The EU Commission approves €12 billion German umbrella scheme to compensate companies for damages suffered due to the COVID-19 pandemic

State aid: Commission approves €12 billion German umbrella scheme to compensate companies for damages suffered due to coronavirus outbreak*

The European Commission has found a €12 billion German umbrella scheme (final part of the Novemberhilfe package) to compensate companies for damages suffered due to restrictive measures to contain the coronavirus outbreak to be in line with EU State aid rules.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The second wave of the coronavirus has hit many businesses very hard. This €12 billion scheme will enable Germany to compensate businesses of all sectors for the damages suffered due to restrictive measures taken to contain the coronavirus outbreak. It complements already approved schemes enabling support of up to €4 million per company as part of the Novemberhilfe package. We continue to work closely with Member States to find effective solutions to support companies in these difficult times, in line with EU rules.”

Under the scheme, companies from all sectors will be entitled to compensation for damages suffered during the lockdown periods imposed by the German government in March/April and November/December 2020 to limit the spread of the coronavirus. The compensation, in the form of direct grants, covers either up to 100% of the actual damage incurred during the lockdown periods, or 75 % of the turnover in the reference months of November and December 2019, whichever amount is lower.

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

The Commission considers that the coronavirus outbreak qualifies as such 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 damages directly linked to the outbreak are justified.

The Commission found that the German aid scheme will compensate damages that 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.

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

Background

The German authorities are implementing the “Novemberhilfe” based on three umbrella schemes: (i) up to €1 million per undertaking under an umbrella scheme on small grants (of up to €800,000 initially) approved by the Commission on 24 March 2020 (SA.56790 and its amendments), combined with de minimis support of up to €200,000 (in line with applicable State aid de minimis regulation); (ii) the “Novemberhilfe plus” for an additional €3 million per undertaking approved by the Commission in a uncovered fixed costs compensation umbrella scheme on 23 November 2020 (SA.59289); and (iii) the scheme approved in today’s decision.

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 outbreak setting 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 and the UK 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 and 13 October 2020, 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.

The Temporary Framework will be in place until the end of June 2021. As solvency issues may materialise only at a later stage as this crisis evolves, for recapitalisation measures only the Commission has extended this period until the end of September 2021. The Commission is currently consulting Member States on a draft proposal to prolong until 31 December 2021 and further adjust the scope of the State aid Temporary Framework. OR With a view to ensuring legal certainty, the Commission will assess before those dates if it needs to be extended.

The non-confidential version of the decision will be made available under the case number SA.60045 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.

More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the Coronavirus pandemic can be found here.

*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 €12 billion German umbrella scheme to compensate companies for damages suffered due to the COVID-19 pandemic, 21 January 2021, e-Competitions January 2021, Art. N° 98865

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