Mediaboss Marketing

The long waited Fourth Amendment of the Chinese Patent Law was eventually passed into law by the Standing Committee of the People's Congress on October 17, 2020. The newly amended Patent Law will take effect as of June 1, 2021.

The main points of the amendment are as follows:

1. Strengthening patent protection

In the recent years, there has been a clear trend towards stronger protection in the Chinese practice of the patent enforcement. That trend is evidently reflected in the amendment. There are quite a few changes concerning strengthening patent protection, which include:

1) The term (protection period) for design patent is extended from 10 years in the current law to 15 years. This is believed to make China ready to join The Hague Agreement Concerning the International Deposit of Industrial Designs.

2) Patent term compensation is available where the patent grant occurs beyond 4 (four) years from the filing date and beyond 3 (three) years from the date of requesting substantive examination, with the exception of any unreasonable delay caused by the applicant's side. This provision is considered as echoing the voice of domestic patent filers for quicker grant of patent rights.

3) So as to make up the time period taken by the regulatory process of a new drug, patent term compensation of up to 5 (five) years is available for a patent concerning the new drug for which marketing authorization has been obtained, provided that the total protection period after the approval of marketing for the new drug is no longer than 14 (fourteen) years. This is the very first time for the Chinese law to make patent term extension available for pharmaceutical patents.

4) The Patent Office (China National Intellectual Property Administration, CNIPA) is empowered to handle patent infringement disputes which are influential country-wide, at the request of an involved party or an interested party. It is noted as the first time for the law to entrust the Patent Office to handle disputes over patent infringement, which handling is supposed to be more speedy and efficient as compared to the judicial track of patent infringement.

5) The acts of willful, serious infringement of a patent right are subject to punitive damages of up to 5 times of regular damages. This provision has been attracting attention of the public ever since it was initially proposed. In fact, 3 (instead of 5) times of regular damages was put forward when the amendment was initially drafted. Notably, the punitive damages provided in the law (5 times of regular damages) are even harsher than in the US practice. Doubtlessly, the amendment makes it possible for patentees to collect relatively high damages when facing willful, severe infringement. However, it is yet to be tested in the future court practice how the legal provisions are applied.

6) The upper limit of the "statutory damages" (meaning the damages awarded at the handling court's discretion) is lifted to amounting 5 million RMB (equivalent to about USD 745,000) from 1 million RMB, which is currently applied. This is obviously another embodiment of the idea of strengthening patent protection.

7) Limitation of actions for patent infringement actions is extended to 3 (three) years from 2 years, which is currently applied. Also, the starting point of the limitation of actions is now the date on which the patentee or an interested party obtains knowledge of the act of infringement and of the identity of the infringer(s). This change makes it possible to avail patentees assertion of legal rights more practically.

2. Introduction of patent linkage system for pharmaceutical patents

There are new provisions in the amendment that are believed to set forth the framework of Chinas patent linkage system for pharmaceutical patents. Again, this is the very first time for the Chinese law to adopt such a system.

1) In the case where, in the regulatory process for drug evaluation and approval, any dispute arises between the applicant for drug marketing authorization and concerned patentee or an interested party over a patent right related to the drug for which regulatory registration is applied for, an involved party may institute legal proceedings in the people's court for requesting a verdict on whether the technical solution related to the drug, for which regulatory registration is applied for, falls with the protection scope of a pharmaceutical patent right owned by a third party. The regulatory authority (National Medical Products Administration, NMPA) may, within prescribed time limit, make a decision on whether to suspend the approval of marketing of the concerned drug in accordance with an effective ruling of the people's court.

2) The applicant for drug marketing authorization and concerned patentee or an interested party may also request the Patent Office (China National Intellectual Property Administration, CNIPA) for an administrative ruling on the dispute over a patent right related to the drug for which regulatory registration is applied.

3) Detailed measures for matters relevant to patent linkage are to be enacted by the regulatory authority (NMPA) in collaboration with the Patent Office.

3. Patentability

1) "Partial design" (meaning a design of a part of a concrete product, but not of the entire product) becomes patentable, in contrast with the current law in which a design application must be for an entire product. This change makes the law more lenient to designers who intend to have the patent protection right on the gist of their designs.

