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On 27 May 2020, the European Commission put forward its proposal for a European Recovery Plan (ERP)1 with a new EUR 750 billion funding via its financial recovery instrument, called the “Next Generation EU” which would be funded by borrowing on the financial markets2.

If approved by the Member States, Next Generation EU will invest EUR 500 billion through grants and EUR 250 billion through loans. This is additional to a ‘boosted and reinforced’ EUR 1.1 trillion EU budget – Multiannual Financial Framework (MFF) for 2021-2027. The ERP will provide huge opportunities for companies investing in projects connected to the EU’s digital strategy objectives as well as its ‘Green Deal’.

Opportunities for TMT companies

Unanimity will be required for the Commission to borrow the proposed funds and it is not certain that all Member States will agree to all elements of the proposals. However, France and Germany have already signaled agreement with the principle, and whilst no doubt compromises will be made, there is confidence in the Commission that consensus can be reached roughly along the lines proposed.

The proposed ERP and in particular the Recovery and Resilience Facility is unprecedented in scale and a game-changer. For the first time, the Commission will be providing very significant funds, in both grants and loans, to support investment in digital as well as green projects. Also it paves the way for accelerated and beneficial treatment in areas such as state aid approval.

The ERP brings many opportunities for TMT companies that act quickly to master the complex and new regulatory environment that underpins it and prepare their R&D pipelines and investment portfolios carefully.

ERP funds

All of the funds from the Next Generation EU Instrument, and the new EU budget, will be channeled through existing and new EU programs. In large part, they will aim to support the EU’s goals regarding its digital transformation priorities and the ‘European Green Deal’. The most important funding programs are following:

  • The Recovery and Resilience Facility (new instrument) – EUR 560 billion

    This fund is by far the biggest of the Next Generation EU instrument, and is the real ‘game-changer’ of this initiative. It will provide approximately three-quarters of the entire recovery program to support investments, mostly following the EU’s funding priorities relating to the green and digital transitions. Of the EUR 560 billion, EUR 310 billion will be through grants, and EUR 250 billion will be available in loans. Every Member State will benefit, but support will be focused on those most affected by COVID-19 and in greatest need of support.

  • The Cohesion Policy programs – An increase of EUR 55 billion 

    Between now and 2022, this will be allocated under the umbrella of the Cohesion Fund, based on where the impact of the COVID-19 crisis been most severe. This represents an increase of 15% of the proposed Cohesion program for 2014 to 2020.

  • Strengthened InvestEU includes new Strategic Investment Facility 

    InvestEU is Europe’s flagship investment program of the EIB. The Commission aims to upgrade and expand it. This includes creating within it a new Strategic Investment Facility, generating EUR 150 billion of private investments, notably linked to the digital and green transition, and ‘key value chains in the internal market.’

Funding priorities

The focus is that Member States ‘need to invest in technologies that spark recovery through new innovation and clean industries’3. Funding will, therefore, be invested in projects which meet the digital single market strategy and/or the EU Green Deal – the so-called ‘twin transitions.’ These projects come under three main pillars outlined in President von der Leyen speech which outline existing and new investment programs to develop digital technologies.4

The following is an illustrative and non-exhaustive list of the type of projects that may attract support:

  • Support for cross-industry developments to improve the EU’s position in digital markets.
  • Investments in Artificial Intelligence technology that develop trust and confidence with citizens, allowing greater adoption by businesses5.
  • Investments in strategic digital infrastructure: supercomputers, data spaces, cybersecurity technology and skills as well as high-speed connectivity solutions (5G/6G and ‘gigabit connectivity’) to support digitized businesses, public services, education and research.
  • Investment in technology to make European supply chains more resilient.
  • Digital technology and infrastructure projects that support the Green Deal (for example in its digital strategy areas such as smart heating and data analytics that help farmers reduce the need for pesticides6). Also sustainable energy for data centres and investments in technology to support the smart circular economy.
  • Further investment in next-generation batteries as part of the Horizon 2020 programme7.

Funding structure

European technology firms and other market participants need clarity in respect of the specific funding structures the Commission proposes to implement to make available the series of grants and loans. The ERP funding programs are, at this stage, still subject to approval by the Member States. As such, the proposal does not address in detail the structuring requirements that will be imposed.

However, as we have seen with the range of government intervention schemes implemented already on a Member State level, the Commission and Next Generation EU’s approach to how this source of funds is structured and the eligibility criteria that will be imposed on companies that apply for such financial support will determine the degree to which the programs are successful.

Based on Baker McKenzie’s experience across Europe in helping our clients navigate and gain access to the existing COVID-19 related funding and state aid at the Member State level, we can identify the following immediate questions that will need to be answered.

