The European Commission Facilitates Access to Financial Support From EU Member States For Companies Hit Hard by the War in Ukraine

Version Française : La Commission européenne facilite l’accès des entreprises frappées de plein fouet par la guerre en Ukraine au soutien financier des Etats membres

In response to Russia's invasion of Ukraine, the European Commission has issued, on March 23, 2022 a temporary crisis framework to EU Member States to give them flexibility to intervene in support of companies in compliance with State Aid Law^[1] (hereafter, the "Framework"). In doing so, it has followed an approach which, while it may be losing its originality due to repeated crises, has proved its worth. In the past, it has already adopted two similar frameworks: one in 2008 in relation to the financial crisis, the other in 2020 in relation to the COVID-19 pandemic.

This approach is based on two ideas:

• The first is that EU state aid law should not buckle under the strain of the crisis. It must continue to apply so that Member States' support is not at the expense of taxpayers, healthy competition between companies, or the proper functioning of the EU's internal market;
• The second is the recognition that the difficulties linked to the crisis justify the provision of additional intervention tools for Member States to enable them, if they so wish, to come to the rescue of the companies affected and the economy in general;

In the Framework, the European Commission, after recalling the "classic" aid measures that can be legally used by Member States, details four temporary measures that can be grouped into three categories:

• aid of a limited amount, in the form of direct subsidies, tax benefits and payment advantages or other forms such as repayable advances, guarantees, loans and equity. The amount of aid must not exceed EUR 400 000 per undertaking, except for undertakings in the primary agricultural production sector and in fisheries and aquaculture, for which the maximum amount of aid allowed is EUR 35 000 per undertaking;
• aid to ensure access to liquidity for companies in the form of (x) guarantees or (y) subsidised loans;
• aid to cover the extra costs resulting from an exceptionally large increase in the price of natural gas and electricity.

This aid may, within certain limits, be cumulated with other aid measures (e.g. aid paid under the 2020 temporary framework for State aid measures to support the economy in the current context of the Covid-19 pandemic).

The beneficiaries of this aid are companies operating in the EU and affected by Russia's aggression against Ukraine and/or by the sanctions imposed or by the retaliatory countermeasures taken in response. In this respect, three clarifications in the Framework are worth highlighting:

• Companies subject to sanctions adopted by the EU are excluded from receiving aid under the Framework. This category of companies includes, but is not limited to, persons, entities or bodies specifically designated in the legal acts establishing these sanctions; companies owned or controlled by persons, entities or bodies targeted by the EU sanctions; or companies operating in sectors targeted by the EU sanctions, to the extent that the aid would undermine the objectives of the relevant sanctions
• « Firms in difficulty » within the meaning of State Aid Law are eligible. This more flexible stance towards firms in difficulty differs from that adopted in the two previous temporary frameworks of 2008 and 2020, which exclude them (albeit with some exceptions) from the benefit of temporary aid. The Commission justifies this eligibility of firms in difficulty by « the specific situation of two subsequent crises that have affected undertakings in multiple ways. »
• Lastly, among the firms receiving aid to cover the additional costs due to an exceptionally large increase in the price of natural gas and electricity, a distinction is made in favour of so-called "energy-intensive" firms, which are eligible for more aid than others.

The Framework is intended to apply until 31 December 2022, but its period of application could be extended depending on how the situation develops.

At the time of writing, no European Commission decision under the Framework has yet been made public. While Member States have very quickly and massively implemented the tools of the 2020 framework, they seem to be a little more wait-and-see today. However, it may be too early to jump to conclusion and predict that this Framework will be less successful with Member States as the 2020.

On its end, France has already announced a series of measures in favour of companies affected by the war.

For beneficiary and non-beneficiary companies alike, particular vigilance will be required as to the conformity of national aid measures in order to ensure, for the former, that the aid paid cannot be challenged in the future by the European Commission or by competitors, and for the latter, that the aid paid to their competitors does not create undue distortions of competition to their detriment.