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The term "crisis" is ubiquitous; there is no binding legal definition in international law.
Due to many recent crises, the European Union and its member states are grappling with the question of how to deal with energy risk potentials, the realisation of which could severely restrict or even paralyse companies on a supra-regional and long-term basis. Against this backdrop, the European Commission (EC) has been working intensively since September 2022 to introduce a comprehensive new crisis management system for the EU internal market (proposal for a regulation establishing a single market emergency instrument (SMEI).1 Remarkably, energy products and electricity are among the planned exceptions to the scope of the SMEI.
The EC's proposal for a regulation establishing the SMEI is intended to become a general legal framework. This framework will regulate cross-sectoral measures to anticipate, prepare for or respond to the effects of crises throughout the EU internal market on the availability of crisis-relevant goods and services. However, the SMEI excludes – at least in the version of the EC's proposed regulation – products such as:
In principle, existing sector-specific EU secondary legislation should take precedence over the proposed SMEI.3 Such specific provisions regulate pharmaceuticals, semiconductors, food products and transport. There are no specific provisions for energy products that regulate crisis mechanisms in the form of SMEI. The secondary legislation referred to in the EC's proposal concerns items relating to such products.4 Moreover, the EC's explanatory memorandum to its proposal provides no reasons for excluding energy products from the SMEI. However, possible approaches for crisis instruments relating to the products (eg, electricity and gas) can be found, for example, in the legal acts on the internal electricity5 and gas6 market or on the resilience of critical entities.7
The European Union has plans. The regulatory objective of the SMEI will be achieved through a three-level risk system (ie, contingency planning, single market vigilance and single market emergency) with different sets of EU measures.
In view of the intensity of the intervention in the business's freedom of decision, the binding and sanctioned orders to individual businesses in the form of requests for information on production capacities and current disruptions in the supply chain and priority rated orders for the production or supply of crisis-relevant goods are paramount.8
These are allowed as measures in case of a single market emergency and require so-called "double activation" by implementing acts of the Council and the EC.9 It is worth noting that binding priority rated orders on the part of the European Union take precedence over any other obligation to perform under private or public law.10
Looking to the near future, recent global crises have prompted decision makers to introduce horizontal crisis instruments (such as SMEI) to provide legal certainty in and despite future crises. At the EU level, the proposed regulation establishing the SMEI excludes energy products from its scope. Thus, a sector-specific approach remains likely for the EU.
1 COM(2022) 459 final. Crisis-proofing the Single Market: equipping Europe with a robust toolbox to preserve free movement and availability of relevant goods and services.
2 Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing an emergency instrument for the internal market and repealing Council Regulation (EC) No 2679/98.
3 COM(2022) 459 final 2 ff.
4 See article 15, 26 SMEI.
5 Regulation (EU) 2019/943 on the internal market for electricity OJ L 2019/158, 54; directive (EU) 2019/944 on common rules for the internal market for electricity OJ L 2019/158, 125.
6 Directive 2009/73/EC concerning common rules for the internal market in natural gas OJ L 2009/211, 94.
7 Directive (EU) 2022/2557 on the resilience of critical entities OJ L 2022/333, 164.
8 Article 28 SMEI.
9 Article 23 SMEI.
10 Article 27 SMEI.
This article was first published on LEXOLOGY.
author: Andreas Lopatka-Sint
crisis law info corner
Businesses are all too familiar with resource shortages due to the many recent crises in the EU. This info corner presents ideas and concepts for responding to such crises from a macroeconomic and regulatory point of view.