State aid: Commission approves French liquidity scheme to support companies in context of Russia’s invasion of Ukraine

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The European Commission has approved a French scheme that enables up to €155 billion in liquidity support for companies across all sectors in the context of Russia’s invasion of Ukraine. The scheme is the first approved under the State aid Temporary Crisis Framework, adopted by the Commission on 23 March 2022, based on Article 107(3)(b) of the Treaty on the Functioning of the European Union (‘TFEU’), recognising that the EU economy is experiencing a serious disturbance.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This scheme will enable France to mitigate the economic impact of Putin’s war in Ukraine and to support companies affected by the current crisis, as well as by the related sanctions. We continue to stand with Ukraine and its people. At the same time, we continue working closely with Member States to ensure that national support measures can be put in place in a timely, coordinated and effective way, while protecting the level playing field in the Single Market.”

The French support measure

France notified to the Commission, under the Temporary Crisis Framework, a loan guarantee scheme to provide liquidity support to companies in the context of Russia’s invasion of Ukraine. The measure will be financed using part of the €300 billion budget that France had initially allocated under three French schemes to support the economy in the context of the coronavirus pandemic that the Commission initially approved on 21 March 2021 (SA.56709).

In light of the high degree of economic uncertainty caused by the current geopolitical situation, the scheme is aimed at ensuring that sufficient liquidity is available for the companies in need through the granting of a State guarantee on new loans to companies by enabling banks to continue lending to the real economy.

The scheme, which will apply to the whole territory of France, including overseas regions, will be open to companies of all sizes active in all sectors, with the exception of certain companies active in the financial sector.

Under the scheme, the eligible beneficiaries will be entitled to receive new loans that will be covered by a State guarantee not exceeding 90% of the loan amount. The maximum loan amount per beneficiary that can be covered by the State guarantee is equal to 15% of the beneficiary’s average total annual turnover over a predefined time period.

The Commission found that the French scheme is in line with the conditions set out in the Temporary Crisis Framework. In particular: (i) the maturity of the loans cannot exceed six years; (ii) the annual interest rates on the loans respect the minimum levels set out in the Temporary Crisis Framework; and (iii) the guarantees will be granted by 31 December 2022 at the latest.

Furthermore, the public support will come subject to conditions to limit undue distortions of competition, including safeguards to ensure (i) a link between the amount of aid granted to companies and the scale of their economic activity; and (ii) that the advantages of the measure are passed on to the largest extent possible to the final beneficiaries via the financial intermediaries.

The Commission concluded that the French scheme 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 Crisis Framework.

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

Background

On 23 March 2022, the Commission adopted the State aid Temporary Crisis Framework to enable Member States to use the flexibility foreseen under State aid rules to support the economy in the context of Russia’s invasion of Ukraine.

The Temporary Crisis Framework provides for the following types of aid, which can be granted by Member States:

• Limited amounts of aid, in any form, of up to €35,000 for companies affected by the crisis active in the agriculture, fisheries and aquaculture sectors and of up to €400,000 per company affected by the crisis active in all other sectors;
• Liquidity support in form of State guarantees and subsidised loans; and
• Aid to compensate for high energy prices. The aid, which can be granted in any form, will partially compensate companies, in particular intensive energy users, for additional costs due to exceptionalgas and electricityprice increases. The overall aid per beneficiary cannot exceed 30% of the eligible costs, up to a maximum of €2 million at any given point in time. When the company incurs operating losses, further aid may be necessary to ensure the continuation of an economic activity.  Therefore, for energy-intensive users, the aid intensities are higherandMember States may grant aid exceeding these ceilings, up to €25 million, and for companies active in particularly affectedsectors and sub-sectors up to €50 million.

Sanctioned Russian-controlled entities will be excluded from the scope of these measures.

The Temporary Crisis Framework includes a number of safeguards:

• Proportional methodology, requiring a link between the amount of aid that can be granted to businesses and the scale of their economic activity and exposure to the economic effects of the crisis;
• Eligibility conditions, for example definingenergy intensive users as businesses for which the purchase of energy products amount to at least 3% of their production value; and
• Sustainability requirements. Member States are invited to consider, in a non-discriminatory way, setting up requirements related to environmental protection or security of supply when granting aid for additional costs due to exceptionally high gas and electricity prices.

The Temporary Crisis Framework will be in place until 31 December 2022. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended. Moreover, during its period of application, the Commission will keep the content and scope of the Framework under review in the light of developments regarding the energy markets, other input markets and the general economic situation.

The Temporary Crisis Framework complements the ample possibilities for Member States to design measures in line with existing EU State aid rules. For example, EU State aid rules enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid. Furthermore, Article 107(2)(b) of the Treaty on the Functioning of the European Union enables Member States to compensate companies for the damage directly caused by an exceptional occurrence, such as those caused by the current crisis.

Furthermore, on 19 March 2020, the Commission adopted a Temporary Framework in the context of the coronavirus outbreak. The COVID Temporary Framework was amended on 3 April, 8 May, 29 June, 13 October 2020, 28 January and 18 November 2021.

The non-confidential version of the decision will be made available under the case number SA.102395 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 Competition Weekly e-News.

More information on the Temporary Crisis Framework and other actions taken by the Commission to address the economic impact of Russia’s invasion of Ukraine can be found here.