In response to the COVID-19 outbreak, the European Commission launched its coordinated economic response, a package of measures designed to limit the economic consequences of the outbreak on 13 March 2020. Part of this package is an easing of the EU rules concerning state aid. In the subsequent temporary framework of 19 March 2020, the Commission referred to five forms of aid, which may be granted within the scope of the framework. The Netherlands may now grant state aid more quickly and more easily to both small and medium-sized enterprises and large companies that experience liquidity problems and credit shortfalls since 1 January 2020 due to the COVID-19 outbreak.
State aid within the temporary framework
The prohibition on state aid under article 107(1) of the Treaty on the Functioning of the European Union (TFEU) prohibits Member States from granting financial advantages of any kind to companies, which result in the distortion of competition. Should a Member State nonetheless wish to grant an aid measure to a company, it must first request the approval of the European Commission.
Under article 107(3)(b) TFEU, the European Commission may approve aid measures in order to remedy the serious disruption of a Member State’s economy. On the basis of this provision the European Commission has adopted the temporary framework, in order to tackle the economic consequences of the COVID-19 outbreak for the European economy.
Until 31 December 2020, the European Commission will approve the following aid measures for companies that have gotten into problems due to the outbreak:
- Member States may support companies facing sudden liquidity issues up to a maximum amount of €800,000. This aid may be given in the form of a subsidy, a repayable advance or a tax advantage.
- Public guarantees on loans with terms of one to six years may be issued in order to ensure that the banks continue to provide loans to companies that need them.
- Member States may grant loans with subsidised interest rates to companies. These loans may help companies cover their investment and working capital requirements.
- The public guarantees and loans issued may also be provided through banks or other financial institutions. The Commission does not consider such banks or other financial institutions as the beneficiaries of aid, provided that the aid benefits the companies.
- The rules regarding short-term export credit insurance are being relaxed. It will become easier to demonstrate that certain countries do not present a marketable risk, so that the state may provide a short-term export credit insurance where necessary.
Nonetheless, aid measures must still be notified in advance to the European Commission. The European Commission has promised that it will quickly assess notifications based on the temporary framework. In recent days, the aid schemes of Italy, Germany, Portugal, France, Latvia and Denmark have all been approved very quickly. On 22 March 2020, the European Commission approved Italian government aid of €50 million within 48 hours for the production and supply of medical equipment and surgical masks.
Existing possibilities for the provision of aid
Aside from the temporary framework, there is also a variety of other possibilities for Member States to support companies experiencing shortages.
No state aid
Member States my take various measures, which fall outside the scope of article 107(1) TFEU. In such measures the European Commission is not involved. This includes measures that apply to all companies, such as wage subsidies, suspension of payment of corporation tax, value added tax or national and employed persons' insurance contributions, as well as direct financial aid to consumers for cancelled services or tickets that the operators concerned will not reimburse.
State aid under the de minimis regulations
Member States may support companies by aid that does not exceed the amounts established in the de minimis regulations. Such aid measures are not covered by the prohibition on state aid and therefore do not have to be notified to the European Commission. A range of regulations is in force for various sectors:
- The basic de minimis regulation, to a maximum of EUR 200,000;
- The de minimis regulation for agriculture, to a maximum of EUR 15,000;
- The de minimis regulation for fisheries, to a maximum of EUR 30,000;
- The de minimis regulation for providers of services of general economic interest, to a maximum of EUR 500,000.
Bailout and restructuring aid
Under article 107(3)(c) TFEU, Member States may notify aid schemes to the European Commission in order to relieve sudden liquidity shortages and to provide support to companies in financial difficulties which may have been caused or exacerbated by the COVID-19 outbreak. An aid scheme granted under this provision may be granted only once.
“Exceptional circumstances”
Under article 107(2)(b) TFEU - the article referring to aid measures for the repair of loss or damage due to “exceptional circumstances” - Member States may compensate companies for loss or damage resulting directly from exceptional circumstances. This concerns companies in sectors that have been particularly affected by the outbreak (e.g. transport, tourism, culture, hospitality and retail). Under this provision, Member States may also provide compensation to organisers of cancelled events for loss sustained directly due to the outbreak.
If you have any more questions on this subject, please contact our team EU & Competition law.
