{"id":85517,"date":"2026-04-09T13:30:11","date_gmt":"2026-04-09T11:30:11","guid":{"rendered":"https:\/\/www.lexxion.eu\/?post_type=uksci&p=85517"},"modified":"2026-04-09T13:35:58","modified_gmt":"2026-04-09T11:35:58","slug":"vexatious-litigation-subsidy-control","status":"publish","type":"uksci","link":"https:\/\/www.lexxion.eu\/en\/uksci\/vexatious-litigation-subsidy-control\/","title":{"rendered":"Vexatious Litigation in the Subsidy Control Regime"},"content":{"rendered":"

Table of Contents:
\n<\/strong>1. The Claim<\/a>
\n2. A Pattern of Vexatious Litigation in The CAT?<\/a>
\n3. Might the Role of Artificial Intelligence (AI) Also Contribute to This Emerging Pattern?<\/a>
\n4. Final Thoughts<\/a><\/p>\n

 <\/p>\n

A public authority\u00a0was recently copied\u00a0into an email principally addressed to the Competition Appeal Tribunal (CAT)\u00a0purporting\u00a0to notify the CAT of an intention to bring an appeal under the Subsidy Control Act 2022 (SCA)\u00a0on the grounds that the\u00a0authority\u00a0had awarded an unlawful subsidy.<\/p>\n

The email was received against the backdrop of a sharp increase in subsidy control challenges. Four challenges were brought under section 70 SCA in 2025, with the latest judgment handed down on 26 February 2026<\/a>. One other has been brought under the Competition Act 1998 (CA98) (see further below). More recently, further claims have continued to\u00a0emerge\u00a0\u2013 the most recent being\u00a0a second case brought by\u00a0Zenob\u0113\u00a0Energy\u00a0Limited\u00a0against\u00a0the\u00a0Gas and Electricity Markets Authority\u00a0on 31 March 2026<\/a>,\u00a0and others are\u00a0likely waiting\u00a0in the wings.<\/p>\n

In this context, one might have expected the threatened challenge to set alarm bells off at the public authority in question. Far from it. The threatened challenge was entirely without merit.\u00a0A concise letter, threatening a costs order, was enough to nip this prospective claim in the bud.<\/p>\n

Examples of such claims, brought without reasonable grounds, primarily to burden the other party with additional delay or expense, are often termed \u201cvexatious\u201d.\u00a0As will be explained, the email itself was deemed as such, owing to issues in both legal and factual merit, as well as the proposed challenge being out of time in any event.\u00a0The principle of \u201cundue delay\u201d as set out in section 72(8) SCA would have no doubt applied had this challenge gone any further.<\/p>\n

But why is the UK\u2019s subsidy control regime attracting vexatious litigation\u00a0such as this? And what can public authorities and prospective appellants alike learn from this case study and the case of\u00a0Thomas &\u00a0Others\u00a0v Durham County Council,\u00a0<\/em>lodged in the latter part of 2025?<\/p>\n

 <\/p>\n

The Claim<\/h2>\n

The prospective appellant argued that\u00a0the public authority,\u00a0pursuant to\u00a0a competitive grant allocation process, had awarded a subsidy\u00a0in excess of\u00a0\u00a32m to a\u00a0direct competitor. They\u00a0surmised that the authority had done so in breach of the SCA,\u00a0alleging\u00a0numerous\u00a0grounds.<\/p>\n

The grounds focused on the authority\u2019s\u00a0apparent\u00a0inability to\u00a0comply with\u00a0the requirements of the SCA. The\u00a0prospective appellant\u00a0argued that the alleged subsidy was a) inconsistent with the subsidy control principles, and b) was not\u00a0publicised\u00a0on the subsidy database (but should have been).<\/p>\n

The prospective appellant\u00a0requested\u00a0a number of\u00a0remedies, including an order requiring the authority to fully fund its own grant application and a review of the authority\u2019s subsidy award process to ensure ongoing compliance.<\/p>\n

