State aid: extension of the Temporary Crisis Framework to support the economy in the context of Russia’s invasion of Ukraine

EU

Many businesses and individuals have been impacted directly or indirectly by the crisis resulting from Russia's invasion of Ukraine, as well as the repercussions of all the economic sanctions adopted at the EU and international level and the countermeasures taken by Russia.

This is taking a heavy toll on the European economy and particularly on energy prices, a situation that is unlikely to improve in the coming months.

In response to this crisis, the European Commission adopted on 23 March 2022 a new Temporary Crisis Framework to allow Member States to use the flexibility of the State-aid rules to address this unprecedented situation while preserving a level playing field in the internal market. A first amendment had been adopted in July 2022 to increase the threshold of the category of limited amounts of aid, to provide for certain technical clarifications regarding aid in the form of guarantees and loans and to include two new categories of aid to accelerate the deployment of renewable energy and to facilitate the decarbonisation of industrial processes.

Recently, the Commission amended again the Temporary Crisis Framework due to the duration of the crisis. It prolonged its duration until 31 December 2023, increased consequently certain thresholds of aid, clarified certain criteria and included new categories of aid aimed at supporting electricity demand reduction.

Under this new amended Framework, Member States may:

  • Set up schemes to grant limited amounts of aid of up to EUR 2 million per crisis-affected undertaking (up to EUR 250,000 and EUR 300,000 for companies active in the agriculture, fisheries and aquaculture sectors respectively). This aid, which can take various forms, does not have to be linked to an increase in energy prices

  • Grant subsidised State guarantees on new bank loans in the form of subsidised premiums, based on a straight-forward table set up by the Commission in function of the size of the beneficiary (SME or large enterprise) and the maturity of the loan.

  • Guarantees of up to six years may cover up to 90% (if the State supports the same risk as the financial institution) or 35% (if the risk is supported primarily by the State) of the amount of bank loans, which are based on the operating needs of the companies (and which may not exceed 15% of the average total annual turnover of the last three accounting years or 50% of the energy costs that the enterprise has had to bear during the last 12 months preceding the application. This amount may be increased in certain cases). Guarantees may cover investment and working capital loans.

    In exceptional cases and subject to strict safeguards, Member States may provide public guarantees exceeding 90% coverage, where they are provided as financial collateral to central counterparties or clearing members.

  • Grant interest rate subsidies for public and private loans. The interest rate of these loans must also be at least equal to the rates set out in a table drawn up by the Commission according to the size of the beneficiary concerned and the maturity of the loan. The maximum amount of the loan depends on the operational needs of the undertaking (and the amount also depends on the turnover, the cash flow costs that the enterprise has had to bear or its specific cash flow needs). These loans, with a maximum duration of six years, can concern both investments and working capital needs.

  • Grant aid to compensate for the extra costs linked to the exceptionally high increase in energy prices. This aid can take any form, but must not exceed 30% of the eligible costs (calculated on the basis of the increase in natural gas and electricity costs linked to Russian invasion of Ukraine) up to a maximum of EUR 2 million.

  • Subject to certain conditions, this aid might reach EUR 25 million for companies considered to be energy intensive users, and up to EUR 50 million for companies active in specific sectors, such as the production of aluminum and other metals, glass fibres, paper pulp, fertiliser or hydrogen and many basic chemicals.

    Member States are now entitled to calculate support based on either past or present consumption, taking into account the need to keep intact market incentives to reduce energy consumption and to ensure the continuity of economic activities. The modalities are also more flexible for particularly affected energy-intensive sectors, subject to safeguards to avoid overcompensation. Companies receiving larger aid amounts have to commit to set a path towards reducing the carbon footprint of energy consumption and implementing energy efficiency measures.

  • Introduce new measures aimed at supporting electricity demand reduction in line with Regulation (EU) 2022/1854. The aid may take several forms: subsidies, loans, guarantees, etc. It must be awarded in a competitive bidding process that is open, clear, transparent and non-discriminatory.

  • The remuneration must be granted to each beneficiary based on the actual additional consumption reduction achieved (as opposed to the additional consumption reduction the beneficiary committed to achieve).

All aid aimed at by the Temporary Crisis Framework must be notified in advance by the Member States to the Commission before being implemented.

Cumulation rules must be observed, in particular for aid granted on the basis of the Temporary Crisis Framework on State aid measures to support the economy in the context of the COVID-19 crisis.

Finally, it should be noted that the Temporary Crisis Framework contains a number of safeguards. For example, Member States are invited to consider, in a non-discriminatory manner, setting up environmental protection or security-of-supply requirements when granting aid.

The Commission also recalls that the Temporary Crisis Framework adds to the range of possibilities available to Member States to develop support measures in line with the European State aid rules.

For example, Member States may adopt support measures for those most at risk: to help them afford their energy bills in the short term or provide support for energy efficiency improvements. These measures do not constitute State aid because they target individuals and not companies and therefore do not need to be reported to the European Commission.

They may also grant aid to make good on the damage caused by the exceptional occurrences under Article 107(2)(b) TFEU. Aid to mitigate the damage caused directly by the current exceptional occurrences linked to Russian aggression against Ukraine may also cover certain direct effects of the economic sanctions imposed or the countermeasures negatively affecting the beneficiary from operating its economic activity or a specific and severable part of its economic activity.

Since the adoption of this specific Framework, the Commission has adopted around 120 related decisions.

CMS keeps you informed of the public measures adopted by the Member States to support your business enterprises.

CMS has the widest coverage and the broadest team 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 consult our brochure for the CMS contact in your jurisdiction.