2) The so-called "grace period" (meaning a six-month period during which certain scenarios of disclosure do not constitute novelty-destroying disclosure) is now applicable to the case where the disclosure is for the first time at a time of national emergency state or exceptional circumstances and for the purpose of public interest. This new provision is believed to have been prompted by the current coronavirus pandemic and is aimed at encouraging early publication of technologies needed for the handling of social crisis such as the pandemic.

3) Statutorily unpatentable subject matters now include processes for nuclear transformation in addition to substances obtained by means of such processes, which are already prohibited in the current law. This is merely a confirmation of the current practice.

4. Open license of patents

As part of the effort of to promote commercialization of patents, an open license mechanism is introduced in the amendment. A patentee may declare to the Patent Office that his patent is licensed to any entities at indicated royalties. Then any parties who are interested in the license may obtain it simply by notifying the patentee and paying the required royalties without any further negotiations with the patentee.

5. Domestic priority for designs

Domestic priority for design applications is newly introduced. An applicant for a design patent may claim priority from his earlier Chinese application on the same design within 6 months from the filing date of the latter. This is to give the same leniency to domestic design filers as foreigners, who can enjoy conventional priority.

More:
Main Points of the 4th Amendment of Chinese Patent Law - Lexology

In the oral argument of Torres v. Madrid on Wednesday, the justices tried out all the tools of constitutional interpretation as they worked through the meaning of the critical Fourth Amendment term, seizure. How they rule will answer one of the last remaining questions in this context: Is there a Fourth Amendment seizure when the police shoot a fleeing suspect who is injured by the bullets but does not stop?

Kelsi Brown Corkran, for Roxanne Torres, and Mark Standridge, for officers (Art Lien)

Kelsi Corkran argued on behalf of Roxanne Torres, a New Mexico woman who was shot twice by state police before driving away from the scene. She had support from Rebecca Taibleson, who appeared as a friend of the court on behalf of the United States. Mark Standridge argued for the police officers, Janice Madrid and Richard Williamson. Torres claims in a civil rights lawsuit that the officers violated her Fourth Amendment right by committing an unreasonable seizure when they shot her. The officers defense is that the shooting did not constitute a seizure at all.

As I mentioned in my case preview, the easiest resolution of the case would be for the court to simply follow its precedent. Justices Sonia Sotomayor and Elena Kagan endorsed this approach, noting that, in the 1991 decision California v. Hodari D., the court crafted a definition of seizure that clearly captures the shooting in this case: a laying on of hands or application of physical force to restrain movement, even when it is ultimately unsuccessful. Justices Clarence Thomas and Neil Gorsuch emphasized in their questioning, however, that this language was dicta, or not essential to the outcome of that case and thus nonbinding on future decisions.

Illustrating the centrality of this issue, Kagan read a series of passages from Hodari D. and noted that the language appeared all over the opinion, cropping up six times [in] only a seven-page opinion. To Kagan, this was not the kind of stray statement that could be easily disregarded. Strengthening this point, Taibleson offered a ringing endorsement of stare decisis in this context, stating that the United States interest here is in establishing a clear and predictable rule that law enforcement can apply in the heat of the moment in the field, and we think the rule established in Hodari D. achieves those ends. While Taibleson acknowledged that the United States had taken a contrary position in 1991, she explained, we didnt feel comfortable simply, you know, running it back.

Whether or not he appreciated Taiblesons pitch-perfect basketball reference, Justice Stephen Breyer seemed similarly swayed by the need for a clear line, stating, We need a line thats somewhat bigger than the one [the officers] propose. For Breyer, the line the court drew in Hodari D. is as good a line as any.

For the conservative justices attracted to the officers narrow seizure definition, the existence of contrary precedent is only part of the problem. There is the added fact that Hodari D. is an originalist precedent written by Justice Antonin Scalia. In his opinion for the court, Scalia wrote that, under the common law at the time of the Framing, the mere grasping or application of physical force with lawful authority, whether or not it succeeded in subduing the arrestee, was sufficient to constitute a seizure. This prompted Justice Brett Kavanaugh to press Standridge to acknowledge that, youre arguing, as I understand it, that Justice Scalia and really all nine justices in that case were wrong about the original meaning of the Fourth Amendment. Kavanaugh similarly pushed Taibleson on this question, with Taibleson ultimately affirming that the United States official position was that Scalia got the history right. Sotomayor fanned the flames, wryly noting that Scalia was very much was an advocate of the common law and quite well informed about it generally.

