EU proposes emergency powers of supply chain, spoiling business

EU proposes emergency powers of supply chain, spoiling business

Wind turbines are seen at a wind park 23 kilometers (14 miles) off the coast of Igmoden, the Netherlands, September 3, 2007. REUTERS/Michael Koren

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BRUSSELS (Reuters) – European-based companies may have to prioritize producing key products and stockpiling goods under draft European Union rules that would give Brussels emergency powers to tackle supply chain crises.

The emergency single market instrument put forward by the European Union CEO on Monday is in response to the 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 opposition from companies and some EU countries, who worry that this amounts to bypassing the European Commission.

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“We need new tools that allow us to act quickly and collectively in any kind of risk we face,” Commission Vice-President Margrethe Vestager told a news briefing.

Vestager sought to allay concerns that the draft rules could force companies to breach trade agreements, saying it would not cancel deals subject to third-state jurisdiction, unlike those that adhere to European contractual laws.

Pressure group BusinessEurope outlined its concerns in a paper published ahead of the EU announcement.

“Mandatory prior market monitoring” of something that may or may not happen under certain circumstances that may change outside our control “fails to meet the principles of proportionality and necessity,” the group said.

“The same goes for some of the possible measures to mitigate the crisis,” Business Europe said.

The draft rules enable the Commission to order EU countries to reorganize supply chains and increase supplies of crisis-related goods as quickly as possible, including by expanding or repurposing existing production capacities or creating new ones and placing crisis-related goods on the market.

Companies could be made to prioritize the production of certain vital goods under the rules, which critics say could breach contractual obligations and expose company secrets.

Companies that provide incorrect or misleading information risk fines of up to 300,000 euros ($299,220). Those who do not comply with the order to prioritize key products may face daily periodic penalty payments of 1.5% of the average daily turnover.

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Fu Yun Che reports. Editing by Philip Blinkinsop and Alexander Smith

Our criteria: Thomson Reuters Trust Principles.

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