The\u00a0prospective\u00a0claim\u00a0was fundamentally flawed.<\/p>\n

First, an appeal was threatened pursuant to Schedule 3 SCA. Schedule 3 SCA sets out rules governing subsidies provided by means of primary legislation. It does not relate to the challenge regime and cannot be read as a gateway into the CAT.<\/p>\n

Second, the prospective claim stated that the allegedly unlawful subsidy awarded by the authority was \u00a32m. The grant competition in question had not resulted in an award greater than \u00a31m.<\/p>\n

Third, the prospective appellant argued that the authority had breached the substantive and procedural requirements of the SCA. However, the authority did not consider that a subsidy had arisen (and therefore such requirements were not engaged). The prospective claim failed to address why it was considered that a subsidy arose in the first place.<\/p>\n

Fourth, the email alleged a breach of subsidy control\u00a0principle\u00a0A on the grounds that the alleged subsidy was disproportionate.\u00a0The proportionality assessment should be conducted\u00a0under subsidy control\u00a0principle\u00a0B.<\/p>\n

Fifth, the claim was threatened months after the prospective appellant had become aware of the allegedly unlawful subsidy. It was plainly out of time: rule 98A of the CAT Rules 2015 provides that an application to the CAT must be made\u00a0within one month of the \u2018transparency date\u2019 on which the interested party first knew or became aware of the subsidy decision.\u00a0In the recent New Lottery <\/em>case<\/a>, the CAT extended this timeframe to scenarios where the public authority has not treated the assistance as a subsidy.<\/p>\n

Finally, even if a subsidy\u00a0was\u00a0unlawfully awarded, that is not to say that the prospective appellant\u2019s application would\u00a0necessarily\u00a0have succeeded.\u00a0As such, it is unclear on what basis the CAT could make an order to fund the prospective appellant\u2019s application. There is also no mechanism for the CAT to order investigations into a public authority\u2019s\u00a0general compliance with the SCA.<\/p>\n

In response to the above, the authority wrote to the prospective appellant, succinctly describing why the claim was without merit. The authority clarified that it would seek its costs in full if proceedings were\u00a0formalised.<\/p>\n

The authority received no further response.<\/p>\n

 <\/p>\n

A Pattern of Vexatious Litigation in The CAT?<\/h2>\n

We were reminded of this case study when reading the CAT\u2019s notice of claim in\u00a0Thomas &\u00a0Others\u00a0v Durham County Council<\/em>.<\/p>\n

That claim was summarised\u00a0by Jamie Dunne<\/a> in a previous edition of the UK Subsidy Control Insider. Without repeating the\u00a0detail, it is fair to say that\u00a0aspects of the claim (at least as summarised publicly) appeared to sit uncomfortably with the pleaded statutory route and forum.<\/p>\n

The claim was brought under section\u00a047A CA98. Section\u00a047A allows for claims for damages\u00a0in the event of\u00a0an alleged infringement of the Chapter I or II prohibitions.\u00a0That\u00a0is\u00a0to say, in\u00a0respect of an alleged anti-competitive agreement or the abuse of a dominant position.<\/p>\n

However,\u00a0on the face of the published summary, the claim did not particularise any\u00a0purported breach\u00a0of either the Chapter I or II prohibition. Instead, the claim focused on alleging that Durham CC had awarded a series of unlawful subsidies. But the claim was\u00a0not\u00a0brought under the SCA, so it\u00a0is unclear on what basis these submissions were relevant in the context of a section\u00a047A CA98 claim.<\/p>\n