With this array of originalist forces against him, Standridge contended that the court should reject historic relics that are not suited to the modern era in favor of rules that have evolved through the process of interpreting the Fourth Amendment in light of contemporary norms and contemporary conditions. Curiously, it was the courts conservatives who seemed most receptive to this argument. Gorsuch questioned the applicability of the Framing-era cases that, he said, primarily concerned Dickensian debt collection practices. Thomas suggested that the cases might be distinguishable because they arose outside the criminal context and involved direct applications of force. Justice Samuel Alito pointed out that none of the cases involved shootings. There seemed to be an irony here in light of the proceedings unfolding at that same moment across the (virtual) street. At the same time that Judge Amy Coney Barrett was extolling the clarity of originalism in her confirmation hearings in the Senate, the courts most prominent originalists seemed to be suggesting that Framing-era precedents offered little insight into the proper application of the Constitution in a modern context.

The justices returned to more familiar territory as they sparred over the plain meaning of the term seizure. The officers strongest textual argument is that the terms ordinary meaning does not apply to unsuccessful attempts to restrain someone. To illustrate the point, Gorsuch deployed the days most extreme hypothetical, conjuring up a driver who blast[s] through roadblocks at 100 miles an hour with police bazookas (!) firing all around, and yet suffers only a scrape. Alito picked up the thread, asking about a baseball pitcher [who] intentionally beans the batter. Thomas added a question about someone hit by a snowball. None of these instances, the justices suggested, fit the term seizure. The examples prompted Kavanaugh to challenge Corkran to explain why shouldnt we just follow the ordinary usage of the term seizure. In an apparent appeal to the justices aligning against her, Corkran responded that its the ordinary meaning at the time of the founding that controls.

The justices hypotheticals arguably underplayed an important fact about Torres claim. Torres was not only shot but felt the effects including (she alleges) temporary paralysis. That the bullets did their damage in the blink of an eye may be causing the justices to overlook their severe impact damage that would have been readily apparent if occasioned by traditional physical contact. This point surfaced when Sandridge responded to Justice Alitos question about an officer who grabs [a] persons shirt for a couple seconds, by acknowledging that this would be a (momentary) seizure. Sotomayor picked up on the exchange in regard to Torres claim, asking Standridge how grabbing a shirt for a few seconds is more of a seizure than putting a bullet in someone.

An undercurrent in the questioning concerned the societal significance of the case. A broad understanding of the term seizure would permit greater judicial scrutiny of excessive police force at a time when the country is increasingly concerned with police violence. Early in the argument, Sotomayor asked Corkran to explain why this case is so important. Corkran obliged, noting that the narrow definition of seizure sought by the officers would leave all sorts of abuses by the government outside of the constitutional framework. Breyer emphasized the point, stating that the officers argument left the right of the people to be secure in their persons without much protection a whole area [with] no protection at all.

Gorsuch and Alito sounded a contrary note, asking both sides whether the suit could have been filed as a civil claim for battery in New Mexico state court. The consensus seemed to be that it could have been, but for the statute of limitations. Standridge drew on his local practice in New Mexico to push back on skepticism of the potential for state law remedies to excessive police force:

I believe I can represent, as an officer of this court and the state courts of New Mexico, that it is likely an assault or battery claim brought by a plaintiff such as this petitioner would[] survive summary judgment and would likely have to have been resolved at trial.

After argument, the case feels closer than expected. Things can always change as the justices dig into the record, but at the moment, I count three votes for Torres and three for the officers, with the outcome hinging on the two remaining justices Kavanaugh and Chief Justice John Roberts who did not tip their hands.

