The Coronavirus (COVID-19) pandemic has been declared an exceptional occurrence, paving the way for more and faster approval of national State aid initiatives in the EU.
The massive and unprecedented financial impact on the world economy has led to a number of European governments promising aid to the sectors and companies hit hard by the COVID-19 virus pandemic. Such aid initiatives are of course subject to the European State aid rules and would – in normal circumstances - require prior notification to the European Commission's Directorate-General for Competition. Non-notified aid or aid that does not conform to the State aid rules must be paid back by aid recipients with interest.
The state aid rules do, however, foresee a possibility for making it easier for Member States to provide aid to make good damage caused by "exceptional occurrences". In a rapid response to the COVID-19 pandemic, on 12 March 2020 the European Commission's Directorate General for Competition issued its first decision in this context stating that the COVID-19 virus can be considered an "exceptional occurrence" within the meaning of the State aid rules (Article 107(2)(b) TFEU). The Commission has published some guidelines for the notification of State aid measures under Article 107(2)(b)TFEU. These guidelines aim at speeding up the review and approval process of public support measures designed to compensate economic damages deriving from the COVID-19 outbreak.
A new Temporary Framework to complement the existing State aid toolbox
Further, on 19 March 2020, the European Commission adopted a new "Temporary Framework" (partially inspired by the two temporary frameworks of the 2008 financial crisis), which will enable Member States to:
The new Temporary Framework is accompanied by a Notification Template that Member States can follow in their notification of State Aid measures in support of the economy in the current COVID-19 outbreak. The Temporary Framework complements the existing State aid toolbox with many other possibilities already available to Member States in line with State aid rules.
Several Member States have already benefited from this Temporary Framework. On 26 March 2020, the European Commission published a list of the State aid measures approved under Article 107(2)(b) TFEU and under the Temporary State Aid Framework since the COVID-19 outbreak. The European Commission has approved public support programs in the following countries:
Nobody knows just what the financial impact of the COVID-19 pandemic will be. But for sure the impact will be very considerable.
On the one hand, to stem the worst effects of the financial impact, the European Commission has, in record time, set up a new framework that will allow EU Member States to mitigate the financial impact through grants of State aid.
On the other hand, the European Commission's planned review if its State aid rules in the fields of energy, environment, regional aid, research and development, finance and Important Projects of Common European Interest, will be delayed due to the COVID-19 crisis.
The Temporary Framework and the existing State aid rules are complex and navigating these remains a challenge. Nonetheless, a unique opportunity is presented to companies as well as State, regional or local authorities, to ward off some of the negative financial consequences of the COVID-19 outbreak.
In the spirit of solidarity with clients and contacts in these extraordinary times, Bird&Bird's state aid experts will, at no cost, guide you with your preliminary state aid queries by phone/email. You will find their contact details below.
Our Competition and EU law team is widely recognised as a leading practice in relation to State aid.
Contact: Morten Nissen, Co-head, Competition & EU Practice Group and José Rivas, Partner, Competition & EU Practice Group
All of our Competition & EU contacts can be found here.
Last reviewed: 30 March 2020