The Commission’s Temporary Framework for State aid measures supporting the economy during the Covid-19 pandemic (the “Temporary Framework”) is proving to be a success. More than 200 Member State schemes and individual measures have been cleared under the Temporary Framework since its adoption in March 2020. It seeks to provide the European economy with a platform to recover from the crisis while limiting distortions of competition in the Internal Market.
On 28 January 2021, the European Commission (“Commission”) adopted a fifth amendment (the “Amendment”) to the Temporary Framework (see our post on the Temporary Framework here, of the first amendment here and of the second amendment here). The third amendment expanded mostly the Framework to further support micro, small and start-up companies and incentivise private investments. The fourth amendment mostly prolonged the validity of the Framework and introduced new possibilities for the State to exit from recapitalised companies while maintaining its previous stake in those companies. The New Amendment extends further the Temporary Framework until 31 December 2021.
Type of Measures Covered by the New Amendment
The Commission increased the aid ceilings and allowed for conversion of repayable instruments into direct grants, under certain conditions. It clarified and amended some of the conditions for certain measures and extended the temporary removal until 31 December 2021 of all countries from the list of “marketable risk” countries under the Short-term export-credit insurance Communication (“STEC”).
Increased aid ceilings
Member States indicated to the Commission that the respective ceilings have been or are about to be exhausted in relation to a number of companies active in certain sectors, or they appear insufficient to address the impact of the Covid-19 related measures. As a response, the Commission increased the amounts of aid ceilings for certain measures granted under the Temporary framework, de facto doubling the previous aid ceilings per company.
Fixed costs not covered by revenues
Companies who have suffered a turnover loss of at least 30% during the crisis can receive State support for part of fixed costs not covered by revenues. The overall aid related to those fixed costs can now amount to up to EUR 10 million per company (previously it was EUR 3 million). The aid can take the form of direct grants, tax and payment advantages, or other forms such as repayable advances, guarantees, loans and equity.
Conversion of repayable instruments into direct grants
In order to incentivise the Member States to choose repayable forms of aid, the Commission provides the possibility for Member States, under certain conditions, to convert such into grants. These conversions should take place by 31 December 2022 at the latest.
The Commission extended the temporary removal of all countries from the list of “marketable risk” countries under the STEC until 31 December 2021. Thus, all commercial and political risks associated with exports are currently considered as temporarily “non-marketable” until 31 December 2021. That means that the Commission takes account of the continued general lack of sufficient private capital to cover all economically justifiable risks for exports to those countries and allows therefore the provision of short-term export-credit insurance support.
The Commission will review the Temporary Framework before 30 June 2021, and will decide whether it needs further amendments or extensions before 31 December 2021. In addition, Member States seeking to adapt their State aid regulations to the Temporary Framework will have to notify the Commission with a list of the existing provisions and the relevant information from the Temporary Framework.
The Covington State aid team will continue to monitor the situation and update you on any new developments.
You can also stay up-to-date with the Covington Competition blog, where we are providing regular updates on the competition law/antitrust implications – both procedural and substantive – of the Covid-19 crisis in the US and the EU.