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State aid: €6 billion public funding approved to help German public transport services recover from COVID-19 pandemic

17 August 2020
The European Commission has granted State aid approval for a €6 billion scheme to help regional and local public transport services in Germany recover from the impact caused by the COVID-19 pandemic.

The scheme includes certain safeguards to ensure that compensation will only be provided for damages directly linked to the COVID-19 outbreak and will not exceed what is necessary to make good the damage. At a time when public transport providers in other countries across Europe are struggling to stay afloat, this case offers a model of what can be achieved within the law if the funding and the political will is there.  

On 7 August 2020, the European Commission announced its approval of a €6 billion German scheme to assist regional and local public transport services recover from the impact caused by the COVID-19 outbreak. 

It has been reported that, passenger numbers on local public road and rail transport in Germany decreased between 70% and 90% since the start of the COVID-19 pandemic. Transport operators have also incurred additional costs for enhanced sanitary and hygiene measures during this time. As a result, the German Government has been exploring ways to help transport operators suffering from significant liquidity problems.  Other countries across Europe, including the UK, are reporting similar problems and concerns.

In what form will the aid be provided?

The support will be in the form of direct grants to cover for losses incurred between 1 March and 31 August 2020. 

The Government will ensure that each individual operator will only receive as much support as it suffered in losses while fulfilling their contractual obligations during the COVID-19 outbreak. Any payment in excess of the actual loss will be recovered by German authorities. 

Under what legal basis was the State aid approved?

The measure was approved under Article 107(2)(b) of the TFEU, which provides a basis upon which Member States can compensate specific companies or sectors for damages directly caused by "exceptional occurrences". The Commission regards the COVID-19 outbreak as such an exceptional occurrence, as "it was not foreseeable, as it is clearly distinguishable from ordinary events by its character and by its effects on the affected undertakings and the economy in general and therefore lies outside of the normal functioning of the market". 

In its decision, the Commission noted that the German aid scheme will compensate only for damages that have a direct causal link to the COVID-19 outbreak. It also found that the measure is proportionate, as the envisaged compensation does not exceed what is necessary to make good the damage.

While it has been approved by the Commission, and very swiftly, the measure still required a notification and individual approval by the Commission before it could be lawfully enacted.  Support of this nature would not have been able to have been provided absent this procedural step. This follows a long history being established now of emergency notifications being swiftly approved to deal with the urgency of the situation(s).  

Conclusion

Public Sector organisations across the EU can learn from the way this intervention was designed in order to minimise the distortive effectives of the measure.  In particular, the European Commission has been clear that the German measure was approved under State aid rules because it contains sufficient safeguards to ensure that the financial support does not exceed what is necessary to make good the damage, and limits the compensation to cover the costs directly linked to the "exceptional occurrence" (the COVID-19 outbreak).  

As noted above, the measure required a notification to be processed but the approval in this case effectively sets a precedent and tells us that a similar measure in another Member State would be likely to receive even quicker approval in similar fashion. 

DWF's award winning Public Sector law team has market leading experience of advising Central Government and Local Authorities on State aid compliance and administering grant schemes. Please get in touch if we can be of assistance. 

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