It is recognised that the sanctions adopted by the EU and its international partners have not only affected the Russian economy but that these sanctions also take a toll on the European economy and will continue to do so in the coming months. With this in mind, on 23 March 2022, the European Commission adopted and published a communication setting out a Temporary Crisis Framework to support the economy in the context of Russia's aggression against Ukraine (the “Temporary Crisis Framework”)[i].
As with the similar framework adopted in the context of the COVID-19 crisis, the Temporary Crisis Framework provides for several types of aids deemed to be compatible under Article 107(3)(b) TFEU, which allows Member States to adopt State aid measures to remedy a serious disturbance in EU economies.
The Temporary Crisis Framework covers three different types of aid and sets the specific conditions for their assessment under Article 107(3)(b), namely:
1. Limited amounts of aid
Member States will be able to set-up schemes to grant up to exceed €400,000 per beneficiary impacted by the war in Ukraine, with a lower capping and additional conditions applying for companies active in the agricultural products, fishery and aquaculture sectors. Aid may be granted in the form of direct grants, tax and payment advantages or other forms (including repayable advances, loans and equity).
2. Liquidity support in form of public guarantees and subsidised loans
Member States will be able to provide (a) subsidised State guarantees to ensure banks keep providing loans to all companies affected by the current crisis; and (b) public and private loans with subsidised interest rates.
Among other conditions, guarantee premiums are set at the minimum level specified in the Temporary Crisis Framework, which increases progressively as the duration of the guaranteed loan increases. Alternatively, Member States may notify schemes, whereby guarantee duration, premiums and coverage may be modulated.
The loans may be granted at reduced interest rates and Member States may notify schemes whereby the loan maturity and the level of credit risk margins may be modulated.
With appropriate justification, the amount of the loan may be increased to cover the liquidity needs from the moment of granting for the coming 12 months for SMEs and for the coming 6 months for large enterprises.
3. Aid to compensate for high energy prices
Member States will be able to partially compensate companies, in any form, including direct grants, for additional costs due to exceptional increase in the price of gas and electricity as a result of the crisis. The overall aid per beneficiary cannot exceed 30% of the eligible costs, up to a maximum of €2 million at any given point in time.
In certain situations, in particular for intensive energy users (including energy products other than natural gas and electricity[ii]), Member States may grant further aid to undertakings incurring operating losses, in order to ensure the continuation of the undertaking’s economic activity.
Member States may grant aid up to EUR 25 million and up to EUR 50 million for companies active in particularly affected sectors (such as, production of aluminium and other metals, glass fibres, pulp, fertilizer or ceramic tiles and flags).
The Temporary Crisis Framework will be in place until 31 December 2022, but as with the COVID-19 Temporary Framework (which to date has been amended and updated 6 times) it is set to be reviewed before then in light of competition or economic considerations as well as international developments.
The Commission has ensured a swift assessment of such measures and has recommended that Member States inform the Commission of their intentions to notify plans to introduce State aid measures "as early and comprehensively as possible".
The European Competition Network (“ECN”) has also issued a Joint Statement on the application of competition law in the context of war in Ukraine.[iii] As it did in the context of the COVID-19 crisis, the ECN recognises that the current extraordinary circumstances may trigger the need for companies to collaborate in order to mitigate the economic consequences or disruptions caused by the impact of the war, including those arising from compliance with sanctions imposed by the EU. Accordingly, in the current circumstances, the ECN will not actively intervene against measures that are strictly necessary and temporary in order to avoid a shortage of supply. If companies have doubts about the compatibility of such cooperation initiatives with EU/EEA competition law, they can reach out to the Commission or the national competition authority concerned for informal guidance.
For more information on State Aid measures, you may get in touch with Ron Galea Cavallazzi on firstname.lastname@example.org or Lisa Abela on email@example.com.
[i] C(2022) 1890 final, Brussels, 23.3.2022.
[ii] As per the Energy Taxation Directive, Council Directive 2003/96/EC of 27 October 2003.