EU’s Single Market Emergency Instrument Faces Business Backlash

The European Commission proposed The Single Market Emergency Instrument, a measure that could force Europe-based companies to prioritize production of key products and stockpile goods under draft EU rules that would give Brussels emergency powers to tackle supply chain crises. The legislation that was put forward on Monday is considered as a response to bottlenecks caused by the pandemic and Russia’s invasion of Ukraine.

The proposal, which is similar to measures adopted by the United States and Japan, is expected to face strong opposition from businesses and some member states, concerned that this amounts to over-reach by the European Commission.

On the other hand, Commission Vice President Vestager said the bloc needs new tools that allows it to act fast and collectively at whatever kind of risk it faces.

Vestager tried to ease some concerns that the rules could force companies breach contractual agreements. She said they will not override deals subject to third country jurisdictions, unlike those bound by European contractual laws.

Ahead of the Commission’s announcement, lobbying group BusinessEurope published a paper that sets out its concerns.

“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 group said.

“The same goes for some of the possible measures to mitigate a crisis,” BusinessEurope added.

The draft rules authorize the Commission to order EU states to reorganize supply chains and increase supplies of crisis-relevant goods as quickly as possible. Those include expanding or repurposing existing production capacities or setting up new ones and placing crisis-relevant goods on the market.

Critics say rules may breach contractual obligations and expose corporate secrets as companies could be made to prioritize the production of certain critical goods.

Businesses that provide incorrect or misleading information risk fines up to €300,000. Those failing to comply with an order to prioritize key products could face daily periodic penalty payments of 1.5% of average daily turnover.

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