(Digital) Omnibus: the European art of creating the problem and celebrating the solution

The European Commission recently announced the so-called Digital Omnibus, a legislative package which, according to the press release (in a free translation), will deliver “simpler EU digital rules and new digital wallets to save businesses billions and boost innovation.” I had to read it twice. Because some jokes write themselves.

For years, I have tried to understand the EU’s regulatory approach. With a particular vocation for identifying in every new phenomenon an excellent opportunity to legislate, it swiftly presents an ambitious, detailed and complex regulatory framework. Shortly thereafter comes the inevitable reflection: the regulatory framework is, after all, premature, overly ambitious, excessively complex, hostile to innovation, impossible to comply with or to enforce, or all of the above at the same time. And it is at that point that an “Omnibus” package arrives to simplify what was previously made complicated.

At first glance, even if in a “second attempt” or at a moment of “reconsideration,” simplification always seems like a good idea. The problem arises when that simplification appears after significant investments have already been made in processes, teams and compliance systems designed to comply, rigorously, with the initial (ultimately) overly demanding rules.

It is precisely here that the apparent virtue gives way to an inequity that is difficult to ignore: those who comply early pay twice. Indeed, early adopters — who believed in the continuity of the original regulatory design — and who therefore moved promptly, reorganised processes and implemented solutions, end up bearing the cost of initial compliance as well as that of the post-“simplification” reconfiguration. Those who wait benefit from version 2.0, lighter and usually clearer.

Consider, in this regard, the reaction of several companies to the sustainability “Omnibus” package. This legislative package postpones the implementation of sustainability reporting obligations for certain categories of companies, introduces proposals for a profound simplification of reporting rules and, in some cases, narrows the scope of companies previously covered.

More than 480 investors and companies such as Nestlé, Unilever, Mars, Ferrero, Primark and L’Occitane signed an open letter calling for the preservation of the essential standards of the current regulatory framework. In that communication, they drew attention to the need for a clear and stable legal framework, referred to the resources already invested in complying with existing legal obligations, and warned of the impact of regulatory uncertainty on investment. It is not difficult to understand the perplexity of these organisations.

Last week, with the presentation of the proposed “Digital Omnibus,” the European Commission suggested simplifying the rules applicable to the “digital ecosystem,” with an impact, in particular, on the Artificial Intelligence Regulation, the General Data Protection Regulation, the NIS2 Directive, the Cyber Resilience Act and the Data Act. To that end, it “reopens” certain aspects of the GDPR, amends the cybersecurity incident reporting mechanism and, in the brand-new Artificial Intelligence Regulation, eliminates the general obligation to promote AI literacy (which entered into force in February of this year), applies a moratorium to obligations relating to high-risk systems, and removes the requirement for a harmonised post-market monitoring plan, among other amendments.

Don't get me wrong: I support simple, balanced rules that create space for innovation. To that extent, I welcome much of what the Digital Omnibus seeks to achieve. The problem lies in the approach that the EU persistently adopts: legislating quickly in order to be first (as was the case with the General Data Protection Regulation and the Artificial Intelligence Regulation), even if that means holding back those who innovate and rewarding those who wait.

It is difficult not to smile at this choreography: first, a demanding, complex and costly system is built; then its simplification is celebrated as if it were an unexpected achievement. The cycle repeats itself, almost elegantly, and we all pretend not to know how it began.

The examples over the years are countless. In this year alone, the European Commission has already presented six simplification packages (from Omnibus I to VI), ranging from sustainability to the Common Agricultural Policy, including defence, chemicals, the single market and EU investments.

Original portuguese version published in Jornal Económico