An overly far-reaching instrument 

The Confederation of Swedish Enterprise provided its views on a draft version at the start of this month, and from a business point of view the final proposal is slightly better.

The aim of the SMEI – to secure a sound free movement in times of crisis - is relevant, and the proposal contains some positive elements, such as:

• A list of prohibited restrictions to freedoms of the Single Market in times of crisis.
• The introduction of special administrative cooperation and transparency measures for Member States.

The SMEI omnibus is designed to complement, not overrule, existing EU legislative measures for crisis management such as the Union Civil Protection Mechanism, as well as EU rules for specific sectors, supply chains or products like health, semiconductors or food security. These elements already foresee targeted crisis response measures.

However, this does not change the interventionist nature of the proposed Regulation, nor the fact that it is incompatible with important principles of a market economy. Indeed, it lacks proportionality and has a number of additional flaws:

• The scope of the proposal is extremely broad. It addresses not only the protection of the Single Market freedoms in times of crisis but also the strategic dependencies and challenges of supply chains. The Confederation believes that a functioning Single Market is the guarantee of resilience in times of crisis, and that the instrument should concentrate solely on the protection aspect.
• Where public authorities are to establish lists of “the most relevant economic operators” before the emergency is even announced, albeit under certain conditions. This raises serious questions over signals to the market and the likely impact on competition.
• The definition of the type of crisis that will trigger the SMEI is unclear, which leads to uncertainty over when the crisis mode should be adopted.
• The proposal would have far-reaching implications for our relations with trading partners outside the EU. There is a proposal for a clause to override existing contracts, to the effect that - when responding to the priority-rated order - an economic operator will avoid any liability for any breach of contractual obligations. It is questionable whether trading partners outside EU would be willing to accept such uncertainty in delivery, given that the proposal foresees that they would neither receive their order nor compensation.
• The crisis response measures include highly interventionist measures – mandatory information, ordering the reorganisation of supply chains and production lines, the reprioritisation of orders, without considering the damages that this would cause business relations.
• Both the ‘vigilance’ and ‘emergency’ phases detailed in SMEI place additional and disproportionate requirements on economic operators in times of crisis, when they are fighting for the survival of their business and the jobs of their employees. Furthermore, the penalties proposed for economic operators who fail to comply with the crisis response measures are unacceptable.

The Confederation of Swedish Enterprise will follow the ongoing development of the proposal and will continue to promote an open and resilient Single Market for the future.