Commission Guidance on penalties Industry recommendations

Summary of the recommendations:

• Penalties should not be the only source of flexibility in the EU MR framework, particularly in a context where key elements required for compliance are missing. Penalties setting should therefore acknowledge such gaps and how much of the relevant current requirements can be met.
• Fragmentation in national implementation represents a significant risk, including for penalties.
• Considering Security of Supply risks when setting penalties is a positive approach, provided it relies on a clear and comprehensive definition of Security of Supply encompassing risks on affordability, allowing to prevent risks ex-ante and matching the timeline of the EU MR reporting requirements. Additionally, it will be required to ensure that when a Security of Supply risk is recognised in a given Member State, it should be acknowledged by the Member States in which the importers supplying that country are established.
• Regarding the guidance being drafted, in light of the current compliance possibility, exacerbated by the emerging energy crisis, we believe the only valid guidance is to have a pan-European grace period associated with a proper grandfathering of the contracts signed in the interim period. Industry remains committed to developing implementable solutions to meet the EU MR objectives. It should be noted that the relief such measures will provide may have different impacts on natural gas vs. crude oil, and that the challenges encountered by the crude oil sectors may require complementary measures: the crude oil market is indeed relying most on short-term/spot deals instead of long-term agreements.
• Guidance is a welcome support from the EC but has no concrete impact in terms of legal certainty at the EU level, something that can only be delivered by changes to the EU legislation and its timeline (e.g., Omnibus with stop-the-clock) and a fully harmonised implementation in all Member States.