European Union: COVID-19 Key EU Developments, Policy & Regulatory Update No. 62

COMPETITION & STATE AID

State Aid

European Commission consults Member States on future of State aid Temporary Framework (see here)

On 30 September 2021, the Commission launched its consultation with Member States on a draft proposal to prolong the State aid Temporary Framework until 30 June 2022 and to extend its scope with the intended aim of further accelerating economic recovery.

The Temporary Framework, to recall, was initially adopted on 19 March 2020 (and most recently amended on 28 January 2021) in view of supporting the economy following the COVID-19 outbreak through various aid measures which, in particular, could be rapidly approved upon notification to the Commission.

In view of signs of economic recovery, the Commission is proposing a limited prolongation of the Temporary Framework with the objective of ensuring against suddenly discontinuing aid to businesses still impacted by the crisis, and instead enabling a coordinated phase-out of such support.

In addition, for a limited period beyond 30 June 2022, the Commission proposes to allow Member States to grant:

• Investment support measures towards a sustainable recovery, in order to help Member States address the investment gap resulting from the crisis while preserving competition; and
• Solvency support measures to leverage private funds and investment in undertakings, in particular small and medium-sized enterprises (SMEs) and small mid-caps, by providing them with access to equity financing.

Member States may now provide feedback on the Commission's draft proposal on amending the Temporary Framework, which the Commission will take into account in determining the way forward.

The Commission, thus far, has taken more than 650 decisions in all Member States, including based on the Temporary Framework, to enable support worth over €3 trillion in total to companies affected by the pandemic.

European Commission distributes prefinancing under Recovery and Resilience Plans to an additional 3 Member States (see here, here, and here)

As of 4 October 2021, an additional 3 Member States received pre-financing disbursements from the Commission (Austria (€450 million); Croatia (€818 million); and Czechia (€915 million)) under the Recovery and Resilience Facility (RRF) towards boosting their economies and recovering from the COVID-19 fallout.

This follows preceding disbursements to 13 Member States: Belgium (€770 million); Cyprus (€157 million); Denmark (€201 million); France (€5.1 billion); Germany (€2.25 billion); Greece (€4 billion); Italy (€24.9 billion); Latvia (€237 million); Lithuania (€289 million); Luxembourg (€12.1 million); Portugal (€2.2 billion); Slovenia (€231 million); and Spain (€9 billion)). These sums are equivalent to approximately 13% of the respective countries' financial allocations.

The Commission will subsequently authorize additional disbursements based on satisfactorily fulfilling the milestones and targets, as set out in each of the Council Implementing Decisions, concerning investments and reforms covered in each Member State's Recovery and Resilience plan. The total amounts foreseen for these initial 16 Member States receiving pre-financing are €3.5 billion (Austria); €5.9 billion (Belgium); €6.3 billion (Croatia); €1.2 billion (Cyprus); €7 billion (Czechia); €1.5 billion (Denmark); €39.4 billion (France); €25.6 billion (Germany); €30.5 billion (Greece); €191.5 billion (Italy); €1.8 billion (Latvia); €2.2 billion (Lithuania); €93.4 million (Luxembourg); €16.6 billion (Portugal); €1.8 billion (Slovenia); and €69.5 billion (Spain).

The disbursements follow the adoption of the Council Implementing Decisions, allowing up to 13% pre-financing, for the approval of national Recovery and Resilience plans for the above-mentioned Member States, which received the first green lights for use of EU recovery and resilience funds in July 2021 (see here), with Slovakia still awaiting its pre-financing disbursement.

Following a positive assessment on 6 September 2021, Council approval is anticipated for the Member State plan for Ireland (€989 million), as earlier approved by the Commission. In addition, the plans for Finland (€2.1 billion), Malta (€316.4 million), and Romania (€29.2 billion) will undergo Council assessment following recent approvals by the Commission.

To recall, the Member State plans set out the reforms and public investment projects foreseen for implementation with the support of the RRF, the key component of NextGenerationEU, the EU's plan for rebounding from the COVID-19 crisis. The RRF will provide up to €672.5 billion to finance reforms and investments (i.e., grants totaling €312.5 billion and €360 billion in loans).

4 Member State plans remain pending Commission approval (see here), with the following total amounts requested under the RRF: Estonia (€982.5 million); Hungary (€7.2 billion); Poland (€23.9 billion); and Sweden (€3.2 billion).

Commission assessment of plans. In evaluating the Member State plans under the criteria set out in the RRF Regulation, notably, the RRF guidelines make clear that the investment projects included in Member State recovery plans must comply with State aid rules.

The Commission published practical guidance for swift treatment of projects under State aid rules, as well as a number of sector-specific templates to help Member States design and prepare the State aid elements of their recovery plans (Jones Day Commentary, "EU Member State COVID-19 Recovery Plans Must Comply with State Aid Rules," March 2021, see here).

The Commission's appraisal of Member State plans will also, in particular, determine whether the plans dedicate at least 37% of expenditure to investments and reforms that pursue climate objectives and 20% to the digital transition.

Member State plans pending submission. The Commission will continue to closely engage with the 2 remaining Member States (i.e. Bulgaria and The Netherlands) to deliver robust national recovery plans. While Member States were invited to notify their plans before 30 April 2021, they may do so until mid-2022.