{"id":83904,"date":"2025-11-04T11:33:16","date_gmt":"2025-11-04T10:33:16","guid":{"rendered":"https:\/\/www.lexxion.eu\/?post_type=uksci&p=83904"},"modified":"2025-11-04T15:21:53","modified_gmt":"2025-11-04T14:21:53","slug":"from-the-sublime-to-the-ridiculous-thomas-v-durham-county-council-in-the-cat","status":"publish","type":"uksci","link":"https:\/\/www.lexxion.eu\/en\/uksci\/from-the-sublime-to-the-ridiculous-thomas-v-durham-county-council-in-the-cat\/","title":{"rendered":"From the sublime to the ridiculous: Thomas v Durham County Council in the CAT"},"content":{"rendered":"

Introduction<\/span><\/b>\u00a0<\/span><\/h3>\n

After a slow start, the number of legal challenges brought under the Subsidy Control Act 2022 (the \u201cAct\u201d) has started to tick up. Only one case \u2013 <\/span>Durham Company v Durham County Council<\/span><\/i> \u2013 was lodged in 2023, with a judgment later that year. The second \u2013 <\/span>Weis v Greater Manchester Combined Authority<\/span><\/i> \u2013 was lodged in 2024 and determined in 2025. Both of those concerned, principally, the question of whether a subsidy had been provided at all, and in both the Competition Appeal Tribunal (\u201cCAT\u201d) decided that no subsidy was present.\u00a0<\/span>\u00a0<\/span><\/p>\n

Permission to appeal the CAT\u2019s judgment in <\/span>Weis<\/span><\/i> was given in October 2025 and, hopefully, the Court of Appeal will soon take advantage of the opportunity to clarify the scope of the regime and how it is to be applied. In that regard, the statement issued on 28 October by the EU\u2019s mission to the WTO \u2013 in which it stated that \u201c<\/span>it is vital to enhance the effectiveness of the United Kingdom\u2019s subsidy control system<\/span><\/i>\u201d \u2013 is timely. There is something of a consensus amongst practitioners specialising in this area that the regime lacks sufficient bite to properly motivate consistent compliance.<\/span>\u00a0<\/span><\/p>\n

Two other challenges under section 70 of the Act are currently before the CAT having been lodged in 2025: <\/span>New Lottery Company v Gambling Commission<\/span><\/i> and <\/span>Bristol Airport v Welsh Ministers<\/span><\/i>. The first, as with <\/span>Durham<\/span><\/i> and <\/span>Weis<\/span><\/i>, concerns whether contributions from the National Lottery Distribution Fund (administered by the Gambling Commission) to Camelot\u2019s budget for marketing the National Lottery constitute a subsidy. The Bristol Airport challenge, meanwhile, is the first brought against financial assistance that has been given as a subsidy (and therefore the first in which the CAT will opine on a subsidy principles assessment and the standard to which such assessments will be held under the Act).<\/span>\u00a0<\/span><\/p>\n

Into this mix steps the rather odd claim of <\/span>Thomas et al v Durham County Council<\/span><\/i>, notice of which was published by the CAT on 21 October 2025.<\/span>\u00a0<\/span><\/p>\n

The facts of the claim<\/span><\/b>\u00a0<\/span><\/h3>\n

Mr Thomas\u2019 claim (in which there are four other Claimants: BEK Developments Ltd, Alleyhaus Ltd, Dales and Moors Developments Ltd and Masonic Hall Ltd) concerns decisions of Durham County Council (\u201cDCC\u201d) to award around \u00a310m in regeneration funding to a number of undertakings (including \u00a35.8m to STACK and two grants of \u00a33.1m and \u00a3887k respectively to the Auckland Project).<\/span>\u00a0<\/span><\/p>\n

