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State aid: EU Commission approves €5 billion French “umbrella” scheme to support research

… development, testing infrastructures and production of coronavirus relevant products

The European Commission has approved a €5 billion French “umbrella” scheme to support research and development, testing and upscaling infrastructures and production of coronavirus relevant products. The scheme was approved under the State aid Temporary Framework adopted by the Commission on 19 March 2020, as amended on 3 April and 8 May 2020.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This €5 billion French “umbrella” scheme will support research and development, and investments in testing and upscaling infrastructures and in the production of coronavirus relevant products, such as medicines, vaccines, and protective clothing. It will contribute to the European effort in the fight against the coronavirus outbreak. We continue to work closely with all Member States to find solutions to tackle the outbreak, in line with EU rules.”

The French support measure

France notified to the Commission under the Temporary Framework an “umbrella” scheme (“régime cadre temporaire”) supporting
(i) coronavirus relevant research and development (“R&D”) projects; (ii) construction and upgrade of testing facilities; and

(iii) investments in production of coronavirus relevant products and technologies.

The aim of the scheme is to stimulate the R&D into medicinal products such as vaccines, medicaments, hospital and medical equipment (including ventilators), and protective clothing and equipment. The measure will also enhance the rapid construction of production facilities for these products, as well as the provision of necessary raw materials and ingredients.

The scheme has a total estimated budget of €5 billion, possibly co-funded by EU structural funds. The public support will take the form of direct grants, repayable advances and tax advantages. Guarantees to cover losses may also be granted either in addition to a direct grant, tax advantage or repayable advance, or as an independent aid measure.

Furthermore, undertakings are encouraged to cooperate with each other or with research organisations by benefitting from a 15% bonus when the R&D research project is carried out in cross-border collaboration with research organisations or other undertakings, or when the research project is supported by more than one Member State.

The measure allows aid to be granted by French authorities at all levels, including the government, regional and local authorities. The scheme is open to all enterprises capable to carry out such activities in all sectors.

The Commission found that the French scheme is in line with the conditions set out in the Temporary Framework. In particular, the aid will cover a significant share of the R&D project costs, as well as of the investment costs necessary for deploying testing infrastructures or for setting up new production facilities. Furthermore, under the scheme, investment projects will have to be completed within six months after the date of granting of the aid.

The Commission concluded that the French measure is necessary, appropriate and proportionate to fight the health crisis and contribute to address the common European production needs in the current crisis, in line with Article 107(3)(c) TFEU and the conditions set out in the Temporary Framework.

On this basis, the Commission approved the measures under EU State aid rules.

Background

The Commission has adopted a Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework, as amended on 3 April and 8 May 2020, provides for the following types of aid, which can be granted by Member States:

(i) Direct grants, equity injections, selective tax advantages and advance payments of up to €100,000 to a company active in the primary agricultural sector, €120,000 to a company active in the fishery and aquaculture sector and €800,000 to a company active in all other sectors to address its urgent liquidity needs. Member States can also give, up to the nominal value of €800,000 per company zero-interest loans or guarantees on loans covering 100% of the risk, except in the primary agriculture sector and in the fishery and aquaculture sector, where the limits of €100,000 and €120,000 per company respectively, apply.

(ii) State guarantees for loans taken by companies to ensure banks keep providing loans to the customers who need them. These state guarantees can cover up to 90% of risk on loans to help businesses cover immediate working capital and investment needs.

(iii) Subsidised public loans to companies (senior and subordinated debt) with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.

(iv) Safeguards for banks that channel State aid to the real economy that such aid is considered as direct aid to the banks’ customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.

(v) Public short-term export credit insurance for all countries, without the need for the Member State in question to demonstrate that the respective country is temporarily “non-marketable”.

(vi) Support for coronavirus related research and development (R&D) to address the current health crisis in the form of direct grants, repayable advances or tax advantages. A bonus may be granted for cross-border cooperation projects between Member States.

(vii) Support for the construction and upscaling of testing facilities to develop and test products (including vaccines, ventilators and protective clothing) useful to tackle the coronavirus outbreak, up to first industrial deployment. This can take the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.

(viii) Support for the production of products relevant to tackle the coronavirus outbreak in the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.

(ix) Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions for those sectors, regions or for types of companies that are hit the hardest by the outbreak.

(x) Targeted support in the form of wage subsidies for employees for those companies in sectors or regions that have suffered most from the coronavirus outbreak, and would otherwise have had to lay off personnel.

(xi) Targeted recapitalisation aid to non-financial companies, if no other appropriate solution is available. Safeguards are in place to avoid undue distortions of competition in the Single Market: conditions on the necessity, appropriateness and size of intervention; conditions on the State’s entry in the capital of companies and remuneration; conditions regarding the exit of the State from the capital of the companies concerned; conditions regarding governance including dividend ban and remuneration caps for senior management; prohibition of cross-subsidisation and acquisition ban and additional measures to limit competition distortions; transparency and reporting requirements.

Research and innovation projects, including those supported under the Temporary Framework, can be part of the joint European effort to tackle the coronavirus pandemic and to recover from the crisis. The success of this joint effort depends, among others, on open access to data and knowledge, and on improved collaboration between national programmes and Horizon 2020, the EU research and innovation programme.

The Temporary Framework enables Member States to combine all support measures with each other, except for loans and guarantees for the same loan and exceeding the thresholds foreseen by the Temporary Framework. It also enables Member States to combine all support measures granted under the Temporary Framework with existing possibilities to grant de minimis to a company of up to €25,000 over three fiscal years for companies active in the primary agricultural sector, €30,000 over three fiscal years for companies active in the fishery and aquaculture sector and €200,000 over three fiscal years for companies active in all other sectors. At the same time, Member States have to commit to avoid undue cumulation of support measures for the same companies to limit support to meet their actual needs.

Furthermore, the Temporary Framework complements the many other possibilities already available to Member States to mitigate the socio-economic impact of the coronavirus outbreak, in line with EU State aid rules. On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities. For example, Member States can make generally applicable changes in favour of businesses (e.g. deferring taxes, or subsidising short-time work across all sectors), which fall outside State Aid rules. They can also grant compensation to companies for damage suffered due to and directly caused by the coronavirus outbreak.

The Temporary Framework will be in place until the end of December 2020. As solvency issues may materialise only at a later stage as this crisis evolves, for recapitalisation measures only the Commission has extended this period until the end of June 2021. With a view to ensuring legal certainty, the Commission will assess before those dates if it needs to be extended.

Arianna PODESTA