Explanatory Memorandum to COM(2022)459 - Single Market emergency instrument and repealing Council Regulation No (EC) 2679/98 - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2022)459 - Single Market emergency instrument and repealing Council Regulation No (EC) 2679/98. |
|---|---|
| source | COM(2022)459  |
| date | 19-09-2022 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
The Single Market is one of the EU’s greatest assets and provides the backbone for the EU’s economic growth and wellbeing. Recent crises, such as the COVID-19 pandemic or Russia’s invasion of Ukraine, have demonstrated some vulnerability of the Single Market and its supply chains in case of unforeseen disruptions and, at the same time, how much the European economy and all its stakeholders rely on a well-functioning Single Market. In the future, in addition to geopolitical instability, climate change and resulting natural disasters, biodiversity loss, and global economic instability may lead to other, new emergency situations. For this reason, the functioning of the Single Market needs to be guaranteed in times of emergency.
The impact of a crisis on the Single Market can be two-fold. On the one hand, a crisis can lead to the appearance of obstacles to free movement within the Single Market, thus disrupting its functioning. On the other hand, a crisis can amplify the shortages of crisis-relevant goods and services if the Single Market is fragmented and is not functioning. As a result, supply chains can swiftly become interrupted, companies face difficulties in sourcing, supplying or selling goods and services. Consumer access to key products and services becomes disrupted. Lack of information and legal clarity further exacerbate the impact of these disruptions. In addition to direct societal risks caused by the crisis, citizens, and in particular vulnerable groups, are confronted with strong negative economic impacts. The proposal therefore aims to address two separate but interrelated problems: obstacles to free movement of goods, services and persons in times of crisis and shortages of crisis-relevant goods and services.
In close cooperation with all Member States and other existing EU crisis instruments, the Single Market Emergency Instrument (SMEI) will provide a strong agile governance structure as well as a targeted toolbox to ensure the smooth functioning of the Single Market in any type of future crisis. It is likely that not all of the tools included in this proposal will be needed simultaneously. The purpose is rather to brace the EU for the future and equip it with what may prove to be necessary in a given crisis situation severely affecting the Single Market.
The European Council in its Conclusions of 1-2 October 2020 1 stated that the EU will draw the lessons from the COVID-19 pandemic and address remaining fragmentation, barriers and weaknesses of the Single Market in facing emergency situations. In the Update of the Industrial Strategy Communication 2 , the Commission announced an instrument to ensure the free movement of persons, goods and services, as well as greater transparency and coordination in times of crisis. The initiative forms part of the Commission Work Programme for 2022 3 . The European Parliament welcomed the Commission’s plan to present a Single Market Emergency Instrument and called on the Commission to develop it as a legally binding structural tool to ensure the free movement of persons, goods and services in case of future crises 4 .
• Consistency with existing policy provisions in the policy area
A number of EU legal instruments lay down provisions which are relevant for the management of crises in general. On the other hand, certain EU frameworks and recently adopted Commission proposals lay down more targeted measures which focus on certain aspects of crisis management or are relevant for specific sectors. The Single Market Emergency Instrument will apply without prejudice to the provisions put forward by these targeted crisis management instruments, which are to be considered as lex specialis. Financial services, medicinal products, medical devices or other medical counter-measures and food safety products in particular are excluded from the scope of the initiative due to the existence of a dedicated crisis-relevant framework in these areas.
Contents
- Interplay with horizontal crisis response mechanisms
- Interplay with horizontal Single Market mechanisms
- Interplay with measures targeting specific aspects of crisis management
- Interplay with sector-specific crisis measures
- Interplay with ongoing initiatives
- Interplay with other instruments
- 1. The advisory group
- 2. The framework for contingency planning
- 3. The framework for Single Market vigilance
- 4. The framework for Single Market emergencies
The integrated political crisis response mechanism (IPCR) 5 is among the horizontal crisis response mechanisms 6 . The Presidency of the Council of the EU uses the IPCR to facilitate information sharing and political coordination among the Member States in responding to complex crises. The IPCR scrutinised for the first time in October 2015 the refugee and migration crisis and it has been instrumental in monitoring and supporting the response to the crisis, reporting to Coreper, the Council and the European Council. The IPCR operated the Union response to major crises caused by cyber-attacks, natural disasters, or hybrid threats. More recently, the IPCR has also operated after the outbreak of the COVID-19 pandemic and the Russian brutal aggression on Ukraine.
Another EU mechanism for general crisis response is the Union Civil Protection Mechanism and its Emergency Response Coordination Centre (ERCC) 7 . The ERCC is the Commission’s central operational 24/7 hub for first emergency response, the establishment of strategic stockpiles at the EU level for emergency response (“rescEU”), disaster risk assessments, scenario building, disaster resilience goals, EU wide overview of natural and man-made disaster risks, other prevention and preparedness measures, such as training and exercises.
When appropriate and necessary, coordination should be ensured between the Single Market Emergency Instrument and the activities of the Single Market Enforcement Task-Force (SMET). In particular, the Commission shall refer notified obstacles that significantly disrupt the free movement of goods and services of strategic goods and services for discussion/review to the Single Market Enforcement Task Force (SMET).