The claimants allege in particular that:<\/span>\u00a0<\/span><\/p>\n

    \n
  1. the STACK grant was increased from an initial \u00a33.8m to \u00a35.8m \u201cwithout competitive tendering\u201d;<\/span><\/li>\n
  2. the \u00a33.1m Auckland Project grant (for the Market Place Hotel) was only disclosed publicly in April 2025 having been given in January 2023;\u00a0<\/span>\u00a0<\/span><\/li>\n
  3. the \u00a3887k grant to the Auckland Project (for the Artist Hub) has not resulted in a completed project;<\/span>\u00a0<\/span><\/li>\n
  4. the Auckland Project has disproportionate influence within the Stronger Town Board which raises concerns of conflict of interest and bias;<\/span>\u00a0<\/span><\/li>\n
  5. these \u201cselective subsidies\u201d distort local competition \u201ccontrary to the Act\u201d (which Act is not clear) and do not satisfy the principles of proportionality, necessity and minimisation of distortion;<\/span>\u00a0<\/span><\/li>\n
  6. DCC failed to conduct any open or transparent process for allocating the funding \u201ccontrary to the Public Contracts Regulations 2015, in particular regulation 18\u201d; and\u00a0<\/span>\u00a0<\/span><\/li>\n
  7. DCC\u2019s failure to publish eligibility criteria and refusal to allow presentations from competing operators make the decisions to give the funding to the recipients <\/span>Wednesbury<\/span><\/i> unreasonable.<\/span>\u00a0<\/span><\/li>\n<\/ol>\n

    Mr Thomas alleges that, having received \u00a3315k from DCC in regeneration funding for one of his own projects, he subsequently acquired further properties on the basis of representations by DCC that funding would be available for those too, but DCC has refused further funding for lack of resources. Mr Thomas alleges that DCC encouraged him to acquire these properties despite knowing funds would not be available, and that this caused him financial loss.<\/span>\u00a0<\/span><\/p>\n

    What\u2019s odd about it?<\/span><\/b>\u00a0<\/span><\/h3>\n

    Where to begin?\u00a0<\/span>\u00a0<\/span><\/p>\n

    First, you will not find the claim by searching the CAT\u2019s website for claims under section 70 of the Act, because it has not been brought under the Act as such, but instead under section 47A of the Competition Act 1998 (the \u201cCompetition Act\u201d). Section 47A of the Competition Act allows a claim to be brought in the CAT where a person alleges that they have suffered loss or damage in respect of an infringement of Chapter I of the Competition Act (which prohibits anti-competitive agreements) or Chapter II (which prohibits the abuse of a dominant market position).<\/span>\u00a0<\/span><\/p>\n

    It is not clear from the face of the notice of claim precisely what sort of breach of the Competition Act the claimants are alleging. It is difficult to even begin to conceive of a \u201cmarket\u201d for public subsidies in which DCC would be dominant, so the contention is presumably that DCC\u2019s agreements to give funding to STACK and the Auckland Project are agreements with an anti-competitive object or effect (one must assume the anti-competitive effect is the \u201cleg up\u201d that the subsidy is providing to those beneficiaries). This, presumably, is what is meant by the claimants\u2019 allegation that selective subsidies distort local competition \u201ccontrary to the Act\u201d.<\/span>\u00a0<\/span><\/p>\n

    It is at this point that one begins to get the sense that the claimants have proceeded without specialist legal advice. For, whether the grant agreements can or cannot be described as having anti-competitive effects in a broader philosophical sense, they are not governed by the Competition Act. Section 2 of that statute prohibits:<\/span>\u00a0<\/span><\/p>\n

    \u201c<\/span>agreements between undertakings, decisions by associations of undertakings or concerted practices which have as their object or effect the prevention, restriction or distortion of competition within the<\/span><\/i> [UK] <\/span>and which\u2014 (a) in the case of agreements, decisions or practices implemented, or intended to be implemented in the <\/span><\/i>[UK]<\/span>, may affect trade in the <\/span><\/i>[UK]<\/span>, or (b) in any other case, are likely to have an immediate, substantial and foreseeable effect on trade within the<\/span><\/i> [UK]\u201d<\/span>\u00a0<\/span><\/p>\n

