Oliver Slater and Beatrice Wood discuss the application of the subsidy control regime to Manchester United's plans for a new stadium and regeneration of the surrounding area.
Manchester United’s plans to build a new stadium have been the subject of widespread criticism: the design has been likened to a “circus tent”, the club’s Supporters’ Trust is “anxious” about implications for ticket pricing; and Graham Stringer MP has described the plans as a “tax exile’s half-baked, misbegotten scheme”.
Mr. Stringer is, concerned about the public sector’s role in facilitating the scheme (which he says will not be able to proceed in the absence of public funding). But is there any basis for a legal challenge to such proposals? And, if so, who would be able to bring such a challenge?
We explore these questions below by specific reference to the UK’s subsidy control regime.
Legal recap on relevant rules
Previous UK sporting infrastructure projects were implemented under EU State aid rules, which govern how EU member states provide financial aid to businesses.
Post-Brexit, economic advantages awarded by UK public authorities are governed by the Subsidy Control Act 2022 (SCA).
These rules are largely untried and untested in terms of legal challenge (only two challenges have been brought under the domestic legislation).
While the SCA appears to offer a more extensive scope to grant aid in some areas than the prior prescriptive EU State aid rules and restrictions, there is no way at the present time to be certain that this is the case.
In order to determine whether SCA rules apply, a public authority first has to determine whether its actions amount to the award of a “subsidy”.
If there is no subsidy, there is no subsidy control.
A subsidy arises where financial assistance:
- is given from public resources by a public authority;
- confers an economic advantage on an enterprise;
- is specific; and
- has, or is capable of having an effect on competition, investment or trade either internally or externally to the UK.
If a subsidy does arise, the public authority must assess that subsidy against the seven subsidy control principles (which include requirements for the subsidy to be proportionate and remedy an identified market failure).
Public authorities are not permitted to award subsidies which are not consistent with these principles.
Do Manchester United’s proposals give rise to a potential subsidy?
Specific details regarding the new stadium are (understandably, at this formative stage) scant.
Andy Burnham (Mayor of Greater Manchester) is clear that “It will be for Manchester United to fund their new home. There will be no public money and that will not change.”
However, the new stadium sits at the heart of wider proposals to regenerate the Trafford area.
To continue Mr Burnham’s analogy, taxpayers may not end up paying for the new house, but will they be asked to pay for the surrounding estate?
United’s Chief Executive, Omar Berrada, says that “the stadium in isolation doesn’t make sense without the wider regeneration project.”
Burnham himself has also referenced ambitious plans to create “thousands of new homes and jobs”.
Rumours also surfaced last year suggesting that the rail freight terminal site adjacent to the current stadium would need to be relocated to make room for the new build.
At this formative stage, key details remain unclear: will the public sector end up carrying out / funding necessary activities?
Will there be an identifiable benefit to Manchester United?
Answers to these questions will be crucial in determining whether suitable grounds for a subsidy control challenge exist.
However, we do know that infrastructure that benefits a specific third party may potentially give rise to subsidy.
If the public sector facilitates the new stadium by building a road to link the stadium to the public highway, or by funding the relocation of the rail freight terminal, questions of subsidy may arise.
If a subsidy arises, the awarding public authority must ensure that it aligns with the subsidy control principles.
This would raise interesting questions of law: how does one argue that a market failure exists in an industry where the club’s competitors have built new stadiums without the need for public funding?
How does one demonstrate the proportionality of a subsidy to a business owned by a billionaire, or that the club would not otherwise fund the costs of the scheme in the absence of state subsidy?
These are not impossible hurdles, but ones which will form the basis of any subsidy assessment carried out by the public sector.
Plans are insufficiently developed to carry out a meaningful assessment at this stage, but subsidy control will need to be considered as more concrete plans develop.
The devil will be in the detail, but it certainly appears as if there is the potential for subsidy questions to arise in respect of the proposed scheme.
Who could challenge Manchester United?
The SCA makes provision for challenges of subsidy decisions to be brought by “interested parties”. This is anyone whose interests may be affected by the giving of the subsidy.
This would appear to open the door to Manchester United’s on-pitch competitors mounting legal challenges.
If the club builds a new stadium, it will generate increased revenue, facilitating additional transfer investment.
This clearly has the possibility of affecting Premier League rivals’ interests.
There is precedent for legal challenges in this regard (albeit pre-dating the SCA).
The 2011 decision of the Olympic Park Legacy Company to grant West Ham United tenancy over the London Stadium was challenged by Tottenham Hotspur by way of judicial review.
The matter ultimately settled out of court, but the Tottenham challenge provides a blueprint for strategic litigation being used to leverage Manchester United’s situation to the benefit of its competitors (Tottenham was subsequently granted permission to build its own new stadium).
The Premier League is also in a particularly litigious era (see recent litigation over the league’s financial rules).
In this context, a challenge on subsidy control grounds should not be ruled out if it stands to potentially delay or altogether halt United’s ambitious proposals.
Wider implications
The analysis above has wider implications for public sector infrastructure schemes, including under what circumstances such schemes give rise to subsidies.
Due to the typically high value of public infrastructure projects, any subsidies arising may trigger the £10m threshold for mandatory referral to the Competition and Markets Authority.
A decision not to consider the subsidy control principles in respect of a “subsidy of particular interest” which should otherwise be referred would leave prospective challengers with an open goal.
Any decision to strike a particular scheme out of the subsidy control regime should be taken cautiously in this context.
Further, and outside the remit of the SCA, judicial review could again be used as a litigation vehicle to slow down or halt United’s plans (as it was in the London Stadium case).
Competitors may consider challenging the rationality of the public sector facilitating a scheme for the benefit of a football club owned by a billionaire.
It is clear that public sector stakeholders should tread carefully in respect of the scheme, less they risk receiving a red card for statutory non-compliance.
Oliver Slater is an Associate and Beatrice Wood is a Junior Associate at Sharpe Pritchard LLP.
Sharpe Pritchard’s market-leading subsidy control team has a wealth of experience advising on the interpretation and application of subsidy control legislation and EU State aid rules. The team advises on the full range of subsidies, from minimal financial assistance awards to subsidies of particular interest considered by the Competition and Markets Authority. Our experienced and active dispute resolution team is experienced in advising both public authorities and challengers in respect of judicial review claims.
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