Coronavirus and the EU State Aid Framework

Tom Coates (Blackstone Chambers)

The coronavirus pandemic has ushered in an era of government spending on a scale not seen since the financial crisis. The Chancellor has so far announced £330bn of financial support in the coronavirus business interruption loan scheme and further support for the self-employed. With some squeezed industries such as aviation clamouring for help, many predict that larger bailouts are around the corner.

Much of this support will fall within the scope of the EU state aid framework. Article 107(1) TFEU prohibits any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition in a way which affects trade between Member States. Where a Member State proposes to put in place a state aid, it must notify the Commission, which determines the compatibility of the proposed aid with the internal market under Article 108 TFEU.

The Commission has scrambled a hasty response to clarify to governments how they can support businesses without infringing the rules. The Commission has done two things: first, explained which kinds of support will fall outside the scope of EU rules and so may not require notification; and second, put in place a Temporary Framework (which was amended on Friday) which sets out the kind of notified aids which it will consider compatible with the internal market.

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