Posted in Torres v. Madrid, Featured, Merits Cases

Recommended Citation: Jeffrey Bellin, Argument analysis: Justices spar over stare decisis, originalism, text and what counts as a Fourth Amendment seizure, SCOTUSblog (Oct. 16, 2020, 3:08 PM), https://www.scotusblog.com/2020/10/argument-analysis-justices-spar-over-stare-decisis-originalism-text-and-what-counts-as-a-fourth-amendment-seizure/

Read more from the original source:
Argument analysis: Justices spar over stare decisis, originalism, text and what counts as a Fourth Amendment seizure - SCOTUSblog

The Supreme Court on Wednesday held oral argument in Torres v. Madrid, which debated whether police in Albuquerque had seized Roxanne Torres when they shot her in the back, even though she was able to drive away. If the Supreme Court declares that Torres wasnt seized, then her lawsuit under the Fourth Amendment would fail.

There is no doubt that when the bullets entered Ms. Torress back, she was seized within the original meaning of the Fourth Amendment, noted attorney Kelsi Corkran, who argued on behalf of Torres.

A Constitution thats unconcerned with the police shooting someone without any provocation so long as the person doesnt immediately stop moving, its not just counterintuitive, Corkran added, it defies the sanctity of the person that forms the foundation of the Bill of Rights, the right to be secure in our bodies from unreasonable government intrusion.

UNITED STATES - OCTOBER 15: The U.S. Supreme Court is seen on Thursday, Oct. 15, 2020. (Photo by ... [+] Caroline Brehman/CQ-Roll Call, Inc via Getty Images)

Justice Samuel Alito was skeptical that people using ordinary speech would refer to a sniper shooting someone or a baseball pitcher who intentionally beans the batter as seizures, claiming this was not consistent with the language of the Fourth Amendment. On behalf of the accused officers, attorney Mark Standridge made a similar argument.

No ordinary person as a matter of common sense, he claimed, could say that a person who is shot by the police but continues to drive well out of range, well out of their sight, and eludes them for a full day could be seized as a matter of the Fourth Amendment. As the officers did not seize [Torres], he asserted, they cannot be held liable to her for excessive force in violation of the Fourth Amendment.

But as Corkran pointed out, under Supreme Court precedent, its the ordinary meaning at the time of the founding that controls, especially if the modern understanding risks diminishing the constitutional right. (Emphasis added.) The Constitution must, at minimum, protect today what it protected at the time it was adopted, she added.

Back then, a seizure included both seizures of goods and arrests, which were considered the seizure of a person. As none other than Noah Webster once phrased it, We say to arrest a person, to seize goods.

Moreover, a seizure is still a seizure, even if its fleeting. Representing the U.S. Department of Justice, Assistant to the Solicitor General Rebecca Taibleson stated that if a subject does not stop, the seizure lasts only a moment, the moment of physical impact. Under that test, Ms. Torres was seized, albeit briefly, so the Fourth Amendment applies, she added.

Though this debate may seem like splitting hairs, without the Fourth Amendment, no alternative avenue for redress exists in many excessive force cases, the Rutherford Institute and the National Association of Criminal Defense Lawyers argued in an amicus brief. Victims of excessive force can also claim that their due-process rights were violated under the Fourteenth Amendment.

But as the amicus brief noted, those challenges have to overcome threshold question [of] whether the behavior of the governmental officer is so egregious, so outrageous, that it may fairly be said to shock the contemporary conscience, a demanding standard that sets a nearly insurmountable burden for any plaintiff.

And while both Justices Alito and Neil Gorsuch claimed that Torres could have filed a battery claim against the officers under New Mexico law, that would be insufficient, the Rutherford-NACDL amicus countered, since state tort claims do not remedy or vindicate constitutional violations.

Plus, law enforcement can often undercut state torts. For example, courts in New Mexico have ruled that because police officers did not employ unconstitutionally excessive force, [they] cannot be liable for assault and battery under New Mexico law.

This lack of accountability is why many organizations from across the political spectrum, including the ACLU, the Cato Institute, the Institute for Justice, the Leadership Conference, LEAP, the NAACP, the Reason Foundation, and the R Street Institute, have all filed amicus briefs urging the Supreme Court to side with Torres.

If this Court takes the extraordinary position that a police officer deliberately shooting at and wounding an individual is not a Fourth Amendment seizure, the NAACP warned, many innocent victims of police shootings will be left without a remedy.

