Belgium and COVID-19: The European Commission Approves Several Belgian State Aid Measures

corona virus

We are happy to share with you an update on the Covid-19 measures that have been approved in Belgium. Our guest auhor Wout De Cock is a PhD candidate at the Vrije Universiteit Brussel and part-time teaching assistant at the Katholieke Universiteit Leuven.*

  1. Introduction

In issue 1/2020 of the European State Aid Law Quarterly, we concluded that the European Commission (“Commission”) had not (yet) approved any Belgian State aid measure in the framework of the COVID-19 crisis. As expected, the Commission has now examined and approved several Belgian State aid measures, being a federal loan guarantee scheme (II), a Flemish loan guarantee scheme (III), a Walloon aid measure to support the Charleroi and Liège airports (IV), a direct grant scheme set up by the Brussels-Capital region to support undertakings active in the agricultural and aquaculture sectors (V), a direct grant scheme set up by the Brussels-Capital region to support coronavirus related research and development (VI), and a Walloon guarantee scheme to support the Walloon economy (VII). In this short contribution, we highlight the main features of these measures, without being exhaustive. For the latest updates on these measures, it is recommended to consult the several websites of the Belgian authorities.1

  1. Federal Loan Guarantee Scheme

On 11 April 2020, the Commission approved a federal loan guarantee scheme, with a budget up to €50 billion, for new short-term loans with a maturity term of maximum one year.2 With this scheme, the Belgian federal government aims to cover the liquidity needs of undertakings that are affected by the COVID-19 crisis. The guarantee scheme is complementary to the commitment of the financial sector to grant undertakings that face liquidity problems as a result of the crisis, postponement of payment of their existing loans.

The guarantee scheme is open to undertakings active in all sectors in Belgium, except undertakings active in the financial sector and government entities. The guarantee scheme provides for strict conditions and criteria, for instance, with regard to the maximum amount of the qualifying loans, the maximum duration of the guarantee, and the remuneration of the guarantee. Moreover, the measure is only open to undertakings that:

  • had less than 30 days of bank payment arrears on 29 February 2020 or on that date were not the subject of a credit restructuring by their bank; and

  • were not an undertaking in difficulty within the meaning of Article 2(18) of the General Block Exemption Regulation on 29 February 2020.

Interestingly, the Commission held that the notified measure did not fall under the scope of its Temporary Framework for State aid in the current COVID-19 outbreak (“Temporary Framework”). This is because the loss distribution of the guaranteed amounts under the Belgian scheme will take place at portfolio level (see infra) and not at individual loan level, as required by the Temporary Framework (point 25). Therefore, the Commission assessed the guarantee scheme under the general compatibility criteria ex Article 107(3)(b) TFEU. However, the Commission explicitly mentioned that the Temporary Framework could be used as guidance and that its principles could be applied in analogy mutatis mutandis as far as relevant.

As said, the Commission approved the federal loan guarantee scheme. In general, it considered the measure to be well targeted to remedy the disturbance of the Belgian economy caused by the COVID-19 crisis. In particular, the scheme covers guarantees on loans with a limited maturity and size, is limited in time, provides for minimum remuneration of the guarantees, and contains adequate safeguards to ensure that the aid is channelled effectively by the banks to the beneficiaries in need. Moreover, the scheme places a significant part of the risk on the banks themselves. The scheme indeed includes a loss-sharing mechanism under which, in case of losses, banks will be the first to cover losses on their portfolios of guaranteed loans, while the State guarantee will only cover residual losses.

  1. Flemish Loan Guarantee Scheme

On 9 April 2020, the Commission approved a Flemish loan guarantee scheme, with a total budget of €3 billion, for new loans and existing loans.3 With this measure, the Flemish authorities aim to limit the risk associated with granting or restructuring loans to undertakings in the framework of the COVID-19 crisis, ensuring herewith the continuation of the activities of the latter. Importantly, this scheme will only be open to undertakings whose loans are not eligible for a guarantee under the aforementioned federal loan guarantee scheme.

