European State aid during COVID-19
RESPOND – A global COVID-19 response for the in-house counsel
Many companies are facing unprecedented liquidity challenges, and are continuously looking for solutions to that problem. If a company receives non-approved State aid, the received amount, increased with a recovery interest rate, must be refunded. How can this unpleasant surprise be avoided?
- How to avoid illegal State aid
- Typical questions to consider
- Typical approach
- Typical government measures
How to avoid illegal State aid
The European Commission is working in close co- operation with Member States to make sure that the necessary company support measures can be put in place. However, the Commission stresses that State aid rules must be respected to ensure a level playing field in the European Union.
No illegal State aid will be tolerated.
On 29 April 2020, Hendrik Viaene and Rafael Piqueras hosted a webinar to share their experience from acting on State aid matters during the 2008-09 financial crisis, and during the current COVID-19 pandemic. They also discussed the forecast, likely scenarios and way forward for State aid matters in context of COVID-19.
View the recording
Typical questions to consider:
- Can payment deferrals for taxes, social contributions, etc. be accepted?
- Can government guarantees for loans be accepted or applied for?
- Can interest subsidies for loans be accepted?
- Can direct government grants or subsidies be accepted?
- Are there any strings attached to the gifts received from the government?
- When considering using a government scheme; accepting direct grants, tax breaks, loans, subsidies, grants, etc.; or asking for them.
- Check compliance with State aid law. This check can often be performed quickly, and a degree of certainty.
- In case of doubt, engage in discussions with the government entities awarding the aid, and agree on a notification to the European Commission, if needed.
Typical government measures in the wake of COVID-19 – State aid check
The European Commission has issued a Communication on 13 March 2020, and adopted a Temporary Framework on 19 March 2020, which already gives good guidance.
Even in times of crisis, a company needs to check whether the government support that is given is not illegal State aid. This will often involve a brief compliance check, but at least you will have some certainty that your company can keep the support.