Baker McKenzie is monitoring the progress of the ERP funding programs and will provide further updates as these questions are answered and other developments arise.

Funding structure issues

  • Jurisdictional Focus: how will the impact of COVID-19 be assessed when applications are made in order to determine which Member States are in need of most support?
  • Sector Focus: will ERP funding be available to companies that operate exclusively within the digital or sustainable sectors only and what are the parameters of these sectors for the purposes of the ERP financing programs?
  • Ownership: will the eligibility criteria exclude applicants that are ultimately owned by Non-EU Member State entities or a Member State that has not been impacted as severely?
  • Funding Terms: what terms will apply to ERP funding structured as a loan (e.g., loan amount, pricing, purpose and requirement for credit support such as security or personal guarantees)?
  • Further Conditionality: will ERP funding be ring-fenced within an applicant company to be applied for an agreed purpose and will dividends or other distributions by the applicant company and/or its wider corporate family be restricted?
  • Regulatory Considerations: will any temporary framework or amendments to State Aid rules take into account different business models, for instance, the accumulation of losses in the early years of a Private Equity investment, to ensure that all types of firms can access the ERP funding as needed?


The Commission has proposed an amendment to the current 2014 to 2020 budget to make an additional EUR 11.5 billion in funding available already in 2020. The remainder of the funds described above will become available with the adoption of the next EU budget, normally as from 2021.

Baker McKenzie has assembled an industry-leading, cross-practice team to assist in identifying opportunities, guiding clients through the regulatory obstacles of securing funding and finance, and then delivering rapid results on the ground.

For more information, please contact a member of the team listed in the alert.

Additional contacts: Raffaele Giarda, Matthew Cox, Haden Henderson and Nick Cusack.
The European Commission specifies that this debt is to be repaid “over a long period of time throughout future EU budgets – not before 2028 and not after 2058”.


Ben Allgrove is a technology and IP lawyer based in London. A Rhodes Scholar, he has twice been named in The Lawyer’s “Hot 100” lawyers (in 2019 and 2012), along with being named E-Commerce Lawyer of the Year (UK) in the ILO Client Choice Awards 2011 and Assistant Solicitor of the Year in the British Legal Awards in 2009. Ranked in the major directories, Chambers 2018 describes Ben as "a much sought after copyright, brands and designs expert with an emphasis on digital media" and notes his "powers of analysis and quick turnaround." Legal 500 2018 lists Ben as a "special[ist] In contentious and regulatory IP matters" and comments that "he is sharp and knows how to outwit the other side." Ben also leads Baker McKenzie's Global IP & Technology Practice and is also the Firm's partner in charge of Global R&D.


Matthew is a Banking partner in Baker McKenzie's London office focusing on leveraged and acquisition financing and restructuring.


Nick is a senior associate in London's Banking and Finance practice. Nick has worked on a range of top of the market acquisition financing, real estate finance, corporate refinancing and restructuring transactions. He has also advised a number of large-cap and mid-cap private equity sponsors, investment banks, debt funds and corporate borrowers across a wide range of sectors. Nick has an extensive knowledge of large-cap and mid-cap LBO financing terms and HY bond-style covenants and European TLB facilities.


Raffaele Giarda chairs Baker McKenzie's Global Technology Media & Telecoms Industry Group and co-heads the Commercial-Corporate/M&A practice in the Firm's Italy offices. He has contributed articles to law journals, and often speaks at and moderates Italian and international conferences and seminars on IT/C legal and regulatory issues. Mr. Giarda is a lecturer at the University of Rome as well as at the Italian National School for Public Administration. He joined the Firm in 1989 and became a partner in 1999.


Steve Holmes leads Baker McKenzie's Technology & Communications practice in London. Steve is rated by the UK legal directories as a leading lawyer in the outsourcing, telecoms and technology categories, which state: "He is very commercial and experienced . . . He is definitely someone you want on your side in a tough negotiation" (Chambers UK, 2020, Telecoms). “Steve is a superstar. He builds rapport like no one I've ever seen and gets deals done efficiently and with finesse." "He's one of the top lawyers in the outsourcing market" (Chambers UK, 2020, Outsourcing). "Very strong." "Excellent academically and commercially" (Chambers UK, 2020, Information Technology). “Steve Holmes brings a combination of expert and commercially relevant analysis that is very much appreciated” (Legal 500, 2020, IT and Telecoms). Clients commend his "wealth of experience in the IT world and for his understanding of where the market is and where the technology is developing," and comment that “his customer service is great and he challenges us to think creatively" (Chambers UK, 2019, Information Technology).


Nick is a partner in the banking and finance team of Baker McKenzie. Nick is based in London and his experience includes a secondment to the Blackstone Group and to the Hong Kong office of his previous firm.