Digital Omnibus on AI: Second Subsidiarity Opinion and Compliance Impact

The European Union's Digital Omnibus package continues to attract scrutiny from national parliaments exercising their subsidiarity review rights under Protocol No. 2 of the Treaty on the Functioning of the European Union. A second subsidiarity opinion has been issued, raising substantive questions about whether Article 114 TFEU provides an adequate legal basis for the package's AI-related provisions and whether the proposed simplifications for small and medium-sized enterprises genuinely respect the proportionality principle.

What Is the Digital Omnibus and Why Does It Matter?

The Digital Omnibus is a horizontal legislative initiative that amends several existing EU digital laws in a single instrument. Its AI-specific provisions target the EU AI Act, seeking to reduce administrative burdens on SMEs by simplifying obligations in Articles 6 and 43. Article 6 governs the classification of AI systems as high-risk, and Article 43 sets out the conformity assessment procedures those systems must undergo before market placement.

The rationale behind the simplification agenda is straightforward: the original AI Act's compliance architecture was designed with large enterprises in mind and imposes costs that are disproportionate for smaller operators. Registering in the EU database, retaining technical documentation, conducting internal audits and, for some systems, engaging notified bodies — these are not trivial undertakings. The Commission's impact assessment acknowledged this imbalance, and the Digital Omnibus attempts to address it through calibrated carve-outs and lighter-touch procedures.

The Second Subsidiarity Opinion: Legal Basis and Proportionality

The second reasoned opinion from a national chamber — the second such opinion within the eight-week window permitted under Article 6 of Protocol No. 2 — focuses on two distinct but related concerns.

First, the opinion questions whether Article 114 TFEU, which empowers the EU legislature to adopt measures for the establishment and functioning of the internal market, is truly the appropriate legal basis for provisions that effectively reduce rather than harmonise standards. Article 114 jurisprudence from the Court of Justice requires a genuine aim of eliminating obstacles to free movement or preventing appreciable distortions of competition. Critics argue that carving out SMEs from uniform conformity assessment requirements does the opposite: it introduces divergence and risks a two-tier market in which AI systems from smaller operators are assessed less rigorously than those from large enterprises, potentially fragmenting trust across the single market.

Second, the proportionality objection targets the scope of the proposed SME simplifications. The opinion argues that the Digital Omnibus does not demonstrate with sufficient evidence that the chosen measures are the least restrictive option capable of achieving the policy objective. Member states point to alternatives such as phased implementation timelines, subsidised conformity assessment schemes, or sector-specific guidance, none of which would require amending the core classification and assessment architecture of the AI Act.

How Member-State Concerns Shape the Legislative Text

The subsidiarity control mechanism does not have the power to block legislation outright unless a majority of legislative chambers trigger the "orange card" procedure, which would require the Commission to review and justify its proposal. However, even short of that threshold, reasoned opinions exert real influence on legislative negotiations in the Council and the European Parliament.

On Article 6, member-state pressure has already produced signals that the rapporteur in the Parliament's Internal Market Committee is considering tiered risk classification criteria rather than outright exclusions for SMEs. This approach would retain the integrity of the high-risk categories while varying the depth of required documentation and internal review based on operator size and market reach.

On Article 43, the debate centres on whether providers of AI systems used in high-risk contexts — including employment decision support, creditworthiness assessment, and access to essential services — can be permitted to self-assess without third-party audit when their annual turnover falls below a defined threshold. Opponents note that Article 43 of the original AI Act already provides for self-assessment in many Annex III cases; what the Omnibus introduces is an additional layer of relief that some member states regard as undermining citizen protection.

Practical Compliance Implications If Simplifications Pass

For businesses currently preparing for AI Act compliance, the uncertainty created by the Digital Omnibus is itself a compliance risk. Technical documentation, data governance records required under Article 10, and risk management system documentation under Article 9 all demand upfront investment. If the Omnibus simplifications pass in their current form, SMEs may find that obligations they have already begun implementing are subsequently relaxed — a welcome development in terms of cost, but a source of strategic confusion in the interim.

Larger enterprises operating AI systems that compete with SME-built equivalents should monitor whether the simplifications introduce regulatory arbitrage opportunities. If a large operator can route AI development through an SME subsidiary or partner to benefit from lighter conformity assessment, enforcement authorities will need clear interpretive guidance on economic reality versus formal corporate structure.

Compliance teams should also watch the interaction between the Digital Omnibus simplifications and national market surveillance arrangements. Article 63 of the AI Act requires member states to designate market surveillance authorities; if simplified obligations reduce the documentation available to those authorities, the effectiveness of post-market oversight under Article 61 may be compromised.

The prudent approach for any business with high-risk AI systems in scope is to continue building compliant infrastructure while tracking the legislative file closely. Simplifications, if enacted, will reduce the marginal cost of compliance — they will not eliminate the need for it.

Frequently Asked Questions

What is a reasoned opinion under the subsidiarity control mechanism? A reasoned opinion is a formal document issued by a national parliament's chamber within eight weeks of a legislative proposal's transmission. It sets out why the chamber believes the proposal violates the principle of subsidiarity — that is, why the objective could be better achieved at member state or regional level than at EU level. Reasoned opinions do not block legislation but oblige the Commission to review its proposal if they accumulate sufficient support.

Could the Digital Omnibus simplifications create a two-tier AI compliance market? This is a genuine risk flagged in the second subsidiarity opinion. If SMEs operating high-risk AI systems face materially lower conformity assessment burdens than large enterprises, procurers and end users may find it difficult to compare the trustworthiness of AI systems across supplier categories. Standardisation bodies are expected to develop harmonised standards under Article 40 of the AI Act that could partially mitigate this fragmentation.

When will the Digital Omnibus simplifications take effect if adopted? Legislative procedures in the European Parliament and Council typically take 12 to 24 months from proposal to adoption for complex digital files. Given the subsidiarity scrutiny and the political sensitivity of AI Act amendments, a final text before late 2026 is optimistic. Transitional provisions would then govern when the simplified obligations apply.

Sources

• European Commission, Proposal for a Digital Omnibus Regulation, COM(2025) 163 final
• Protocol No. 2 on the Application of the Principles of Subsidiarity and Proportionality, TFEU
• Regulation (EU) 2024/1689 of the European Parliament and of the Council (EU AI Act), Articles 6, 9, 10, 13, 43, 57, 61, 62, 63
• Court of Justice of the European Union, Case C-376/98 Germany v Parliament and Council (Tobacco Advertising)
• European Parliament, IMCO Committee, Working Document on Digital Omnibus, April 2025