Read the original post:
Can A Woman Sue Cops Who Shot Her In The Back? Supreme Court Unsure If Fourth Amendment Even Applies - Forbes

The Fourth Amendment prohibits unreasonable searches and seizures. On Wednesday, the Supreme Court is scheduled to hear oral argument in Torres v. Madrid, a case that will provide important guidance on what constitutes a Fourth Amendment seizure. Heres a rundown of the case starting with the relevant facts and procedural history, followed by a discussion of the legal issues and finally a couple of things to watch for at the argument.

In the early morning hours of July 15, 2014, New Mexico state police descended on an apartment complex in Albuquerque. Officers Janice Madrid and Richard Williamson approached a Toyota FJ Cruiser that was backed into a parking spot with its engine running. The officers tried to speak to the driver, Roxanne Torres. Torres, who says she thought she was the victim of an attempted car-jacking, drove off.

Madrid and Williamson, who say they feared for their safety, fired their weapons. Torres was hit twice but did not stop. She drove to a nearby parking lot, swapped her severely damaged FJ Cruiser for an unattended Kia Soul with its motor running, and drove 75 miles to Grants, New Mexico or, as the briefing helpfully informs the justices, approximately the distance from this Court to Harpers Ferry, West Virginia. Torres promptly checked into the hospital, where police arrested her the next day.

Two years later, Torres filed this case, a civil rights lawsuit against Madrid and Williamson, alleging that the shooting was an unreasonable Fourth Amendment seizure. The district court granted summary judgment in favor of the officers, ruling that the shooting did not constitute a seizure at all. The U.S. Court of Appeals for the 10th Circuit agreed. Thats the ruling the Supreme Court will review in this case, with significant implications for the admissibility of evidence against criminal defendants, as well as the viability of excessive-force prosecutions and lawsuits against police.

The basic test for identifying a Fourth Amendment seizure comes from Justice Potter Stewarts opinion in United States v. Mendenhall: [A] person has been seized within the meaning of the Fourth Amendment only if, in view of all the circumstances surrounding the incident, a reasonable person would have believed that he was not free to leave.

If that were the only test, Torres would have won already. Nothing says you are not free to leave like two police officers with guns drawn, firing bullets into your car. But there is a catch. In California v. Hodari D., the Supreme Court offered an addendum to the seizure definition for situations when you are not free to leave but you leave anyway.

Hodari D. held (7-2) that a person being chased by an officer (and so not free to leave) is not actually seized until caught. The following language from Justice Antonin Scalias majority opinion is critical to this case:

The word seizure readily bears the meaning of a laying on of hands or application of physical force to restrain movement, even when it is ultimately unsuccessful. (She seized the purse-snatcher, but he broke out of her grasp.) It does not remotely apply, however, to the prospect of a policeman yelling Stop, in the name of the law! at a fleeing form that continues to flee. That is no seizure.

Hodari D. makes clear that a person fleeing from a show of authority is not seized. But it also suggests a different answer once there is physical contact.

Starting with the language in Hodari D., Torres and the eight amici supporting her in the case present a blizzard of overlapping textual, historical and policy arguments for concluding that the shooting in this case was a seizure. The U.S. solicitor general, arguing in support of Torres, writes that this conclusion is required by the plain text of the Fourth Amendment, follows from this Courts precedent defining a seizure, and is consistent with the common law.

The officers response centers on the textual point. From their perspective, the key to the case is that to be seized means to be stopped, and Torres kept going. Offering the justices a bright-line rule, the officers contend: The citizens freedom of movement must actually be physically restrained or controlled for a seizure to occur. After all, if Torres was seized in Albuquerque, how did she travel 75 miles to a hospital in Grants?

Torres and her amici have an answer. Torres was seized the moment she was shot. She was seized again when police arrested her the next day. In between those two events, she was not seized. Torres can concede that there was no continuous seizure because she only needs one moment. If the initial, momentary seizure was unreasonable, the officers violated her Fourth Amendment rights.

