Phasing-out of the Temporary Framework on State aid linked to the COVID-19 crisis

On 19 March 2020, the European Commission adopted the Temporary Framework on State aid measures to support the economy in the current context of the COVID-19 outbreak ("Temporary Framework"). The Temporary Framework is based on Article 107(3)(b) TFEU and aims to remedy a serious disturbance in the European economy. The Temporary Framework allowed States to adopt measures to contribute to the continuity of economic activity during the COVID-19 pandemic and to ensure recovery after the crisis.

The Temporary Framework, adopted in March 2020 and initially in force until the end of 2020, provided for five categories of aid which could, under certain conditions, be considered by the Commission to be compatible with the internal market:

• aid in the form of direct grants, repayable advances or tax concessions, up to a maximum amount of EUR 800,000 per company;
• aid in the form of loan guarantees;
• aid in the form of subsidised interest rates for public loans;
• aid in the form of public guarantees and reduced interest rates provided to enterprises through credit or other financial institutions; and
• aid in the form of short-term export credit insurance.

In view of the pandemic's development and its impact on the economies of EU Member States, the Temporary Framework has been amended several times and its duration extended.

On 3 April 2020, the Commission adopted a first amendment so that aid could be used to accelerate research, testing and production of COVID-19-related products, to protect jobs and to further support the economy during the crisis (see our article of 7 April 2020).

On 8 May 2020, it adopted a second amendment to further facilitate access to capital and liquidity for companies affected by the crisis (see our article of 13 May 2020).

On 29 June 2020, it adopted a third amendment to further support start-ups and micro, small and medium-sized enterprises and to encourage private investment (see our article of 10 July 2020).

On 13 October 2020, it adopted a fourth amendment to prolong the Temporary Framework and to allow aid to be used to cover part of the uncovered fixed costs of companies hit by the crisis (see our article of 16 October 2020).

On 28 January 2021, it adopted a fifth amendment to further extend the Temporary Framework, to adapt the aid thresholds set out in the Temporary Framework and to allow reimbursable instruments to be converted into direct grants under certain conditions (see our article of 3 February 2021).

Finally, on 18 November 2021, the European Commission extended the Temporary Framework until 30 June 2022 (see our article of 24 November 2021). The main change concerns the introduction of two categories of phasing-out aid, i.e. the option for Member States to grant investment and solvency support measures beyond the fixed expiry date (i.e. beyond 30 June 2022).

• Investment support measures
• Solvency support measures

In addition, the Commission has made other changes, namely:

• extending from 30 June 2022 to 30 June 2023 the option for Member States to convert certain reimbursable instruments (such as guarantees, loans and repayable advances) granted under the Temporary Framework into other forms of aid, such as direct grants;
• adjusting the maximum amounts of certain types of aid in proportion to their extended period;
• clarifying the exceptional flexibility provisions of the Commission's rescue and restructuring guidelines; and
• extending by three months (from 31 December 2021 to 31 March 2022) the adapted list of non-marketable risk countries for short-term export credit insurance.

At the beginning of 2022, the Commission consulted Member States on a possible extension of the Temporary Framework and requested related macroeconomic data.

However, the European Commission announced on 12 May 2022 that the Temporary Framework would not be extended beyond 30 June 2022, although some measures can be implemented by States after this date; for example, Member States will still be able to convert loans into limited amounts of aid in the form of direct grants, subject to the conditions of the Temporary Framework and provided that this option has been envisaged in their national schemes. This conversion option could be used under strict conditions to cancel loans or parts of loans for the benefit of borrowers who are unable to repay.

Similarly, Member States will also be able to implement their schemes to restructure loans, for example by extending their duration or lowering the applicable interest rates, within defined limits.

In addition, during the phasing-out and transition phase, Member States will be able to adopt the specific investment support and solvency support measures described above until 31 December 2022 and 31 December 2023 respectively, subject to prior authorisation by the Commission (see above).

In conclusion, just over two years after the Temporary Framework's entry into force, the Commission will have enabled Member States to provide rapid and flexible support to companies affected by the COVID-19 crisis. The Commission has in fact adopted more than 1,300 decisions in the context of the coronavirus pandemic, authorising almost 950 national measures for a total amount of State aid estimated at almost EUR 3,200 billion.