EU supply chain emergency powers proposed, fear trade

On September 3, 2007, wind turbines were seen at a wind farm 23 km (14 mi) off the coast of Ijmiden, the Netherlands. REUTERS/Michael Koren

BRUSSELS, Sept 19, 2009 (Reuters) – Europe-based companies could be prioritized for key products and stockpiles under draft EU rules giving Brussels emergency powers to deal with supply chain crises.

The single market emergency instrument proposed by the EU executive on Monday is a response to disruptions caused 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 strong pressure from businesses and some EU countries, who fear the European Commission is overreaching.

Commission Vice President Margrethe Vestager told a news briefing: “We need new tools that will allow us to act quickly and collectively in any crisis.”

Vesteger tried to allay concerns that the bills would force companies to break commercial agreements, saying they would not invalidate third-country legal agreements, unlike under European contract law.

Lobby group BusinessEurope set out its concerns in a paper published ahead of the EU announcement.

“Mandatory ex ante market monitoring, which intervenes in some cases for something that may or may not change beyond our control, fails to meet the principles of proportionality and necessity,” the group said.

“It is similar to some measures that can be taken to address the problem,” BusinessEurope said.

The draft law empowers the Commission to order EU countries to organize their supply chains and increase the availability of problem-related goods as soon as possible, including expanding or renovating existing production capacities or establishing new ones and placing the problem-related goods on the market.

Companies may be forced to prioritize certain critical items according to the law, critics may violate contractual obligations and expose corporate secrets.

Businesses that provide false or misleading information face fines of up to 300,000 euros ($299,220). Those who do not comply with the prioritization order for key products may face penalty fees of up to 1.5% of the average daily.

($1 = 1.0026 euros)

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

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