Background
In July 2024, the property developer Aubrey Weis issued proceedings against Greater Manchester Combined Authority in respect of two loans that the Combined Authority planned to give to companies within the Renaker Group, one of the city's most prolific developers.
One loan, valued at £70.8m, was to be awarded to Trinity Developments (Manchester) Limited towards the construction of Trinity Islands, a large complex which includes four towers with between 39 and 60 storeys alongside the River Irwell.
The second loan was worth £69.2m and was to be awarded to New Jackson (Contour) Investments Limited towards the construction of a 988 unit development called Contour New Jackson to the South of the City Centre.
At the date proceedings were issued, neither loan had been entered into. However the Combined Authority had considered a report about the loans on 22 March 2024 that sought approval to "delegate authority" to officers of the Combined Authority to "prepare and effect the necessary legal agreements" but "subject to the usual due diligence processes". The loans were eventually awarded on 22 November 2024.
The case made on behalf of Aubrey Weis was that such loans would not have been granted by a commercial operator and therefore ought to have been treated as subsidy and that the failure to do so may have distorted the commercial property market in and around Manchester. Greater Manchester Combined Authority ("GMCA") argued that it had reasonably satisfied the requirements of the Commercial Market Operator principle ("CMO") meaning that the award should not be regarded as not a subsidy.
The CMO principle is an important part of subsidy law, deriving primarily from Section 3(2) of the Act, which in effect mirrors the previous Market Economy Operator Principle (MEOP) in EU State aid law. It broadly holds that when the State behaves as an ordinary market investor in the same or similar circumstances might reasonably be expected to do, then it confers no economic advantage on the third parties affected, such as to give a subsidy. This is on the presumption that when the State behaves in this way, those third parties are effectively getting no better nor worse deal than they might have if they had been dealing with other private parties.
Court decision
On 24 July 2025, the Competition Appeal Tribunal robustly dismissed the Subsidy Control challenge brought by Aubrey Weis, stating that it "is clearly not the case" that the "Renaker Group was being provided with loans at unduly favourable rates". Rather Greater Manchester Combined Authority in considering the awards "went though a proper process and the terms and rates" were "considered by persons with significant experience in development loans".
In particular, the Court noted the wide margin of appreciation that a State body has when approaching what might be considered a CMO principled action and that GMCA had clearly applied an exhaustive process involving highy experienced personnel. The Court therefore endorsed previous caselaw on this point from the State aid era, notably the Sky Blue Sports (Coventry Arena) case.
However in noting the above the Court also made some nuanced points which will need to be taken into account by public authorities in future.
Lesson 1: a subsidy decision is distinct from the giving of a subsidy
As set out at paragraph 152 of the Weis Decision "although it is not until the date of the entry of the 2024 Renaker Loans on 22 November 2024 that the borrowers had an enforceable right to financial assistance … this does not mean that there was no subsidy decision challengeable before then".
The Court drew a distinction between a public authority deciding to give a subsidy and then actually giving it, noting particularly the terms of Section 12(1) of the Act, paragraphs (a) and (b). The giving of a subsidy clearly depends on there being a binding legal agreement in place whereas a "subsidy decision" in paragraph (a) does not. Such a "decision" may come earlier and include a decision which is only "in principle", taken before and subject to due diligence and legal checks. When a public authority makes a decision is a function of each authority's internal procedures. Such an "in principle" only decision does not give a subsidy (which only comes with the later binding commitment), but the Court noted that even such an early decision which has not yet resulted in anything is challengeable.
It might be thought there is little to be gained from challenging a decision before it has led to anything, hence no harm has been caused, and the time limit for challenging a subsidy only expires within a set period after it has been given and a relevant notice placed in the national subsidy database. What might normally result from attacking such an early decision, as happened here, is a stay in proceedings pending the actual giving of the subsidy (or not). Arguably this merely results in giving an authority forewarning to ensure the final award is more carefully thought through as against the relevant exemption relied on. However, the Court's judgement does infer that authorities will wish to be careful of taking subsidy decisions in principle before the subsidy exemption rationale has been considered, and/or ensure that when subsidies are finally given, the internal decision relied on to implement the same has been taken with due consideration of the subsidy exemption rationale.
