COVID-19: European Commission specifies State-aid guidelines
On Friday, 13 March 2020, the European Commission issued a press release in which it addressed, among other things, the possibility of using State aid measures to mitigate the economic impact of COVID-19 (novel coronavirus). The Commission emphasised that State aid regulations do allow Member States to act quickly and efficiently in support of private individuals as well as businesses who are affected economically by the drastic measures taken to prevent the spread of COVID-19. The Commission underlined also that aid to affected airlines will be subject to special processing.
Various possible aid measures
Many EU Member States are working on or have already implemented aid packages to mitigate the economic effects of COVID-19. The Danish government, for example, just presented its first aid package to Danish businesses under Article 107(b)(2) TFEU, which allows the granting of aid in exceptional circumstances to make good the damage caused by natural disasters or “exceptional occurrences”. The assessment, therefore, is that “exceptional occurrences” does cover a situation such as the current COVID-19 pandemic.
The European Commission emphasised also in its press release that current State aid rules allow Member States to design and implement aid measures specifically targeting those sectors of industry and society that are hit particularly hard. Margrethe Vestager also emphasised that there are many ways governments can help but also that support for businesses in one Member State must not undermine the unity that Europe needs in a time of crisis such as this. Specifically, she emphasised a number of aid measures that are readily available within the current State aid rules:
- Governments are free, for example, to implement measures that apply to all businesses, e.g. wage subsidies or deferral of tax or VAT payments. Measures such as these will boost liquidity directly and effectively and will not require State aid approval (because they are not selective but broadly accessible to businesses at large), which means they can be implemented immediately.
- Member States may also provide aid directly to consumers, e.g. compensation for cancelled events in cases where no reimbursement is available from operators. This type of measure, too, falls outside the scope of State aid rules (because it is not aid to businesses engaged in economic activity in the market, thus eliminating the risk of distortion of competition) and can therefore be implemented immediately.
- Article 107(3)(c) TFEU allows Member States, subject to prior approval by the Commission, to aid businesses at risk of becoming insolvent as a result of the COVID-19 outbreak and thus in need of immediate contribution of liquidity. Any such aid will be subject to assessment by the Commission, i.a. under the Rescue Aid and Restructuring Guidelines.
- As we have previously noted, Article 107(b)(2) TFEU allows, subject to Commission approval, the granting of aid to specific enterprises or sectors to make good the damage caused by natural disasters or “exceptional occurrences”. The Commission now underlines that said provision may also apply in cases of serious outbreaks of diseases. It allows Member States to offer aid to, among other recipients, specific industries or individual enterprises who have been hit particularly hard, e.g. event organisers who have been forced to cancel scheduled events.
- Additionally, the Commission emphasised that aid measures may also be implemented under the normal rules, including the de minimis Regulation and the General Block Exemption Regulation (GBER). Aid under these acts will be available, within certain specified conditions, with no need for prior approval by the Commission.
Specifically on the situation in Italy
The Commission emphasised in its press release that the situation in Italy is such as to allow the use of Article 107(3)(b) TFEU, enabling the Commission to approve additional national support measures to remedy a serious disturbance to the economy of a Member State. For that assessment, the Commission has placed particular emphasis on the expected decline in BNP, the extensive precautionary measures that the Italian authorities have had to implement, the difficulties in which the public healthcare system currently finds itself, and the travel restrictions put in place by other countries in relation to Italy. This allows the Commission to approve additional measures that would in normal circumstances qualify as State aid and therefore would have to go through the usual approval procedure.
The Commission announced that it is constantly monitoring the situation in the other Member States to assess if Article 107(3)(b) TFEU will apply to them. At the same time, the Commission is working on a special framework regulation under Article 107(3)(b) TFEU similar to the one adopted in connection with the financial crisis in 2008.
Specifically on aid to airlines
A spokesperson for the Commission has announced that aid to airlines struggling with the consequences of the COVID-19 outbreak will be processed under a special procedure. As a result, new aid to airlines will, exceptionally, not be assessed in light of previous aid granted to the airline. Normally, the EU’s so-called ‘one time, last time’ principle prevents Member States from aiding air carriers more than once. This principle will be suspended in respect of aid granted to air carriers to mitigate the effects of COVID-19.
The process for aid measures
Lastly, the Commission emphasised that it has taken steps to ensure the swift processing and approval of State aid notifications from Member States, as indeed evidenced by the recent Danish case. At the same time, the Commission will be ready to guide Member States through the notification process, i.a. by offering templates for them to follow.
Kromann Reumert’s assistance
Kromann Reumert’s state-aid specialists have extensive experience advising both granting authorities, recipients, and complainants from a range of different industries.
We are also at your service for any advice you need on matters pertaining to COVID-19, including for a preliminary and information talk.
Kromann Reumert’s COVID-19 task force
Kromann Reumert has set up a COVID-19 Task Force consisting of a number of our experts within various legal practice areas. We will continuously provide information about the problems that you and your company may encounter in connection with the COVID-19 situation.
Click here for previous news articles and more on our COVID-19 Task Force