State aid: Commission approves € 1.6 billion Polish scheme to compensate companies for damages suffered due to coronavirus outbreak and provide liquidity support

This article is brought to you in association with the European Commission.

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The European Commission has approved, under EU State aid rules, an approximately €1.6 billion (PLN 7.5 billion) Polish scheme that partially compensates large enterprises and certain small and medium-sized enterprises (SMEs) for the losses suffered due to the coronavirus outbreak and provides them with direct liquidity through loans. The scheme is part of a wider Polish support programme, the so-called “Financial Shield for Large Enterprises”. Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The € 1.6 billion scheme will allow Poland to compensate large enterprises and certain small and medium-sized enterprises for the damage suffered as a result of the coronavirus outbreak, while supporting their immediate liquidity needs. The measure will help those businesses continue their activities during and after the outbreak. We are working in close contact and cooperation with Poland, as we continue working with all Member States to ensure that national support measures can be put in place as quickly and effectively as possible, in line with EU rules.” The Polish support measure Poland notified to the Commission an approximately €1.6 billion (PLN 7.5 billion) scheme to compensate affected companies for the damages caused by the coronavirus outbreak. The scheme, which will be managed by the Polish Development Fund, is part of the “Financial Shield for Large Enterprises”, a support programme set up by the Polish authorities which has an overall budget of approximately EUR 5.5 billion and will be open to large enterprises and certain larger SMEs registered in Poland. The support will be given in the form of subsidised loans at favourable interest rates which can be redeemed by 30 September 2021 in an amount not exceeding 75% of the actual damage incurred by the beneficiary companies from 1 March until at the latest 31 August 2020 directly due to the coronavirus outbreak. Beneficiaries of the aid will therefore have access to immediate liquidity, through loans. The aid is planned to be granted in the form of loans to be partially written-off later by an amount equivalent to the calculated damages suffered due to the coronavirus outbreak. The Commission assessed the measure, which provides for both compensation for damages and liquidity support, under two legal bases:

1. Article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU), which enables the Commission to approve State aid measures granted by Member States to compensate specific companies or specific sectors (in the form of schemes) for the damages directly caused by exceptional occurrences, and
2. under Article 107(3)(b) TFEU, which enables the Commission to approve State aid measures implemented by Member States to remedy a serious disturbance in their economy.

The Commission considers that the coronavirus outbreak qualifies as an exceptional occurrence, as it is an extraordinary, unforeseeable event having a significant economic impact. Therefore, exceptional interventions by the Member States to compensate for the damages linked to the outbreak are justified. The Commission found that the Polish aid scheme will compensate damages that are directly linked to the coronavirus outbreak. It also found that the measure is proportionate, as the foreseen compensation does not exceed what is necessary to make good the damage, in line with Article 107(2)(b) TFEU. Moreover, the Commission concluded that the measure for liquidity support will contribute to managing the economic impact of the coronavirus in Poland.It is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework adopted by the Commission on 19 March 2020, as amended on 3 April and 8 May 2020. On this basis, the Commission approved the measure under EU State aid rules. Background As of today, the Commission has approved 20 measures notified by Poland under the Temporary Framework worth over €50 billion, in part financed by EU structural funds. The Commission is assessing all coronavirus related measures notified by Member States as a matter of priority. At the same time, the duration of this assessment depends on a number of factors, including the complexity of the measure and how comprehensive the information submitted by the Member State is. Financial support from EU or national funds granted to health services or other public services to tackle the coronavirus situation falls outside the scope of State aid control. The same applies to any public financial support given directly to citizens. Similarly, public support measures that are available to all companies such as for example wage subsidies and suspension of payments of corporate and value added taxes or social contributions do not fall under State aid control and do not require the Commission’s approval under EU State aid rules. In all these cases, Member States can act immediately. When State aid rules are applicable, Member States can design ample aid measures to support specific companies or sectors suffering from the consequences of the coronavirus outbreak in line with the existing EU State aid framework. On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities. In this respect, for example:

• Member States can compensate specific companies or specific sectors (in the form of schemes) for the damage suffered due and directly caused by exceptional occurrences, such as those caused by the coronavirus outbreak. This is foreseen by Article 107(2)(b)TFEU.
•  State aid rules based on Article 107(3)(c) TFEU enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid.
•  This can be complemented by a variety of additional measures, such as under the de minimis Regulation and the General Block Exemption Regulation, which can also be put in place by Member States immediately, without involvement of the Commission.

In case of particularly severe economic situations, such as the one currently faced by all Member States and the UK due the coronavirus outbreak, EU State aid rules allow Member States to grant support to remedy a serious disturbance to their economy. This is foreseen by Article 107(3)(b) TFEU of the Treaty on the Functioning of the European Union. On 19 March 2020, the Commission adopted a State aid Temporary Framework based on Article 107(3)(b) TFEU 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; (ii) State guarantees for loans taken by companies; (iii) Subsidised public loans to companies, including subordinated loans; (iv) Safeguards for banks that channel State aid to the real economy; (v) Public short-term export credit insurance;(vi) Support for coronavirus related research and development (R&D); (vii) Support for the construction and upscaling of testing facilities; (viii) Support for the production of products relevant to tackle the coronavirus outbreak; (ix) Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions; (x) Targeted support in the form of wage subsidies for employees; (xi) Targeted support in the form of equity and/or hybrid capital instruments. 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 that date if it needs to be extended. The non-confidential version of the decision will be made available under the case number SA.57054 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News. More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.