• Consistency with other Union policies
The above-mentioned horizontal crisis response mechanisms are supplemented by other more targeted measures, focusing on specific aspects of the Single Market such as the free movement of goods, common rules on exports or public procurement.
One such framework is the Regulation (EC) No. 2679/98 setting up a response mechanism to address obstacles to the free movement of goods attributable to a Member State leading to serious disruptions and requiring immediate action (‘The Strawberry Regulation’) 8 . This Regulation provides for a mechanism of notification as well as a system of information exchange between the Member States and the Commission. (See sections 8.1 and 8.2 for more details.)
The Regulation on common rules for exports 9 allows the Commission to subject certain categories of products to an extra-EU export surveillance or to an extra-EU export authorisation. The Commission was subjecting certain vaccines and active substances used for the manufacture of such vaccines to export surveillance 10 on this basis.
Other economic measures include negotiated procedure and occasional joint procurement by the Commission on behalf of the Member States 11 .
Certain EU frameworks lay down more targeted measures which focus only on certain specific aspects of crisis management or only concern certain specific sectors.
The Commission communication “Contingency plan for ensuring food supply and food security” 12 draws lessons learnt during the COVID-19 pandemic and previous crises with the objective to step up coordination and crisis management including preparedness. To this end, the contingency plan puts forward key principles to be followed to ensure food supply and food security in the event of future crises. To ensure the implementation of the contingency plan and the key principles therein, the Commission in parallel established the European Food Security Crisis preparedness and response Mechanism (EFSCM), a group composed of Member States and non-EU countries representatives as well as of food supply chain stakeholders chaired by the Commission to strengthen coordination, exchange data and practices. The EFSCM was convened for the first time in March 2022 to discuss the impacts of the energy and input price increases and the consequences of Russia’s invasion of Ukraine for food security and supply. The market observatories and the civil dialogue groups are other fora that ensure transparency and the flow of information in the food sector.
The Commission communication “Contingency plan for transport” 13 has the objective to ensure crisis preparedness and business continuity in the transport sector. The plan establishes a “crisis manual” that includes a toolbox consisting of 10 actions aimed at mitigating any negative impact on the transport sector, passengers and the internal market in the event of a crisis. These include among others measures rendering EU transport laws fit for crisis situations, ensuring adequate support for the transport sector, ensuring free movement of goods, services and people, sharing of transport information, testing transport contingency in real-life situations etc. 14
Regulation (EU) No 1308/2013 establishing a common organisation of the markets in agricultural products 15 (CMO Regulation) as well as the sister CMO Regulation for fisheries 16 provide the legal basis for collecting relevant information from Member States to improve market transparency 17 .
Regulation (EU) No 2021/1139 1308/2013 establishing the European Maritime, Fisheries and Aquaculture Fund 18 (EMFAF Regulation) provides the legal basis for supporting the fisheries and aquaculture sector in case of exceptional events causing a significant disruption of markets.
Regulation (EU) 2021/953 establishing the EU Digital COVID Certificate 19 sets out a common framework for the issuance, verification and acceptance of interoperable certificates for COVID-19 vaccination, test or recovery certificates to facilitate free movement of EU citizens and their family members during the COVID-19 pandemic. Furthermore, based on Commission proposals, the Council adopted specific recommendations on the coordinated approach to the restriction of free movement in response to COVID-19 pandemic 20 . The Commission also announced in the 2020 citizenship report 21 that it intends to review the 2009 guidelines on free movement in order to improve legal certainty for EU citizens exercising their free movement rights, and to ensure a more effective and uniform application of the free movement legislation across the EU. The reviewed guidelines should address among others the application of restrictive measures on free movement, specifically those that are due to public health concerns.
Regulation (EU) 2022/123 on a reinforced role for the European Medicines Agency in crisis preparedness and management for medicinal products and medical devices provides a framework to monitor and mitigate potential and actual shortages of centrally and nationally authorised medicinal products for human use considered as critical to address a given ‘public health emergency’ or ‘major event’ 22 .
Finally, the Commission Decision of 16 September 2021 established the Health Emergency Preparedness and Response Authority 23 for coordinated action at Union level to respond to health emergencies, including monitoring the needs, swift development, manufacturing, procurement and equitable distribution of medical countermeasures.
In parallel, a number of initiatives, which have been recently proposed and are currently being discussed, concern aspects relevant for the crisis response and preparedness. These initiatives however have a limited scope covering specific types of crisis scenarios and are not intended to set up a general horizontal crisis-management framework. To the extent these initiatives include a sectoral crisis response and preparedness framework, that framework will take precedence over the Single Market Emergency Instrument as lex specialis.
The Commission proposal for a Regulation on serious cross-border threats to health, repealing Decision No 1082/2013/EU (the Cross-border Health Threats Decision) 24 aims at strengthening the EU's health security framework, and reinforcing the crisis preparedness and response role of key EU agencies with respect to serious cross-border health threats 25 . When adopted, it will strengthen the preparedness and response planning and reinforce epidemiological surveillance and monitoring, improve data reporting, strengthen EU interventions.
