Coronavirus crisis: EU conditions to obtain a compensation for exceptional occurrence under state aid rules

International

While Member States are adopting stricter measures in the attempt to combat the spread of the coronavirus, the Commission has published the list of information to be provided for by Member States for notifications of aid for exceptional occurrence under Article 107(2)(b) TFEU.

As a reminder, Executive Vice-President Vestager had announced on 17 March 2020 a public consultation on the European Commission’s draft proposal for a State aid Temporary Framework to support the economy in the context of the COVID-19 outbreak.  

The Temporary Framework which will be based on Article 107(3)(b) TFEU to remedy a serious disturbance across the EU economy aims at regulating national public support to provide liquidity funds for undertakings in the form of subsidies, tax advantages, subsidized guarantees and interest rates.

Furthermore, companies suffering from damage caused directly by the Coronavirus pandemic may be eligible to compensation in accordance with Article 107(2)(b) TFEU as the Commission qualified the pandemic situation as an “exceptional occurrence”. This provision has been used in the past for the air transport sector following the terrorist attacks of 11 September 2001.

Denmark notified on 11 March 2020 a 12 million EUR compensation scheme for organizers of events that were cancelled because of the Coronavirus. The beneficiaries of the aid scheme are all private legal entities organizing events in Denmark either with more than 1000 participants or targeted at designated COVID-19 related risk groups, such as the elderly and vulnerable, irrespective of the number of participants. Costs eligible for compensation are income loss and additional costs due to cancellation, deferral or change in the conditions of the event organization. The European Commission approved the scheme within 24h.

The European Commission intends to act swiftly on further compensations notified by Member States. In order to be able to react swiftly to further notifications, the Commission has published a template with the information to be provided by the Member State in their notifications in order to enable the European institution to verify if the conditions of Article 107(2)(b) TFEU are fulfilled.

To this aim, the notification of aid schemes by Member States to the European Commission must contain:

1. The description of the exceptional occurrence and the official reaction of your authorities meaning a description of the situation in your country providing data such as the number of affected persons, the economic impact of the outbreak and particularly in the sectors covered by the scheme and the recommendations of the local authorities concerning the sectors’ situation;

2. A general description of the aid scheme with reference to the national legal basis on which it relies as well as the objective, budget, form of aid, beneficiaries, duration and aid intensity of the aid scheme;

3. A description of the damage covered with specific description of the causal links between the outbreak and the damages and between the damages and the aid. The description of the type of damages compensated and the methodology used for assessing the damage is also required;

4. A description of the aid measure with a precise description of the mechanism aid in order to demonstrate that the amount of the aid will not exceed the damages suffered (the question of proportionality);

5. Other commitments are therefore at stake. They concern confirmations about the aid’s payment. With, for example, the obligation to confirm that any payment in excess of the damages will be recovered, that the payment is net of any amount recovered by insurance, litigation or other sources for the same damage. The aid may furthermore not be cumulated, a report must be made, etc.

A specific annex is applicable to the transport sector as the public support will have to be assessed on a case-by-case basis and not be included in an aid scheme.

For compensation to airlines, airports, groundhandlers, rail and bus undertakings, maritime companies, etc., the Commission requests the following information in the notification of the Member States :

  • identification of the additional costs, of the foregone revenues (e.g. loss of traffic as a result of restrictions imposed by Member States, such as flight bans, lock-downs, or more generally, reduced demand resulting from Coronavirus), as well as costs not incurred (e.g. variable costs, catering). These items should be directly related to the spread of the Coronavirus;
  • Definition of a reference period, when the situation was comparable to the situation that should have prevailed during the period of the outbreak of the Coronavirus (e.g., summer and winter season, holidays); reconstitution of damages caused by comparison of the situation during the period of spread of the Coronavirus and the reference period. The reconstitution should factor in the change of important parameters (e.g., fall in price of fuels).

In such specific cases, the input of the companies concerned will be essential.

The European Commission is expecting numerous notifications and has announced that the 24h process will not be repeated. In order to facilitate the process, the Commission has suggested to Member States to proceed with notifications in English and a waiver template has been provided.

CMS will keep you informed of the adoption of the Temporary Framework and of the public measures adopted by Member States in order to support your business enterprises.

CMS has the widest coverage and one of the strongest teams of state aid specialists in Europe. Furthermore, we have extensive experience in setting up aid schemes and in public interventions in favour of undertakings in difficulty.

Please refer to our brochure for the CMS contact in your jurisdiction.