EU Commission publishes amendments to its Temporary Framework for state aid in relation to the COVID-19 crisis

The EU Commission has published an amendment to its 19 March guidance document on state aid in reaction to the COVID-19 outbreak (see our blog post). 

It adds further measures to the list of support instruments that the Commission will consider compatible with the internal market upon notification of aid packages by member states. It also clarifies certain points in the original document.

1. What are the new state aid measures that the Commission will consider compatible?

There are five new measures in the amended Temporary Framework.

1. Aid for COVID-19 relevant research and development

Member states can fund R&D costs including clinical trials to 100 per cent (for fundamental research) and 80 per cent (for industrial research); the latter can be increased up to 95 per cent if more than one member state supports the research project.

Projects must be COVID-19 related or concern other antiviral research (some conditions are relaxed if the project has a COVID-19 specific "Seal of Excellence").

Beneficiaries shall commit to grant non-exclusive licences to third parties in the EEA.

2. Investment aid for testing and upscaling infrastructures

Direct grants, tax advantages or repayable advances can be granted for the “construction or upgrade of testing and upscaling infrastructures required to develop, test and upscale, up to first industrial deployment prior to mass production, COVID-19 relevant medicinal products (including vaccines) and treatments, their intermediates, active pharmaceutical ingredients and raw materials; medical devices, hospital and medical equipment (including ventilators and protective clothing and equipment as well as diagnostic tools) and necessary raw materials; disinfectants and their intermediary products and raw chemical materials necessary for their production; as well as data collection/processing tools”.

Investment projects (generally eligible as of 1 February 2020) should be completed after six months from the granting of the aid (otherwise aid needs to be partially repaid).

Up to 75 per cent of the eligible investment costs can be subsidised (with increase up to 90 per cent if the project is completed in two months, or if more than one member state are involved); a loss cover guarantee can be given on top.

3. Investment aid for the production of COVID-19 relevant products

COVID-19-relevant products include: 

• medicinal products (including vaccines) and treatments, their intermediates, active pharmaceutical ingredients and raw materials; 
• medical devices, hospital and medical equipment (including ventilators, protective clothing and equipment as well as diagnostic tools) and necessary raw materials; 
• disinfectants and their intermediary products and raw chemical materials necessary for their production; and 
• data collection/processing tools.

Aid can be given as direct grants, tax advantages or repayable advances plus a loss coverage guarantee; a maximum of 80 per cent (95 per cent if the project is completed in two months or if more than one member state is involved) of investment costs can be subsidised, projects must be completed within six months.

4. Aid in the form of deferrals of tax or and/or social security contributions

5. Aid in form of wage subsidies for employees to avoid lay-offs during the COVID-19 outbreak

Both these final two new categories cover selective (i.e. not generally applicable) variants of those measures, because only then would they constitute state aid. This means that member states can limit social security relief or wage subsidies to particular sectors or regions.

Aid should be granted by 31 December 2020 and any deferral should not be foreseen beyond the end of 2022.

Sectoral or regional wage subsidies can only be given where the beneficiaries would otherwise have had to lay-off people, who are now kept in employment, and for a maximum of 12 months, and should not generally exceed 80 per cent of the monthly gross salary.

What other clarifications are in the amended Temporary Framework?

The amendment clarifies that the conditions for loan guarantees and subsidised interest loans apply per loan and per beneficiary. 

It also streamlines the wording of the condition that beneficiaries cannot be "undertakings in difficulty" as well as the rules on cumulation of certain types of aid.

Are there any changes to the rules on loan guarantees in particular?

It has been reported in the media that the Commission would now permit guarantee coverage ratios up to 100 per cent. 

However, the amended Temporary Framework only allows this for small loans made in lieu of a direct grant under section 3.1 of the Framework. 

Therefore, only loans of up to €800,000 per undertaking may benefit from 100 per cent coverage by state guarantee. 

Larger loans continue to only be permissible with up to 90 per cent coverage by a state guarantee (against a guarantee fee).

Another precision is that a flat premium may be used for the entire duration of the guarantee, if it is higher than the minimum premiums for the first year set out in the table in section 3.2 for each type of beneficiary, as adjusted according to guarantee duration and guarantee coverage.

How many member states have already made use of the possibilities under the Temporary Framework?

The Commission has approved (as of Monday 6 April, midday CEST) 31 notified schemes by member states (including Denmark, France, Italy, Germany, Latvia, Luxembourg, Spain, UK, Estonia, Poland, Portugal, Ireland, Sweden, Malta, Greece, and the Netherlands).