On 19 March 2020, the European Commission adopted a new State Aid Temporary Framework (Temporary Framework) in light of the COVID-19 outbreak. The last time the European Commission adopted such a temporary framework was in 2008 in response to the financial crisis.
The Temporary Framework enables Member States to support the economy in the context of the COVID-19 outbreak and in particular to ensure that sufficient liquidity remains available to businesses to help them to weather the downturn and to prepare a sustainable recovery. Here, Dorit McCann (partner, EU, Competition & Procurement) outlines the provisions of the Temporary Framework.
What types of State aid does the Temporary Framework allow?
The Temporary Framework sets out the conditions the Commission will apply to aid granted by Member States in light of the COVID-19 outbreak. Member States must show that the State aid measures notified to the Commission under the Temporary Framework are necessary, appropriate and proportionate to remedy a serious disturbance in the economy of the Member State concerned and that all the conditions in the Temporary Framework are met.
The Temporary Framework provides for five types of aid:
- Direct grants, selective tax advantages and advance payments: Member States will be able to set up schemes to grant up to €800,000 to a company to address urgent liquidity needs.
- State guarantees for loans taken by companies from banks: Member States will be able to provide State guarantees to ensure banks keep providing loans to customers.
- Subsidised public loans to companies: Member States can grant loans with favourable interest rates to help businesses cover immediate working capital and investment needs.
- Safeguards for banks that channel State aid to the real economy: Aid to banks to support businesses is considered to be direct aid to the banks' customers and not the banks themselves. The Temporary Framework gives guidance on how Member States can ensure that minimal distortion of competition between banks arise.
- Short-term export credit insurance: Member States can provide short-term export credit insurance where needed.
How long will the Temporary Framework be in place?
The Temporary Framework will initially be in place until the end of December 2020. The European Commission will assess before that date whether it needs to be extended.
Are there other ways in which Member States can grant support to businesses without requiring the approval of the Commission?
On 13 March 2020, the European Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak. The Communication outlines possibilities for economic support compatible with the State aid regime which can be put in place by Member States immediately, without involvement of the Commission. These include:
- Measures applicable to all companies, for example wage subsidies and suspension of payments of corporate and value added taxes or social contributions.
Direct financial support to consumers, e.g. for cancelled services or tickets that are not reimbursed by the operators concerned.
- Measures under the De Minimis Regulation which allows grants of up to €200,000 over a 3-year period (the threshold figures are €100,00 in the freight transport sector, €25,000 for agriculture and up to €30,000 for fisheries).
- Measures under the General Block Exemption Regulation which allows State aid in certain circumstances.
How quickly will the Commission decide on the compatibility of proposed measures with the State aid rules?
The Commission has said that it will take decisions within days of receiving a complete State aid notification from Member States, where necessary. For example, the first notification from Denmark for a compensation scheme for cancellation of events related to COVID-19 was cleared within 1 day.
The Commission has also set up a dedicated mailbox and telephone number to assist Member States with any queries they have.
The Temporary Framework provides much needed guidance on what types of aid will be approved by the Commission in light of the COVID-19 outbreak. However, this is a situation which is evolving on a day-to-day basis and further communication and clarification may be needed from the Commission in the weeks and months ahead. The Commission has already indicated that it may publish templates based on precedent decisions which would undoubtedly lessen the burden on Member States.
For more information please get in touch with Dorit McCann (EU, Competition & Procurement).
To discuss any other COVID-19 related issues impacting your business, please get in touch with Barry Cahir (Litigation and Insolvency), Thomas O'Dwyer (Litigation), Sharon Delaney (Litigation), Dorit McCann (EU, Competition & Procurement), Damian Maloney (Corporate and Commercial), Aidan Marsh (Commercial Property), Gerry Gallen (Commercial Property), Sandra Masterson Power (Employment), Paul Gough (Employment), Edward Evans (Corporate & Commerical), Fidelma McManus (Housing) or your usual Beauchamps contact.