The Commission proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 851/2004 established a European Centre for disease prevention and control 26 .
The Commission proposal for a Council Regulation on a framework of measures for ensuring the supply of crisis-relevant medical countermeasures in the event of a public health emergency at Union level 27 provides for crisis response tools such as joint procurement, mandatory information requests for businesses about their production capacities, and repurposing production lines in case of public health crises once a public health emergency would be declared. The declaration of an EU emergency situation would trigger increased coordination and allow for the development, stockpiling and procurement of crisis-relevant products. The proposal covers medical countermeasures defined as medicinal products for human use, medical devices and other goods or services that are necessary for the purpose of preparedness and response to serious cross-border threats to health.
The Commission proposal for the European Chips Act 28 aims to strengthen Europe’s semiconductor ecosystem. One important pillar of this strategy is to set up a mechanism for coordinated monitoring and response to shortages in the supply of semiconductors, aiming to anticipate and swiftly respond to any future supply chain disruptions, through a dedicated emergency toolbox, together with Member States and international partners. The planned mechanism is specific to a possible semiconductor crisis and will apply in an exclusive way if the crisis mode is activated.
The Commission proposal for a Data Act 29 will allow public sector bodies to access data held by the private sector that is necessary for exceptional circumstances, particularly to implement a legal mandate if data are not otherwise available or in case of a public emergency (i.e. exceptional situation negatively affecting the population of the Union, a Member State or part of it, with a risk of serious and lasting repercussions on living conditions or economic stability, or the substantial degradation of economic assets in the Union or the relevant Member State(s)).
The Commission proposal to amend the Schengen Borders Code 30 aims to provide a common response at the internal borders in situations of threats affecting a majority of Member States. The proposed amendment will also put in place procedural safeguards in case of unilateral reintroductions of internal border controls and provide for the application of mitigating measures and specific safeguards for cross-border regions in cases where internal border controls are reintroduced. Such controls affect in particular people crossing the border for their daily life (work, education, health care, family visits) as evidenced during the COVID-19 pandemic. The proposal promotes increased use of effective alternative measures to address the identified threats to internal security or public policy instead of internal border controls, for instance increased checks by police or other authorities in border regions, subject to certain conditions. The proposal also includes the possibility for the Council to quickly adopt binding rules setting out temporary travel restrictions for third country nationals at the external borders in case of a threat to public health. It also clarifies which measures Member States can take to manage the EU's external borders effectively in a situation where migrants are instrumentalised by third countries for political purposes.
The proposal for a Directive on the resilience of critical entities adopted by the Commission in December 2020 31 has the objective to enhance the resilience of entities providing services that are essential for the maintenance of vital societal functions or important economic activities the EU. With this initiative, the aim is to create a comprehensive framework to support Member States in ensuring that critical entities providing essential services are able to prevent, protect against, respond to, resist, mitigate, absorb, accommodate and recover from significant disruptive incidents such as natural hazards, accidents or terrorism. The Directive will cover eleven key sectors, including energy, transport, banking and health.
The Joint communication of 18 May 2022 on the Defence Investment Gaps Analysis and Way Forward, identified several issues including the ability of the EU's Defence Technological and Industrial Base (as well as the global Defence Technological and Industrial Base) to address upcoming defence Member State procurement needs, and putting forward several measures.
In the context of the General Product Safety Directive 2001/95/EC revision, the Commission intends to examine the questions whether and to what extent, or by what modalities, the production issues that are addressed by the Omnibus rules as regards goods covered by various harmonised regimes could be addressed in the distinct context of non-harmonised goods.
Consistency with the EU’s external action
The European External Action Service will support the High Representative in her/his function, as Vice-President of the Commission, to coordinate the Union’s external action within the Commission. Union delegations under the authority of the High Representative will exercise their functions as external representatives of the Union and assist, as relevant, in external dialogues.
The Commission can support Member States in designing and implementing reforms to anticipate, prepare and respond to impacts of natural or man-made crises on the Single Market through the Technical Support Instrument (TSI) 32 .
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The proposal is based on Articles 114, 21 and 45 TFEU.
Within the context of a crisis, the Single Market can be impacted both by the appearance of the specific disruptions and shortages inherent to the said crisis, as well as by the possible intra-EU restrictions to the free movement of goods, services and persons, which may emerge in an attempt to address the said crisis. The general objective of the initiative is to lay down the mechanisms and procedures, which would allow to prepare for and to address potential crises and disruptions to the proper functioning of the Single Market. Such measures are also aimed to minimise the intra-EU obstacles to the free movement in times of crisis. Whereas the measures concerning free movement of goods and freedom to provide services are covered by the internal market legal basis, the free movement of persons’ provisions require the Regulation to rely additionally on Articles 21 and 45 TFEU. In the case of a crisis that affects the supply chains of the Single Market, measures have to be taken to address any identified shortages and to safeguard the availability of crisis-critical goods and services across the entire EU.
