COVID-19 brings certain questions to centre stage regarding State aid. In this short read, Peter Wytinck, Sophie Van Besien and Michèle de Clerck discuss the possibility of State aid in case of significant financial losses as a result of the spread of the corona virus.
Pursuant to European State aid law, there are certainly situations in which the Belgian and regional government can offer aid to remedy a serious disturbance in the economy of a Member State. Small “de minimis" aid will always be allowed. General aid measures that are available to all companies such as wage subsidies, the suspension of payments of corporate and value added taxes or social contributions, and direct financial support to consumers for cancelled services or tickets not reimbursed by the concerned operators, do not fall within the scope of State aid control and do not require the Commission's approval under EU State aid rules. For other types of aid above “de minimis" level (e.g. aid to meet acute liquidity needs and support companies facing bankruptcy due to the outbreak of the corona virus), prior approval of the European Commission may be necessary.
Specifically with regard to the corona virus, the European Commission has, in record-breaking time, adopted a Temporary Framework for COVID-19 State aid measures, which will enable four types of State aid:
- Increased “de minimis" aid: direct grants or tax advantages up to € 800.000 will be allowed for companies with urgent liquidity needs. The Belgian government already decided to grant compensation for the hotel and catering industry. Additional tax measures (delayed tax payments, etc…) are equally taken and also at regional level there are initiatives;
- In addition, Member States will be able to offer State guarantees or set up guarantee schemes supporting bank loans taken out by companies with subsidised premiums. The guarantees may relate to both investment and working capital loans, with limits on the maximum loan amount in specific circumstances. In addition, the guarantees cannot exceed 90% (where losses are sustained proportionally under same conditions by the credit institution and the State) and 35% (where losses are first attributed to the State and only then to the credit institutions, i.e. a first-loss guarantee) respectively. The duration of the guarantee is limited to a maximum of six year;
- Member States can also enable public loans to companies with subsidised interest rates. The loans may relate to both investment and working capital loans, with limits on the maximum loan amount.
- If Member States channel aid to the real economy via the banking sector, this is not considered aid to banks but direct aid to the banks' customers. Safeguards are to be put in place to make sure that the aid is passed on, to the largest extent possible, to the final beneficiaries in the form of higher volumes of financing, riskier portfolios, lower collateral requirements, lower guarantee premiums or lower interest rates.
The Temporary Framework also allows for additional flexibility on how to demonstrate that certain countries are not-marketable risks, thereby enabling short-term export credit insurance to be provided by the State where needed.
The State aid offered in the context of this Temporary Framework will be available for companies, which were not in difficulty on 31 December 2019, but entered into difficulty thereafter due to the outbreak of the Corona virus. Member States must grant the aid by 31 December 2020 at the latest.
It is important to note that under the Temporary Framework Member States still will first have to adopt generally applicable “schemes" and notify them to the Commission. The Commission then has to examine the compatibility of the proposed schemes with the Temporary Framework. Once the “national scheme" has received the Commission's approval, Member States can grand individual aid immediately without the Commission's approval.
This article provides some general insights on different legal questions. These insights do not constitute legal advice and may not be relied upon as if they were legal advice. The outcome of any legal analysis will strongly depend both on the specific facts and circumstances of each case and on the particularities of the sector and legal relationship involved. Our legal experts in the various domains concerned are available to assist you with the analysis of your questions and provide specific advice tailored to your case and circumstances.