European Commission adopts Temporary Crisis Framework to support the economy in the context of the Russian invasion of Ukraine 

Many businesses and individuals are already feeling the effects of the crisis resulting from the Russian invasion of Ukraine, as well as the repercussions of all the economic sanctions adopted at the EU and international level and the countermeasures taken by Russia.

This is taking a heavy toll on the European economy and particularly on energy prices, a situation that is unlikely to improve in the coming months.

In response to this new crisis and after consulting Member States on the issue, the European Commission adopted on 23 March 2022 a new Temporary Crisis Framework to allow Member States to use the flexibility of the State aid rules to address this unprecedented situation while preserving a level playing field in the internal market.

This Temporary Crisis Framework is available via EUR-Lex - 52022XC0324(10) - EN - EUR-Lex (europa.eu).

The latter, based on Article 107(3)(b) TFEU to remedy a serious disturbance in the economy, complements other instruments adopted by the Commission in October 2021 and March 2022, notably following the significant rise in energy prices.

Under this new Framework, in force until 31 December 2022, Member States may :

• Set up schemes to grant limited amounts of aid of up to EUR 35,000 to crisis-affected undertakings active in the agriculture, fisheries and aquaculture sectors and up to EUR 400,000 per crisis-affected undertaking active in all other sectors. This aid, which can take various forms, does not have to be linked to an increase in energy prices.
• Grant subsidized State guarantees on new bank loans, in the form of subsidized premiums, based on a straight forward table set up by the Commission in function of the size of the beneficiary (SME or large enterprise) and the maturity of the loan.
• Grant interest rate subsidies for public and private loans. The interest rate of these loans must also be at least equal to the rates set out in a table drawn up by the Commission according to the size of the beneficiary concerned and the maturity of the loan. The maximum amount of the loan depends on the operational needs of the undertaking (and the amount also depends on the turnover, the cash flow costs that the enterprise has had to bear or its specific cash flow needs). These loans, with a maximum duration of six years, can concern both investments and working capital needs.
• Grant aid to compensate for the extra costs linked to the exceptionally high increase in energy prices. This aid can take any form, but must not exceed 30% of the eligible costs (calculated on the basis of the increase in natural gas and electricity costs linked to the Russian invasion of Ukraine) up to a maximum of EUR 2 million. Subject to certain conditions, this aid might reach EUR 25 million for companies considered to be energy intensive users, and up to EUR 50 million for companies active in specific sectors, such as the production of aluminum and other metals, glass fibers, paper pulp, fertiliser or hydrogen and many basic chemicals.

Such aid must be notified in advance by the Member States to the Commission before being implemented.

The Commission will assess in due course the need to extend the scope or the duration of this Framework.

Cumulation rules must be observed, in particular for aid granted on the basis of the Temporary Crisis Framework on State aid measures to support the economy in the context of the COVID-19 crisis.

Finally, it should be noted that the Temporary Crisis Framework contains a number of safeguards. For example, Member States are invited to consider, in a non-discriminatory manner, setting up environmental protection or security-of-supply requirements when granting aid.

The Commission also recalls that the Temporary Crisis Framework adds to the range of possibilities available to Member States to develop support measures in line with the European State aid rules.

For example, Member States may adopt support measures for those most at risk: to help them afford their energy bills in the short term or provide support for energy efficiency improvements. These measures do not constitute State aid because they target individuals and not companies and therefore do not need to be reported to the European Commission.

They may also grant aid to make good the damage caused by the exceptional occurrences under Article 107(2)(b) TFEU. Aid to mitigate the damage caused directly by the current exceptional occurrences linked to the Russian aggression against Ukraine may also cover certain direct effects of the economic sanctions imposed or the countermeasures negatively affecting the beneficiary from operating its economic activity or a specific and severable part of its economic activity.

It is now up to the Member States to set up public support for the economy since European constraints are now clearly defined.

The Commission was reactive in the context of the COVID-19 health crisis, approving a number of decisions in a short time. The adoption of this Temporary Framework specific to this new crisis caused by Russia shows once again this willingness to support the European economy in these difficult times.

CMS keeps you informed of the public measures adopted by the Member States to support your business enterprises.

CMS has the widest coverage and the broadest team of State aid specialists in Europe. Furthermore, we have extensive experience in setting up aid schemes and in public interventions in favour of undertakings in difficulty.

Please consult our brochure for the CMS contact in your jurisdiction.