Current Affairs

New EU State Aid Rules: How Associations Can Help Their Members

In a new article written together with David Gabathuler, Boardroom's legal contributor Giulia Mauri argues that associations can play a vital role in explaining the operation of the EU Commission's Temporary Framework.

Trade associations in Europe have always closely followed developments in the EU State aid field and provided support and guidance to their members. They frequently intervene to ensure that specific State aid rules and guidance are appropriately framed to the needs of their sector and lobby at the European and national level for the award of aid. They also regularly represent their members’ interests in State aid proceedings, including lodging complaints with the Commission against perceived harmful aid measures and occasionally bringing court challenges. 

The coronavirus outbreak and the unprecedented government intervention in the economy to tackle the economic fallout caused by the impact of this pandemic have only heightened the need for trade associations to closely follow State aid developments and assist their members and the industries they represent. 

Commission’s State Aid Temporary Framework 

In mid-March, the European Commission introduced a specific Temporary Framework for State aid whose aim is to help Member States to swiftly channel government support to severely affected industries during this unprecedented economic crisis. The Temporary Framework is in place until 31 December 2020 and aid provided further to the framework must generally be granted by this date.

The Commission’s Temporary Framework identifies particular types of aid measures that the Commission considers compatible with the EU State aid rules during the current crisis, including operating aid as well as aid to recapitalise companies. Governments are still required to notify measures adopted under the Temporary Framework for prior approval, but the Commission is committed to granting swift clearance to measures that fall within its terms. In some instances, the Commission has approved schemes in less than 24 hours when a normal procedure can take weeks or months (and even years, if it opens an in-depth State aid investigation).

The amounts granted under this Temporary Framework are staggering. By early May, the Commission had approved over 120 Member State aid schemes with an estimated aid value of €1.9 trillion. This represents over 10% of the combined GDP of the EU27 and UK.  Moreover, this figure doesn’t even include government support measures that do not fall within the scope of the EU State aid rules as they are economy-wide and don’t provide a selective advantage (e.g. cross-sectoral wage subsidy schemes, the suspension of corporate tax and VAT payments or social security contributions) or concern the provision of essential public services that the market cannot provide. 

The role of associations 

Many associations are providing the Commission and the national authorities with detailed information about the impact of the coronavirus outbreak on their sector and supporting their members’ efforts to make sure that they receive appropriate and timely aid.

Associations can play a vital role in explaining the operation of the Temporary Framework and the relevant conditions to their members as they can help them understand and navigate their way through the complexities of the State aid Temporary Framework and the individual aid schemes. 

Indeed, there are a number of strict formal and substantive conditions that apply to State aid measures under the Temporary Framework (e.g. regarding the timeframe, eligibility criteria, the relevant beneficiary and reporting and monitoring formalities). These conditions must be properly observed on implementation at the national level, as a granting authority is obliged to recover (claw-back) any aid with interest of its own initiative if it later discovers that the conditions for granting the aid were not met. 

It is important that associations, in particular those that include small and medium-sized companies (SMEs) amongst their membership, familiarise themselves with the conditions of the Temporary Framework and provide guidance to their members.

Giulia Mauri is Boardroom’s new legal contributor. She is the founder of Kadrant, a Brussels based law firm with a strong specialization in the not-for-profit sector. Giulia’s knowledge not only linked to her work in advising associations, but also to her participation in the activities of various associations as board member or chair of various working committees.

Moreover, associations need to be vigilant and carefully assess whether aid schemes granted under the Temporary Framework in their sector are appropriately framed and, if relevant, properly implemented at the national level and be prepared to intervene and make representations to the Commission and the national authorities to support their members’ interests.

The relaxation of the State aid rules and the size of the aid schemes has the potential to distort competition, especially if the granting of the aid is not subject to appropriate conditions. For example, associations representing the interests of new entrants in the rail sector in Europe have recently called for the aid to be transparent and not to discriminate between historic and new operators.

Associations also therefore need to be mindful of the potential for badly structured aid schemes to harm their members’ interests and need to be prepared to step in and challenge discriminatory and harmful schemes. 

It is likely that the application and enforcement of the EU State aid rules will remain high on the agenda of the EU even after Member States’ economies have started to recover from the lockdown and the pandemic.

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