Public aid to sports clubs and organisations affected by Covid-19 must respect EU State aid rules

#stateaid #sportclubs #covid19

Tuesday, 19 May 2020  - The Covid-19 pandemic has undoubtedly affected the sports sector throughout Europe very hard and at all levels. Not only is grassroots sport suffering badly, but also the professional sports sector and the entire sports industry and its stakeholders are facing major challenges, including: players, coaches, referees, (employees in) sport organisations and sport clubs, (small) businesses such as fitness clubs, gyms and sports equipment producers, event organisers, marketing agencies, etc.

Public aid will be crucial for the sector’s recovery, but this support will have to respect the EU State aid rules when it is granted to undertakings engaged in an economic activity.

PRINCIPLE OF STATE AID

The principle prohibiting the granting of State aid can be found in Article 107 (1) of the Treaty on the Functioning of the European Union (TFEU):

“Any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market”.

Four cumulative conditions must be fulfilled before a measure can be qualified as State aid:

• the measure is decided by the State (or a Region, a city council, a State-owned undertaking etc.) and financed by State resources;
• the measure confers an economic advantage in any form (a capital injection, loan, guarantee, subsidy, discounts, etc.) upon an undertaking;
• the support is granted to one or several undertakings: the measure should be selective;
• the measure distorts or threatens to distort competition and affects trade between Member States.

Public financial support in favour of professional sports clubs or sports organisations carrying out economic activities therefore risks falling within the scope of Article 107 (1) TFEU.

However, this does not mean that such aid will automatically be considered incompatible. The European Commission is aware of the urgent need for State aid in the current circumstances and certainly has not been slow to respond. It is providing the necessary support to the Member States and is certainly using flexibility in applying its State aid rules.

STATE AID IN THE TIME OF COVID-19

On 19 March 2020, a specific Temporary State Aid Framework was adopted. On this basis, additional temporary State aid measures can be approved very rapidly upon notification to remedy the liquidity shortage faced by undertakings and to ensure that the disruption caused by the Covid-19 outbreak does not undermine their viability. The new Framework provides, for example, the power for Member States to adopt aid schemes in the form of direct grants, selective tax advantages and advance payments of up to € 800,000, to grant subsidised State guarantees and subsidised public loans, etc. Although not specifically aimed at the sports sector, this new Framework does offer some interesting options for sports companies to help keep their ‘heads above water’.  

In addition to the Temporary Framework, Article 107(2) b TFEU constitutes an important legal basis for the provision of State aid in the sports sector. The Article provides the possibility for Member States to grant aid to make good the damage caused by natural disasters or exceptional occurrences. The Covid-19 outbreak is considered to be such an exceptional occurrence. Measures that could be covered are measures compensating companies in sectors that have been particularly hard-hit and measures compensating organisers of cancelled events (concerts, festivals, sports events, commercial fairs, etc.) for the damage they have suffered as a direct consequence of Covid-19.

In principle, approval of aid under this Article 107 (2) b TFEU should follow automatically if certain objective criteria are met. The European Commission thus has not the same margin of discretion as under the Temporary Framework and the aid amounts may also be higher as all the damage directly linked to the Covid-19 crisis can be compensated. However, the demonstration of this damage needs to be as precise as possible, which probably explains why the number of notifications on this basis so far has been much lower than under the Temporary Framework.

The Commission has provided Member States with templates for notifications under both regimes (Temporary Framework and Article 107 (2) b TFEU).

It is important to add that measures that apply to all undertakings in all sectors, such as wage subsidies and the suspension of payments of corporate and value added taxes or social contributions will not constitute aid as there is no selectivity. These measures can be granted without any intervention by the Commission and many Member States (including Belgium) have already made use of this option.

For a more detailed overview of State aid measures that can be adopted by Member States, we refer to the ALTIUS Corona Q&A on State aid. An overview of the Belgian support measures for companies, can be found here.

CONCLUSION

At present, no notified national State aid measures have been adopted specifically for the sports sector (unlike the aviation or cultural sectors). However, the European Commission has already approved a huge number of aid schemes that could also be useful for commercial sports clubs/organisations (such as, for example, the Belgian Federal guarantee scheme mobilising € 50 billion for companies affected by the Covid-19 outbreak or the Flemish subordinated loan scheme of € 250 million to support start-ups, scale-ups and SMEs). A complete list of Member State measures approved under the Temporary State aid Framework and Article 107 (2) b TFEU can be found here.

Finally, it is also important to note that at the EU level, the EOC EU Office in collaboration with sport stakeholders of the European Commission’s SHARE Initiative have adopted a “Position paper on the impact of COVID-19 crisis on the sport sector”. The joint position paper urges the European entities to ensure that sports organisations are fully eligible for support under the relevant EU funding schemes directed to overcome the crisis. This is related, especially, to the redirection of the European Structural and Investment Funds (ESIF), such as the Coronavirus Response Investment Initiative (CRII), and the Coronavirus Response Investment Initiative Plus (CRII+). It should be stressed that resources from the EU should be regarded as State resources when the national authorities have a discretionary power as to their use (including the selection of beneficiaries), and so then should also respect the EU State aid rules.

For this article, the Atfield team was able to rely on the dedicated assistance of ALTIUS lawyer Hanne BAEYENS (This email address is being protected from spambots. You need JavaScript enabled to view it. or +32 (0) 2 426 14 14).

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