On April 27, 2022, the European Commission (the “Commission”) approved a State aid scheme of €700 million of the French State “to support research, development and innovation projects by companies of all sizes and active across all sectors” (the “French Scheme” or the “Scheme”). The French authorities estimate the number of beneficiaries of the scheme to range between 11 and 50 companies. The scheme will be in place until December 31, 2023.
As with several other national State aid schemes over the past two and a half years, the Commission assessed the French Scheme within the framework of the State Aid Temporary Framework (the “Temporary Framework”), adopted following the Covid-19 outbreak and set to be phased out as of June 30, 2022. The French Scheme is part of the “France 2030” recovery program, a €30 billion plan over five years, aimed at developing industrial competitiveness and future technologies following the pandemic.
The Commission’s substantial assessment
On the basis of the Temporary Framework, as well as the 2014 Framework for State aid for research and development and innovation (the “RDIF”), the Commission assessed, notably, whether the French Scheme meets the following conditions:
- Necessity, e., whether the aid allows for the development of an economic activity that would not have taken place in the absence of the measure or, at least, would not have taken place under the same conditions;
- Incentive effect, e., whether the aid motivates the beneficiary to create new activities that it would not normally carry out or would carry out in a limited or different manner absent aid;
- Appropriateness of the selected aid instruments, e. whether the proposed form of aid is appropriate to achieve the aid’s main purpose in the context of the relevant market failures;
- Proportionality, e., whether the aid amount and intensity are limited to the minimum necessary to carry out the activity being supported; and
- Effect on competition, e., whether the scheme sets out safeguards to limit any possible distortion of competition and has positive effects that outweigh the possible negative effects.
The Commission found that the French Scheme meets all these conditions. In particular, with respect to necessity, the Commission held that the French Scheme has been designed to promote a wide dissemination of patented or unpatented knowledge within the European Union thanks to public funding. In addition, the Commission found that the French Scheme sets out relevant safeguards to limit any distortions to competition, such as (i) the condition that one group may not receive more than 10% of the whole budget nor allocate more than 30% of the budget of the measure to a single research area, or (ii) a control mechanism to ensure that the aid does not create or strengthen overcapacity in the relevant market.
How to benefit from such aid
The French Scheme allows aid in the form of direct grants, soft loans or repayable advances to support two types of research, development and innovation (“RDI”) projects: research and development on the one hand, and process and organizational innovation on the other hand. Only projects relating to the four following thematic areas can benefit from the scheme, namely: (i) energy transition and environmental protection, (ii) digital transition, (iii) innovations in production processes, and (iv) European value chains and the security of supply.
French public authorities can grant aid under this scheme on the basis of transparent public procedures (in particular, call for projects) to all companies, regardless of their size. However, depending on the aid envisaged as well as the size of the company, the maximum aid intensity ranges from 25% to 100% of the eligible costs, with possible additional bonuses.
In addition, the French Scheme sets out several additional conditions, including rules on cumulation with other aid, dissemination of results, eligible costs and granting procedures, as well as possible aid thresholds, in order for companies to benefit from the scheme.
The French Scheme is one of the last schemes that will be authorized within the Temporary Framework. It shows the great diversity of the aid schemes adopted by the member states within the framework of the health crisis and the directions for recovery. According to Vice-President Margrethe Vestager, the Commission adopted more than 1,300 decisions under this framework, approving nearly 950 national measures, for an estimated total State aid amount approved of nearly 3.2 trillion euros.
 See Commission’s decision SA.102230, §21.
 Communication from the commission temporary framework for State aid measures to support the economy in the current Covid-19 outbreak of March 19, 2020. Amendments were adopted on April 3, May 8, June 29 and October 13, 2020 and January 28 and November 18, 2021, extending the scope of the Temporary Framework.
 However, investment support towards a sustainable recovery will be possible until December 31, 2022, and solvency support until December 31, 2023. See Cleary Gottlieb Alert Memorandum of May 24, 2022, available here.
 See Commission’s decision SA.102230, §94.
 Aid exceeding thresholds laid down by the French Scheme is not eligible and should be, in any case, formally notified to the Commission (see Commission’s decision SA.102230, §40 and 41).
 See Commission’s decision SA.102230, §22 to 27.
 Subject to meeting specific requirements in the case of process and organizational innovation projects.
 For example, a 25% maximum aid intensity is allowed for experimental development projects to “large companies”, whereas fundamental research projects could benefit from a 100% aid intensity, regardless of the size of the company.
 See Commission’s decision SA.102230, §41. For example, aid for process and organizational innovation, exceeding a threshold of €11,250,000 per undertaking and per project have been excluded from the scope of the notified scheme, and should therefore be individually notified to the Commission.
 See Commission’s press release of May 12, 2022, available here.