COVID-19 outbreak qualifies as an “exceptional occurrence” meaning EU Member States can compensate companies in economic sectors that have been adversely affected by the pandemic.
Aid to remedy a serious disturbance to the economy under the Temporary Framework (Article 107(3)(b) TFEU)
A Temporary Framework has been implemented mid-March and updated two times already to facilitate expedited approval by the Commission of measures proposed by Member States within the scope of this framework. The Temporary Framework provides for several categories of state aids (which may be expanded);
- aids facilitating access to liquidity (direct grants, selective tax advantages, repayable advances or equity; State guarantees for loans; subsidised interest rates for loans; short-term export credit insurance).
aids to accelerate research, testing and production of COVID-19 relevant products
aids that aim at protecting jobs in sectors and regions adversely affected (deferrals of tax payments and/or suspensions of social security contributions; aid in the form of wage subsidies for employees to avoid lay-offs)
the second amendment (8 May) enables public interventions in the form of recapitalisation aid to non-financial companies. Member States can also provide subordinated debt to companies at favourable terms.
Companies facing liquidity needs and/or bankruptcy (Article 107(3)(c) TFEU)
Member States can rely on the Rescue Aid and Restructuring Guidelines to grant urgent and temporary assistance to companies facing liquidity needs or bankruptcy due to the COVID-19 outbreak. These (pre-existing) rules have been loosened to provide more flexibility.
Further guidance about state aid rules during the outbreak (incl. temporary framework) is available here.
Eligibility criteria are determined by individual Member States who are responsible for granting the aids within the ambit of the Temporary Framework.
As far as recapitalization measures are concerned, on top of safeguards put in place by the European Commission to avoid undue distortions of competition in the Single Market Member States may condition recapitalization to additional conditions to meet policy objectives (green and digital transformation preventing fraud, tax evasion or tax avoidance).
The European Commission must approve the public support schemes/aids.
The European Commission has also approved individual aids, such as the €7b French scheme to support Air France.
Note: A number of measures are not considered state aids (e.g. financial measures directed to all companies, etc.) or are exempted (e.g. de minimis support). Individual Member States can take these measures without prior notification to the Commission.
The Temporary Framework is already in place will be in principle until the end of December 2020 (and until the end of June 2021 for recapitalisation measures only)
To date, the Commission has authorized more than 100 public schemes from all the Member States under the Temporary Framework for an estimated €1.9 trillion.
A tracker of the national measures approved is available here.
Note: first legal actions against sate aids have started.