Brexit and Morocco, corporate re-domiciliation and UK’s Subsidy Control Act

Brexit and Morocco

On 21st April 2022, The Times published a full-page advertisement from “Morocco Now”, the Moroccan Government Trade and Investment Agency, aimed at encouraging UK investors to explore opportunities in Morocco and at building up trade between the two countries. The advertisement referred to the recent official launch of “Morocco Now” in the UK and to its related B2B roadshow, both of which were intended to showcase “how the UK – Morocco business relationship can deepen, and what not to miss out on”.

The development of port facilities known as “Tanger Med”, the strength of Morocco’s passenger car manufacturing and aeronautics industries, the development of low carbon impact production and transportation in Morocco, and Morocco’s “young, dynamic, competitive, and qualified workforce” are all given as reasons in the advertisement for UK investors and traders to work more closely with Morocco. In addition to these industry sectors, Morocco’s food (including such stand-out items as tomatoes, which appear to have given EU tomatoes imported into the UK a run for their money) and drink sectors are established exporters to the UK.

On 26th October 2019, the UK and Moroccan Governments had signed a trade and political continuity agreement, essentially rolling over for the post-Brexit bilateral UK-Morocco trade and investment relationship the terms of the pre-existing EU–Morocco Association Agreement, which applied to the UK while the UK was still a member of the EU. Both sides seem keen to build upon that relationship in the future.

Both the UK and Moroccan Governments have referred to the strong ties that have existed between the two countries for over 800 years and (according to The Times advertisement) to quote Dr Andrew Murrison, the UK PM’s Trade Envoy to Morocco, speaking at the recent “Morocco Now” launch event in London: “I have a message for UK investors: You had better get on this particular bandwagon folks, because it is going places. Morocco has a truly great future in the years and decades ahead and I don’t want the UK to be missing out”.

A very positive message!

Brexit and Corporate Re-domiciliation

On 12th April 2022, the UK Government published the Outcome (essentially a Summary of Responses from interested stakeholders) of its Consultation on Corporate Re-domiciliation.

The Outcome document reported that, overall, respondents were broadly supportive of the UK Government’s proposal to introduce a corporate re-domiciliation regime and noted that existing routes to relocate companies are cumbersome and costly. The Outcome document further reported that respondents agreed that a re-domiciliation regime should be flexible but recognised the need to balance simplicity of design with sufficient rigour and appropriate checks. According to the Outcome document, the majority of respondents supported a two-way regime, permitting both inward and outward re-domiciliation.

In the “next steps” section of the Outcome document, the UK Government reported that it intends to introduce a corporate re-domiciliation regime, making it possible for companies to move their domicile to and relocate to the UK by enabling the re-domiciliation of companies. In its final paragraph of its “next steps” section, the Outcome document states, however, that more detailed analysis and engagement will be needed before it will be possible to enact the required legislation.  It concludes: “The [UK] Government will continue to develop these proposals [for corporate re-domiciliation] taking full account of the responses to this consultation, including further formal consultation as appropriate”.

It is perhaps significant that in the post-Brexit era the UK is open to new ideas for corporate reform.

Brexit and the UK’s Subsidy Control Act 2022

The UK’s Subsidy Control Act 2022 received Royal Assent on 28th April 2022 and is expected to come into force in Autumn 2022.

According to the UK Government’s press release of the same date, under the new rules, UK public authorities (including the UK’s devolved administrations and local authorities) will, for the first time, decide whether to issue subsidies by following UK–wide principles. As the press release puts it: “These UK-wide principles will allow public authorities to deliver subsidies where they are needed without facing excessive red tape, creating a level playing field for subsidies across the entire country”.

The press release goes on:-

“The new system will prohibit subsidy races in which public authorities try to outbid each other’s subsidies to attract investment and will also give public authorities the flexibility to design subsidies according to local needs, including to give subsidies that target localised and regional inequalities.

“The new rules will help foster a vibrant free market economy in the UK by banning unlimited government guarantees to businesses as well as subsidies granted to “ailing or insolvent” enterprises where there is no credible restructuring plan.

“The UK’s new system will also contribute to meeting the UK’s international commitments on subsidy control, including its international commitments at the World Trade Organization (WTO) and in Free Trade Agreements”.

The press release confirms that enforcement of the new subsidy system will be through the UK’s courts and tribunal system and that jurisdiction to judicially review the award of subsidies will be given to the UK’s Competition Appeal Tribunal. The press release also confirms that a new Subsidy Advice Unit will be set up within the UK’s Competition and Markets Authority.

According to the press release, a limited set of subsidies will be exempted from the new subsidy control principles, such as those required for safeguarding national security and subsidies granted temporarily to address emergencies such as flooding. As is the case now, however, all subsidies will still be subject to WTO rules.

The press release reminds readers that on 25th March 2022 the UK Government launched a public consultation (closing on 6th May 2022) on the initial Subsidies of Interest/Particular Interest regulations.

The press release adds that, ahead of the new regime coming into force, the UK Government will be publishing guidance to support public authorities getting ready for the new rules.

In Northern Ireland, the press release refers to Article 10 of the Northern Ireland Protocol, which provides that EU State aid rules will continue to apply to the UK in respect of measures which affect trade in goods and wholesale electricity between Northern Ireland and the EU. The press release goes on that the UK Government considers the existing provisions in Article 10 to be “redundant in their existing form” and that “the current situation prevents subsidies from being granted on an equal basis across the UK, so there are issues to be addressed”.

Interesting times!

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Disclaimer: Nothing in the Legal Insights section and this blog is intended to provide legal or other professional advice and, if readers are interested, they should consider taking separate legal or other professional advice accordingly.

David Glass

Partner in Business & Corporate, Commercial Contracts
& Insolvency & Corporate Recovery

E: [email protected]
T: +44 (0)845 257 9449