Torres argument is stronger than most momentary-physical-contact-seizure claims for two reasons: She was seriously injured by the bullets, and she immediately felt their effects. One can imagine weaker cases in which an application of physical force causes only fleeting or unnoticed impacts, like a brief grasp of the wrist or a bullet stopped by a lucky belt buckle. But in this case, the officers fired two bullets into Torres torso. Torres testified at her deposition that immediately after she was shot, one of her arms became temporarily paralyzed. (Curiously, the lower-court opinions overlook this aspect of Torres testimony which must be credited at the summary-judgment stage.) Quoting another Supreme Court case, Graham v. Connor, the officers acknowledge that a Fourth Amendment seizure occurs whenever government actors have in some way restrained the liberty of a citizen. They will have to convince the justices that being shot twice at close range resulting in partial paralysis is not a restraint on ones liberty.

On precedent and history, the officers largely play defense. As already noted, the courts clearest precedent, Hodari D., suggests that the actual application of physical force with an intent to stop someone, even if unsuccessful, constitutes a seizure. As for Framing-era history, most of the briefing agrees that at the time the Fourth Amendment was adopted, any physical contact during an attempt to restrain a suspect constituted a common law arrest, the quintessential seizure. But whether Framing-era citizens would have thought that Fourth Amendment seizure rights tracked the varying common law arrest doctrines, and how much that should matter given the vast differences in Framing-era policing, remain perhaps unresolvable questions.

There are two things to look for in the upcoming argument.

(1) How broadly is the court inclined to rule?

The court could rule for Torres here, while still leaving room for a different outcome in cases with less substantial physical contact. The District of Columbia Court of Appeals, for example, found no seizure in a case in which a suspect wriggled out of his coat to escape an officers grasp. In those circumstances, despite the physical contact, the suspect (as opposed to the suspects jacket) arguably was never seized. And that case, unlike this one, raises a potential conflict, hinted at by some of the amici, between the constitutional text and the common law of arrest. The justices may want to avoid confronting that conflict by ruling narrowly in this case.

A ruling for the officers, on the other hand, might leave open the possibility that some degree of actual impairment handcuffs placed on a suspect who then breaks away, or a blow that measurably slows the suspect can create a seizure even if the suspect is not immediately stopped.

(2) Is the court thinking about searches too?

Searches and seizures are strongly linked in the Fourth Amendment, separated by only a conjunction. This suggests that search and seizure cases should share a similar interpretive methodology. Yet currently, the two doctrines are nothing alike. Search cases, powered by the reasonable expectation of privacy test, are a mixture of armchair philosophy, speculation about societal norms and strained allusions to dystopian fiction. By contrast, seizure cases appear to hinge on straightforward textual interpretation. The court determines whether a seizure occurred by applying the commonly understood meaning of a relatively clear term. Given the plethora of search cases queuing up on the horizon, and the justices increasing frustration with their convoluted search doctrine, this striking contrast may be the most significant part of the case. If the justices enjoy the analytical clarity of textual seizure analysis, they may begin to contemplate the benefits of a similar methodological approach to the term search.

Posted in Torres v. Madrid, Featured, Merits Cases

Recommended Citation: Jeffrey Bellin, Case preview: When is a fleeing suspect seized?, SCOTUSblog (Oct. 13, 2020, 9:00 AM), https://www.scotusblog.com/2020/10/case-preview-when-is-a-fleeing-suspect-seized/

Visit link:
Case preview: When is a fleeing suspect seized? - SCOTUSblog

The EU Commission has published a fourth amendment to its 19 March 2020 guidance document on state aid in reaction to the COVID-19 outbreak (see our blog post).

The Temporary Framework was previously amended on 3 April 2020 (see our blog post), on 8 May 2020 (see our blog post) and on 29 June 2020 (see our blog post).

The fourth amendment extends the availability of all the measures set out in the Temporary Framework. Furthermore, it introduces an extension of the temporary removal of all countries from the list of marketable risk" countries under the Short-term export-credit insurance Communication (STEC). In addition, it modifies recapitalisation aid rules for state-owned companies and introduces a new instrument allowing governments to cover part of companies' fixed costs during the crisis.

Extension of Temporary Framework measures

The exceptional support measures (apart from recapitalisation measures) permitted by the Temporary Framework were initially meant to end by 31 December 2020. The Commission has now adopted a six-month extension until 30 June 2021 for all support measures covered by the Temporary Framework, except for the recapitalisation measures, which are prolonged until 30 September 2021.