In the present case the Court's observations on this point did not affect the ultimate outcome, noting in particular that the subject matter was ultimately considered not a subsidy anyway.
Lesson 2: the application of the CMO test is more complicated than often envisaged
The concept of CMO is that no subsidy arises where a transaction conforms with market practice because in such circumstances there is no material difference between the allocation of public and private funds, and so no economic advantage is conveyed as is required for a subsidy to exist as per Section 2 of the Act..
There are multiple ways for a public authority to demonstrate such compliance. A common route has been to apply the process set out at paragraph 8 of the Subsidy Control (Gross Cash Amount and Gross Cash Equivalent) Regulations 2022 which provides a proxy interest rate based upon the repayment period, creditworthiness of the recipient and percentage loss that a lender might face.
However at paragraph 197 of the Weis Decision, the Competition Appeal Tribunal stated that these "Regulations gave what was correctly perceived to be a low rate of not less than 5.3% … The mere fact that the rate may have been compliant with the 2022 Regulations is not in itself determinative of whether the rates adopted were market rates within the meaning of s.3(2) of the Act".
What this means in practice is that the (Gross Cash Equivalent) Regulations may be used as an indicator but this should be supplemented by additional consideration against the specific circumstances of the case in question in order to arrive at a rounded view that the loan agreement viewed in the round is suitably "market" or not.
Lesson 3: independent expert reports are not an absolute requirement for a satisfactory CMO determination
Another point emerging from the CMO assessment is that GMCA did not employ the services of an independent expert to report on the market nature of the proposed loan, and instead took that view itself. The Court specifically observed in this case that GMCA and its relevant officers "had a great deal of of experience in lending and understanding the lending market". On this basis the Court noted that GMCA could have sought an independent expert report, as is a common recommendation in such situations, but the fact that it chose not to did not invalidate GMCA's due and propert judgment on its own that the terms of the loans were suitably representative of the market.
The lesson here is that certain (normally larger and more mature) authorities like GMCA will have the depth and expertise to handle such matters "in house", but certainly not all authorities will, and so decisions on whether to seek independent expert reports to corroborate judgements of what are "market" arrangements will continue to be a case-by-case issue for most authorities based on a risk analysis.
Lesson 4: in Subsidy Control cases the whole decision making process will be interrogated
At paragraph 153 of the Weis Decision the Competition Appeal Tribunal stated that "in determining the key issue in this case as to whether or not the 2024 Renaker Loans amount to financial assistance which confers an economic advantage, the Tribunal does not simply look at the terms of the GMCA Committee decision on 22 March 2024. It needs to consider the whole process including the various stages leading up to that decision as well as the due diligence and final terms of the 2024 Renaker Loans. It will also consider the internal records on the setting of the interest and other terms."
Therefore a Subsidy Control challenge will involve an assessment of the entire process resulting in the award of the subsidy. This will include the role of each of the officials involved in that process and the documentation considered. In the present case the Court found that the procedures and considerations applied were extensive, and while it was noted that GMCA "could have done more" it had plainly done enough.
Conclusion
Greater Manchester Combined Authority has welcomed the ruling which it said "completely vindicates the approach" that it has taken. Our view is that this is correct, but there are lessons for all public authorities to take from the Weis Decision, including the warning to be careful if and when separating subsidy decisions from subsidy awards.
The picture emerging on CMO judgements has broadly cemented prevailing thinking on the breadth of discretion that public authorities enjoy in how to make such a determination, but the case certainly emphasises the need to do a thorough examination and not simply make assumptions. DWF has vast experience of advising on Subsidy Control matters, including in the Durham Case. If you're unsure about any element of Subsidy Control compliance, we can be of assistance.