    The problems here are obvious: in what sense is DCC acting as an \u201cundertaking\u201d? Even if one accepts for argument\u2019s sake that it was, in what sense would an undertaking choosing one contractual counterparty over another constitute a prevention, restriction or distortion of competition? Public bodies are of course subject to a number of special rules when they enter into commercial agreements, from public procurement and subsidy control rules to best consideration, best value and administrative law principles. They are subject to those rules precisely because a person\u2019s choice of contractual counterparty (including their discretion to contract or not contract with any other party) is not as a generality a regulated matter. It is certainly not a competition law problem. If I freely choose to buy something from a given enterprise (or indeed, for whatever reason, to donate money to that enterprise) that will clearly be a good thing for that enterprise and a bad thing for its competitors (who might otherwise have secured the sale or donation) but that is competition at work, not a <\/span>distortion<\/span><\/i> of it.<\/span>\u00a0<\/span><\/p>\n

    If DCC choosing to enter into a grant agreement with A and not B is not, therefore, a breach of the Competition Act, then is it a procurement issue?<\/span>\u00a0<\/span><\/p>\n

    Clearly not. The Public Contracts Regulations 2015 (in force at the relevant time but superseded for entirely new procurements with effect from 24 February 2025) regulate the award of public contracts. A contract is defined for such purposes as a contract \u201c<\/span>for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities and having as<\/span><\/i> [its] <\/span>object the execution of works, the supply of products or the provision of services<\/span><\/i>\u201d. It is trite law that this requires the creation of an enforceable obligation to deliver something for the contracting authority\u2019s benefit (<\/span>Helmut Muller v Bundesanstalt f\u00fcr Immobilienaufgaben<\/span><\/i>) and so by definition a grant arrangement (which provides financial assistance which may be tied to specific purposes) is not a public contract.\u00a0<\/span>\u00a0<\/span><\/p>\n

    Subsidy control<\/span><\/b>\u00a0<\/span><\/h3>\n

    Of course, as I have noted, public authorities do not have a free hand to give money to favoured enterprises (or at least, the UK-EU Trade and Cooperation Agreement obliges the UK to ensure in its domestic law that they do not). But that is not a competition or procurement matter, it is a matter of subsidy control.<\/span>\u00a0<\/span><\/p>\n

    The purpose of the UK\u2019s domestic subsidy control regime is \u2013 <\/span>as I have argued here before<\/span><\/a> \u2013 at best a little confused, but is at least partly to ensure that taxpayer funded grants are properly justified and their distortive effects on competition minimised. DCC \u2013 like any other public authority \u2013 has duties when it is deciding whether to provide such financial assistance.\u00a0<\/span>\u00a0<\/span><\/p>\n

    What the notice of the claimants\u2019 claim does not mention, though, is the steps that DCC has taken to comply with those duties. In particular the grants to the Auckland Project formed part of a broader package worth \u00a328m that was the subject of a detailed assessment as to whether that subsidy was consistent with the subsidy control principles \u2013 an assessment that was referred to the Subsidy Advice Unit in February 2025 and reported on in March 2025. As SAU reports go this was fairly glowing, with only two areas identified for improvement: greater clarity on what would happen if the viability gap was larger than the subsidy, and the removal of wider potential benefits that did not relate directly to the policy objective.<\/span>\u00a0<\/span><\/p>\n

    The SAU\u2019s report on DCC\u2019s assessment makes it particularly clear that questions of market distortion have been dealt with head-on, with potential negative impacts properly considered. Ultimately:<\/span>\u00a0<\/span><\/p>\n

    \u201cthe Council conclude that the risk that the proposed projects may distract from other regional businesses is outweighed by the beneficial effects that enhanced infrastructure, increased employment and economic activity will have in pursuit of the policy objectives.\u201d<\/span><\/i>\u00a0<\/span><\/p>\n

