State aid for undertakings impacted by Russia's invasion of Ukraine

The Temporary Crisis Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia (hereinafter "TCF") was adopted on 23 March 2022 by the European Commission to address the disruption to the EU economy caused by Russia's invasion of Ukraine, by allowing Member States to grant State aid in a more flexible way to support the economy while maintaining a level playing field within the internal market. Adopted initially until the end of 2022, it has been prolonged until 31 December 2023 and its scope extended to cover more categories of aid in the context of the energy crisis. On 9 March 2023, the Commission adopted the new Temporary Crisis and Transition Framework ( hereinafter “TCTF”) to foster support measures in sectors which are key for the transition to a net-zero economy, in line with the Green Deal Industrial Plan. The TCTF introduces new categories of aid, amends and prolongs some measures of the TCF until 31 December 2025.

The Russian military aggression against Ukraine, the sanctions imposed and the countermeasures taken by Russia have all had an economic impact on the European economy. Undertakings in the EU are affected in multiple ways, both directly and indirectly, notably due to disruptions of supply chains for EU imports from Ukraine for certain products, especially cereals and vegetable oils, as well as for EU exports to Ukraine and Russia. Furthermore, energy prices have significantly increased in the EU. The impact has also been felt on financial markets, in particular with concerns for liquidity and market volatility in commodity trade.

For those reasons, the Commission has decided to adopt the TCF to specify the criteria for the assessment of the compatibility of State aid measures that Member States may take to remedy the economic effects following Russia's war of aggression against Ukraine and the following sanctions imposed by the EU and international partners and the countermeasures taken by Russia.

The aid authorised on the basis of the TCF are based on Article 107 (3) (b) of the Treaty on the Functioning of the European Union ("TFEU"), which allows aid to be granted to remedy a serious disturbance in the economy of a Member State.

The beneficiaries of the aid that the Member States decide to grant under the TCF are companies affected by the crisis. Excluded from such aid are undertakings under sanctions adopted by the EU, persons, entities or bodies specifically named in the legal acts imposing those sanctions, undertakings owned or controlled by persons, entities or bodies targeted by sanctions adopted by the EU, or undertakings active in industries targeted by sanctions adopted by the EU, insofar as the aid would undermine the objectives of the relevant sanctions.

Member States remain entirely free to decide whether or not to grant aid on the basis of the TCF. Member States may also decide to provide for more restrictive conditions than those of the TCF.

TCF was adopted on 23 March 2022. Initially in force until the end of 2022, it was extended until 31 December 2023. The TCTF extends and introduces several new categories of aid that are into force until 31 December 2025.

The TCF provides for several categories of aid that can be put in place by the Member States until 31 December 2023:

• limited amounts of aid schemes, capped at a maximum of EUR 2 million per company and per country and up to respectively EUR 250,000 and EUR 300,000 in the agriculture, fisheries and aquaculture sectors;
• public guarantees and subsidised loans;
• measures that facilitate the decarbonisation of industrial processes: these are measures that allow Member States either to set up new schemes based on calls for tender or to support projects directly, without a call for tender, with certain limits on the share of public support per investment; (extended by the TCTF until 31 December 2025)
• support for the provision of insurance or reinsurance to companies transporting goods to and from Ukraine.

The TCF provides for several categories of aid that can be put in place by the Member States to tackle the energy crisis until 31 December 2023:

• aid schemes to compensate for high energy prices: up to EUR 25 million for companies considered to be energy intensive, and up to EUR 50 million for companies active in the production of aluminium and other metals, glass fibres, paper pulp, fertilisers or hydrogen and many basic chemicals;
• measures to accelerate the deployment of renewable energies: this measure aims at facilitating investments in renewable energies, including renewable hydrogen, biogas and biomethane, storage and renewable heat, including heat pumps. (extended by the TCTF until 31 December 2025)

Other support may be provided on a case-by-case basis:

• support for filling gas storage facilities;
• transitional and time-limited support for switching to more polluting fossil fuels, subject to energy efficiency efforts and to avoid lock-in effects;
• support for companies affected by the reduction of gas consumption.

The TCTF provides measures to further accelerate investments for the transition towards a net-zero economy, applicable until 31 December 2025.

If a Member State intends to grant aid under the TCF, it must give the European Commission prior notification. Such aid must be suspended pending its formal approval.

In 2 years, the European Commission approved more than 200 aid notified by Member States on the basis of the TCF.

CMS lawyers represent both public authorities and private companies on all aspects of State aid rules, notably State aid granted on the basis of the TCF. This includes:

• Legal assessment of the application of the TCF and its compatibility;
• Setting up aid schemes;
• Assisting public authorities in notifying State aid according to the TCF to the European Commission;
• Assisting public authorities or beneficiaries in State aid granted on the basis of the TCF in investigations by the European Commission
• Drafting and lodging complaints with the European Commission;
• Litigation before national and EU courts.

The CMS State Aid Practice Area Group comprises 40 State aid law specialists practising State aid law in 17 jurisdictions located in 20 cities in Europe and beyond – all committed to assist you.

Find your local contact person in our brochure CMS State Aid Group.