COVID-19: European Commission extends and adds flexibility to temporary framework for authorization of state aid

European Union Alert

On April 3, 2020 the European Commission announced the adoption of an amendment extending and adding flexibility to the Temporary Framework adopted on March 19, 2020 to enable Member States to give State aid for research, testing and production of coronavirus related products, and also to grant greater volumes of aid under the categories already allowed under the original Temporary Framework. 

The amendment adds five new types of aid which were not included in the original Temporary Framework. In addition, it increases the intensities of the already included categories of aid.

Three of the new types of aid relate to support for research and the manufacture of medical devices to tackle the pandemic:

  • Support for coronavirus related research and development (R&D) in the form of direct grants or subsidies, repayable advances or tax advantages.
  • Support for the construction and upscaling of facilities for testing products to tackle the COVID-19 outbreak (including vaccines, equipment or medical devices, protective clothing and disinfectants) in the form of direct grants or subsidies, tax advantages, repayable advances and no-loss guarantees.
  • Support for the manufacture of products to tackle the COVID-19 outbreak (including vaccines, equipment or medical devices, protective clothing and disinfectants) in the form of direct grants/subsidies, tax advantages, repayable advances and no loss guarantees.

The aid granted for these three items may be even greater if it is supported by more than one Member State. Additionally, aid for coronavirus related R&D can only be granted if beneficiaries agree to grant non-exclusive licenses under non-discriminatory market conditions to third parties in the European Economic Area.

The amendment further adds another two types of aid to tackle the pandemic's impact on the economy:

  • Aid in the form of deferral of tax payments and/or suspensions of social security contributions in the sectors or regions, or for the types of companies, that are the hardest hit by the outbreak, to reduce the liquidity constraints on companies and to preserve employment.
  • Support in the form of wage subsidies for employees in sectors or regions or at types of companies that have suffered most from the outbreak, to help constrain the impact of the coronavirus crisis on workers.

These two types of measures may only be approved in relation to specific regions, sectors, or types of companies. This is because the Commission assumes that, in principle, any similar types of support applicable to all businesses in a Member State are not selective measures and do not amount to State aid.

Thirdly, the amendment of the Temporary Framework also increases the intensities and adds flexibility to the conditions required for the categories of aid already allowed under the original Temporary Framework. The elements to be noted include the following:

  • Member States will be able to grant interest-free loans and guarantees on loans covering 100% of the risk.
  • Member States will also be able to provide capital with a nominal value of up to €800,000 per company.
  • Additionally, these types of aid may be cumulated with de minimis types of aid. Because this aid has a cap of €200,000 per company and year (except for a few sectors), the receipt of both types of aid will mean that every company may receive up to €1,000,000 in a year. This aid may also be received alongside any other types of aid that have been held compatible for reasons unrelated to the public health crisis.

The Temporary Framework will remain in effect until December 2020, although before that date the Commission will consider a potential extension if necessary. Recent practice has shown that, should the need arise, that Temporary Framework could be reviewed before that time limit, and quite quickly.

It needs to be underlined that the Temporary Framework that has just been amended is not directly effective legislation. Rather, it is a non-binding communication through which the European Union explains the criteria it intends to use in order to decide at a later date on the compatibility of the various types of State aid with EU law. The Temporary Framework does not exempt Member States either from the obligation to give prior notice of the aid they intend to give, or to wait before granting it until the Commission has authorized the aid in a formal decision.

It is foreseeable therefore that over the coming days any Member States who wish, and have room in their budgets, will notify to the Commission new state aid regimes or amendments to the regimes already in place, and the Commission will approve. Spain is also likely to do just that, although we have yet to find out which specific types of aid it intends to use.

Click here for the Temporary Framework approved by the