The guarantee scheme is available to all undertakings active in the Flemish region, with the exception of financial intermediaries. As said, the scheme covers not only new loans, but also existing loans after they are restructured with the consent of the borrower. The guarantee scheme provides for several conditions and criteria, amongst others, with regard to the amounts of the loans and the guarantee premiums.

The Commission found the scheme to be in line with Article 107(3)(b) TFEU and the conditions set out in its Temporary Framework. In particular, it noted that the underlying loan amount per undertaking is limited to what is needed to cover its liquidity needs for the near future, the guarantee will only be provided until the end of 2020, the guarantee will be limited to a maximum of six years, and the envisaged guarantee fee premiums will not exceed the levels foreseen by the Temporary Framework. In general, the Commission found the Flemish guarantee scheme to be necessary, appropriate and proportionate and thus approved it.

  1. Walloon Aid Measure to Support the Charleroi and Liege Airports

On 11 April 2020, the Commission approved an aid measure by the Walloon region to support the Charleroi and Liège airports.4 This measure allows the airports to defer the payment of the concession fees that would in principle be due for the year 2020. With this measure, the Walloon authorities aims to ensure that the two airports have sufficient liquidity to counter the impact of the COVID-19 crisis, ensuring herewith the continuity of their economic activities during and after the crisis.

The Commission found the measures to be in line with Article 107(3)(b) TFEU and the conditions set out in its Temporary Framework. The payment deferral may indeed only be granted until the end of this year and its duration will not exceed six years. Moreover, the payment deferral involves minimum remuneration in line with the Temporary Framework. Lastly, the Commission concluded that the Walloon aid measure is necessary, appropriate and proportionate and thus approved it.

  1. Direct Grant Scheme Set Up by the Brussels-Capital Region to Support Undertakings Active in the Agricultural and Aquaculture Sectors

On 24 April 2020, the Commission approved a regional grant scheme set up by the Brussels-Capital region to support undertakings active in the primary production of agricultural products and in aquaculture for the food sector in the region.5 This measure, which will take the form of direct grants, needs to support undertakings active in these sectors and which are experiencing liquidity problems due to the COVID-19 outbreak.

The Commission found the measure to be in line with the conditions set out in the Temporary Framework. In particular, the aid will not exceed €100,000 per undertaking for undertakings in the primary agriculture sector and €120,000 per undertaking active in the aquaculture sector. Aid under the scheme can be granted until 31 December 2020. In general, the Commission concluded that the measure is necessary, appropriate and proportionate and thus approved it.

  1. Direct Grant Scheme Set Up by the Brussels-Capital Region to Support Coronavirus Related Research and Development

On 27 April 2020, the Commission approved a direct grant scheme set up by the Brussels-capital region, with a total budget of €4 million, to support coronavirus related research and development projects in the region.6 This measure will take the form of direct grants and will be accessible to undertakings from all sectors that are capable to carry out such research activities and have at least one place of business in the Brussels-Capital region.

With this scheme, the regional government aims to support the development of innovative solutions to the pandemic, such as vaccines, drugs and treatments, medical devices, hospital and medical products and equipment, including ventilators, protective clothing, diagnostic tools and disinfectants.

The Commission found the scheme to be in line with the conditions set out in its Temporary Framework. In particular, the Commission clarifies in its press release that the scheme covers industrial research and experimental development projects and supports 80% of the eligible costs for the duration of the project. Moreover, undertakings are encouraged to cooperate with each other or with research organisations by benefitting from a 15% bonus when the R&D research project is carried out in cross-border collaboration with research organisations or other undertakings, or when the research project is supported by more than one Member State.

The Commission concluded that the grant scheme is necessary, appropriate and proportionate and thus approved the measure.

