By Philippe Vlaemminck, managing partner & Arno Couwenbergh, associate pharumlegal
The measures put in place by EU governments in response to the COVID-19 pandemic have caused large parts of the tourism, culture and hospitality sectors to grind to a halt. The State budgets can step in to cushion the damage suffered by these industries. We set out briefly one of the options EU member states have to support the sectors hit hardest and most directly by the measures taken in response to the pandemic.
Under article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU), Member States can grant aid to undertakings or sectors “to make good the damage caused by natural disasters or exceptional occurrences”. The Commission has already recognised both in a Communication and in multiple Decisions that COVID-19 and the measures taken to combat the pandemic are an “exceptional occurrence”. The Commission directly referred to the tourism, culture and hospitality sectors as well as organisers of cancelled events when discussing possible applications of article 107(2)(b). When applying this legal basis the Commission has no discretion but must accept any national aid measures that respect the conditions.
For any aid granted under this regime to be compatible with EU law it must be:
- Directly and causally linked to damage caused by the COVID-19 outbreak or measures taken by Member States to combat COVID-19 such as obligatory closures, restrictions on free circulation of people etc.
- Proportionate and thus not exceed the damage suffered by COVID-19 which means that only the net damage suffered may be compensated.
- Notified to the European Commission as state aid based in art. 107(2)(b).
The Commission has provided Member States with a template to follow when notifying these types of state aid measures.
This template firstly requires information on the COVID-19 impact in the Member State concerned; secondly the scope, goal, budget and other specificities of the envisioned measure; as well as an explanation as to how the envisioned measure meets the above conditions.
Finally, the Commission requires the Member State concerned to among others commit to clawing back payments exceeding damage suffered, deduct any monies recovered by insurance, litigation or arbitration, refusing coverage for applicants that are themselves responsible or did not conduct their business with due diligence, not respect applicable laws or not take any measures to mitigate damages.
Several Decisions have already been taken where the Commission accepts the notified aid measures for COVID-19 damage in directly impacted sectors such as the event sector or air travel. The first Decision was taken on 12 March 2020 already regarding a Danish scheme to support organisers of cancelled or postponed events.
It must be stressed however that every individual undertaking applying for state aid under such an approved scheme must meet the conditions set out above as well.