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European Union: actions against the coronavirus pandemic

The COVID-19 pandemic has forced individual countries affected by the infection to act, but the European Union is also responding to the crisis caused by the pandemic. The actions taken by the EU are to ensure the health and safety of citizens’ lives and to combat a global economic crisis that will affect the economies of individual Member States as well as the functioning of the entire European Union.

1. Closing of borders

By a joint agreement of the Heads of the Member States of the European Union, it was decided to close the external borders of the European Union. The borders have been closed for the period of 30 days with the reservation that the said period can be prolonged.

The ban on the entry into the European Union concerns foreigners, but does not apply to family members of the EU citizens, holders of an EU residence card and diplomats.

The European Commission issued guidelines to the Member States to take appropriate actions to ensure the smooth flow of essential goods and services. Special transport corridors were set up to ensure the supply of goods and enable the EU citizens to return to their countries.

2. Investment initiative

On 13 March 2020, the European Commission initiated a number of legislative and budgetary changes under the so-called Coronavirus Investment Initiative. In particular, the initiative aims to help SMEs to cope with the losses associated with the COVID-19 pandemic, including alleviating liquidity problems caused by the need to temporarily suspend certain businesses and reduce demand.

The Commission plans to make approx. EUR 37 billion available under Cohesion Policy. These funds are to be used in 2020, with an initial EUR 8 billion to be made available to the Member States immediately.

The distribution of funds is to be made, inter alia, by waiving the obligation for the Member States to reimburse unused pre-financing from the European Structural and Investment Funds in 2020. The funds offered are to be used for the most urgent expenditure related to the fight against the pandemic, mainly to support the Member States’ healthcare systems and to help entrepreneurs.

The initiative of the European Commission takes the form of a legislative proposal to amend the existing Regulations establishing and governing the European Regional Development Fund (“ERDF”), the European Social Fund (“ESF”), the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund (“EMFF”).

3. Assistance within the Member States

On 19 March 2020, the European Commission issued a communication on a temporary framework for the state aid to support the economy in the context of the COVID-19 epidemic.

COVID-19 was identified as a serious threat to the health and life of the population as well as to the economy of the entire European Union. As the European Commission indicated in its communication, the measures preventing from the spread of COVID-19, in particular by reducing people-to-people contacts, introducing a state of quarantine and a ban on movement, closing down educational, cultural and commercial establishments, and aimed at reducing the scale and duration of the crisis caused by the COVID-19 pandemic, have at the same time a direct impact on the functioning of the national economies of all Member States and, consequently, of the economy of the entire European Union. Companies – both small and medium-sized enterprises and large corporations – will be most severely affected in virtually all sectors of the economy, although companies operating in the health, tourism and transport sectors are among those most seriously affected by the crisis.

The Commission Communication presents a catalogue of aid tools available to the Member States, to provide businesses – in particular SMEs – with liquidity and access to finance at a time of sudden funding shortfalls caused by the COVID-19 pandemic.

The following mechanisms applied by the Member States will be considered compatible with the Union law:

  • Financial aid in the form of direct grants, repayable advances, tax or payment advantages; under established schemes, the Member States will be able to grant financial assistance of up to EUR 800,000.00 to companies that were not in difficulty on 31 December 2019 to meet their urgent needs;
  • Loan collateral in the form of the state guarantees for loans taken out by enterprises in banks, in order to ensure the possibility of obtaining a loan;
  • Subsidised public loans for enterprises, granted by the Member States to enterprises to meet urgent capital and investment needs;
  • Guarantees for banks – some Member States plan to use the existing lending capacity of banks as a channel to support companies, in particular SMEs;
  • Short-term export credit insurance.

4. EU medical supplies (rescEU)

The European Commission decided to create a strategic stock of medical supplies. The rescEU stockpile is to be set up under the EU Civil Protection Mechanism to assist the Member States in the fight against the COVID-19 pandemic.

The rescEU inventory is to include, among other things:

  • Intensive care medical equipment, such as respirators;
  • Personal protective equipment, including reusable masks;
  • Vaccines, medicines;
  • Laboratory equipment.

The stock will be held by one or more Member States. These countries will be responsible for ordering medical supplies. 90% of the stock will be financed by the Commission; the remaining 10% will be borne by the Member States.

The distribution of funds under rescEU will be managed by the Crisis Response Coordination Centre.

The initial budget of the European Union for the stockpiling of the rescEU is EUR 50 million, of which EUR 40 million is to be released subject to approval by the EU budgetary authorities.

Currently, EU Member States are purchasing personal protective equipment, ventilators and articles necessary for testing COVID-19 under the Joint Procurement Agreement. Group procurement and a coordinated approach to purchasing gives Member States a stronger position in negotiations on availability and prices of medicinal products.

5. To help the Air Force

The Union also took actions to temporarily suspend slot requirements at airports that oblige airlines to use at least 80% of their slots for maintenance in the following year. Member States’ ambassadors in the Council’s Permanent Representatives Committee approved a mandate for the Presidency to negotiate with the European Parliament a proposal to suspend the “use it or lose it” rule during the period from 1 March to 24 October 2020, with the reservation that the said period can be prolonged.

These measures are intended to help air carriers cope with the sharp drop in demand caused by the COVID-19 pandemic and the associated countermeasures, including the need to suspend part of their air services.

6. Consumer protection

The European Commission, together with national consumer protection institutions, including the Polish Office of Competition and Consumer Protection, are taking action against unfair commercial practices of sellers who offer fake coronavirus medicines and hygiene products at prices many times higher than their market value.

The actions taken focus mainly on tracing and blocking rogue traders, operating mainly via the Internet. Within the framework of Union cooperation, national institutions shall exchange information on identified cases of rogue traders and on the application of preventive measures, in particular website blocking.

The European Commission, in cooperation with national institutions, developed guidelines on what online practices should be considered unfair. This is to enable platforms and institutions to quickly identify and deal with rogue traders.

Not only cases of overpricing are considered as unfair market practices (the German Federation of Consumer Organisations [VZBV] identified, inter alia, the sale of 10-packed protective masks at a price of € 999.99 per pack, i.e. more than 600 times their actual price), but also any promotion of products as preventing or treating COVID-19 infection.

7. Millions to fight covid-19

Back in February 2020, EU Commissioner for Crisis Management Janez Lenarczicz announced that the European Union would allocate more than €230 million to the global fight against COVID-19.

Within the earmarked resources, EUR 114 million will go to the World Health Organisation (WHO). The European Union will allocate another €100 million to research, in particular for a public-private partnership with the pharmaceutical industry to develop a vaccine against the SARS-Cov-2 virus which causes COVID-19 disease.

 

Prepared by:

Ewa Lejman-Widz, partner, attorney-at-law, tax adviser, Izabella Żyglicka i Wspólnicy

Kamila Spalińska, trainee attorney, Izabella Żyglicka i Wspólnicy

 

Revised: 24 March 2020

 

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