    It is difficult to see in the SAU\u2019s assessment any indication of significant flaws in DCC\u2019s assessment that might lead the CAT to conclude that the subsidies \u201cdo not satisfy the principles of proportionality, necessity and minimisation of distortion\u201d. Indeed, DCC may find itself glad that this assessment was the subject of an SAU report, given that this means its assessment has already survived external scrutiny. The CAT will of course reach its own conclusions but it is hard to imagine it departing significantly from the SAU\u2019s views.<\/span>\u00a0<\/span><\/p>\n

    In theory arguments as to a lack of transparency might have more force \u2013 if DCC had awarded the Auckland Project \u00a33.1m in January 2023 then it would have had to publish an entry on the subsidy database within three months of confirmation of its decision (section 33(3)(c) of the Act). But there is no basis given for the assertion that the award was made in January 2023 (and that suggestion would not be consistent with an SAU referral in 2025).<\/span>\u00a0<\/span><\/p>\n

    Bias and <\/span><\/b>Wednesbury<\/span><\/i><\/b> unreasonableness<\/span><\/b>\u00a0<\/span><\/h3>\n

    Pity the town of Wednesbury. It is more than 75 years since the Court of Appeal held that its decision to prohibit children in cinemas on Sundays was not \u201c<\/span>so outrageous in its defiance of logic or accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it<\/span><\/i>\u201d and was not, therefore, irrational as a matter of administrative law. Yet its name is doomed to be forever associated with decisions that meet that threshold of outrageousness.\u00a0<\/span>\u00a0<\/span><\/p>\n

    Thus the claimants here argue that DCC\u2019s processes (in particular its opacity, failure to publish eligibility criteria, and refusal to allow presentations from competing operators) render its decision to award the subsidies to STACK and the Auckland Project \u201c<\/span>unreasonable in the Wednesbury sense<\/span><\/i>\u201d.<\/span>\u00a0<\/span><\/p>\n

    It is again trite to observe that this is a very high hurdle for any challenger in judicial review proceedings. There seems little road for such a claim here.<\/span>\u00a0<\/span><\/p>\n

    As to the argument that the Auckland Project exercised disproportionate influence within the Stronger Town Board, it is difficult to begin to see the relevance of this. It is not, of course, a decision of the Stronger Town Board that is under review, but a decision of DCC. No suggestion appears to be made that DCC delegated any decision making authority to that Board.<\/span>\u00a0<\/span><\/p>\n

    The remedies sought<\/span><\/b>\u00a0<\/span><\/h3>\n

    The claimants ask the CAT to declare that the subsidies breach subsidy control, competition and\/or public procurement law, to require DCC to recover the subsidies, to direct DCC to undertake competitive allocation of future regeneration funding, and to compensate the claimants for the \u201closs\u201d of grant allocations for their own projects, as well as abortive costs associated with those projects, and litigation costs.<\/span>\u00a0<\/span><\/p>\n

    Of course, recovery is only a remedy if the Act has been breached. The competition and procurement challenges might be a basis for damages (if they had any substance to them at all) but would not provide a basis for disgorgement. The claimants\u2019 only \u201closs\u201d seems to be that they were not themselves the recipients of public money \u2013 but of course it does not follow that had STACK and the Auckland Project not been funded the claimants would have been. There does not appear to be any argument here that funding those projects has or will, by itself, cause loss to the claimants (for example because they will face tougher competition from those funded projects).<\/span>\u00a0<\/span><\/p>\n

    Most implausible though is the request that the CAT mandate a specific means of compliance with the subsidy control principles \u2013 to wit, a competitive allocation process. If Parliament had wanted to mandate such a thing it could have, but it left it to individual public authorities to decide on the appropriate process and substantive measures to deploy so as to minimise competitive distortion. Even in a much stronger challenge than this it is nigh on impossible to see the CAT, in what is (we must bear in mind) a <\/span>judicial review<\/span><\/i>, mandating a particular process to follow.<\/span>\u00a0<\/span><\/p>\n

