EU: COVID-19 Government support update

First changes to substantive EU State aid rules, so they don't get in the way of recovery

In brief

On 2 July 2020, the EU Commission for the first time modified the existing substantive State aid exemptions and guidelines to facilitate the grant of State aid in response to the COVID-19 pandemic (see here and here), while at the same time prolonging their validity. It also amended the Temporary Framework for COVID-19 State aid for the third time on 29 June 2020 (see here and here). More information on the Temporary Framework and its earlier amendments is available here [1st Amendment and 2nd Amendment].


Contents

Key takeaways 

  • The Commission has acted to ensure that State aid rules are not in the way of "good" State aid necessary to pave the way to recovery.
  • The General Block Exemption Regulation ("GBER") is now open for aid to companies that are in financial difficulties because of the COVID-19 pandemic, but were viable before it started. 
  • The 3rd Amendment to the Temporary Framework 
    • incentivises private investments in recapitalization measures involving Member States, and 
    • increases the possibility of aid for micro, small and start-up companies. 

In more detail

Targeted substantive changes 

The GBER and the de minimis Regulation have been amended, as well as seven State aid guidelines that also had their duration extended to 31 December 2021 or 2023. The following substantive changes were made to these texts to mitigate the economic and financial impact of the COVID-19 outbreak on companies: 

  • Companies which entered into difficulties between 1 January 2020 and 30 June 2021 as a result of the COVID-19 outbreak, and which, under the existing rules, would not have been able to receive certain types of aid, are now able to benefit from exempt aid under the GBER and under guidelines for regional aid, for research, development and innovation aid, for environmental protection and energy aid and for projects of common European interest.
  • Job losses due to the COVID-19 outbreak are not to be considered as a relocation (i.e. losing jobs in other EEA locations with the same activity of the business receiving the aid). If a relocation of jobs takes place, businesses are normally disqualified from receiving regional investment aid, which prohibits relocation.

The Commission has extended the validity of certain State aid rules beyond their scheduled expiry at the end of 2020 until 31 December 2021 or 2023. This serves the interest of predictability and legal certainty while the Commission considers possible wider ranging amendments of the rules including with a view to supporting the objectives of the European Green Deal and the European Industrial Strategy Communications.

3rd Amendment to the Temporary Framework 

  • To encourage significant private participation in capital injections (which limits the need for State involvement), the 3rd Amendment significantly relaxes the conditions for recapitalisation measures under the Temporary Framework if they involve private investors that make a significant contribution of at least 30% of the total capital increase on the same terms and conditions as the public investor.
  • The 3rd Amendment also recognises that micro and small companies (i.e. undertakings with less than 50 employees and less than EUR 10 million of annual turnover and/or annual balance sheet total), which includes most start-ups, have been particularly affected by the liquidity shortage caused by the COVID-19 outbreak. They can now benefit from public support under the Framework even if they were already in financial difficulty on 31 December 2019.

For more resources on this topic (including an overview of previous amendments to the Temporary Framework), you may visit Baker McKenzie's COVID-19 and Antitrust Law page.


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