Back to a new normal?

As of 30 June 2024, the EU’s Temporary Crisis and Transition Framework for state aid measures, which was introduced following the Russian invasion of Ukraine, has expired in relation to state aid measures applicable to most sectors. Measures relating to the primary agriculture, fishery, and aquaculture sectors remain covered by the Framework until 31 December 2024. We will explore the potential consequences of this in more detail below.


The full-scale invasion of Ukraine by Russia on 24 February 2022 led to the imposition of several packages of sanctions by the European Union. The most recent one, the 13th to date, was passed by the European Council on the two-year anniversary of the war – 23 February 2024.

In response to these, Russia introduced counter-sanction measures, and notably made the decision to cut off gas supplies to a number of EU Member States, such as Bulgaria and Poland. The impact on these countries, as well as on the internal market generally, was significant. Companies had to cope with the resulting spike in energy prices. In this context, on 23 March 2022, the European Commission adopted the Temporary Crisis Framework (the “Framework”) to enable Member States to support their economies by way of state aid measures.

The principle: state aid is prohibited

Under EU law, the general principle contained in Article 107 TFEU is that state aid measures are prohibited, as they are contrary to the continuing integration of the internal market. State aid can however be justified, if it is needed to ‘remedy a serious disturbance in the economy of a Member State’ (Article 107(3)(b)). The Framework explicitly states that state aid granted ‘to remedy the liquidity shortage faced by undertakings that are directly or indirectly affected by the serious disturbance of the economy caused by the Russian military aggression against Ukraine, the sanctions imposed by the EU or by its international partners, as well as the economic counter measures taken’ may be permissible.

It should be noted that this is not the first temporary framework set up by the European Union in response to global events. A similar framework to weather the COVID-19 storm was set up in 2020, and expired on 30 June 2022. Under both frameworks, the approach taken by the EU is not a blanket approval of state aid granted to companies: measures are subject to conditions to be considered permissible. For example, the Framework specifies that any undertaking may not benefit from total aid exceeding EUR 400 000 at any given point in time. It also requires for the undertaking to actually be “affected by the crisis”. Special rules also apply to the primary agriculture, the fishery and aquaculture sectors. Despite recognising the Russo-Ukrainian war and its economic consequences as an exceptional circumstance, the EU therefore presented itself as remaining cautious when considering state aid.

Commission decisional practice

It is nonetheless interesting to note that the Commission has not made any decisions to initiate formal investigation procedures into any state aid measure granted after 23 March 2022 and justified on the basis of the Framework. While such decisions are not the norm in any context, this remains remarkable: in the same period, the Commission initiated an investigation into 17 other measures justified on other pieces of legislation (such as, for example, on the basis of the Agricultural Guidelines). This suggests a certain leniency when considering cases justified on the basis of the Framework: whether an undertaking is “affected by the crisis” can namely be interpreted quite widely.

In a decision dated 13 November 2023, the Commission for example considered that a financial aid measure granted by the Polish state to raspberry producers, in light of increased competition from Ukrainian raspberries, was justifiable on the basis of the Framework. While higher energy prices were cited, other, more indirect factors, were also cited by the Commission in its analysis. It for example considered the difficulties of keeping the fruit frozen due to power outages in Ukraine, and the impact this had on the market in Poland. This evidences the Commission’s wide approach to what may be considered a consequence of the crisis.

Looking to the future

The Framework was first extended in October 2022. It was then amended in March 2023, and rebranded as the Temporary Crisis and Transition Framework. In line with the EU Green Deal, this amended Framework aims to also cater to measures which have as their objective to foster the transition to a net-zero economy. The expiry date for the Framework was also set at 30 June 2024, with some exceptions in relation to specific sectors, as previously mentioned.

The Framework coming to an end could be seen as surprising: when the COVID Framework came to an end in June 2022, the height of the pandemic had passed in most EU Member States. The Ukraine war is however currently still a ‘hot’ conflict, as shown notably by the May 2024 Kharkiv offensive. A 14th package of sanctions was introduced by the EU on 24 June 2024, included a ban on reloading services relating to Russian LNG in the EU for the purpose of transshipment operations to non-EU countries, the purchase, import or transfer Russian LNG through LNG terminals in the Union that are not connected to the interconnected natural gas system, as well as restrictive measures against Russian LNG projects. More about this can be read in the Reed Smith client alerts here and here.  This comes against the backdrop of recent sanctions enforcement by the wider G7 coalition targeting Russian LNG projects: many of the factors explaining the introduction of the Framework therefore appear to remain current.

However, wider economic and political circumstances could be the explanation. Most notably, the EU’s dependence on Russian gas has fallen from 45% in 2021 to only 15% in 2023, allowing for energy prices to somewhat stabilize. Simultaneously, a number of Member States who were initially very committed to supporting Ukraine in its defense efforts are showing signs of lassitude: for example, in a much-publicized move in April 2023, Poland banned imports of Ukrainian wheat and corn. More recently, on 14 May 2024, the EU adopted regulations imposing caps on duty-free imports for some Ukrainian produce, including eggs, poultry, and certain types of grains.

As the impact of the conflict on EU markets somewhat stabilizes, the end of the Framework and the progressive return to regular state aid rules therefore appears to mark the return to a new normal. The end of the Framework could however entail a shift away from the Commission’s permissive attitude, and undertakings receiving state aid should be aware of the risks associated with this. In tandem with the ongoing imposition of sanctions and counter-sanctions, the regulatory landscape therefore presents complexities: as the Russia-Ukraine conflict evolves, the situation could also be subject to rapid changes. Undertakings affected by the fall out of the war should seek appropriate advice in order to navigate these issues, and to ensure regulatory changes are anticipated promptly.