Article 19 — Voluntary prioritisation of defence products

1. For the sole purpose of this Regulation and where Ukraine is confronted with severe difficulties in the placing or in the execution of a contract for the supply of defence products that are urgently needed and meet the eligibility requirements set out in Article 13(4) or (5), an economic operator together with the Participating Member State on the territory of which its production site is located may jointly submit a request to the Commission to issue a prioritisation measure to prioritise a certain order of such products manufactured by that economic operator. 2. The joint request referred to in paragraph 1 shall include the following elements: (a) the initial request from Ukraine; (b) the list of products to be subject to the prioritisation measure, their specifications and the quantities in which they are to be supplied; (c) the time limits within which the delivery of the defence products is to be completed; (d) evidence that the economic operator cannot meet the request from Ukraine referred to in point (a) without a prioritisation measure; and (e) an indication of a fair and reasonable price at which the prioritisation measure could be placed as well as elements substantiating that price. 3. Upon receipt of a request as referred to in paragraph 1, the Commission shall assess that request without undue delay. 4. The Commission shall base the assessment referred to in paragraph 3 on objective, factual, measurable and substantiated data, with the aim of determining whether such prioritisation is indispensable in order to address the severe difficulties referred to in paragraph 1. 5. Where the assessment referred to in paragraph 3 concludes that the prioritisation is indispensable, the Commission shall, by means of an implementing act, adopt a prioritisation measure setting out: (a) the legal basis of the priority-rated request to be complied with by the economic operator; (b) the list of products subject to the priority-rated request, their specifications and the quantities in which they are to be supplied; (c) the time limits within which the priority-rated request is to be completed; (d) the beneficiaries of the priority-rated request; (e) the scope of contractual obligations over which the priority-rated request shall have precedence; (f) the waiver of contractual liability under the conditions laid down in paragraph 7; and (g) the penalties provided for in paragraphs 12 to 18 for non-compliance with the obligations stemming from that implementing act. The implementing act referred to in the first subparagraph of this paragraph shall be adopted in accordance with the examination procedure referred to in Article 27(3). 6. The prioritisation measure referred to in paragraph 5 shall: (a) be placed at a fair and reasonable price, adequately taking into account the economic operator’s opportunity costs when fulfilling the prioritisation measure as compared to existing contractual obligations; and (b) take precedence over any contractual obligations under private or public law related to the defence products subject to the prioritisation measure, under the conditions laid down in the implementing act referred to in paragraph 5. 7. The economic operator subject to a prioritisation measure pursuant to paragraph 5 shall not be liable for any breach of contractual obligation that is governed by the law of a Participating Member State, provided that: (a) the breach of contractual obligation is strictly necessary for compliance with the required prioritisation; (b) the implementing act referred to in paragraph 5 has been complied with; and (c) the request referred to in paragraph 1 did not have the sole purpose of unduly avoiding a prior performance obligation under private or public law. 8. The economic operator subject to a prioritisation measure may request the Commission to amend the implementing act referred to in paragraph 5 where it considers it to be duly justified based on one of the following grounds: (a) the economic operator is unable to perform the prioritisation measure on account of insufficient production capability or production capacity, even under preferential treatment of the request; (b) completion of the prioritisation measure would place an unreasonable economic burden on, and entail particular hardship for, the economic operator. 9. The economic operator shall provide all relevant and substantiated information to allow the Commission to assess the merits of the request for amendment referred to in paragraph 8. 10. Based on the examination of the reasons and evidence provided by the economic operator, the Commission may, after consultation and prior agreement of the Participating Member State on the territory of which the relevant production site of the economic operator concerned is located, amend its implementing act to release, partially or in totality, the economic operator concerned from its obligations under this Article. 11. Where an economic operator, after having expressly accepted to prioritise the orders requested by the Commission, intentionally or through gross negligence does not comply with the obligation to prioritise those orders, it shall be subject to fines set out in paragraphs 12 to 18, except where: (a) the economic operator is unable to perform the priority-rated request on account of insufficient production capability or production capacity, or on technical grounds; or (b) performance or completion of the request would place an unreasonable economic burden on, and entail particular hardship for, the economic operator, including substantial risks relating to business continuity. The revenue from the fines shall constitute external assigned revenue within the meaning of Article 21(5) of Regulation (EU, Euratom) 2024/2509 to an external assistance programme under which Ukraine is eligible. 12. Where it deems it to be necessary and proportionate, the Commission may, by means of implementing acts, impose on the economic operators fines not exceeding EUR 300000 where the economic operator, intentionally or through gross negligence, does not comply with the obligation to perform the priority-rated request pursuant to this Article. The implementing acts referred to in the first subparagraph of this paragraph shall be adopted in accordance with the examination procedure referred to in Article 27(3). 13. Before taking a decision pursuant to paragraph 12, the Commission shall provide an opportunity for the economic operator concerned to be heard in accordance with paragraph 15. The Commission shall take into account any duly reasoned justification presented by the economic operator for the purpose of determining whether fines are deemed necessary and proportionate. 14. In fixing the amount of the fine, the Commission shall take into consideration the nature, gravity and duration of the infringement, including whether the economic operator has partially complied with the priority-rated order or the priority-rated request. 15. Before taking a decision pursuant to paragraph 12, the Commission shall ensure that the economic operators concerned have been given the opportunity to submit observations on: (a) the preliminary findings of the Commission, including any matter in relation to which the Commission has raised objections; (b) the measures that the Commission may intend to take in view of the preliminary findings pursuant to point (a) of this paragraph. 16. The economic operators concerned may submit to the Commission their observations on the Commission’s preliminary findings within a time limit which shall be fixed by the Commission in its preliminary findings, and which may not be less than 14 working days. 17. The Commission shall base its imposition of fines only on objections on which the economic operators concerned have been able to comment. 18. Where the Commission has informed the economic operators concerned of its preliminary findings as referred to in paragraph 15, it shall give access, if so requested, to the Commission’s file under the terms of a negotiated disclosure, subject to the legitimate interest of economic operators in the protection of their business secrets, or in order to preserve business secrets or other confidential information of any person. The right of access to the file shall not extend to confidential information and internal documents of the Commission or the authorities of the Participating Member States, in particular to correspondence between the Commission and the authorities of the Participating Member States. This paragraph shall not prevent the Commission from disclosing and using information necessary to prove an infringement. 19. This Article is without prejudice to the rights of the Participating Member States to protect their essential security interests in accordance with Article 346(1), point (b), TFEU.