On 3 April 2020, the European Commission adopted an amendment (the “Amendment”) extending the Temporary Framework for State aid measures to support the economy during the COVID-19 outbreak (The “Temporary Framework”) (See our previous post on the Temporary Framework here). The Amendment aims in particular to facilitate the grant of aid for the research, testing and production of products relevant for the fight against COVID-19 (e.g., medicines, vaccines, disinfectants, medical devices and equipment), as well as to protect jobs and to further support the economy in the context of the COVID-19 outbreak.

The Amendment provides for five types of aid in addition to the ones that were already covered by the Temporary Framework; the first three types of which may not be granted to undertakings that were already in difficulty before 31 December 2019:

  1. Support for COVID-19 related research and development: Member States may grant aid in the form of direct grants, repayable advances or tax advantages for R&D projects related to the development of products relevant for the fight against COVID-19. All projects started after 1 February 2020 or having received a COVID-19 Seal of Excellence are eligible. Projects started before 1 February 2020 are eligible if it can be demonstrated that the aid is necessary to widen or accelerate the scope of the project. Member States may finance up to 100% of the costs if the project relates to fundamental research and up to 80% if the project relates to industrial and experimental development within the meaning of Regulation N° 651/2014; in the latter case an additional 15% of the costs may be covered if the project is financed by more than one Member State. Further, the beneficiary should commit to grant non-exclusive licences under non-discriminatory conditions to third parties in the EEA.
  2. Support for the construction and upscaling of testing facilities: Member States may grant aid in the form of direct grants, tax advantages, repayable advances and no-loss guarantees to support investments enabling the construction or upscaling of infrastructures needed to develop and test products relevant to fight the COVID-19 outbreak, up to first industrial deployment. All projects started after 1 February 2020 or having received a COVID-19 Seal of Excellence are eligible. Projects started before 1 February 2020 are eligible if it can be demonstrated that the aid is necessary to widen or accelerate the scope of the project. The aid may cover up to 90% of the investment costs if the project is concluded within two months of the grant or if it is financed by more than one Member State and up to 75% in other instances. The project should in any event be completed within 6 months of the grant, otherwise 25% of the aid must be reimbursed per month of delay. To limit distortions of competition, the infrastructures financed through the aid should be open to several users on a transparent and non-discriminatory basis and at market price.
  3. Support for the production of products relevant to tackle the COVID-19 outbreak: Member States may grant aid in the form of direct grants, tax advantages, repayable advances and no-loss guarantees to support investments enabling the rapid production of products relevant for the fight against COVID-19. All projects started after 1 February 2020 or having received a COVID-19 Seal of Excellence are eligible. Projects started before 1 February 2020 are eligible if it can be demonstrated that the aid is necessary to widen or accelerate the scope of the project. The aid may cover up to 95% of the investment costs if the project is concluded within two months of the grant or if it is financed by more than one Member State and up to 80% in other instances. The project should in any event be completed within 6 months of the grant, otherwise 25% of the aid must be reimbursed per month of delay.
  4. Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions: Deferral of tax payments and/or suspensions of social security contributions do not constitute State aid within the meaning of Article 107 TFEU if they are available to all undertakings. However, they do fall under Article 107 TFEU if they are limited to certain regions, sectors and/or companies. The Amendment provides that Member States may grant targeted deferrals of payment of taxes and social security contributions in those sectors, regions or for types of companies that are hit the hardest by the outbreak. The deferral must be granted before 31 December 2020 and its end date should not be later than 31 December 2022.
  5. Targeted support in the form of wage subsidies for employees: Wage subsidies for employees do not constitute State aid within the meaning of Article 107 TFEU if they are available to all undertakings. However, they do fall under Article 107 TFEU if they are limited to certain regions, sectors and/or companies. The Amendment provides that, in order to avoid lay-offs, Member States may grant targeted wage subsidies to companies active in sectors or regions that have suffered the most from the COVID-19 outbreak. The monthly wage subsidies should not exceed 80% of the benefiting personnel’s gross salary and should be limited to 12 months.

The Amendment also brings some clarifications and modifications on the conditions under which the five types of aid already considered in the original Temporary Framework may be granted. For example, the Amendment extends the first category of aid covered by the Temporary Framework.  In addition to direct grants, tax and payment advantages, Member States may now also grant aid in the form of zero-interest loans, guarantees on loans covering 100% of the risk, and equity. These types of aid must be granted on the basis of a scheme with an estimated budget and should not exceed EUR 800.000 per company but can be combined with de minimis aid. Further, they may not be granted to undertakings that were in difficulty before 31 December 2019. In addition, the Amendment also clarifies the conditions under which the amounts of guarantee premiums set out in paragraph 25 a) and the amounts of interest rates set out in paragraph 27 a) of the Temporary Framework may be modulated.

The measures adopted under the Temporary Framework and the Amendment must still be notified but the Commission has committed to ensure a smooth approval process. At the time of drafting this post, 37 aid measures have already been approved under the Temporary Framework (the full list is available here).

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.