A number of measures in this proposal derogate from or complement existing EU harmonisation legislation, based on the general internal market legal basis. Measures such as facilitating the ramping up of production capacities for crisis relevant goods and service activities, accelerating the permitting procedures, prioritising orders and the building-up and distributing strategic reserves are of exceptional nature and aim at ensuring a coherent response to future crises and to avoid the fragmentation of the Single Market. In cases where there are substantial risks to the functioning of the Single Market or in cases of severe shortages or an exceptionally high demand of goods of strategic importance, measures at EU level aimed to ensure the availability of crisis-relevant products, such as strategic reserves or priority rated orders, may prove to be indispensable for the return to the normal functioning of the Single Market. Such measures have a gradual, stepped approach, whereby the resort to more binding measures follows inaction of economic operators to tackle the crisis at stake.
• Subsidiarity (for non-exclusive competence)
The economic activities across the Single Market are deeply integrated. Interaction between companies, service providers, clients, consumers and workers located in different Member States that rely on their free movement rights, is increasingly common. The experience of past crises has shown that often the distribution of production capacities across the EU is uneven. In parallel, in the case of a crisis, the demand for crisis-relevant goods or services across the EU territory may also be uneven as some EU regions are disproportionally vulnerable and exposed to supply chain disruptions, in particular the EU outermost regions 33 located thousands of kilometres away from mainland Europe The objective of ensuring the smooth and undisrupted functioning of the Single Market cannot be achieved by means of unilateral national measures. Moreover, even if measures adopted by the Member States individually may be able to address to a certain extent the deficiencies resulting from a crisis at the national level, they are in fact more likely to further exacerbate the said crisis across the EU by adding further obstacles to the free movement and/or additional strain on products already impacted by shortages.
The introduction of rules which govern the functioning of the Single Market is a competence shared between the EU and the Member States. A significant number of EU frameworks governing various aspects are already in place and they contribute to the smooth operation of the Single Market by laying down coherent sets of rules which apply across all the territories of the Member States. However, the existing EU frameworks generally lay down rules concerning the day-to-day functioning of the Single Market, outside of any specific crisis scenarios. There is currently no horizontal set of rules and mechanisms which address aspects such as the contingency planning, the crisis anticipation and monitoring and the crisis response measures, which would apply in a coherent manner across economic sectors and the entire Single Market.
The emergency instrument has the objective of ensuring a coordinated approach to anticipate, prepare for and respond to crises that have important effects across borders or specifically in border regions or both and threaten the functioning of the Single Market, and where no EU instrument already exists or where the existing instruments do not lay down crisis-relevant provisions. Putting in place contingency and vigilance measures across the Single Market can facilitate the coordination of the response measures in the case of a crisis. Furthermore, such measures can be complemented by effective and efficient coordination and cooperation between the Commission and Member States during the crisis in order to ensure that the most appropriate measures to address the crisis are taken.
The Single Market Emergency Instrument is not intended to lay down a detailed set of EU level provisions which should be exclusively relied upon in the case of crisis. Instead, the instrument is intended to lay down and ensure the coherent application of possible combinations between provisions taken at EU level together with rules on the coordination of the measures taken at the level of the Member States. In this respect, the measures which may be taken at EU level on the basis of the Single Market Emergency Instrument would be coordinated with and complement the response measures adopted by the Member States. In order to allow for such coordination and complementarity, the Single Market Emergency Instrument sets out specific measures which the Member States should refrain from imposing once a Single Market emergency has been activated at EU level.
In this context, the EU added value of this instrument would be to lay down the mechanisms for a swift and structured way of communication between the Commission and Member States, coordination and information exchange when the Single Market is put under strain, and to be able to take necessary measures in a transparent and inclusive way – accelerating existing mechanisms as well as adding new targeted tools for crisis situations. It would also ensure transparency across the internal market, ensuring that businesses and citizens that rely on their free movement rights have at their disposal appropriate information about the applicable measures in all the Member States. This will increase legal certainty allowing them to take informed decisions.
A further advantage of action in this domain would be to equip the EU with the resilience tools needed to sustain the competitiveness of the EU industry in a geopolitical context in which our international partners and competitors can already rely on legal instruments allowing for a structured monitoring of supply chain disruptions and for the adoption of possible response measures such as strategic reserves.
• Proportionality
The measures contained in this Regulation are carefully tailored in order to ensure that they do not go beyond what is necessary for the achievement of its objective of ensuring the smooth and undisrupted functioning of the Single Market. The measures complement Member States’ action where the aims of the Regulation cannot be achieved by means of unilateral action by the Member States. They take into account the need for the economic operators to be able to manage the normal business risks, to have their own contingency plans and to come up with initiatives for resolving supply chain issues. This is catered for in particular by means of obligations of the Commission to consult the economic operators before resorting to mandatory Single Market emergency measures such as mandatory information requests and priority rated orders.
• Choice of the instrument
The Single Market Emergency Instrument initiative takes the form of a Proposal for a Regulation of the European Parliament and of the Council. Considering that in the case of provisions laid down in a Regulation, there is no need for the Member States to transpose them into their respective national legislation, this specific legal instrument would allow to ensure that the provisions are applied in a consistent manner.
