The EU Commission approves a Polish scheme to compensate large companies for damages suffered due to the COVID-19 pandemic and provide liquidity support

State aid: Commission approves a Polish scheme to compensate large companies for damages suffered due to coronavirus outbreak and provide liquidity support*

The European Commission has approved, under EU State aid rules, a Polish scheme to partially compensate large companies for the damages suffered due to the coronavirus outbreak and the restrictive measures implemented by the Polish government, while providing them with direct liquidity support through subsidised loans. The scheme is part of a wider Polish support programme, the so-called “Financial Shield for Large Enterprises”.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This scheme will enable Poland to partially compensate large companies for the damages suffered as a result of the restrictive measures put in place to limit the spread of a third wave of the coronavirus pandemic, while supporting their immediate liquidity needs. We continue working in close cooperation with Member States to find workable solutions to mitigate the economic impact of the coronavirus outbreak, in line with EU rules.”

The Polish scheme

Poland notified to the Commission a scheme to compensate large companies for the damages caused by the coronavirus outbreak and to support their immediate liquidity needs.

The scheme, which is modelled upon a previous Polish scheme approved by Commission on 29 May 2020 (SA.57054), will be implemented by the Polish Development Fund and is part of a wider Polish programme, called “Financial Shield for Large Enterprises”, supporting companies in the context of the coronavirus outbreak.

Under the scheme, which will be open to large companies active in all sectors and registered in Poland, the aid will take the form of subsidised loans at favourable interest rates, which can be redeemed in an amount not exceeding 75% of the actual damages incurred by the beneficiary companies from 1 November 2020 until 30 April 2021 and directly due to the coronavirus outbreak.

Beneficiaries of the aid will therefore have access to immediate liquidity, through loans. The aid is planned to be granted in the form of loans to be partially written-off later by an amount equivalent to the calculated damages suffered due to the coronavirus outbreak.

The Commission assessed the Polish scheme, which provides for both compensation for damages and liquidity support, under two legal bases:

  • 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 to compensate specific companies or specific sectors for the damages directly caused by exceptional occurrences, and
  • under Article 107(3)(b) TFEU, which enables the Commission to approve State aid measures implemented by Member States to remedy a serious disturbance in their economy.

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 damages linked to the outbreak are justified.

The Commission found that the Polish measure will compensate damages that are directly linked to the coronavirus outbreak, and that it is proportionate, as the compensation will not exceed what is necessary to make good the damage, in line with Article 107(2)(b) TFEU.

Furthermore, the Commission found that the liquidity support measure is in line with the conditions laid down in Article 107(3)(b) TFEU and in the Temporary Framework. In particular, (i) the loan contracts will be signed by 31 December 2021 at the latest; (ii) they will be limited to a maximum of six years and (iii) the maximum loan amount per beneficiary does not exceed the limits set out in the Temporary Framework. The Commission concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU.

On this basis, the Commission approved the measures under 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 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 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 Frameworkhttps://eur-lex.europa.eu/legal-con... 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 and 28 January 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.

The Temporary Framework will be in place until the end of December 2021. With a view to ensuring legal certainty, the Commission will assess before this date if it needs to be extended.

The non-confidential version of the decision will be made available under the case number SA.62752 in the State aid 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 Competition 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 a Polish scheme to compensate large companies for damages suffered due to the COVID-19 pandemic and provide liquidity support, 17 June 2021, e-Competitions June 2021, Art. N° 101322

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