    Concluding thoughts<\/span><\/b>\u00a0<\/span><\/h3>\n

    Although not articulated as such, this is the fifth legal challenge brought under the Act. Two have failed on the basis that the CAT did not think they involved subsidies. The third may yet fail on the same argument. The fourth involves an acknowledged subsidy and will finally give some clarity on the intensity of review to be applied by the courts to subsidy principles assessments. The fifth, as we have seen, holds little promise of useful precedent.<\/span>\u00a0<\/span><\/p>\n

    Why have claims so far been so few, and so weak? A lack of transparency doesn\u2019t help. There simply cannot be as few public subsidies as would be suggested by the number of entries on the subsidy database. Public authorities are effectively entrusted to police themselves: yes, a subsidy principles assessment may in some circumstances have to be subject of a public report by the SAU (a category limited even further now by the increase in the principal Subsidy of Particular Interest threshold to \u00a325m), and yes subsidies have to be published. But how would anybody know if they were not? The most questionable subsidies are precisely the ones that will be most shielded from public view, either because the authority (possibly in good faith, possibly not) has concluded that they are not subsidies at all, or because it has decided not to publish the details. Only an independent national monitoring body (in lieu of the European Commission) or a regime that mandates full transparency of all financial assistance from public funds, and allows potential challengers to identify the subsidies from amongst them \u2013 or both \u2013 can possibly be expected to provide an effective safeguard.<\/span>\u00a0<\/span><\/p>\n

    Perhaps, for all its wanting, the <\/span>Thomas<\/span><\/i> case is a sign of coming change. Procurement challenges typically involve winners and losers: one supplier will win the contract, one (or several) others will not, and they will be aggrieved. Subsidies have not, at least since the Act came into effect, been quite so zero sum. If all can have prizes, there is less incentive to challenge the prizegiver\u2019s choices. But in a new age of public sector austerity there will not be enough for grants to everyone. One can read from the face of this challenge that the claimants might not have brought it if only they had been funded too (by contrast, Bristol Airport appears primarily to seek a level playing field with Cardiff Airport where nobody is propped up with public money). These situations will become more common. Will more challenges follow?<\/span>\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

    Introduction\u00a0 After a slow start, the number of legal challenges brought under the Subsidy Control […]<\/p>\n","protected":false},"author":145,"featured_media":83901,"menu_order":0,"comment_status":"open","ping_status":"closed","template":"","uksci-category":[3614],"uksci-tag":[],"class_list":["post-83904","uksci","type-uksci","status-publish","has-post-thumbnail","hentry","uksci-category-uksci"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.lexxion.eu\/en\/wp-json\/wp\/v2\/uksci\/83904","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lexxion.eu\/en\/wp-json\/wp\/v2\/uksci"}],"about":[{"href":"https:\/\/www.lexxion.eu\/en\/wp-json\/wp\/v2\/types\/uksci"}],"author":[{"embeddable":true,"href":"https:\/\/www.lexxion.eu\/en\/wp-json\/wp\/v2\/users\/145"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lexxion.eu\/en\/wp-json\/wp\/v2\/comments?post=83904"}],"version-history":[{"count":4,"href":"https:\/\/www.lexxion.eu\/en\/wp-json\/wp\/v2\/uksci\/83904\/revisions"}],"predecessor-version":[{"id":83914,"href":"https:\/\/www.lexxion.eu\/en\/wp-json\/wp\/v2\/uksci\/83904\/revisions\/83914"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lexxion.eu\/en\/wp-json\/wp\/v2\/media\/83901"}],"wp:attachment":[{"href":"https:\/\/www.lexxion.eu\/en\/wp-json\/wp\/v2\/media?parent=83904"}],"wp:term":[{"taxonomy":"uksci-category","embeddable":true,"href":"https:\/\/www.lexxion.eu\/en\/wp-json\/wp\/v2\/uksci-category?post=83904"},{"taxonomy":"uksci-tag","embeddable":true,"href":"https:\/\/www.lexxion.eu\/en\/wp-json\/wp\/v2\/uksci-tag?post=83904"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}