For good measure,\u00a0Mr Thomas\u00a0threw in a procurement angle, arguing that the grants were awarded in breach of Regulation\u00a018 PCR 2015 (which sets out the general principles of procurement under the previous legislative regime). Grants are\u00a0not\u00a0\u201cpublic contracts\u201d which are subject to procurement rules. So,\u00a0unless the Council mislabelled services contracts as \u201cgrants\u201d,\u00a0this part of the claim\u00a0also seemed to be\u00a0a non-starter. In any event, PCR 2015 challenges should be brought in the High Court, not the CAT.<\/p>\n

A hearing to consider the claimants’ application to amend their claim form and the defendant’s application to strike out proceedings was listed for 25 March 2026. This hearing was due to consider an application made in\u00a0BEK Developments Ltd and Others v Durham County Council<\/em><\/a>,\u00a0<\/em>which appears to be\u00a0a refined version of this earlier challenge. It should be acknowledged that, at least on the face of the publicly available summary, corrective steps were clearly taken to reformulate the arguments into a more recognisable subsidy control challenge, drawing focus to what should be identified as an identifiable \u201csubsidy decision\u201d (including a decision taken \u201cin principle\u201d) and alleged non-compliance with the subsidy control principles.<\/p>\n

That said, it appears that the case\u00a0was not heard on its listed date in the end, and it is currently unclear whether it will be relisted for a later date.<\/p>\n

For us, this raises a wider question about whether the UK subsidy control jurisdiction is at risk of attracting a \u201csnowball\u201d of claims that generate interim activity but may never reach a full merits hearing. That is not necessarily a reflection on the CAT; as will be discussed later, it may reflect the incentives created by a new, fast-moving regime and the practical difficulty for prospective claimants in accessing sufficiently early legal advice to finesse arguments into an arguable SCA case within tight time limits. If so, there is a role for the legal sector,\u00a0not just\u00a0policy makers,\u00a0to educate clients and colleagues (including in adjacent disciplines\u00a0such as public procurement law) and to reduce avoidable uncertainty, because the regime\u2019s \u201cnewness\u201d can only justify misconceived claims for so long.<\/p>\n

 <\/p>\n

Might the Role of\u00a0Artificial Intelligence (AI)\u00a0Also Contribute to\u00a0This Emerging Pattern?<\/h2>\n

Examples of AI hallucinations have been well\u00a0publicised, including in\u00a0High\u00a0Court litigation<\/a>. Put simply, AI\u00a0is capable of quoting\u00a0the wrong law,\u00a0and such mistakes are not always picked\u00a0up\u00a0by laypersons (or even lawyers). AI can draft\u00a0reasonably compelling\u00a0arguments, but once one scratches the surface, such arguments are found wanting.<\/p>\n

To illustrate the point, we asked\u00a0an AI\u00a0model\u00a0to draft us a letter:<\/p>\n

I want to bring a claim against a public authority. The authority has awarded a \u00a310m grant to my competitor. It should have gone to me! Write me a letter to send to the relevant court. I am\u00a0very angry.<\/em><\/p>\n

The model responded with a\u00a0relatively brief, nondescript letter \u2013 warning that\u00a0\u201ca letter to a court needs to stay measured\u201d<\/em>. So far, so good. To further assist, the model asked if we would like help drafting a\u00a0particulars of claim.<\/p>\n

The particulars of claim \u2013 based solely on the prompt quoted above \u2013 included the following legal inaccuracies:<\/p>\n\n\n\n\n\n\n
Legal inaccuracy<\/strong><\/td>\nCorrect answer<\/strong><\/td>\n<\/tr>\n
The subsidy did not comply with principle D (need to address a market failure or equity objective).<\/td>\nPrinciple D provides that subsidies should not compensate for costs that would have been funded in the absence of the subsidy. The model conflated principle D with principle A.<\/td>\n<\/tr>\n
A public authority must keep contemporaneous records demonstrating compliance (section 33 SCA).<\/td>\nThere is no express requirement in section 33 for a public authority to keep contemporaneous records demonstrating compliance. Section 33 relates to the transparency rules.<\/td>\n<\/tr>\n
The claimant seeks an order quashing the subsidy decision under section 73 SCA.<\/td>\nSection 73 relates exclusively to the CAT\u2019s powers in Scottish cases. We are not based in Scotland.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

