in the works: a new temporary state aid framework to support the EU economy following Russia’s invasion of Ukraine | McDermott Will & Emery

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On March 10, 2022, the European Commission (the Commission) sent a draft proposal to EU Member States with the aim of establishing a temporary crisis framework for state aid to support the economy of the EU. EU following Russia’s invasion of Ukraine (the proposal). The legal basis for the proposal is Article 107(3)(b) TFEU, which allows state aid to be granted to remedy a “serious disturbance” affecting the EU economy.

Commission Executive Vice-President Margrethe Vestager, responsible for competition policy, explained that the Russian invasion of Ukraine is expected to affect the EU economy and that the Commission is “ready to use all flexibility of our State aid toolbox to allow Member States to support seriously affected businesses and sectors” while “protecting a level playing field in the European single market”.

Although we know little about the full scope of the proposal at this stage, the Commission explains in its press release that it is currently seeking Member States’ views on the measures they consider necessary to deal with the current crisis, in addition to the measures already available under Article 107(2)(b) TFEU. Under Article 107(2)(b) TFEU (which allows “aid intended to repair the damage caused by […] exceptional events”), Member States can already mitigate the damage directly caused by the Russian military invasion, including some direct effects of economic sanctions or other restrictive measures taken in response to the invasion.

According to the Commission’s press release, the proposal provides possibilities for Member States to grant:

  • (i) temporary liquidity support (in the form of guarantees and/or subsidized loans) to all companies affected by the current crisis,
    (ii) aid (in whatever form) for the additional costs due to exceptionally high gas and electricity prices in order to partially compensate companies, in particular large energy consumers, for increases in electricity prices ‘energy.

Although state aid rules generally tend to be more restrictive for companies in difficulty, this does not seem to be the case here since the Commission explains that both types of measure would also be available for companies in difficulty. The measures are not available for entities sanctioned or controlled by Russia.

Alongside its proposal, the Commission also sent a list of general and more specific questions to the Member States concerning, inter alia, aid intensities and ceilings, the definition of large energy consumers, the advisability of attaching a green conditionality to aid to these users, whether other input costs subject to price increases similar to those of gas and electricity should be taken into account, and whether certain sectors, such as agriculture, would require other measures.

Once comments on the proposal and an answer to the Commission’s questions have been received, the Commission “will rapidly assess the answers in order to finalize its position on a new temporary framework, and will assess the support measures notified by Member States under the current crisis as a priority.

Stay tuned.

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