State aid: Commission approves €511 million Italian scheme to compensate commercial rail passenger operators for damages suffered due to coronavirus outbreak

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

The European Commission has approved, under EU State aid rules, €511 million in Italian support to compensate providers of commercial, long-distance rail passenger services for the damage suffered between 8 March and 30 June 2020 due to the coronavirus outbreak and the restrictive measures that Italy had to implement to limit the spread of the coronavirus.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Competition in the high-speed segment in Italy has been key to develop services with more capacity, frequency and connections, leading to lower prices and better quality for consumers. This €511 million aid measure will enable Italy to support long-distance rail passenger operators on commercial lines in these difficult times, by compensating them for the damage suffered as a result of the emergency measures that Italy put in place during the first wave of the pandemic. We continue to work 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.”

In the period between 8 March and 30 June 2020, the Italian government put in place an array of measures that were necessary to limit the spread of the coronavirus, including, until 3 June 2020, a general prohibition to travel across regions. Further restrictions remained in place also in June, in particular a mandatory staggered seating reservation system that cut available seats by 50%. Those mandatory restrictions severely affected long-distance rail passenger transport providers.

In the period March-June 2020, passenger numbers fell by up to 100% compared to 2019, resulting in a significant drop in revenues for rail passenger transport providers. At the same time, transport operators continued to face various costs, in particular additional expenditures to enhance sanitary and hygiene measures. This led to serious liquidity problems, which risk driving transport operators out of the market.

Italy notified a €511 million scheme, which is part of a wider measure designed to compensate providers of commercial rail passenger services, namely those operators that are not subject to public service obligations, for the damage suffered as a direct consequence of the coronavirus outbreak and the resulting containment measures. Under the notified measure, the beneficiaries will be entitled to compensation in the form of direct grants for the damage suffered between 8 March 2020 and 30 June 2020.

Italy will ensure that no individual beneficiary receives more in compensation than what it suffered in damages.

The Commission assessed the measure under 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.

The Commission considers that the coronavirus outbreak qualifies as such exceptional occurrence, as it is an extraordinary, unforeseeable event having a significant economic impact. As a result, exceptional interventions by Member States to compensate for damages linked to the outbreak are justified.

The Commission found that the Italian aid scheme will compensate damages that are directly linked to the coronavirus outbreak. It also found that the measure is proportionate, as the envisaged compensation does not exceed what is necessary to make good the damage.

The Commission therefore concluded that the scheme is in line with EU State aid rules.

Background

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 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, 8 May, 29 June, 13 October 2020 and 28 January 2021, 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; (xii) Support for uncovered fixed costs for companies facing a decline in turnover in the context of the coronavirus outbreak.

The Temporary Framework will be in place until the end of December 2021. With a view to ensuring legal certainty, the Commission will assess before this date if it needs to be extended.

The non-confidential version of the decision will be made available under the case number SA.59346 in the State aid case 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 Competition 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.