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Commission approves Danish aid scheme to compensate damages caused by cancellations of large public events due to COVID-19 outbreak
Practical Law UK Legal Update w-024-4666 (Approx. 3 pages)
Commission approves Danish aid scheme to compensate damages caused by cancellations of large public events due to COVID-19 outbreak
| Published on 13 Mar 2020 • European Union |
On 13 March 2020, the European Commission announced that it has approved under EU state aid rules a DKK91 million (EUR12 million) Danish aid scheme to compensate organisers for the damage suffered due to the cancellation of large events with more than 1,000 participants due to the Covid-19 outbreak.
Speedread
On 13 March 2020, the European Commission announced that it has approved under Article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU) a DKK91 million (EUR12 million) Danish aid scheme to compensate organisers for the damage suffered due to the cancellation of large events with more than 1,000 participants due to the Covid-19 outbreak. Article 107(2)(b) of the TFEU allows aid to make good the damage caused by exceptional occurrences. The Commission approved the scheme under within 24 hours of receiving the notification from Denmark.
This is the first and only state aid measure notified by a member state to the Commission in relation to the COVID-19 outbreak so far. The Commission commented that financial support from EU or national funds granted to health services or other public services, or directly to citizens, to tackle the Covid-19 situation falls outside the scope of state aid control.
Background
Article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU) allows member states to grant aid to make good damages to specific companies or specific sectors (in the form of schemes) directly caused by exceptional occurrences.
On 11 March 2020, Denmark notified the Commission of its intention to set up a DKK91 million (EUR12 million) aid scheme to compensate organisers of events with more than 1,000 participants or targeted at designated risk groups, such as the elderly or vulnerable people, irrespective of the number of participants, which had to be cancelled or postponed due to the COVID-19 outbreak. Under the scheme, operators would be entitled to be compensated for the losses suffered as a consequence of the cancellations or postponement the events, for which, for example, tickets were already sold.
Decision
The Commission assessed the measure under Article 107(2)(b) of the TFEU.
It considers that the Covid-19 outbreak qualifies as an 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 the damages linked to the outbreak are justified.
The Commission found that the Danish aid scheme will compensate damages that are directly linked to the Covid-19 outbreak. In this respect, the scheme will contribute to address the economic damage caused by the Covid-19 virus in Denmark. 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 as it will contribute to mitigate the negative consequences of Covid-19 for Danish businesses, without unduly distorting competition in the internal market.
Comment
This is the first and only state aid measure notified by a member state to the Commission in relation to the COVID-19 outbreak so far. The Commission approved the scheme under EU State aid rules within 24 hours of receiving the notification from Denmark. It states that it Commission stands ready to work with all member states to ensure that possible national support measures to tackle the outbreak of the Covid-19 virus can be put in place in a timely manner, in line with EU rules. It has established a dedicated contact point for member states to provide them with guidance on possibilities under EU rules.
The Commission commented that financial support from EU or national funds granted to health services or other public services, or directly to citizens, to tackle the Covid-19 situation falls outside the scope of state aid control.
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 Covid-19 outbreak in line with the existing EU framework, for example:
- Public support measures that are available to all companies such as for example the extension of payment deadlines for corporate tax do not fall under state aid control, as they do not provide a selective advantage to specific companies vis-à-vis others in comparable situations. These measures can be implemented by member states without the need of the Commission's approval under EU state aid rules.
- EU state aid rules and more specifically the Rescue Aid and Restructuring Guidelines, which are based on article 107(3)(c) of the TFEU, enable member states to help companies cope with liquidity shortages and needing urgent rescue aid. Member states can, for example, put in place dedicated support schemes for SMEs, including to cover their liquidity needs for a period of up to 18 months. Some member states already have this type of schemes in place. For example, in February 2019, the Commission approved a EUR400 million support scheme in Ireland to cover acute liquidity and rescue and restructuring needs of SMEs as a Brexit preparedness measure.
In case of particularly severe economic situations, such as the one currently faced by Italy, the Commission also observed that Article 107(3)(b) of the TFEU allows member states to grant support to remedy a serious disturbance to their economy. However, if such measures are not properly designed and well-targeted for their purpose, they can give an unfair competitive advantage to companies, distorting competition in the single market, and cannot be justified under EU state aid rules.
On 13 March 2020, the Commission also published a Communication outlining its immediate response to mitigate the economic impact of the COVID-19 outbreak, which contains state aid guidance (see Legal update, Commission Communication on co-ordinated economic response to the COVID-19 outbreak: state aid aspects).