The proposed Regulation will introduce procedures which are complementary to the Single Market Transparency Directive or the Services Directive and are to be applied in the emergency mode. The Regulation clarifies the relationship between the relevant legal frameworks but without amending the respective legal frameworks.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
The Regulation (EC) No. 2679/98 setting up a response mechanism to address obstacles to the free movement of goods attributable to a Member State leading to serious disruptions and requiring immediate action (‘The Strawberry Regulation’) will be repealed. According to its evaluation finalised in October 2019 and supported by an external study, this mechanism is rarely used and its information exchange system is insufficient as it is too slow and outdated 34 .
• Stakeholder consultations
As outlined in Annex 2 to the Impact Assessment accompanying this proposal, stakeholder consultation activities were conducted between October 2021 and May 2022. The consultation activities included: a call for evidence published on the “Have your say” portal and open from 13 April to 11 May 2022, a public consultation conducted via a questionnaire published on the same portal in the same period, a stakeholder workshop on 6 May 2022, a Member State survey in May 2022 and targeted consultations conducted by means of meetings with Member States and specific stakeholders.
Stakeholders largely agree with the need to ensure free movement as well as greater transparency and coordination in times of crisis. Most experiences described by stakeholders came from the COVID-19 crisis. When it comes to ensuring availability of crisis-relevant goods, Member States have expressed support for measures such as coordination of public procurement, fast-track conformity assessment and improved market surveillance. A number of Member States have voiced concern about including broad crisis preparedness measures when no crisis is looming on the horizon, without specifying targeted supply chains. While some business stakeholders voiced concerns about mandatory measures targeting economic operators, others have expressed support for a greater coordination and transparency, measures to ensure free movement of workers, fast-track notifications of national measures, fast track procedures for development and publishing of European standards, EU and national single points of information, emergency simulations for experts.
• Collection and use of expertise
Evidence and data that were used for the development of the Impact Assessment included:
–“The impact of COVID-19 on the Internal Market”, study at the request of the EP IMCO Committee;
–Evaluation of the “Strawberry Regulation” (EC) No 2679/98 and its supporting external study;
–Evaluation of the New Legislative Framework;
–Relevant information and/or evidence collected in the context of preparation of existing or proposed EU crisis response initiatives and mechanisms, including through consultation activities or impact assessment studies (e.g. the Data Act, Single Market Information Tool (SMIT), the EU Health Security Framework, Schengen Borders Code, Contingency plan for ensuring food supply and food security, the integrated political crisis response mechanism (IPCR), Contingency plan for transport, EU Digital COVID Certificate Regulation, Council Recommendation (EU) 2020/1475 on a coordinated approach to the restriction of free movement in response to the COVID-19 pandemic and its adaptations);
–Academic studies and literature on the effect of previous crises on the functioning of the Single Market, as well as existing position papers and other documents drawn up by relevant stakeholders;
–Newspaper articles and press materials.
The Impact Assessment further relied on the information received from consultation activities as detailed in the synopsis report contained in Annex 2 of the Impact Assessment.
The evidence base of the report is strongly limited due to the relatively low number of responses to the call for evidence and the public consultation, and the lack of a supporting study. To remedy this situation, on 6 May 2022 the Commission conducted a stakeholder workshop attended by a large number of stakeholders and conducted a series of targeted consultations, especially with Member States and stakeholders.
• Impact assessment
In line with its ‘Better Regulation’ policy, the Commission conducted an Impact Assessment 35 . The Impact Assessment evaluated three policy options establishing a governance body and a framework for contingency planning, vigilance and emergency modes. Both Single Market vigilance mode and Single Market emergency mode would be activated according to specific criteria and triggering mechanisms. Certain measures in the toolbox would need additional activation.
