The European Commission's response to Corona under EU State Aid rules

The Commission had announced already measures to cushion the economic consequences of the Corona crisis (see Noerr article here). In relation to the question as to how such measures have to comply with EU State Aid rules, the Commission now set the first example by approving a Danish scheme, followed by further guidance on its coordinated response to counter the economic impact of the Corona virus. Both issues will be dealt with further below.

The Commission intends to find pragmatic solutions under EU State Aid rules addressing the current economic needs – or in the words of Executive Vice-President Margrethe Vestager: “Our goal here is to make sure that businesses have the liquidity they need to keep operating, and to make sure the support reaches the companies that need it:” The Commission can also be expected to act fast.

Commission qualifies Corona virus as “exceptional occurrence” under State Aid rules and approves Danish Aid scheme

On 12 March 2020, the Commission announced its first Corona virus-related State Aid decision when it approved a EUR 12 million Danish scheme to compensate damages caused by cancellations of large public events due to the outbreak of the Corona virus. The Commission reviewed and approved the Danish scheme under the EU State Aid rules within as little as 24 hours demonstrating a very high responsiveness and willingness to find effective solutions to the economic obstacles caused by the Corona pandemic. To this end, the Commission has set-up a dedicated mailbox and telephone number, to assist Member States with respect to the notification of State Aid measures. In a press conference held later, the Commission underlined that support via this phone number will be available all hours of the day and all days of the week.

Legally, the Commission relied on a provision of the Treaty on the Functioning of the European Union (“TFEU”) which enables the Commission to approve State aid measures compensating for the damages directly caused by “exceptional occurrences” (Art. 107 II b TFEU).

Commission considers additional support measures for Italy as appropriate to remedy a serious disturbance in the economy of a Member State

In addition, the Commission published a press release on 13 March 2020 arguing that the outbreak in Italy is of a nature and scale that allows to approve additional national support measures to remedy a serious disturbance to the economy of a Member State. This is a second exception in the EU State Aid framework (Art. 107 III b TFEU) showing its general flexibility to react to this crisis.

Commission summarizes State aid measures to address the economic impact of Corona virus and announces further guidance

The Commission further summarized and highlighted a few areas in which State Aid will play an increasingly important role in the near future (and where swift and decisive actions by the Commission can be expected). These include inter alia:

• sectors hit especially hard by the crisis, like tourism, transport (e.g. airlines) or hotels and restaurants. Here, the Commission will work with governments to put in place schemes that compensate companies for the damage they have suffered;
• schemes by Member State that give small and medium-sized companies liquidity they need to react to this crisis;
• Member States use of banks as a channel for support to the economy as lenders – including to small and medium-sized companies.

The Commission also confirms that it works on a temporary framework for deal with the crisis. It is intended to provide guidance as the Commission’s temporary framework adopted during the financial crisis did – guiding Member States as to how to use state aid to help stabilize the European economy while protecting the single market.

Key Take away

The Commission can be expected to use the flexibility provided by the EU State Aid framework enabling Member States to take swift and effective action to support citizens and companies affected by the Corona virus. The upcoming temporary framework will provide more guidance. No doubt, the Commission will act fast.

Companies should consider carefully if State Aid relief is available in their respective sectors under aid schemes newly established by Member States. In addition, they should closely scrutinize potential notification requirements in order to avoid returning the aid.