British Sugar legal briefing

On 24 February 2022 the High Court ruled on the Secretary of State for International Trade’s (the Trade Minister) decision to remove tariffs on certain quantities of raw sugar cane imports. We first reported on this case in August 2021 when British Sugar brought these proceedings on the basis that the measure effectively amounted to a state subsidy for its competitor, Tate & Lyle Sugars Limited (T&L). As we said then, this case marks a precedent-setting period in UK trade: this is the first time that the courts have scrutinised and applied the subsidy provisions in the Northern Ireland Protocol (NIP) and in the Trade and Cooperation Agreement (TCA) between the EU and the UK. Beyond that, an independent subsidy regime has often been presented as a key benefit of Brexit – this case sheds some light on the extent to which this remains constricted by international agreements.

Both British Sugar and T&L produce refined sugar in the UK, but whereas British Sugar uses homegrown sugar beet for its refined sugar production, T&L uses imported raw sugar cane – making it the only importer of significant amounts of raw cane sugar for the specific purpose of refining it. British Sugar’s challenge relates specifically to a zero-duty autonomous tariff quota (ATQ) which applies to the import of raw cane sugar, and which the Trade Minister imposed in the process of creating a post-Brexit tariff regime. It argued that it constitutes an unlawful subsidy in favour of T&L due to the ATQ violating the relevant provisions in both the NIP and TCA. Both claims were rejected by the High Court, which found that the ATQ was not “specific” (under the NIP) or “selective” (under the TCA) and therefore does not constitute a subsidy under either treaty. In addition to these findings, the High Court commented on more general issues of interpretation in relation to the subsidy regime.

In our latest in-depth briefing we take a detailed look at a number of issues highlighted by this ruling, including:

• whether ATQs or other preferential tariff measures (eg under free trade agreements or the generalised system of preferences) are subject to subsidy rules under the NIP and TCA;
• the application of these rules, focusing on specificity/selectivity – the key requirements that was not met in this case; and
• the effects of the trade test considered in the NIP and TCA, and how subsidies can be challenged in national courts.

If any of the topics discussed in this blog or our briefing are of interest to you, please do not hesitate to reach out to a member of our Trade team, or your usual Freshfields contact.