EU proposes supply chain emergency powers, spooking businesses

Wind turbines are seen at a wind farm 23 kilometers (14 miles) off the coast of Emeden in the Netherlands on September 3, 2007. REUTERS/Michael Kooren

Sign up now for free and unlimited access to

BRUSSELS, Sept 19 (Reuters) – European companies could be asked to prioritize the production of critical products and stockpiles of goods under draft EU rules, which would give Brussels emergency powers to deal with a supply chain crisis.

The single market emergency tool proposed by the EU executive on Monday is a response to bottlenecks created by the COVID-19 pandemic and Russia’s invasion of Ukraine.

The proposal, which echoes similar measures taken by the United States and Japan, is expected to face backlash from businesses and some EU countries, who fear the measures amount to excessive intervention by the European Commission.

Sign up now for free and unlimited access to

“We need new tools that will allow us to take collective action quickly in any risk situation,” European Commission Vice-President Margrethe Vestager told a news conference.

Vestager sought to allay concerns that the draft rules could force companies to breach commercial agreements, saying they would not overturn deals governed by third countries, unlike those governed by European contract law.

The lobbying group BusinessEurope laid out its concerns in a paper published ahead of the EU announcement.

“Intrusive mandatory ex-ante market surveillance of ‘things that may or may not occur under certain conditions and may be beyond our control’ is inconsistent with the principles of proportionality and necessity,” the group said.

“So are some possible measures to mitigate the crisis,” BusinessEurope said.

The draft rules empower the European Commission to order EU countries to restructure supply chains and increase the supply of crisis-related goods as soon as possible, including expanding or repurposing existing capacity or building new capacity and placing crisis-related goods on the market.

Companies can prioritize the production of certain key goods under the rules, which critics say could breach contractual obligations and leak company secrets.

Businesses that provide incorrect or misleading information face fines of up to €300,000 ($299,220). Those who fail to comply with orders to prioritise critical products could face regular fines of 1.5 per cent of their average daily turnover.

(1 USD = 1.0026 EUR)

Sign up now for free and unlimited access to

Reporting by Foo Yun Chee; Editing by Philip Blenkinsop and Alexander Smith

Our Standard: The Thomson Reuters Trust Principles.

Source link