Under draft legislation that would give Brussels emergency powers to tackle future supply chain crises, Europe-based companies could be made to prioritise the production of key products and stockpile goods.
The Single Market Emergency Instrument put forward by the EU Commission on Monday comes in response to bottlenecks caused by the Covid -19 pandemic and Russia's invasion of Ukraine.
The proposal – which echoes similar measures adopted by the United States and Japan – is expected to face strong resistance from businesses and some European Union countries, concerned that this amounts to intrusive over-reach by the European Commission.
Speaking in Brussels, Commission Vice-President Margrethe Vestager stated: "We need new tools that allows us to act fast and collectively at whatever kind of risk we face."
Early days of Covid - we all remember the borders closing down. The thousand trucks stuck at borders. We must be better prepared for crisis. We must have new tools to make sure our #EUSingleMarket stays open at all times. The #SingleMarketEmergencyInstrument is such a tool pic.twitter.com/NrdXH0NhTy
— Margrethe Vestager (@vestager) September 19, 2022
Business concerns
Vestager sought to ease concerns, however, that the draft regulations may force companies to break commercial agreements. She said the regulations would not override deals subject to third country jurisdictions, unlike those bound by European contractual laws.
Lobbying group BusinessEurope outlined its concerns in a paper published ahead of the EU announcement.
"An intrusive mandatory ex-ante market monitoring for 'something that may or may not happen under certain conditions which may change beyond our control' fails to meet the proportionality and necessity principles," the paper reads.
"The same goes for some of the possible measures to mitigate a crisis."
We still need to ensure that the Single Market Emergency Instrument #SMEI is a helping hand for businesses to navigate crises, not a planned economy fist as some SMEI provisions look like pic.twitter.com/70FyKmF4Ci
— BUSINESSEUROPE (@BusinessEurope) September 19, 2022
Emergency powers
The draft rules would give the Commission powers to demand that EU states reorganise supply chains and increase supplies of crisis-relevant goods as quickly as possible.
Companies could be made to prioritise the production of certain critical goods under the rules, which critics say may breach contractual obligations and expose corporate secrets.
Businesses that provide incorrect or misleading information risk fines of up to €300,000.
Those failing to comply with an order to prioritise key products could face daily periodic penalty payments of 1.5% of average daily turnover.
