clearly such works are capable of being a subsidy if Parliament considers it appropriate to provide a route to giving them lawfully, albeit in narrowly defined circumstances.

With regard to whether councillors had the relevant legal opinions in front of them, Lord Lake considered that this was irrelevant. What mattered is that they had the report of officers setting out what that legal advice was – something that was undisputed – and that, in the Court’s view, the legal advice had been fairly and accurately summarised in that report. Elected members knew that the opinions existed and could have requested them if they wanted to. It was not necessary that they be included in the papers given to members. The final and definitive advice to members was what was set out in the report and it was not necessary or appropriate to examine every piece of advice provided in the run up to that. It could be inferred that the Council took the decision it did having had due regard to what was set out in the report.

Finally the Council had no duty to weigh Allanvale’s arguments against those raised by officers and therefore no duty to provide reasons for siding with the recommendation and the advice given over the petitioner’s preferred position. A Council does not decide quasi-judicially between the recommendation of officers and the arguments of third parties.

Comment

This case is an unusual example of the SCA being considered by the court in circumstances where a subsidy has not been given, rather than where it (allegedly) has. The Court of Session has underlined the potential breadth of the definition of “subsidy” under the SCA and therefore the scope for something to be a subsidy in one context and not a subsidy in a different context, particularly given the lack of case law on the correct application of the SCA. The regime is self-policing in this way too. Perhaps the South Ayrshire case offers an explanation of why no CAT challenges have yet been successful – is it too much to hope that perhaps this is a reflection of authorities taking their duties seriously and deciding against subsidies where they think the risk of unlawfulness is too high?

More broadly Lord Lake’s decision underlines the level of scrutiny that the court will apply to decisions of local authorities in judicial review proceedings. A decision taken by a local authority, on the basis of a report presented by officers to that authority, will be presumed to be taken based on that report. It is not necessary that every piece of evidence or advice that might be cited in that report is presented as an accompanying paper.

Jamie Dunne at Brodies acted for South Ayrshire Council, instructing Ruth Crawford KC and Niall McLean, Solicitor Advocate (of Advocacy by Brodies).

If you would like to discuss how these cases (or the Subsidy Control Act more broadly) affect your organisation, please contact Jamie Dunne, Niall McLean or Charles Livingstone, or your usual Brodies contact.