On the basis of a 40 word prompt, the model\u00a0(a) drafted particulars of claim,\u00a0(b) incorrectly quoted the law, and\u00a0(c) created new facts to strengthen the claim (for instance,\u00a0\u201cthe defendant misapplied its scoring methodology\u201d;\u00a0\u201cthe evaluation process was inconsistent\u201d; and\u00a0\u201cthe subsidy materially alters competitive conditions in the relevant market\u201d).<\/p>\n

Aside from the proliferation of AI use, there are specific features of the subsidy control regime that unintentionally create an environment in which vexatious or misconceived claims can arise, such as:<\/p>\n

1. There Is No Fee to Bring a Challenge in the CAT<\/strong><\/strong><\/strong><\/strong><\/p>\n

Unlike judicial review or many civil proceedings, there is no issue fee or filing fee for SCA challenges. This removes an early financial barrier that would normally deter weak, speculative, or impulsive claims.<\/p>\n

2.\u00a0 Public Descriptions of the Regime are Likely to Entice More Challengers<\/strong><\/strong><\/p>\n

The CAT has been described<\/a>\u00a0as a \u201cfast, cheap and simple\u201d\u00a0jurisdiction\u00a0for subsidy control challenges. While the volume of claims under the SCA originally expected has not materialised, one can see that this description makes the CAT\u00a0a relatively attractive\u00a0jurisdiction\u00a0for appellants. Combined with the no-fee structure, this creates low-risk, low-cost conditions\u00a0for vexatious litigants to \u201chave a go\u201d.<\/p>\n

3. Contextually, the Foundation of Subsidy Control Is Built Around \u201cWinners vs. Losers\u201d<\/strong><\/strong><\/strong><\/strong><\/strong><\/p>\n

Subsidy control challenges frequently arise out of competitive funding rounds with clear winners and losers. Aggrieved losers are \u2013 in certain cases \u2013 motivated to challenge awarded processes simply to rerun grievances or attempt to disrupt awards already made, notwithstanding the veracity of supporting legal arguments.<\/p>\n

 <\/p>\n

Final Thoughts<\/h2>\n

Our analysis above\u00a0is not to say that AI is an unhelpful tool. Nor is it an attempt to extol the virtues of\u00a0human\u00a0lawyers. But it is important for public authorities to recognise a potential pattern of vexatious litigation in the CAT \u2013 and understand a potential cause of the same. It is also important for prospective appellants to recognise the implications of spurious claims: namely, reputational damage and costs orders.<\/p>\n

Further, the\u00a0additional\u00a0features of the regime, which\u00a0perhaps enable vexatious litigants highlighted above, are\u00a0not unmanageable.\u00a0However, a core problem with the regime is that our oversight architecture is too \u201clight touch\u201d to filter out weak cases and arguably too narrow to catch the right ones. The\u00a0Subsidy Advice Unit\u00a0can only issue\u00a0non-binding\u00a0reports on referrals and has no initiative or remedial powers of its own, while August 2025\u2019s uplift of the\u00a0SSoPI\u00a0threshold to\u00a0\u00a325m\u00a0has further reduced the flow of large cases into scrutiny, leaving the\u00a0CAT\u00a0to shoulder enforcement with JR-style review. The result is an enforcement gap (fewer cases than expected until a recent uptick) paired with occasional misconceived filings that waste public resources, as explained above.<\/p>\n

To address both dynamics, there are several potential ways the regime could be bolstered. In addition to those suggested by Alexander Rose and\u00a0Schellion\u00a0J. Horn in a\u00a0previous edition<\/a>\u00a0of the UK Subsidy Control Insider, in relation to vexatious claims,\u00a0it may be prudent for the\u00a0government to:<\/p>\n