On the basis of analysis of problem drivers and gaps in the relevant sector-specific legislation, eight building blocks of measures were defined by grouping measures into blocks applying at different times (at all times, in vigilance mode and in emergency mode). For each building block, three policy approaches were analysed ranging from non-legislative measures (approach 1) to a hybrid approach (approach 2) to a more comprehensive legislative framework (approach 3). On the basis of this analysis, some or all approaches were retained for each building block and were combined into three realistic policy options reflecting different levels of political ambition and stakeholder support:
| Mode | Building blocks | Policy Option 1 TRANSPARENCY | Policy Option 2 COOPERATION | Policy Option 3 SOLIDARITY |
| All times | 1. governance, coordination and cooperation | Approach 2 Formal Advisory Group as the technical-level forum and obligation of the MS to share information within the group in anticipation and during the crisis | ||
| All times | 2. crisis contingency planning | Approach 2 Recommendation to the MS for risk assessment, training and drills & compendium of crisis response measures | Approach 3 - Recommendation to MS for risk assessment & compendium of crisis response measures and - Obligation of the Commission for Union level risk assessment - Obligation of MS to train their relevant crisis management staff regularly | |
| Vigilance | 3. Single Market vigilance | Approach 2 - Recommendation to the Member States on information gathering concerning identified strategic supply chains - Recommendations to the Member States for building up strategic reserves of goods of strategic importance | Approach 3 - Obligation to MS to gather information concerning identified strategic supply chains - Obligation of the Commission to draw up and regularly update list with targets for strategic reserves - Obligations to MS 36 to build up strategic reserves for selected goods of strategic importance if the MS strategic reserves fall significantly short of the targets | |
| Emergency | 4. key principles and supportive measures for facilitating free movement during emergency | Approach 2 Reinforcing key principles of free movement of crisis-relevant goods and services in binding rules where appropriate for effective crisis management | ||
| Emergency | 5. transparency and administrative assistance during emergency | Approach 3 Binding full-fledged fast-track notification mechanism, flash peer review and possibility to declare the notified measures incompatible with EU law; contact points and electronic platform | ||
| Emergency | 6. speeding up the placing of crisis-relevant products on the market during emergency | Approach 2 Targeted amendments of existing Single Market harmonisation legislation: faster placing of crisis-relevant products on the market; Commission can adopt technical specifications; MS prioritise market surveillance for crisis-relevant products | ||
| Emergency | 7. public procurement during emergency | Approach 2 New provision on joint procurement/common purchasing by the Commission for some or all Member States | ||
| Emergency | 8. measures impacting crisis-relevant supply chains during emergency mode | Approach 1 Guidance on ramping up production capacity; speeding up permitting procedures; accepting and prioritising orders of crisis relevant goods Recommendations to businesses to share crisis-relevant information | Approach 2 Recommendations to MS for the distribution of stockpiled products; speeding up permitting procedures; encouraging economic operators to accept and prioritise orders Empowering MS 37 to oblige economic operators to ramp up production capacity and to address binding information requests to economic operators | Approach 3 Obligations of MS 38 to distribute products previously stockpiled; speeding up permitting procedures, Obligations of businesses to accept and prioritise orders; ramp up production capacity and provide crisis-relevant information |
The Impact Assessment did not present a preferred option, instead leaving the choice of options for political decision. The measures chosen in the legal proposal correspond to Policy Option 3 for all building blocks with the exception of building block 8. For building block 8, a combination of Policy Option 1 (for ramping up production), Policy Option 2 (for distribution of stockpiled products and for speeding up permitting procedures), and Policy Option 3 (for obligations of businesses to accept and prioritise orders and to provide crisis-relevant information) has been chosen.
On 15 June 2022, the Commission submitted the Impact Assessment to the Regulatory Scrutiny Board (RSB). The RSB gave a negative opinion, noting in particular (1) the need to provide clear and detailed information related to the foreseen Single Market emergency including a definition, the criteria and decision-mechanisms for establishing and terminating it and the measures which would be implemented during it; (2) the need to provide a thorough assessment of the impacts of the policy options; and (3) the need to present alternative combinations of relevant policy options, in addition to the policy approaches, and to link the comparison to the analysis of impacts. To address these findings, the Commission provided a clear definition of a Single Market emergency, specified the criteria and decision making mechanisms, explained the three modes of functioning of SMEI and specified which building block of SMEI would be activated under which mode. It further elaborated the assessment of impacts to cover more types of impacts i.e. economic impacts for key stakeholders (businesses, Member States and Commission), impacts on SMEs, impacts on competitiveness, competition, international trade, and differentiated which impact would occur with the immediate effects and which could be expected under the vigilance and emergency modes. Further, the Impact Assessment defined three alternative policy options based on a combination of different approaches to some of the building blocks, provided an assessment of impacts of these options and extended the comparison of options to cover proportionality and subsidiarity.
On 29 July 2022, the Commission submitted the revised Impact Assessment to the RSB. The RSB then gave a positive opinion with comments. These comments related to the need to further explore the different types of crisis that may impact the functioning of the Single Market, to more clearly set out the interplay with possible measures taken on the basis of Article 4(2) TFEU and to sufficiently justify some of the measures proposed from the subsidiarity and proportionality point of view. To address these comments, indications on effects of potential future crises were added, interplay with potential measures under Article 4(2) TFEU was better explained and further details were added on the obligatory measures foreseen under emergency mode.
Further information on how the RSB recommendations are reflected in the Impact Assessment report can be found in Annex 1, point 3, of the Impact Assessment.
• Regulatory fitness and simplification
According to the Commission’s Regulatory Fitness and Performance Programme (REFIT), all initiatives with the objective to change existing EU legislation should aim to simplify and deliver stated policy objectives more efficiently (i.e. reducing unnecessary regulatory costs).
The proposal provides a toolbox of measures to address Single Market emergency, consisting a set of measures applicable at all times as well as certain measures only applicable in vigilance or emergency modes, to be separately activated. There are no administrative costs for businesses and citizens that would apply with immediate effect and during the normal functioning of the Single Market.
For measures likely to lead to strong impacts and potential costs for SMEs, in particular measures such as mandatory information requests, requests to ramp up production and to accept priority-rated orders, during the additional activation of such measures specific analysis and assessment will be done as to their impact and proportionality, in particular their impact on SMEs, by the Commission. This assessment will be part of the process of additional activation of these specific measures by a Commission implementing act (additional to the overall activation of the emergency mode). Depending on the nature of the crisis and the concerned strategic supply chains and crisis-relevant products, specific accommodations will be provided for SMEs. While it is not possible to except microenterprises completely from the scope of measures such as mandatory information requests, as these enterprises may have specific unique know-how or patents of critical importance in a crisis, specific accommodations will include simplified survey designs, less onerous reporting requirements, and longer deadlines for responses, to the extent possible in view of the need for urgency in the context of a specific crisis.
