Another bite at the cherry? New application issued in the CAT challenges subsidies proposed by Durham County Council

Beatrice Wood and Shyann Sheehy provide an insight into a new challenge in the Competition Appeal Tribunal to proposed subsidies to be put in place by Durham County Council.

“CAT” receives application to appeal against proposed Bishop Auckland subsidies.

On 15 January 2026, the Competition Appeal Tribunal (“CAT”) published a notice of an application of an appeal from BEK Developments Ltd, Alleyhaus Ltd, Dales and Moors Development Ltd, and Masonic Hall Ltd (the “Appellants”) challenging two proposed subsidies by Durham County Council.

The proposed subsidies concerned are:

1. the intention[1] to award further grant funding to Stack Bishop Auckland Ltd (“Stack”), who Durham County Council are already party to a grant agreement with for the redevelopment of 9-11 Newgate Street; and
2. a proposed[2] subsidy to The Auckland Project (“TAP”) for the Market Place Hotel development.

The application appears to be a refinement of the previous claim lodged by Mr Graham Thomas & Others in October of last year.

Regardless of its overall merit (as specific detail remains unknown, and showing causation of loss may remain a sticking point), the application serves as a timely reminder that subsidy decisions – whether finalised or still in principle – may be scrutinised closely for compliance with the statutory principles and any scheme requirements.  For public authorities, the application illustrates the importance of robust reasoning, clear policy objectives, and transparent processes.

Further, the issues raised by this application go to the heart of how public authorities should approach subsidy control assessments under the Subsidy Control Act 2022 (“SCA”).

What decisions can be challenged under SCA?

Under section 70 SCA, an “interested party”[3] may apply to the CAT for review of a subsidy decision[4]. Reviewable decisions include granting a standalone subsidy and creating a subsidy scheme.

There are strict procedural rules for the timing for bringing subsidy control review claims to the CAT. Those strict time limits are set in Rule 98A Competition Appeal Tribunal Rules 2015 (“2015 Rules”), which tie a one month window to a “relevant date” defined by either:

• 98A(2)(a): one month after a public authority gives notice to the interested party that it has responded to the request a pre‑action information (as per the duty outlined in section 76), if such pre-action request was made within one month of the “transparency date” (see further below);
• 98A(2)(b): the date of a post‑award referral report (i.e. referred by the Secretary of State to the CMA under section 60 SCA); or otherwise
• 98A(2)(c): on the “transparency date”, being either:
  • The date of publication of the subsidy/scheme on the subsidy control database (where a duty to publish exists under section 33 SCA); or
  • the date the interested party knew or ought to have known of the making of the subsidy decision, in cases where the section 33 duty does not apply (and where a referral under section 60 has not been made).

Read together, section 70 SCA establishes that “subsidy decisions” can be challenged by “interested parties”; Rule 98A of the 2015 Rules controls when they must be challenged.

When is a “subsidy decision” made?

This is a key issue raised by the Appellants in their application. While the relevant grant funding arrangements for the Stack and TAP subsidies have not been finalised, the Appellants contend that a subsidy decision arises where a public authority decides, in substance, to provide an economic advantage through public funds.

This is an interesting point, and the Appellants may have identified a potential area where clarification is needed[5].

Firstly, section 70(7) SCA defines a “subsidy decision” as “a decision to give a subsidy or make a subsidy scheme”, which is arguably not the same thing as the subsidy actually being given (or the scheme being made).

There are parallels to be drawn with judicial review claims on this point. For example, under Rule 54.1(ii) of the Civil Procedure Rules, a claim for judicial review may challenge “a decision, action or failure to act in relation to the exercise of a public function”. That formulation deliberately separates the decision from the action by which it is implemented, meaning challenges can be brought at earlier stages. It may be that Parliament intended the same principle to apply in a subsidy control context.

The application of judicial review processes to the area of subsidy control is not a novel concept, and there is clear direction from the Court of Appeal[6] that, in respect of subsidy decisions, the court should adopt the same standard of review as in judicial review cases (i.e. the court will refrain from substituting its judgment for that of the decision maker.) Therefore, it may be that this extends to the analysis of when a “subsidy decision” is made, meaning challenges could be brought when the decision to give a subsidy has been made ‘in substance’, before the act of transfer has actually occurred?

