Council’s loan to Coventry Arena was not state aid

The case of R (on the application of Sky Blue Sports & Leisure Ltd and others) v Coventry City Council [2014] EWHC 2089 (Admin) is an interesting one and it is worth reading the full judgment if you can for Judge Hickinbottom’s helpful analysis of the facts and why he concluded that Coventry City Council was acting as a rational private market investor would have done. This is a summary of the main points.

The general rule is that aid that satisfies all these four limbs — granted by the state or through state resources; favours certain undertakings;distorts or threatens to distort competition; and affects trade between member states — is illegal state aid unless the EU Commission has approved it or it falls within a specified exemption.

Whether aid distorts or threatens to distort competition depends on the objective test of whether a rational private investor might have entered into the transaction in question on the same terms, having regard to the foreseeability of obtaining a return and leaving aside all social and policy considerations — the ‘private investor test’ or ‘market economy operator test’. If they would have done, then the state has not given that undertaking an advantage over its competitors and there is no state aid…

Click on the link below to read the rest of the Walker Morris briefing.

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