In the Making: New State Aid Temporary Framework to Support the EU Economy in the Wake of Russia’s Invasion of Ukraine

Commission Executive Vice-President Margrethe Vestager, in charge of competition policy, explained that the Russian invasion of Ukraine is expected to affect the EU economy, and that the Commission is “ready to use the full flexibility of our State aid toolbox to enable Member States to support companies and sectors severely impacted” whilst at the same time “protecting the 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 which measures they deem necessary to tackle the current crisis in addition to measures already available under Article 107(2)(b) TFEU. Under Article 107(2)(b) TFEU (which permits “aid to make good the damage caused by […] exceptional occurrences”), Member States may already mitigate damage directly caused by the Russian military invasion, including certain direct effects of economic sanctions or other restrictive measures taken in response to the invasion.

According to the Commission’s press release, the Proposal sets out possibilities for Member States to grant:

(i)temporary liquidity support (in the form of guarantees and/or subsidised loans) to all companies affected by the current crisis,
(ii) aid (in any form) for additional costs due to exceptionally high gas and electricity prices so as to partially compensate companies, in particular intensive energy users, for energy price increases.

Although State aid rules would generally tend to be more restrictive for companies in difficulty, that does not appear to be the case here as the Commission explains that both types of measures would also be available to companies in difficulty. Measures are not available for sanctioned or Russian-controlled entities.

Along with its Proposal, the Commission has also sent a list of general and more specific questions to the Member States relating to, amongst others, aid intensities and ceilings, the definition of energy intensive users, whether green conditionality should be attached to aid to such users, whether other input costs subject to similar price increases as gas and electricity should be considered, and whether certain sectors, such as agriculture, would require other measures.

Once comments on the Proposal and a response to the Commission’s questions have been received, the Commission will “rapidly assess the responses in order to finalise its position on a new Temporary Framework, and will assess support measures notified by the Member States in the context of the current crisis as a matter of priority.”

Stay tuned.