  1. Walloon Guarantee Scheme to Support the Walloon Economy

On 30 April 2020, the Commission approved a Walloon loan guarantee scheme to support undertakings active in the Walloon region and affected by the coronavirus outbreak.7 With this measure, the Walloon regional government aims at limiting the risk associated with issuing or restructuring loans to the undertakings that are most severely affected by the economic impact of the coronavirus outbreak.

The Commission found that the measure is in line with the Temporary Framework. The scheme indeed provides for certain conditions and criteria, for instance, (i) the underlying loan amount per undertaking is limited to what is needed to cover its liquidity needs for the near future, (ii) the guarantee fees and interest rates are in line with the criteria and conditions laid down in the Temporary Framework, (iii) the guarantees and loans will be provided until the end of this year, with a maximum duration of six years, and (iv) aid may be granted only to undertakings that were not in difficulty already on 31 December 2019.

The Commission concluded that the measure is necessary, appropriate and proportionate and thus approved it.

  1. Conclusion

As discussed, the Commission has now examined and approved several State aid measures of different Belgian authorities. Due to the severity of the COVID-19 crisis and its large-scale impact on the Belgian economy, it is expected that the Belgian authorities will notify even more State aid measures. It is thus inevitable that more Commission decisions will follow.8 The Belgian authorities have also adopted several other “measures” to support the economy and undertakings active in Belgium. Most of these measures do not qualify as State aid in the meaning of Article 107(1) TFEU and, therefore, fall outside the scope of EU State aid law. Other measures may be State aid, but have already been approved by the Commission in the past or fall within the scope of an block exemption regulation. Hence, these measures can be implemented without notification to and approval by the Commission.

——————————————————————–

1 Amongst others, the Belgian federal government (<https://www.info-coronavirus.be/>); the Flemish Region (<https://www.vlaio.be/nl/begeleiding-advies/moeilijkhedencoronavirus/specifieke-maatregelen-mbt-het-coronavirus/coronavirus> and <https://www.vlaanderen.be/gezondheid-en-welzijn/gezondheid/coronavirus-covid-19>); the Walloon Region (<https://www.1890.be/article/coronavirus-quelles-mesures-pour-leconomie-et

-lemploi-en-wallonie>; and the Brussels-Capital Region (<https://bps-bpv.brussels/nl>).

2 European Commission, Decision of 11 April 2020, SA.56819 – Belgium – COVID-19 – Loan guarantee scheme in response to the COVID-19 (C(2020) 2364 final). The press release is available on <https://ec.europa.eu/commission/presscorner/detail/en/ip_20_648>.

3 European Commission, Decision of 9 April 2020, State Aid SA.56919 (2020/N) – Belgium The COVID-19- loan guarantee – Flemish Region (C(2020) 2359 final) <https://ec.europa.eu/commission/presscorner/detail/en/ip_20_636>

4 The public version of this decision has not yet been published. The press release of the Commission can be consulted on <https://ec.europa.eu/commission/presscorner/detail/en/ip_20_645>

5 The public version of this decision has not yet been published. The press release of the Commission can be consulted on <https://ec.europa.eu/commission/presscorner/detail/en/ip_20_732>.

6 The public version decision has not yet been published. The press release of the Commission can be consulted on <https://ec.europa.eu/commission/presscorner/detail/en/ip_20_735>.

7 The public version decision has not yet been published. The press release of the Commission can be consulted on <https://ec.europa.eu/commission/presscorner/detail/en/ip_20_792>.

8 For all updates on the Commission decisional practice, it is recommended to consult its website: <https://ec.europa.eu/competition/state_aid/what_is_new/covid_19.html>.

* A version of this report will be published in a future issue of the European State Aid Law Quarterly.

[Photo by CDC on Unsplash]

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Wout De Cock

Wout De Cock is a PhD candidate at the Vrije Universiteit Brussel and part-time teaching assistant at the Katholieke Universiteit Leuven.

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