Covid-19 Key EU Developments Policy and Regulatory Update – Operational Impacts and Strategy

This regular alert covers key EU regulatory developments related to the COVID-19 situation. It does not claim to provide an exhaustive overview of developments and does not contain any analysis or opinion.

LATEST KEY DEVELOPMENTS

  • The Council of the European Union approves the recovery and resilience plan for the Netherlands

  • The European Commission approves a €292.5 million Italian measure to support the construction of a factory in the semiconductor value chain

  • The European Commission announces a consultation of Member States on a proposal to extend and modify the temporary crisis framework in Ukraine

  • European Commission approves further schemes under Ukraine’s Temporary Crisis Framework

Trade / Export Controls

  • The European Commission publishes the second annual report on the implementation and application of EU trade agreements

Medicines and medical devices

  • The Council of the European Union approves the Digital Services Act

  • The EDPB Coordinated Supervisory Committee publishes the 2020-2022 activity report

  • Council of the European Union approves conclusions on ICT supply chain security

  • European Commission adopts equivalence decision for Brazilian COVID digital certificates

COMPETITION & STATE AID

State aid

The Council of the European Union approves the Dutch recovery and resilience plan (see here)

On 4 October 2022, the Council adopted its implementing decision on the Dutch €4.7 billion recovery plan, following the positive assessment of the plan by the Commission on 8 September 2022.

The Netherlands was the last Member State to submit a recovery plan, as previously reported in the Commission’s first report on the implementation of the Recovery and Resilience Facility (RRF) in March 2022 (see Jones Day COVID-19 Update No. 78 March 4, 2022).

As a reminder, the recovery plans of the Member States set out the reforms and public investment projects which are planned to be implemented with the support of the FRR, the key element of NextGenerationEU, the EU’s historic recovery fund.

When assessing Member States’ plans under the RRF Regulation, in particular, the RRF Guidelines specify that investment projects included in Member States’ recovery plans must comply with State aid rules (Commentary by Jones Day, EU Member State COVID-19 Recovery Plans Must Comply with State Aid Rules, March 2021, see here).

The Commission’s assessment of Member States’ plans will also determine, in particular, whether the plans devote at least 37% of expenditure to investments and reforms that pursue climate objectives and 20% to the digital transition.

Following the Council’s approval of the Dutch recovery plan, the Commission will authorize disbursements to the Netherlands based on satisfactory compliance with the milestones and targets set out in its plan, reflecting the progress made in the implementation of investments and reforms (see below for the recent disbursement from the FRR for Italy).

Commission approval is still pending for one Member State’s plan (Hungary (€7.2 billion) (see here).

With regard to Hungary, as a reminder, the Commission launched a “rule of law procedure conditionality mechanism” against Hungary in April 2022. On 18 September 2022 (see here), it proposed to the Council fiscal protection measures under the conditional EU settlement. The Commission has proposed: (i) a suspension of 65% of commitments for three operational programs under cohesion policy, and (ii) a ban on entering into legal commitments with public interest trusts for programs implemented in direct and indirect management. Additional risks for the Hungarian economy would result from the failure to approve Hungary’s National Recovery Plan for the disbursement of approx. €7 billion in NextGenerationEU grants.

The Recovery and Resilience Dashboard provides an overview of the progress of the implementation of the RRF and national plans (see here).

The European Commission approves a €292.5 million Italian measure to support the construction of a factory in the semiconductor value chain (see here)

On 5 October 2022, the Commission announced the approval under EU State aid rules of a €292.5 million Italian measure made available through the Facility for Recovery and Resilience (FRR, see above for details) to help STMicroelectronics build a factory in the semiconductor value chain in Catania, Sicily.

The €292.5 million direct grant will support STMicroelectronics’ €730 million investment to build a silicon carbide (SiC) wafer plant. SiC is a material used to manufacture wafers serving as the basis for specific microchips used in high-performance power devices, for example, electric vehicles, fast charging stations and renewable energies.

According to the Commission, the Italian measure will strengthen Europe’s security of supply, resilience and digital sovereignty in semiconductor technologies, in line with the objectives of the Communication on the European Chip Law (see Jones Day COVID-19 Update No. 76 of February 9, 2022; and commentary by Jones Day, EU Chips Act: The EU’s Push for Semiconductor Autonomy, March 2022).

As a reminder, the Commission has previously argued that the COVID-19 crisis has highlighted the vulnerabilities of certain sectors in Europe due to the heavy dependence on an allegedly narrow range of non-European suppliers, in particular for raw materials. The Commission believes this is particularly the case for EU industries facing shortages of semiconductors and the emergence of fake semiconductor chips on the market that compromise the security of electronic devices and systems.

Under the Italian measure, STMicroelectronics must (i) fulfill EU priority orders in the event of supply shortages, (ii) invest in the development of next-generation microchips, and (iii) continue to contribute to the strengthening of the European semiconductor ecosystem.

The European Commission announces a consultation of Member States on a proposal to extend and modify the temporary crisis framework in Ukraine (see here)

On 6 October 2022, Executive Vice-President and Commissioner for Competition Margrethe Vestager announced the launch by the Commission of a consultation of Member States on a draft proposal to extend and modify the temporary aid crisis framework. State to Ukraine, given the “heavy toll” of the war in Russia. against Ukraine and the resulting “severe energy crisis affecting households and businesses across Europe”.

As a reminder, when adopting this crisis framework on 23 March 2022, the Commission noted that Russia’s war against Ukraine had had a significant impact on the energy market and that the sharp increases in oil prices energy had affected various economic sectors, including some of those particularly affected by COVID-19. 19 pandemic, such as transport and tourism.

The crisis framework was amended for the first time on July 20, 2022, in particular to extend its scope to other types of aid measures, which can be granted until June 30, 2023.

The Commission is currently consulting Member States on possible changes to the crisis framework, such as:

  • Extension the temporary crisis framework;

  • Proportionally increase the maximum aid ceilings in the provisions on limited amounts of aid, which allow Member States to provide direct grants or other forms of assistance to companies in any sector affected by the crisis;

  • Given the high volatility of the markets, the use of a targeted adjustment to further facilitate access to liquidity support energy companies to cover financial guarantees for their trading activities; and

  • Simplifying the criteria for Member States to support companies affected by high energy pricesincluding large energy consumers, ensuring that support remains targeted and proportionate while maintaining incentives to reduce energy demand.

Commissioner Vestager noted that the draft proposal already reflected Member States’ responses to a survey launched in mid-September 2022 and that the Commission would continue its close cooperation with Member States in the review process.

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