The European Commission approves Danish COVID-19 compensation scheme

Background

On 6 March 2020, the Danish authorities issued as a consequence of the COVID-19 outbreak a recommendation that events involving more than 1,000 participants be cancelled or postponed. For the time being, the recommendation will apply until the end of March.

For the purpose of mitigating the negative economic impact of this to organisers, the Danish Parliament passed a compensation scheme totalling DKK 91m on 12 March 2020 aimed at granting compensation for events involving more than 1,000 participants which were to have taken place during the period 6 - 31 March 2020 but were cancelled or where the conditions for such events have changed drastically, for instance because they take place with less - or without - participants/spectators. The compensation scheme also covers events involving only 500-1,000 participants if they are aimed at special COVID-19 at-risk groups, such as older adults and persons who have serious medical conditions.

It is expected to be possible to submit applications for compensation under the scheme from 20 March 2020.

The compensation scheme is part of the Danish government's COVID-19 economic stimulus programme directed at Danish businesses and also includes the extension of time for payment of VAT and taxes.

The European Commission's approval of the compensation scheme
It is only legal to grant financial support to specific business by use of government funds if the European Commission's advance approval has been obtained and such support is aimed at one of the objectives listed in Article 107 of the TFEU. If state aid is granted without the prior approval of the Commission, the beneficiary may be ordered to repay such aid with interest. The government therefore notified the Commission of the compensation scheme.
The Commission found that the compensation scheme amounts to state aid but can be justified by Article 107(2)(b) of the TFEU which allows aid "to make good the damage caused by natural disasters or exceptional occurrences"  The Commission found that the COVID-19 outbreak amounts to such an "exceptional occurrence" because it is an exceptional and unpredictable event having significant financial impact. On this background, the Commission approved the compensation scheme.

The government notified the compensation scheme on 11 March 2020, and it was thus approved by the Commission in only one day. It is the fastest processing of a state-aid notification ever.

Commissioner for Competition Margrethe Vestager stated in connection with the approval that "We stand ready to work with all Member States to ensure that possible national support measures to tackle the outbreak of the virus can be put in place as quickly and effectively as possible, in line with EU rules”.

Plesner's comments
The Commission's approval of the compensation scheme entails that organisers who may apply for and obtain compensation for cancelled or postponed events under the scheme do not risk being ordered to repay such aid subsequently.

The Commission's general finding that the COVID-19 outbreak may justify state-aid also paves the way for the government to be able to obtain approval of additional compensation schemes. This is a positive move for the vast number of businesses other than organisers of large events, including travel agents, hotels, restaurants, public houses and cinemas, that have incurred or have prospects of incurring significant losses as a consequence of the COVID-19 outbreak.

Moreover, the extremely fast approval process shows that the Commission does it utmost to ensure that initiatives aimed at mitigating the negative economic impact of the COVID-19 breakout can be implemented as quickly as possible.