European Union: COVID-19 Is State Aid Available?

On the 12 March, the European Commission approved the first national state aid scheme notified by Denmark to compensate companies that had to cancel events with more than 1000 people due to  the COVID-19 outbreak. The EU Commission signed off on those plans within an unprecedented 24 hours.

With the rapid spreading of this virus around the globe, countries are taking unprecedented measures to contain the spread and businesses are increasingly struggling with the economic impact, particularly airlines, tour operators and event businesses being the first to be affected. Statistics show that Europe’s airports are registering double digit decreases in passengers during March 2020, in comparison to the equivalent weeks in 2019.

EU State aid law will play an important role in the European and national responses to this crisis. In principle, a State’s support measures may constitute state aid within the scope of Article 107(1) of the Treaty of the Functioning of the European Union (TFEU), unless such measures are considered de minimis or fall under some block exemption regulation or an approved State aid scheme.

The question therefore for many businesses is whether and how they can benefit from State aid to counteract the effect of COVID-19 outbreak.

For the time being, it is not clear what exact support measures Malta and the European Union plan to implement for COVID-19 related State aid. Pending further guidance, however, from an EU State aid law perspective, the following legal benchmarks may apply. Article 107(2)(b) allows “aid to make good the damage caused by natural disasters or exceptional occurrences”. The current large socio-economic impact has led the European Commission to inquire into ways of extending the interpretation of the phrase “exceptional occurrences” to include the COVID-19 outbreak, as it did, coincidentally when approving the Danish scheme.

Moreover, the nature and scale of the current circumstances in Italy enabled the Commission to approve additional national support measures in terms of Article 107(3)(b) which the European Commission considered necessary to “remedy a serious disturbance to the economy of a Member State”. Indeed, the Commission has announced that is preparing a special legal framework under Article 107(3)(b) TFEU to adopt in case of need.

The Commission might also return to its rescue and restructuring guidelines for undertakings in difficulty which are based on Article 107 (3) TFEU. Member States may in turn explore granting aid in certain circumstances under the De Minimis Regulation or under the General Block Exemption Regulation. Member States can of course, grant financial support directly to consumers, for example for cancelled services or tickets that are not reimbursed by the operators concerned. This would not constitute State aid.

Time and the particular economy of a Member State play a key factor in devising a State’s aid measures. Businesses who are looking for COVID-19-related aid measures should seek advice to ensure that any aid measure is in line with EU state aid rules.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.