4th amendment of COVID-19 State aid Temporary Framework adopted

COVID-19 update: Commission prolongs State aid Temporary Framework and expands it to support for uncovered fixed costs.

On 19 March 2020, the European Commission adopted a State aid Temporary Framework to support the economy in the context of the first wave of the COVID-19 outbreak (see our article on the Temporary Framework here). This Temporary Framework was amended on 4 April 2020 (see our article on this amendment here), on 8 May 2020 (see our article on this amendment here) and on 29 June 2020 (see our article on this amendment here). Since its adoption, numerous national State aid measures have been approved by the European Commission on almost a daily basis. The status as of 9 October 2020 can be found here for the European Commission and here for the EFTA Surveillance Authority.

Yesterday, the European Commission has adopted the 4th amendment of the Temporary Framework.

First, the amendment prolongs the Temporary Framework by six months, ending on 30 June 2021 instead of on 31 December 2020.

Second, the 4th amendment adds as a State aid possibility the option to provide, under certain conditions, support for uncovered fixed costs of undertakings that have suffered from the suspension or reduction of their business activities.

Third, various clarifications or minor amendments to the Temporary Framework are made. For instance in relation to direct grants, the amendment clarifies that aid reimbursed before 30 June 2021 will not be taken into account when determining whether the ceiling is reached. Moreover, in relation to recapitalisation measures, the 4th amendment indicates that - in case the State is the only existing shareholder, or in relation to COVID-19 equity which the State would need in order to retain its shareholding status to that of before the recapitalisation – the redemption of COVID-19 recapitalisation may now also be done on the basis of a positive valuation of the beneficiary by an independent entity (instead of a sale via an open and non-discriminatory consultation of potential purchasers or a sale on the stock exchange). If however the valuation is negative (ie less than the minimum price paid), the governance rules set out by the Temporary Framework will continue to apply for four years after the recapitalisation measure.

Finally, the 4th amendment amends the list of temporary non-marketable risk countries – that can be covered by export-credit insurance with the support of Member States – and extends its application to 30 June 2021.

We continue to closely monitor the situation. In Brussels and elsewhere in our network, we have a dedicated group of EU State aid experts able to guide companies and public authorities through the maze of EU State aid law and to assist in the procedure before the Commission.

Should you need assistance, have any further questions regarding this client alert or State aid generally, please do not hesitate to contact any of the individuals listed or your usual contact at Simmons & Simmons.