The government is facing a post-Brexit legal challenge over trade policy, after the High Court agreed that a decision to cut sugar tariffs should be reviewed judicially.
British Sugar is bringing the case against international trade secretary Liz Truss in response to her decision to allow 126,000 tonnes of raw cane sugar to enter the UK tariff-free for 12 months from January.
The Financial Times reports that British Sugar has argued in court documents that this decision meant a de-facto subsidy for US rival Tate & Lyle Sugars as it is the main refiner of cane sugar in the UK.
Tate & Lyle is the only main refiner of cane sugar in the UK, while British Sugar refines sugar from homegrown sugar beet.
Lawyers for British Sugar also argue that the tariff-free trade in raw cane sugar impacts trade and investment in Northern Ireland and is therefore in breach of the Northern Ireland Protocol.
Legal experts believe the case will be the first to test how far state aid clauses in the post-Brexit Northern Ireland Protocol can go to stop the UK setting its own subsidy regime.
UK decisions on subsidies that have a potential impact on the Northern Ireland Protocol need to be referred to the European Commission for approval.
The government said in its submission to the court that British Sugar’s arguments are “ambitious and counter-intuitive”.
“If the claimant were right, the UK government would have to consider notifying each and every element of its global tariff regime to the European Commission as a potential state aid,” the government said.
Justice Foxton decided the case should be heard, while adding that there was some “formidable obstacles” to the court being convinced of British Sugar’s argument.
A Department for International Trade spokesperson said: “We do not comment on ongoing legal proceedings.”