Further, the interpretation of Rule 98A of the 2015 Rules arguably leaves the door open for the Appellants’ argument. In particular, as outlined above, Rule 98A(2)(c) sets the one‑month clock by reference to a “transparency date,” which (where section 33’s publication duty does not apply) is the date the interested party first knew or ought to have known of the making of the subsidy decision (Rule 98A(4)(b)(i)).

Because the section 33 SCA duty to publish on the subsidy control database only bites once a subsidy is “given”, pre‑award decisions (if they are indeed challengeable “subsidy decisions”) would necessarily fall under the time limit in Rule 98A(4)(b)(i) of the 2015 Rules. In short, it is possible that this time limit could respond both to awards that are never published under section 33 SCA (because they do not need to be) and to pre‑award situations.

All of the above is yet to be clarified by the CAT. For now, it may be safest for public authorities to assume that any economically meaningful steps (including communications, commitments in principle, or progression of funding proposals) could later be scrutinised (at a minimum, as the subject of a notice of an appeal to the CAT).

Bishop Auckland subsidies by Durham County Council: Other key subsidy control issues the CAT could analyse

Durham County Council referred a subsidy control principles assessment on TAP to the Subsidy Advice Unit (“SAU”) in February 2025, with the SAU issuing its report in March 2025. Notably, the SAU identified only two areas requiring improvement:

• first, the need for greater clarity as to how any viability gap exceeding the proposed subsidy would be addressed; and
• second, the removal of wider asserted benefits that did not directly relate to the specific policy objective underpinning the subsidy.

Despite this, the Appellants’ challenge to the Stack and TAP projects centres largely on whether Durham County Council properly applied the statutory subsidy control principles and followed the scheme assessment requirements in sections 12-18 SCA. Again, setting aside merits of the specific factual arguments made (as these are still unknown), the application provides a helpful reminder of the issues public authorities are expected to address when awarding subsidies[7].

Below are the most significant points that this application brings to the forefront, and key subsidy control compliance reminders for public authorities at this stage:

Allegation that Durham County Council failed to recognise new funding as a fresh subsidy

A recurring allegation in the application is that Durham County Council failed to recognise when new funding constituted a new subsidy (rather than an extension of the existing arrangements), requiring a fresh assessment. The Appellants claim the additional funding to Stack amounts to a subsidy under section 2 SCA and that the “commercial market operator principle”[8] does not apply. As such, they allege that the Council should have re-assessed the subsidy in line with the duties under sections 12 – 18 of the SCA.

Reminder:

Authorities should not assume further or varied funding under an existing arrangement falls within the original subsidy assessment. Each additional intervention must be reviewed to determine whether it is:

• a continuation of the same subsidy; or
• a new subsidy requiring independent evaluation and publication

Pursuing a specific policy objective in order to remedy an identified market failure or address an equity rationale (Subsidy Control Principle A)

The Appellants argue that Durham County Council failed to identify and evidence a specific policy objective justifying either subsidy.

Reminder:

Every subsidy must be clearly linked to a defined, specific policy objective. Regeneration-led rationales should be specific, documented, and capable of measurement. Authorities should be able to show why the subsidy advances that objective and why the objective cannot be achieved without intervention, with reference to the relevant market failure and/or equity objective.

Proportionality to the subsidy’s specific policy objective and limited to what is necessary to achieve it (Subsidy Control Principle B)

Concerns are raised in the application about whether the TAP subsidy represented the minimum necessary to deliver the specific policy objective.

Reminder:

Authorities must demonstrate:

• why the subsidy is needed to deliver the policy objective;
• why the chosen form and amount of subsidy is proportionate to achieving the policy objective; and
• how they determined the subsidy is the minimum necessary (e.g. through market-testing, alternative financing analysis, or benchmarking).

Unverified cost escalations or developer-asserted financial constraints (without independent valuation or benchmarking) likely will not suffice.

Subsidies should not normally compensate for the costs the beneficiary would have funded in the absence of any subsidy (Subsidy Control Principle D)

The application challenges the reliance on public funds to address cost overruns that would ordinarily be the developer’s responsibility.

Reminder:

Authorities should analyse whether the issue requiring support stems from a genuine market failure, or simply poor project management or commercial risk that should not be socialised.