This is intended to ensure that national support measures effectively help affected companies. To ensure legal certainty, the Commission will decide before 30 June 2021 whether the Temporary Framework needs to be further extended.

Extension of temporary removal of all countries from the list of marketable risk countries under the STEC

As a consequence of the COVID-19 outbreak, the Commission found in March 2020 that there is a lack of sufficient private insurance capacity for short-term export-credits in general and considered all commercial and political risks associated with exports to the countries listed in the Annex to STEC as temporarily non-marketable until 31 December 2020.

Taking into account the outcome of a public consultation, as well as the overall signs of continuing disruptive impact of COVID-19 on the economy of the EU as a whole, the fourth amendment to the Temporary Framework now provides for an extension until 30 June 2021 of this temporary removal of all countries from the list of marketable risk" countries under the STEC. This will allow to further make public short-term export-credit insurance available in light of the current crisis linked to the coronavirus outbreak.

The STEC is in force since 2013 and provides that trade within 27 EU Member States and nine OECD countries listed in its Annex, with a maximum risk period of up to two years, entails marketable risks and should, in principle, not be insured by the State or State supported insurers.

Governments may now cover part of companies' fixed costs during the crisis

Many companies are temporarily facing lower demand and so cannot cover all of their fixed costs. In an attempt to provide an efficient solution that does not require those companies to downsize and incur significant restructuring costs, the Commission now allows governments to contribute to part of their fixed costs on a temporary basis. To be eligible, companies must show that their turnover declined by at least 30% as a result of COVID-19. The maximum amount governments may contributed to a companys fixed costs is 3 million.

The Commission hopes that this may avoid reduction of the companies capital, maintain their business activity and ensure they have a strong base from which to recover post-crisis.

Further option for Member States to exit equity and/or hybrid capital contributions

The Temporary Frameworks recapitalisation measures allow Member States to provide aid in the form of equity and/or hybrid capital instruments to companies facing financial difficulties due to the COVID-19 outbreak.

Until now, a Member State has been able to exit a recapitalisation measure either through:

In addition, as some companies receiving COVID-19 aid were already owned entirely or partially by the relevant Member State, the Commission has recognised that public consultation is not always possible. The fourth amendment to the Temporary Framework therefore introduces a new possibility for Member States to redeem their recapitalisation, which can be used two years after the capital injection has taken place.

If the Member State is the only existing shareholder, there will no longer need to be a competitive sale, and instead an independent expert can confirm the sale price as being in line with market conditions. Here, the Commission introduces a legal fiction: if the independent valuation establishes a positive market value, the Member State is automatically considered to have redeemed the COVID-19 recapitalisation, even if the beneficiary remains in state ownership (i.e. the state did not actually sell its shares). For recapitalisation measures that exceed 250 million, the Member State will have to submit the independent valuation to the Commission.

If there are private shareholders in addition to the Member State, this legal fiction applies only to the Member States stake that corresponds to its pre-COVID shareholding. For the Member States shareholding over and above the pre-COVID-19 level, the competitive sale process continues to be applicable and the Member State will not have priority rights.

An example used in the fourth amendment to describe these new exit rules is explained with the following table:

Simplified example: Member State is one of several pre-existing shareholders in Company A

Time

Total Company A shares

Member States shareholding

Other investors shareholding

Pre-COVID-19

100

50% (= 50 shares)

50% (= 50 shares)

Recapitalisation measure: Member State buys additional 400 shares in Company A

Post-COVID-19

500

90% (= 450 shares)

10% (= 50 shares)

Two years after recapitalisation measure: Member State wants to exit

Equity class 1:

The Member State may redeem the part of the recapitalisation that it would need to retain in order to restore its pre-COVID-19 shareholding (i.e. 50%) via an independent valuation.

This would correspond to max. 250 shares or 50% of the Member States shareholding in Company A.

Equity class 2:

For the equity that goes above and beyond the Member States pre-COVID-19 shareholding, the pre-existing rules apply, and a competitive sales process is mandatory.

This would correspond to max. 200 shares or 40% of the Member States shareholding in Company A.

Read more:
EU Commission publishes fourth amendment to its Temporary Framework for state aid in relation to the COVID-19 crisis - Lexology