The European Commission has amended its Temporary Framework for coronavirus related State aid measures

On 19 March 2020, the European Commission adopted a Temporary Framework for State aid measures to enable EU Member States to support the economy in the current COVID-19 outbreak. On 3 April 2020, the European Commission published an amended version of the Temporary Framework, which includes new potential support measures along with clarifications and amendments concerning measures in the original Temporary Framework. This newsletter provides a brief overview of the amended Temporary Framework.

Since the beginning of the coronavirus outbreak, the European Commission has approved more than 20 State aid measures by EU Member States who are attempting to tackle the effects of the COVID-19 outbreak on their economy.

Almost all of the measures were approved under the European Commission’s Temporary Framework for State aid measures to enable EU Member States to support the economy in the current COVID-19 outbreak, which was adopted on 19 March 2020.

The original Temporary Framework set out temporary State aid measures that the European Commission considered compatible under Article 107(3)(b) TFEU, and which could be – and have been – approved very rapidly upon notification to the European Commission by the Member State concerned.

On 3 April 2020, the European Commission amended the Temporary Framework by adding additional support possibilities for five types of aid measures and by clarifying and amending support possibilities under the original Temporary Framework.

According to Executive Vice-President Margrethe Vestager, in charge of competition policy, the amended Temporary Framework enables Member States to support companies that develop and manufacture much-needed products to fight the coronavirus, e.g. vaccines, medicines, medical devices, disinfectants and protective equipment. Further, the amended Temporary Framework will help Member States ease liquidity constraints faced by companies and save jobs in sectors and regions that are hit particularly hard by the coronavirus crisis.

The amended Temporary Framework now also covers the following five types of aid measures:

1. Support for coronavirus related and other relevant antiviral research and development (R&D) in the form of direct grants, repayable advances or tax advantages. A bonus may be granted for cross-border cooperation projects between Member States. Beneficiaries must commit to grant non-exclusive licences under non-discriminatory market conditions to third parties in the European Economic Area.
2. Support for the construction or upscaling of infrastructures needed to develop and test products useful to tackle the coronavirus outbreak, up to first industrial deployment, in the form of direct grants, tax advantages, repayable advances and no-loss guarantees. The products include medicinal products (including vaccines) and treatments, medical devices and equipment (including ventilators, protective clothing and diagnostic tools), disinfectants, data collection and processing tools useful to fight the spread of the virus. A bonus may be granted when an investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.
3. Support for the production of products relevant to tackle the coronavirus outbreak in the form of direct grants, tax advantages, repayable advances and no-loss guarantees. The products include medicinal products (including vaccines) and treatments, medical devices and equipment (including ventilators, protective clothing and diagnostic tools), disinfectants, data collection and processing tools useful to fight the spread of the virus. A bonus may be granted when an investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.
4. Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions in specific sectors or regions or for types of companies that are hit the hardest by the coronavirus outbreak.
5. Targeted support in the form of wage subsidies for employees to companies in sectors or regions that have suffered most from the coronavirus outbreak, and would otherwise have had to lay off personnel.

Further to these additional potential State aid measures that the European Commission considers compatible under Article 107(3)(b) or 107(3)(c) TFEU, provided that a number of conditions are met, the Temporary Framework contains clarifications and amendments with regards to certain aid measures already included in the original Temporary Framework published on 19 March 2020.

For example, the amended Temporary Framework enables Member States to give, up to the nominal value of € 800 000 per company, zero-interest loans, guarantees on loans covering 100 % of the risk, or provide equity.

Another example relates to short-term export-credit insurance. Normally, marketable risks cannot be covered by export-credit insurance with the support of Member States. This follows from a European Commission Short-term export-credit Communication, according to which trade within 27 EU Member States and nine OECD countries, with a maximum risk period of up to two years, entails marketable risks and should not be insured by the State or State supported insurers.

The original Temporary Framework introduced additional flexibility on how to demonstrate that certain countries are not-marketable risks.

As a consequence of the current COVID-19 outbreak, the European Commission decided on 27 March 2020 to temporarily remove all countries from the list of “marketable risk” countries under the Short-term export-credit Communication. Therefore, Member States can make available public short-term export credit insurance in light of the increasing insufficiency of private insurance capacity for exports to all countries in the current coronavirus crisis, without the need for the Member State in question to demonstrate that the respective country is temporarily “non marketable.” This is also reflected in the amended Temporary Framework.

Member States wishing to grant aid under the Temporary Framework must show that a number of conditions are fulfilled. Different conditions apply for the different State aid measures mentioned in the Temporary Framework.

Undertakings that may receive State aid are encouraged to seek legal advice and ensure that all conditions are complied with since the consequences of receiving illegal State aid, i.e. State aid that has not been notified to and approved by the European Commission, can be severe.