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Draft Withdrawal Agreement: Procurement and State Aid Update

on Tuesday, 18 December 2018.

The UK Government has recently published the draft Withdrawal Agreement, which sets out the basis upon which the UK will leave the EU.

The agreement governs the initial steps to ensure the orderly exit from the European Union and includes provisions for a transition period currently proposed to last until 31 December 2020. However, this deadline could be extended. The provisions of the transition period will not come into effect if the UK leaves the EU under a 'no deal' scenario. The Withdrawal Agreement does not deal with a longer term relationship between the UK and EU which would need to be subject to further negotiations.

We have reviewed the agreement to identify the key information on the likely future shape of procurement and State aid legislation in the UK in the short to medium term.

Procurement

The public procurement directives (underpinning the Public Contracts Regulations 2015, the Concession Contracts Regulations 2016 and Utilities Contracts Regulations 2016) will apply to all public procurement procedures launched before the last day of the transition period (31 December 2020, unless extended).

Framework agreements established before the last day of the transition period and any subsequent call-off contracts will remain subject to the current legislative regime.

What Next?

After the transition period, once the UK leaves the European Union, EU derived legislation will be re-enacted into the UK Statute book (via the European Union (Withdrawal) Act 2018). The current procurement regime will continue to apply until it is amended by Government.

In the longer term, the shape of procurement legislation in the UK is likely to depend on trade deals negotiated with third countries (including the EU). The UK Government has signalled its intention to accede to the World Trade Organisation Government Procurement Agreement (GPA) which provides reciprocal access to procurement markets. The draft Political Declaration setting out the framework for the future relationship with the EU indicates the UK intends, at present, to 'build on' the GPA standards to make available remedies and review procedures, including before judicial authorities in procurement activity. The political declaration is 'non-binding' and could be subject to significant change.

State Aid

During any transition period, the State aid legislation will continue to apply as it does at present. During this time, the European Commission will oversee State aid investigations and the European Courts will hold ultimate jurisdiction on State aid matters. Additionally, the European Commission will be able to investigate State aid in the UK up to four years after the end of the Transition Period.

What Next?

After the UK leaves the EU, the current State aid legislation will be transposed into UK law, subject to minor amendments to ensure the legislation is effective in a domestic context. The General Block Exemption Regulation, De Minimis Regulation and other State aid schemes will continue to be available.

The Competition and Markets Authority (the "CMA") will take over the role of monitoring and enforcing State aid as well as approving (or rejecting) State aid notifications in the UK after exit day. The CMA will need to assume a new role as independent State aid authority and exercise similar powers to those held by the European Commission in relation to State aid. It is likely to prove challenging to ensure the CMA is sufficiently independent and resourced, particularly where it is required to investigate State aid granted by the Government.


For more information or advice on this or any other procurement or State aid issue you may be facing, please contact Robert Prater in our Procurement Law team on 020 7665 0927.