Brussels: Europe and the Arabs

The Presidency of the Council of the European Union, representing the member states, and negotiators from the European Parliament have reached a preliminary agreement on a number of new laws that form part of the fourth comprehensive legislative package. This preliminary agreement covers legislation specific to small and medium-sized enterprises (SMEs), as well as legislation on digital transformation and standardized specifications. The current Cypriot Presidency of the EU stated, "This is another simplification package concluded by the Cypriot Presidency, representing another tangible step towards a more competitive Europe. Under this agreement, we are extending support measures to include expanding companies, alongside SMEs, and supporting business growth, innovation, and job creation across the Union. We are also reinforcing the principle of 'digitalization as a default,' reducing unnecessary paperwork and lowering costs for businesses. With this agreement, we are taking another step towards turning the promise of simplification into concrete results for European companies." This was according to a European statement distributed in Brussels by Marilena Rauna, Deputy Minister for European Affairs of the Republic of Cyprus, which holds the current Presidency of the EU.

Objectives of the New Legislation

The new laws on digitalization and standardization aim to digitize existing physical requirements by applying the principle of 'digitalization as a default' and introducing a mechanism that enables the Commission to establish standardization across a number of pieces of legislation.

Furthermore, a new directive and regulation aim to extend certain relief and support measures available to SMEs to include companies that have fallen outside the definition of SMEs, known as micro-enterprises. Medium-sized enterprises (SMEs) play a vital role in the EU economy, providing 6% of total employment and having a strong presence in key competitive sectors within the EU, such as electronics, aerospace and defense, energy, energy-intensive industries, and healthcare.

Defining a new category of SMEs is intended to:

Prevent sudden collapses and facilitate a smooth transition for SMEs to medium-sized enterprises.

Allow medium-sized enterprises to maintain the same favorable environment they enjoyed as SMEs.

Provide better incentives for SMEs to expand.

The new regulations amend 20 EU product-related provisions under the Single Market rules on digitalization and uniform standards. These regulations complement a broader strategy to prioritize digital formats with the aim of eliminating paper requirements in product legislation.

Specifically, the new regulations mandate the digitization of EU conformity declarations, as well as the exchange of information between national authorities and economic actors. They also allow manufacturers to provide user instructions in digital format instead of paper. Furthermore, the regulations introduce The new approach offers alternative solutions for demonstrating product compliance with EU rules through "common specifications" rather than harmonized standards in certain exceptional cases. This will provide greater legal certainty, reduce costs, and enhance competitiveness.

Interim Agreement on SMEs
Regarding SMEs, the Commission's original proposal defined this new category as companies with fewer than 750 employees and a maximum annual turnover of €150 million, or a maximum annual balance sheet of €129 million.

In the Interim Agreement, legislators raised these limits to include companies with fewer than 1,000 employees and a maximum annual turnover of €200 million, or a maximum annual balance sheet of €172 million.

Furthermore, within five years of the new legislation entering into force, the Commission will review the application of this definition, including its impact on reducing administrative burdens and on the competitiveness of SMEs. Finally, the Interim Agreement maintains a 15-month period for the Directive to be incorporated into Statute. Date of entry into force.

Interim Agreement on Digitalization and Standards
Regarding digitalization and standards, legislators retained the core of the Commission’s proposal, modifying some of the technical elements specific to each piece of legislation.

The interim agreement provides further clarification on access to digitally available information and to the company’s “digital contact.”

The text also ensures that safety information is always available in paper format in cases where serious harm to consumers is likely. Legislators aligned the texts of the standard with the approach agreed upon in the Toy Safety Regulation (Article 14) last year, while granting the Commission additional powers in certain exceptional cases.

The interim agreement clarifies that the standard should only be used as a fallback option when harmonized standards are unavailable or insufficient, thus promoting consistency across all EU achievements.

Finally, the cooperating legislators extended the Directive’s implementation period to 24 months to allow Member States sufficient time to implement the amendments.    

Next steps

The interim agreement must now be approved by the Council and the European Parliament before undergoing legal/linguistic review prior to its formal adoption by legislators at a later stage.

It is worth noting that in October 2024, the European Council called upon all EU institutions, Member States, and stakeholders, as a matter of priority, to move forward with work, particularly in response to the challenges identified in the reports by Enrico Letta (“Much More Than a Market”) and Mario Draghi (“The Future of European Competitiveness”). The Budapest Declaration of 8 November 2024 subsequently called for “launching a revolution in simplification” by ensuring a clear, simple, and efficient regulatory framework for businesses, and significantly reducing administrative, regulatory, and reporting burdens, especially for small and medium-sized enterprises (SMEs).

On 21 May 2025, the Commission adopted the Fourth Comprehensive Legislation Package. The package includes a proposal for a directive and regulation on medium-sized enterprises, a proposal for a directive and regulation regarding the digitization and harmonization of common specifications that amends 20 EU product legislations under the Single Market rules, as well as an amendment to the regulation relating to batteries in relation to due diligence requirements.