The EU Commission approves a €88 million German support to compensate a national railway company for damages suffered by its subsidiary due to the COVID-19 outbreak (Deutsche Bahn / DB Cargo)

State aid: Commission approves €88 million German support to compensate Deutsche Bahn for damages suffered by its subsidiary DB Cargo due to the coronavirus outbreak*

The European Commission has found a €88 million German support measure in favour of Deutsche Bahn AG to be in line with EU State aid rules. The measure, which will take the form of an equity injection, aims at compensating Deutsche Bahn for the damages suffered by its subsidiary DB Cargo due to the coronavirus outbreak between 16 March and 17 May 2020.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: ”This measure will enable Germany to compensate Deutsche Bahn for damages suffered by its subsidiary DB Cargo as a direct result of restrictions that were put in place to limit the spread of the virus. We continue working closely with Germany and all other Member States to ensure that national measures to support all sectors that were hit by the crisis, including the rail sector, can be implemented as quickly as possible, in line with EU rules.”

The German support measure

DB Cargo, a subsidiary of Deutsche Bahn, provides rail freight transport services in Germany and other countries. Between mid-March and mid-May 2020, DB Cargo experienced a drop in transport volumes and revenues, due to the restrictive measures that Germany and other Member States had to implement to limit the spread of the coronavirus.

In particular, the combination of total or partial standstills in production, the suspension of retail activities and travel restrictions entailed that the main DB Cargo’s clients, active notably in the automotive, steel, chemicals/mineral oil and combined transport segments, were prevented in full or in part from exercising their economic activities in several geographic areas. Given the heavy reliance of DB Cargo’s business on such clients, this resulted into a decline of its activities and revenues.

Germany notified to the Commission, under Article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU), an equity injection of €88 million into Deutsche Bahn to compensate the company for having covered the losses suffered by its subsidiary DB Cargo in the period between 16 March and 17 May 2020 due to the restrictions in place to limit the spread of the virus.

The Commission assessed the measure under Article 107(2)(b) TFEU, which enables the Commission to approve State aid measures granted by Member States to compensate specific companies or specific sectors (in the form of schemes) for damage directly caused by exceptional occurrences.

The Commission considers that the coronavirus outbreak qualifies as an exceptional occurrence, as it is an extraordinary, unforeseeable event having a significant economic impact. As a result, exceptional interventions by the Member States to compensate for the damage linked to the coronavirus outbreak are justified.

The Commission found that the German measure will compensate damages which are directly linked to the coronavirus outbreak. It also found that the measure is proportionate, as the envisaged compensation does not exceed what is necessary to make good the damage.

In estimating the amount of damage to be compensated, the measure also takes into account of reductions in track access charges that DB Cargo benefitted from on the basis of a German scheme that the Commission approved on 30 July 2021 (SA.63635).

The Commission therefore concluded that the measure is in line with EU State aid rules.

Background

Financial support from EU or national funds granted to health services or other public services to tackle the coronavirus situation falls outside the scope of State aid control. The same applies to any public financial support given directly to citizens. Similarly, public support measures that are available to all companies such as for example wage subsidies and suspension of payments of corporate and value added taxes or social contributions do not fall under State aid control and do not require the Commission’s approval under EU State aid rules. In all these cases, Member States can act immediately. When State aid rules are applicable, Member States can design ample aid measures to support specific companies or sectors suffering from the consequences of the coronavirus outbreak in line with the existing EU State aid framework.

On 13 March 2020, the Commission adopted a Communication on a coordinated economic response to the COVID-19 outbreaksetting out these possibilities.

In this respect, for example:

  • Member States can compensate specific companies or specific sectors (in the form of schemes) for the damage suffered due and directly caused by exceptional occurrences, such as those caused by the coronavirus outbreak. This is foreseen by Article 107(2)(b)TFEU.
  • State aid rules based on Article 107(3)(c) TFEU enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid.
  • This can be complemented by a variety of additional measures, such as under the de minimis Regulation and the General Block Exemption Regulation, which can also be put in place by Member States immediately, without involvement of the Commission.

In case of particularly severe economic situations, such as the one currently faced by all Member States due the coronavirus outbreak, EU State aid rules allow Member States to grant support to remedy a serious disturbance to their economy. This is foreseen by Article 107(3)(b) TFEU of the Treaty on the Functioning of the European Union.

On 19 March 2020, the Commission adopted a State aid Temporary Framework based on Article 107(3)(b) TFEU to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework, as amended on 3 April, 8 May, 29 June, 13 October 2020, 28 January and 18 November 2021, provides for the following types of aid, which can be granted by Member States: (i) Direct grants, equity injections, selective tax advantages and advance payments; (ii) State guarantees for loans taken by companies; (iii) Subsidised public loans to companies, including subordinated loans; (iv) Safeguards for banks that channel State aid to the real economy; (v) Public short-term export credit insurance;(vi) Support for coronavirus related research and development (R&D); (vii) Support for the construction and upscaling of testing facilities; (viii) Support for the production of products relevant to tackle the coronavirus outbreak; (ix) Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions; (x) Targeted support in the form of wage subsidies for employees; (xi) Targeted support in the form of equity and/or hybrid capital instruments; (xii) Support for uncovered fixed costs for companies facing a decline in turnover in the context of the coronavirus outbreak; (xiii) Investment support towards a sustainable recovery; and (xiv) Solvency support.

The Temporary Framework will be in place until 30 June 2022, with the exception of investment support towards a sustainable recovery, which will be in place until 31 December 2022, and of solvency support, which will be in place until 31 December 2023. The Commission will continue to monitor closely the developments of the COVID-19 pandemic and other risks to the economic recovery.

The non-confidential version of the decision will be made available under the case number SA.63847 in the State aid case register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

*This is the original title of the press release. The title above has been amended in order to match the e-Competitions format. Individual authors are welcome to provide original independent commentaries on the case law. Articles are subject to approval by the Board of e-Competitions Bulletin before publication based on the Editorial Policy (click here).

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European Commission, The EU Commission approves a €88 million German support to compensate a national railway company for damages suffered by its subsidiary due to the COVID-19 outbreak (Deutsche Bahn / DB Cargo), 22 December 2021, e-Competitions December 2021, Art. N° 104407

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