State aid: Commission approves EUR 700 million French scheme to compensate for damage suffered by certain companies due to the coronavirus pandemic.*
The European Commission has approved, under the EU State aid rules, a EUR 700 million French scheme to support certain companies particularly affected by the coronavirus pandemic and the restrictive measures put in place by the French government to limit the spread of the virus.
Margrethe Vestager, Executive Vice-President in charge of competition policy said: "Closures to limit the spread of the pandemic have resulted in very significant losses in turnover for certain companies, whereas their costs could not be adjusted downwards. This EUR 700 million scheme will allow France to partially compensate those companies for the losses incurred. We are continuing to work in close cooperation with Member States to find workable solutions to mitigate the economic impact of the coronavirus pandemic, in line with EU rules".
The French scheme
France notified the Commission of a EUR 700 million scheme to compensate certain companies for losses incurred as a result of the French government’s administrative closure measures to limit the spread of the coronavirus.
The scheme will be open to companies operating in certain sectors hard hit by closures, in particular the catering, events and accommodation sectors, travel agencies, gyms, museums and leisure parks. Companies whose activities have been significantly impacted by administrative closure measures affecting other companies with which they have a business relationship are also eligible.
The activities carried out must have been prohibited for certain periods from January 2021 and have suffered a loss of turnover of 80% compared to the corresponding periods in 2019.
As a direct result of the restrictive measures in place, the turnover of the companies concerned declined, whereas their costs, particularly fixed costs, could not be adjusted downwards.
Eligible beneficiaries will be able to obtain compensation in the form of direct grants amounting to 70% of the operating losses incurred during the closure periods. The maximum amount of aid will be limited to EUR 25 million per beneficiary.
In order to ensure the proportionality of the aid, the scheme includes a cap to avoid overcompensation for the damage actually suffered.
The Commission assessed the measure under Article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU), which authorises Member States to compensate for damage directly caused by exceptional occurrences such as the coronavirus pandemic.
The Commission took the view that the French aid scheme will compensate for losses that are directly linked to the coronavirus pandemic. It also found that the measure was proportionate, as the compensation envisaged did not exceed the amount necessary to make good the damage.
The Commission therefore concluded that the scheme is in line with the EU State aid rules.
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 wage subsidies and suspension of payments of corporate and value added taxes or social security contributions, do not fall under State aid control and do not require the Commission’s approval under the EU State aid rules. In all these cases, Member States can act immediately. When the 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 pandemic 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 that connection, for example:
- Member States can compensate specific companies or sectors (in the form of aid schemes) for losses incurred as a direct result of exceptional occurrences, such as those caused by the coronavirus pandemic. Article 107(2)(b) TFEU makes provision to that effect;
- the State aid rules based on Article 107(3)(c) TFEU enable Member States to help companies affected by liquidity shortages and needing urgent rescue aid;
- these measures 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 the Commission’s involvement.
In the event of particularly severe economic situations, such as the one currently faced by all Member States due to the ongoing coronavirus pandemic, the EU State aid rules allow Member States to grant aid to remedy a serious disturbance in their economies. Article 107(3)(b) TFEU makes provision to that effect.
On 19 March 2020 the Commission adopted a Temporary Framework for State aid measures on the basis of Article 107(3)(b) TFEU to enable Member States to make full use of the flexibility provided for under the State aid rules to support the economy in the context of the coronavirus pandemic.
The Temporary Framework, as amended on 3 April, 8 May, 29 June and 13 October 2020 and 28 January and 18 November 2021 provides for the following types of aid to be granted by the Member States: i) direct grants, equity injections, selective tax breaks and advance payments; ii) State guarantees for loans taken out by companies; iii) subsidised public loans to companies, including subordinated loans; iv) safeguards for banks that channel State aid to the real economy; v) 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 tackling the coronavirus pandemic; ix) targeted support in the form of deferral of tax payments and/or suspension 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 pandemic; xiii) investment support towards a sustainable recovery; and (xiv) solvency support.
The Temporary Framework will remain in force until 30 June 2022, except for investment support towards a sustainable recovery, which will be in place until 31 December 2022, and solvency support, which will be in place until 31 December 2023. The Commission will continue to closely monitor the evolution of the COVID-19 pandemic and of the other risks to economic recovery.
The non-confidential version of the decision will be made available under case number SA.64114 in the State aid register on the Commission’s competition website, once any confidentiality issues have been resolved. The latest State aid decisions published in the Official Journal and on the internet 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.