EU COVID-19 Temporary Framework for State Aid: Sixth amendment

On 18 October 2021, the EU Commission published the sixth amendment to its Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak (the Temporary Framework) adopted on 19 March 2020 (see our blog post).

The Temporary Framework was previously amended on 3 April 2020 (see our blog post), on 8 May 2020 (see our blog post), on 29 June 2020 (see our blog post), on 13 October 2020 (see our blog post), and 28 January 2021 (see our blog post).

With its sixth amendment, the EU Commission inter alia:

• prolonged the measures already set out;
• introduced two new tools in the form of investment support and solvency support; and
• adapted the ceilings of various aid measures.

Prolongation until 30 June 2022 

The Temporary Framework, which was set to expire by 31 December 2021, has been prolonged until 30 June 2022.

The prolongation is intended to encourage a gradual and coordinated phase-out of crisis measures, by allowing Member States to extend their support schemes and ensure that businesses still affected by the crisis will not suddenly lose necessary support.

New incentivising measures

In an attempt to link the aid granted under the Temporary Framework to the EU Commission’s broader aims under its EU Green Deal and digital strategy, the EU Commission has introduced two new elementsto create direct incentives for forward-looking private investment (new Section 3.13) and solvency support measures (new Section 3.14) for a faster, greener and more digital recovery:

• Investment support measures in the form of incentives for investments by companies, to help Member States address the investment gap left by the crisis (available to Member States until 31 December 2022). The aid must be granted on the basis of a scheme. The maximum individual aid that may be granted per undertaking may not exceed 1% of the total budget available for such a scheme, except in situations that are justified by the Member State. However, the overall aid will be capped, with the maximum depending on the aid instrument used. Member States may in addition limit the aid to investments that support specific areas of particular importance for the economic recovery.
• Solvency support measures in the form of guarantees, to leverage private funds and make them available for investments in small and medium-sized enterprises, including start-ups, and small midcaps (available to Member States until 31 December 2023). The support must be provided as an incentive for private investments into equity, subordinated debt, or quasi-equity, including silent participations or participative loans. It must be granted on the basis of a scheme, in the form of public guarantees or similar measures for dedicated investment funds as an incentive to invest in final beneficiaries. The total amount must not exceed EUR 10 million per undertaking.

Other amendments 

The Commission has also prolonged until 30 June 2023 the possibility for Member States to convert repayable instruments granted under the Temporary Framework into other forms of aid such as grants.

With regard to the maximum aid intensity, the EU Commission has increased the limit under Section 3.1 of the Temporary Framework from EUR 1.8 million to EUR 2.3 million per undertaking. The limit on aid in the form of support for uncovered fixed costs under Section 3.12 of the Temporary Framework has been increased by the EU Commission from EUR 10 million to EUR 12 million per undertaking.

The Commission also clarified the exceptional flexibility provisions in relation to its Rescue and Restructuring Guidelines. In particular it noted that it may be justified that own contributions by an undertaking receiving rescue and restructuring aid remain below 50% of the overall restructuring costs, as long as the own contributions remain significant and include additional fresh funding at market conditions. Under the Rescue and Restructuring Guidelines, own contributions generally have to amount to at least 50% of the restructuring costs to qualify as “significant”.

Lastly, the EU Commission also prolonged the adjusted list of non-marketable risk countries for Short Term Export Credit protection for an additional three months until 31 March 2022

The sixth amendment to the Temporary Framework is available here and an informal consolidated version of the Temporary Framework is available here.

Please contact us or your usual contact in our Antitrust, Competition and Trade team to discuss these developments further.