New State Aid Temporary Framework in the context of the war in Ukraine – Export controls and trade and investment sanctions

0

It is recognized that the sanctions adopted by the EU and its international partners have not only affected the Russian economy, but that these sanctions are also weighing on the European economy and will continue to do so in the months to come. With this in mind, on March 23, 2022, the European Commission adopted and published a Communication establishing a Temporary crisis framework to support the economy as part of Russia’s aggression against Ukraine (there “Temporary Crisis Framework“)1.

As with the similar framework adopted in the context of the COVID-19 crisis, the temporary crisis framework provides for several types of aid deemed compatible under Article 107(3)(b) TFEU, which allows Member States to adopt State aid measures to remedy a serious disturbance in the EU economies.

The Temporary Crisis Framework covers three different types of aid and lays down the specific conditions for their assessment under Article 107(3)(b), namely:

1. Limited amounts of aid

Member States will be able to set up grant schemes of up to €400,000 per beneficiary affected by the war in Ukraine, with a lower ceiling and additional conditions applying to companies active in the sectors of agricultural products, fishing and aquaculture. Aid can be granted in the form of direct grants, tax advantages and payments or other forms (including repayable advances, loans and equity investments).

2. Liquidity support in the form of public guarantees and subsidized loans

Member States will be able to provide (a) subsidized state guarantees to ensure that banks continue to lend to all companies affected by the current crisis; and (b) public and private loans with subsidized interest rates.

Among other conditions, the guarantee premiums are set at the minimum level specified in the temporary crisis framework, which gradually increases as the duration of the guaranteed loan increases. Alternatively, Member States can notify schemes, in which the duration of the guarantee, the premiums and the cover can be modulated.

Loans can be granted at reduced interest rates and Member States can notify schemes allowing the duration of loans and the level of credit risk margins to be modulated.

Upon appropriate justification, the loan amount can be increased to cover liquidity needs from the time of granting for the next 12 months for SMEs and for the next 6 months for large companies.

3. Aid to offset high energy prices

Member States will be able to partially compensate companies, in any form, including direct subsidies, for additional costs due to the exceptional increase in the price of gas and electricity as a result of the crisis. The overall aid per beneficiary may not exceed 30% of the eligible costs, within the limit of €2 million at any given time.

In certain situations, in particular for large consumers of energy (including energy products other than natural gas and electricity2), Member States may grant additional aid to companies suffering operating losses, in order to ensure the continuation of the economic activity of the company.

Member States can grant aid of up to €25 million and up to €50 million to companies active in sectors particularly affected (such as the production of aluminum and other metals, fiber glass, pulp, fertilizer or ceramic tiles and flags).

The temporary crisis framework will be in place until 31 December 2022, but as with the temporary COVID-19 framework (which to date has been modified and updated 6 times), it must be reviewed by then at the light of economic or competitive considerations, as well as international developments.

The Commission ensured a rapid assessment of these measures and recommended that Member States inform the Commission of their intention to notify their plans to introduce State aid measures “as soon and as fully as possible”. .

The European Competition Network (“REC“) also issued a joint statement on the application of competition law in the context of the war in Ukraine.3 As it has done in the context of the COVID-19 crisis, the ECN recognizes that the current extraordinary circumstances may trigger the need for businesses to collaborate in order to mitigate the economic consequences or disruption caused by the impact of war, including those resulting from compliance with EU sanctions. Accordingly, under the current circumstances, the ECN will not actively intervene against strictly necessary and temporary measures in order to avoid a shortage of supply. If companies have any doubts about the compatibility of these cooperation initiatives with EU/EEA competition law, they can contact the Commission or the relevant national competition authority for informal advice. .

Footnotes

1. C(2022) 1890 final, Brussels, 23.3.2022.

2. In accordance with the Energy Taxation Directive, Council Directive 2003/96/EC of October 27, 2003.

3. https://ec.europa.eu/competition-policy/system/files/2022-03/202203_joint-statement_ecn_ukraine-war.pdf

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

Share.

About Author

Comments are closed.