The Regulation (EC) No. 2679/98 setting up a response mechanism to address obstacles to the free movement of goods attributable to a Member State leading to serious disruptions and requiring immediate action (‘The Strawberry Regulation’) will be repealed. This will lead to the simplification of the legal framework.
• Fundamental rights
This Regulation and in particular the priority rated orders and the measures facilitating the repurposing of production lines as well as the measures facilitating the expansion of production capacity affect the freedom to conduct business set out in Article 16 of the EU Charter of Fundamental Rights of the economic operators active on the Single Market during the Single Market emergency. Such restrictions have been carefully tailored and are balanced against the vital interests of the society. The provisions on priority rated orders provide for a number of safeguards for the economic operators subject to such orders, in order to balance the intensity of the restriction.
The mandatory information requests to economic operators may also affect the protection of business secrets and other sensitive information of economic operators. However, the Regulation provides for safeguards and guarantees that such information requests will be only made in case the relevant information is indispensable for resolving the Single Market emergency and is not available on a voluntary basis or from publicly accessible sources, and the obtained information is handled carefully, ensuring secrecy and non-disclosure of sensitive business information, such restrictions are proportionate and justified.
Finally the sanctions which are foreseen for breaches of the mandatory information requests to economic operators and the priority rated orders constitute restrictions to the right to property set out in Article 17 of the EU Charter of Fundamental Rights. Given the fact that the amounts of fines have been set at appropriately dissuasive, but not excessive levels, and the period of their application is limited in time, with a possibility to contest them before the CJEU, they amount to proportionate and justified restrictions of the right to property.
The Regulation respects the right to an effective judicial remedy and to a fair trial as provided for in Article 47 of the Charter. It reiterates the right of economic operators subject to information requests and priority rated orders to defend their rights before the CJEU and provides for possibilities of contesting such requests of the Commission in administrative procedures before that.
4. BUDGETARY IMPLICATIONS
The budgetary implications of the proposals would relate to three expenditure categories. The recurrent costs of staff within the Commission would be in principle covered under the heading “Administrative expenditure” while costs for the foreseen training activities and the necessary extension of the IT tool used for the notification system would be covered under the Single Market Programme. Under the current set-up, the costs related to the emergency mode, namely building up of strategic reserves, the secure supply, such as those related to procurement of goods and services of strategic importance and crisis-relevant goods, or to priority rated orders would be borne exclusively by the Member States and there would be no impact on Union resources. The additional management costs in the Commission deriving from the occurrence of a crisis, which are unpredictable by nature, would be covered in principle via internal redeployment of Union resources under the heading 1 “Single market, innovation and digital” and/or heading 7 “Administrative expenditure”.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
The Commission will carry out an evaluation of the effectiveness, efficiency, coherence, relevance and EU added value of this legislative initiative and present a report on the main findings to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions five years after the date of application of the legislative acts. The Commission may propose based on the evaluation report how to improve the Single Market Emergency Instrument.
The European Anti-Fraud Office (OLAF) shall be consulted for all the contracts and financing agreements issued on the basis of this Regulation, to ensure that antifraud clauses are appropriately integrated.
• Detailed explanation of the specific provisions of the proposal
The SMEI aims to establish a comprehensive preparedness and crisis-response architecture composed of the following main components:
–an advisory group;
–a framework for contingency planning;
–a framework for Single Market vigilance and
–a framework for Single Market emergencies.
The role of this group will be to advise the Commission on the appropriate measures for preventing or addressing the impact of the crisis on the Single Market. It can be involved in the activation and in determining the scope of the Single Market vigilance and emergency modes and analyse the relevant information gathered by voluntary or mandatory means, including from the economic operators. This central body will be composed of one representative of each Member State with expertise in Single Market matters as permanent members, and observers representing other crisis relevant bodies such as the Integrated Political Crisis Response group of the Council, the Health Crisis Board, the Health Security Committee, European Semiconductor Board, European Food Security Crisis preparedness and response Expert Group, etc. The Commission will organise and chair the meetings.
In normal times where no sudden event is likely to have or is already having severe disruptive effects on the Single Market, market forces ensure the functioning of the businesses and the Single Market. The framework of contingency planning does not require an activation step and consists of:
(a)Arrangements for crisis protocols and crisis communication and training and emergency simulations in view of ensuring timely cooperation and exchange of information between the Commission, Member States and relevant Union level bodies and organising trainings and rehearsals on potential scenarios of Single Market emergencies.
(b)Ad hoc alerts for early warning system for any incidents that significantly/ seriously disrupt or have the potential to significantly/seriously disrupt the functioning of the Single Market and in its supply chains of goods and services. In determining the significance or the seriousness of the disruption, pre-determined parameters will be taken into account such as the number of economic operators affected, geographical area or duration of the disruption.
