Worldwide: COVID-19 Key EU Developments, Policy & Regulatory Update No. 94

LATEST KEY DEVELOPMENTS

Competition & State Aid

• Council of the European Union approves last national recovery plan (subject to meeting rule of law milestones
• European Commission approves further schemes under COVID Temporary Crisis Framework
• European Commission approves further schemes under Ukraine Temporary Crisis Framework

Trade / Export Controls

• Council of the European Union expands sanctions against Russia and Iran
• EU-US Trade and Technology Council issues Joint Statement following third Ministerial Meeting.
• European Commission publishes third Counterfeit and Piracy Watch List

Medicines and Medical Devices

• Council of the European Union adopts updated Recommendations lifting all restrictions on free movement and travel to the EU during COVID-19 pandemic
• Council of the European Union adopts Conclusions on vaccination as effective tool for preventing disease and improving public health
• Council of the European Union adopts Recommendation for new approach on cancer screening

Cybersecurity, Privacy & Data Protection

• Joint Declaration published on EU legislative priorities for 2023 and 2024
• Council of the European Union adopts 2030 Policy Programme: Path to the Digital Decade
• Council of the European Union moves ahead on proposed framework for European Digital Identity

Council of the European Union approves last national recovery plan (subject to meeting rule of law milestones (see here)

On 15 December 2022, the Council adopted the Implementing Decision approving Hungary's recovery plan under the Recovery and Resilience Facility (RRF)*, to be financed by €5.8 billion in grants (see here). This was the Council's last remaining approval of the 27 Member State recovery plans.

However, Hungary's recovery plan is conditioned on Hungary's full and effective implementation of 27 milestones on the rule of law, judicial independence, anti-corruption, and protecting the EU's budget. These reforms must be fulfilled before any payment to Hungary is possible (see also Jones Day COVID-19 Update No. 93 of 1 December 2022)

The remaining milestones in Hungary's recovery plan concern other rule of law reforms related to judicial independence and audit and control measures.

Despite certain reforms underway by Hungary, the Commission considered that Hungary had failed to timely and adequately implement central aspects of the necessary 17 remedial measures agreed under the conditionality mechanism. The Commission thereby also announced on 30 November 2022 that it maintained its proposal to the Council (see here) for budget protection measures under the Conditionality Regulation against Hungary's breaches of the rule of law, including:

• a suspension of 65% of the commitments for three operational programs under cohesion policy, amounting to €7.5 billion; and
• a prohibition to enter into legal commitments with the public interest trusts for programs implemented in direct and indirect management.

The European Parliament also earlier adopted a Resolution on 24 November 2022 on Hungary's compliance with the rule of law and Hungary's recovery plan (see here). The Resolution asserted the ongoing risk of misuse of EU funds in Hungary and, in this respect, deplored that because of the Hungarian government's actions, EU recovery funds have not yet reached its people. The Resolution also emphasized that final beneficiaries of EU funds should not be deprived of support due to Hungary's lack of cooperation and called on the Commission to find ways to distribute EU funds via local governments and NGOs.

Next steps: Regarding the Commission proposal to protect the EU budget against Hungary's breaches of principles of the rule of law, the Council has until 19 December 2022 to take a decision, by qualified majority.

Concerning the RRF, the Council now has, in principle, four weeks to adopt the proposed Council Implementing Decision to endorse the Commission's positive assessment of Hungary's recovery and resilience plan.

European Commission approves further schemes under COVID Temporary Crisis Framework (see here and here)

The Commission has adopted a significant number of State aid measures under Article 107(2)b, Article 107(3)b and under the State aid COVID Temporary Crisis Framework adopted in March 2020.

With certain exceptions, the Temporary Framework applied until 30 June 2022.* Among the latest schemes (until 23 September 2022):

• €557 million German support to compensate Deutsche Bahn for damages suffered by its subsidiary DB Fernverkehr due to the coronavirus pandemic.
• €100 million Cypriot scheme to support companies and selfemployed persons affected by the coronavirus pandemic.
• 12.6 million Dutch scheme to support zoos in the context of the coronavirus pandemic.

European Commission approves further schemes under Ukraine Temporary Crisis Framework (see here)

The Commission continues to approve additional measures under the State aid Temporary Crisis Framework for State Aid measures in the context of Russia's invasion of Ukraine.

To recall, in adopting this Crisis Framework, the Commission noted that the conflict had significantly impacted the energy market, and steep rises in energy prices had affected various economic sectors, including some of those particularly affected by the COVID-19 pandemic, such as transport and tourism. The conflict has also disrupted supply chains for both EU imports from Ukraine (in particular, cereals and vegetable oils) and EU exports to Ukraine.

The Commission recently prolonged (until 31 December 2023 (instead of 31 December 2022)) and expanded the Crisis Framework (see Jones Day COVID-19 Update No. 90 of 28 October 2022).

Among the latest schemes under the Crisis Framework (until 18 November 2022):

• €50 million Latvian scheme to support the manufacturing industry in the context of Russia's war against Ukraine.
• €50 million Italian scheme to support companies in the region of Marche in the context of Russia's war against Ukraine.
• Amendments to Italian scheme, including €50 million budget increase, to support the agricultural, forestry, fisheries and aquaculture sectors in Friuli Venezia Giulia in the context of Russia's war against Ukraine.
• €1.22 billion Irish scheme to support companies across sectors in the context of Russia's war against Ukraine.
• €34.4 million Italian scheme to support companies in the context of Russia's war against Ukraine.
• Amendments to existing German umbrella schemes, including their prolongation and an up to €45 billion overall budget increase, to support companies in the context of Russia's war against Ukraine.
• €50 million Slovak scheme to support the agricultural, fishery and aquaculture sectors in the context of the Russia's war against Ukraine.
• €7.75 million Cypriot scheme to support some agricultural producers in the context of Russia's war against Ukraine.
• €45 billion budget increase, to support companies in context of Russia's war against Ukraine.

Notably, the Crisis Framework complements the various possibilities for Member States to design measures in line with existing EU State aid rules. For instance, State aid measures under the Crisis Framework may be cumulated with aid granted under the COVID-19 Temporary Framework, provided that their respective cumulation rules are respected.

The Crisis Framework, applicable since 1 February 2022, will be in place until 31 December 2023. During its period of application, the Commission will keep the Framework under review in light of developments regarding the energy markets, other input markets, and the general economic situation. Prior to the Crisis Framework's end date, and in view of maintaining legal certainty, the Commission will assess whether it should be prolonged.

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