Law During Lockdown: State Aid & Sport

What is State Aid and what is the problem with it?

The current Coronovirus pandemic and the impact it is having on a wide range of different industries and businesses is well reported in the news, as are some of the schemes that governments are using to try to help and support industries and businesses to get through it.

However, a principle which is central to the working of any free market economy is that competition is king, and consequently, that the state should not help individual businesses in a way that provides an unfair advantage over its competitors.  Such ‘help’ includes just the sort of things that governments and local authorities are offering at the moment;  loans, guarantees of loan repayments, relief of debt, wage subsidies, tax relief (amongst other things). If unfair assistance is provided (so the theory goes) then the market becomes distorted, potentially leading to monopolies, higher prices, inefficiency, poorer products and services (to name but a few problems).  What is more, the fundamental importance of competition applies to any ‘market’, both national and international (such as the single market in Europe) and explains why nation states are often prepared to voluntarily agree to restrictions on how they can assist ‘their own’ businesses. Such restrictions usually arise as part of wider trade deals and are generally referred to as rules against ‘state aid’.

State aid and the COVID-19 pandemic

In the context of the EU state aid rules that are relevant to the UK, the general prohibition on state aid is subject to various exceptions and exemptions, including dealing with the fall-out of exceptional occurrences (such as a pandemic). If you like, the pandemic is just the sort of situation where rules against state aid become a lot more flexible. That said, states are not free to do as they please and  for schemes involving large sums of money, prior permission of the EU commission is generally required. It appears so far that the EU is taking an understanding approach given the context, but it remains to be seen how flexible the state aid rules will prove to be, whether they may limit what governments and local authorities can do to help businesses and industries and whether there may be problems later down the line.

The sporting industry is one of the industries to be most severely hit by the pandemic and one that id relying on government assistance. In a recent webinar hosted by SportsResolutions  and barristers from 39 Essex Chambers provided an insight was provided into some of the potential opportunities to gain assistance (as well as the pitfalls) for the sports industry presented by the ‘relaxation’ of state aid rules in the current pandemic.

Opportunities and pitfalls for sports

One particularly interesting angle that was discussed was the possibility of sporting organisations ( or whole industries) who are able to demonstrate the wider social benefits  they can offer (e.g. in promoting health and social cohesion) may find that they are in the favourable position to receive state assistance. An example of such assistance is a recent £16 million loan to Rugby League, with the significant social impact on the north of England being given as a particular reason for government assistance.

On the flip side of the coin, there is uncertainty about how the use of state aid will play out where different states are taking different approaches, or indeed where states are taking different approaches to different sports.  For example, Tottenham Hotspur have recently been granted a £175 million loan facility by the bank of England. Might there be a legal challenge in the future from a club in a different EU country who has not had the benefit of such a loan scheme? Is competing againsgt a team with ‘government’ backing fair?

If you would like to find out more on state aid rules and how they may impact on sports organisations, you can access the recording of the webinar on youtube.

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