COVID-19: Public bodies given greater freedom to financially support businessesFriday, 20 March 2020
The European Commission has declared COVID-19 to be an “exceptional occurrence” for the purposes of State aid law. This means that Member States and their public bodies providing financial assistance during the crisis will be subject to a more light-touch State aid regime, with fewer restrictions on the aid amounts and eligible costs that can be provided to businesses.
Article 107(2)(b) of the Treaty on the Functioning of the European Union (“TFEU”) enables Member States and public bodies to compensate companies for the damages directly caused by “natural disasters and exceptional occurrences”, as measures considered to be compatible with the EU internal market. This provision was invoked by Denmark as the legal basis of a scheme approved expeditiously within 24 hours by the European Commission on 12 March 2020. The Danish scheme was the first of its kind notified to European the Commission following the COVID-19 outbreak and is set to provide €12 million to compensate businesses for damages caused by cancellations of large public events due to the virus.
Schemes using Article 107(2)(b) as their legal basis must have regard to the European Commission’s notification requirements for such measures. These include: (i) providing a detailed description of the aid scheme (the national legal basis, objective, beneficiaries, duration, and aid intensity), (ii) a description of the damage covered (causal links, the type of damages compensated, and the methodology for assessing the damage), and (iii) commitments by the notifying entity in relation to the recovery of the aid, cumulation and other co-financing measures.
This is just one of a number of State aid-related measures likely to be available to public bodies to support business during the COVID-19 crisis. For example, public bodies can deploy the market economy investor principle to take equity stakes in struggling businesses, provide aid of up to €200,000 per undertaking over 3 years under the de minimis Regulation, or grant aid to remedy a serious disturbance in the economy of a Member State under Article 107(3)(b) TFEU and the Commission’s guidelines on State aid for rescuing and restricting non-financial undertakings in difficulty.
Please note that the content of this summary does not amount to professional advice. Legal and tax advice should be sought in respect of specific queries. The COVID-19 situation is evolving rapidly and this update is provided on the basis of information available as at 20 March 2020.