This will be the framework for impacts of significant incidents that have not yet escalated into a full-blown Single Market emergency. It requires activation when an incident that has occurred has the potential to significantly disrupt the supply chains of goods and services of strategic importance that are dependent on non-diversifiable and non-substitutable inputs or which causes firsts signs of severe shortages of such goods and services. This framework includes a set of measures such as:
(a)Monitoring of the supply chains of goods and services of strategic importance that have been identified in the Union level risk assessment referred in the framework for contingency planning and whose supply could be significantly disrupted due to the occurrence of an incident. Such monitoring will be carried out by the Member States on the basis of voluntary requests for information about factors impacting the availability of the selected goods and services of strategic importance (such as production capacity, stocks, suppliers limitations, possibilities for diversification and substitution, demand conditions, bottlenecks) to all actors along the relevant supply chain of goods and services of strategic importance and other relevant stakeholders established in Member States national territory.
(b)Building-up of strategic reserves, which is a measure subject to additional activation by means of additional Commission implementing acts. The Commission may draw up lists of individual and non-binding targets for the strategic reserves that the Member States should maintain. The Member States, acting jointly in a spirit of solidarity, shall deploy their best efforts to build up strategic reserves of the goods identified as being of strategic importance. The Commission might, in exceptional circumstances, on its own initiative or if asked by 14 Member States, assess the need to take further measures to build up strategic reserves of such goods. Following such assessment supported by objective data, the Commission may adopt an implementing act to render the individual target for one or more Member States mandatory;
(c)Public procurement: i) procurement of goods and services of strategic importance by the Commission on behalf of Member States and ii) procurement of goods and services of strategic importance by the Member States
The activation of the Single Market emergency will immediately activate the application of a number of emergency-response measures, which include:
(a)Measures to improve transparency: Member States obligations to notify any draft measures relating to crisis-relevant goods and services and goods and services of strategic importance as well as crisis-relevant restrictions of free movement of persons, together with the reasons for those measures;
(b)Actions for re-establishing and facilitating free movement: general requirements for free movement restrictions during a Single Market emergency (list of key principles) as well as provisions on prohibited restrictions.
(c)The banning of restrictions to free movement rights during a Single Market emergency requiring Member States to refrain from, for example, introducing intra-EU export bans of crisis-relevant goods or services and any export restriction of products or services that
–hamper their free movement;
–disrupt their supply chains and
–create or increase shortages in the Single Market;
(d)Public procurement: i) procurement of crisis-relevant goods by the Commission on behalf of Member States and ii) procurement of crisis-relevant goods by the Member States
(e)Actions to ensure the availability and supply of crisis-relevant goods
–facilitating the expansion or repurposing of existing or the establishment of new production capacities for crisis-relevant goods;
–facilitating the expansion of existing or the establishment of new capacities related to activities;
–the introduction of measures ensuring regulatory flexibility, including on permitting, aimed at facilitating the production and placing on the market of crisis-relevant goods
(f)Targeted and coordinated distribution of strategic reserves
The Commission may recommend the Member States to distribute Union strategic reserves and, where those are not available or sufficient, Member States strategic reserves in a targeted way, where there is concrete and reliable evidence of serious disruptions in the supply chain of crisis-relevant goods leading to dire shortages of goods of strategic importance, including in geographical areas particularly vulnerable to such disruptions such as the EU outermost regions
(g)Emergency measures of exceptional nature requiring additional activation:
–information requests to economic operators
The Commission shall, if necessary in case of severe shortages of crisis-relevant goods or services or an immediate threat thereof and after consulting the designated Advisory Group, request representative organisations of economic operators or, if necessary individual economic operators in crisis-relevant supply chains to provide targeted information to the Commission in relation to their production capacities and current supply chain disruptions.
The Commission shall present aggregate information based on any targeted information requests to economic operators or representative organisations of economic operators to the designated Advisory Group.
–priority rated orders
In the first stage, the Commission may invite economic operators to accept and prioritise an order of inputs for production of crisis-relevant goods or orders for the production or supply of crisis-relevant goods as final products.
In the second stage, the Commission may, in exceptional circumstances, on its own initiative or if asked by 14 Member States, assess the necessity and proportionality of resorting to priority rated orders of such goods, taking into account the position of the economic operator and potential affected parties. Following such assessment, the Commission may address an implementing act requiring an economic operator to accept and prioritise orders of inputs for the production or supply of crisis-relevant goods or orders of crisis-relevant goods as final products. Economic operators may, within 10 working days, decline to accept such obligation, and provide an explanation of duly justified reasons for doing so. The Commission may make such reasoned explanation or parts thereof public. The obligation, if accepted, shall take precedence over any performance obligation under private or public law.
–The Commission shall have regard to the circumstances of the case, including the principles of necessity and proportionality. The priority rated order shall be placed at fair and reasonable price;targeted amendments of harmonised product legislation
(b)This measure will allow an accelerating placing on the market of the identified crisis-relevant goods by introducing emergency procedures for conformity assessment, adoption of common technical specifications and market surveillance in the context of a Single Market emergency.