Minimising negative effects on competition and investment within the UK (Principle F) and the balancing exercise (Subsidy Control Principle G)

The Appellants argue that Durham County Council failed to assess:

• the distortive effects of subsidies on competitors;
• suppression of market entry or expansion; and
• market foreclosure within the local accommodation and leisure sectors.

Reminder:

Authorities must conduct a competition impact assessment. This does not necessarily need to entail complex economics and should be proportionate to the subsidy in question, but authorities should undertake a reasoned evaluation of:

• the relevant market;
• who competes in it;
• how the subsidy may advantage one economic operator over others; and
• whether this distortion is justified and proportionate

Subsidies should be an appropriate policy instrument for achieving their specific policy objective and that objective cannot be achieved through other, less distortive, means (Subsidy Control Principle E)

The appellants allege that alternatives the proposed subsidies (such as commercial lending, equity participation, phased development, or alternative operators) were not evaluated.

Reminder:

Authorities must document why a subsidy is the least distortive means of achieving the objective. They should justify why a subsidy is the most appropriate instrument for addressing the identified policy objective and explain why other non-subsidy instruments have not been chosen.

Procedural Fairness and Transparency

Claims are also made that affected parties were not adequately notified or consulted, and that the Council failed to publish required information under the SCA[9].

Reminder:

While consultation is not always required, transparency obligations under the SCA are strict. Authorities must publish required information to the subsidy control database within statutory time limits. To facilitate this, authorities should maintain clear records of its decision-making process.

Why does this matter for public authorities?

As explained above, previous caselaw has outlined that CAT should refrain from substituting its judgment for that of the decision maker. Accordingly, the likelihood of a successful legal challenge to a public authority’s assessment of the subsidy control principles under section 12 of the SCA is low, with judicial intervention limited to circumstances of clear legal errors.

However, a challenge being brought by Bristol Airport against the Welsh Government’s subsidy to Cardiff International Airport (which will be heard by the CAT on the 9^th of February 2026) will likely bring the application of the subsidy control principles into question (see our article on this challenge).

This newest notice of appeal on the Stack and TAP subsidies again seeks to challenge the established level of judicial intervention. It is possible that the CAT may clarify expectations for public-sector subsidy decision-making, particularly around necessity, proportionality, and analysis of competitive impact.

Also, this application questions whether subsidy decisions communicated “in principle” may be challengeable under s70 of the SCA, even before grant agreements are executed. It will be interesting to see how this point is dealt with.

In the meantime, for public authorities engaged in public funding, the message is clear: subsidy control principles assessments must be thorough and evidence-based. A well-documented decision-making trail remains the best safeguard against challenge under the SCA.

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[1] Though the subsidy has not been awarded, the Council has communicated to Stack, to North East Combined Authority (to whom it has applied to secure the additional funding), and to third parties (including the Appellants) that it intends to award the Additional Stack Funding, subject only to administrative approvals.

[2] No grant funding agreement relating to this subsidy has yet been executed and no funds have been disbursed.

[3] For further information on who may fall within the definition of an “interested party”, please see our previous article on The CAT’s approach to Subsidy Decision Reviews.

[4] Even where a subsidy is not subject to the full subsidy control requirements (e.g. minimal financial assistance (MFA) or services of public economic interest (SPEI)), decisions may still be challenged on general public law grounds.

[5] That said, this point may not necessarily help the Appellants’ case. Currently, they allege that as the Council has now decided in principle to grant both of these subsidies, the Respondent has made subsidy decisions in relation to both, which are capable of being challenged. There is no specific detail given as to the date that these decisions “in principle” were allegedly made, therefore it is possible that the Appellant could be deemed out of time in any event.

[6] R (British Gas Trading and E.ON) v Secretary of State for Energy Security and Net Zero [2025] EWCA Civ 209 at [89]-[90]

[7] Section 12 of the SCA, requires public authorities to consider the subsidy control principles and be of the view that their subsidy or scheme is consistent with those principles before giving an individual subsidy or making a subsidy scheme.

[8] For further information on this principle, please see our previous article: Commercial market operator principle clarified in CAT ruling on subsidy control challenge – Sharpe Pritchard

[9] See Chapter 3 of the Subsidy Control Act 2022.