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This week, the Prime Minister set a deadline of 15 October 2020 for conclusion of UK/EU negotiations, prompting speculation that a ‘no deal’ exit from the EU at the end of transition is the most likely outcome. And the government published its Internal Markets Bill which would regulate the UK’s internal market after transition, but which – incredibly – the government admits would break international law by contravening the Withdrawal Agreement in respect of Northern Ireland.

So much for the golden future?

On 7 September 2020, Boris Johnson said:

‘There needs to be an agreement with our European friends [on a UK/EU free trade agreement (FTA)] by the time of the European Council on 15 October 2020 if it’s going to be in force by the end of the year. So there is no sense in thinking about timelines that go beyond that point. If we can’t agree by then, then I do not see that there will be a free trade agreement between us, and we should both accept that and move on.’

The PM’s view was that, if no deal were struck, the UK would ‘have a trading arrangement with the EU like Australia’s’ and that would be a ‘good outcome’, notwithstanding that it would mean the imposition of WTO tariffs, and significant additional burdens in terms of paperwork, for UK importers and exporters. The PM also failed to mention that EU is a far more significant trading partner for the UK (43% exports; 51% imports) than for Australia (7.8% exports; 18.3% imports), and so the absence of an FTA would have a greater impact on the UK.

Instead, the PM focused on sovereignty: that the UK would have ‘full control over our laws, our rules, and our fishing waters … [and] the freedom to do trade deals with every country in the world.’ Critics would say the government is failing to conclude a trade deal with our largest trading partner; the government would likely respond that no independent sovereign country would accept the EU’s terms: ongoing ‘dynamic alignment’ to its standards, policed by its institutions.

Internal Markets Bill

The government’s Internal Markets Bill is largely concerned (clauses 2 to 27) with measures to maintain the harmony of the UK’s internal market post-Brexit in terms of market access for goods and services, and mutual recognition of professional qualifications.

Currently, both Westminster and the devolved institutions are constrained by EU rules and standards. But that constraint will be lifted once the transition period comes to an end at the end of the year (subject to anything agreed in the ongoing FTA negotiations). The UK government wants to avoid the devolved administrations in Edinburgh, Cardiff and Belfast – none of which, incidentally, are Tory – legislating for different regulatory regimes in their own jurisdictions in respect of the matters for which they are responsible under the devolution settlements: changing food labelling requirements, product standards, inspection and quality assurance regimes, phyto-sanitary and environmental checks and standards, for example. Unsurprisingly, this hasn’t been welcomed by the institutions themselves.

The UK government may be particularly conscious that such divergence might affect its ability to, say, negotiate a trade deal with the United States: how can it agree to accept certain controversial agricultural products (the famous chlorinated chicken) in the UK, if the Welsh, Scots or Northern Irish pass legislation making the sale of such products illegal?

The Bill also contains provisions (clauses 28 to 38) to establish an independent monitoring body, the Office for the Internal Market (OIM), to support the smooth running of trade within the United Kingdom. The body will sit within the Competition and Markets Authority (CMA) and provide independent, technical advice to parliament and the devolved administrations on regulation that may damage the UK’s internal market. However, the reporting and monitoring role undertaken by the OIM will be non-binding (unlike, say the policing of the EU Single Market by the Commission and the ECJ). The government is clear the OIM will provide reports to the UK parliament and the devolved legislatures and that it will be for these bodies, supported by their respective administrations and intergovernmental processes, to determine how to take action in response, minimising the need to seek court action.

Finally, the Bill contain powers (clauses 46 to 48) to enable the UK government:

‘… to invest in communities and businesses nationwide with powers covering infrastructure, economic development, culture, sport, and support for educational, training and exchange opportunities both within the UK and internationally – much of which were previously done at an EU level.’

Much of these proposals sound like a UK-equivalent of the EU’s structural funds, such as the Regional Development Fund. But bear in mind too that UK public authorities, including the government, were previously constrained from making such ‘investments’ by EU state aid rules which sought to avoid government’s subsidizing domestic companies in order to promote fair competition across the Single Market. The UK government will now be able to apply public money to private enterprise: in attracting and facilitating investment in the UK, in ‘picking winners’, to a much greater extent than before. And it is the UK government, clause 48 amends the devolution statutes to clarify that subsidy control or state aid powers are reserved and so a matter exclusively for the UK government.

Breaking the law

Most controversially, and as leaked earlier this week, Part 5 of the Bill explicitly provides that the government reserves the right to set its own customs and state aid regime for Northern Ireland:

  • clause 42 (ministers can disapply or modify exit procedures applicable under the Northern Ireland protocol in the event of no deal);
  • clause 43 (ministers can modify the application of article 10 of the Northern Ireland protocol in respect of state aid); and
  • clause 45 (regulations made under 42 and 43 have effect notwithstanding their incompatibility with international agreements, ie the Withdrawal Agreement, and the suspension of ‘direct effect’ of the Withdrawal Agreement provided by EUWA 2018, s.7A-7C).

This is contrary to the Protocol on Northern Ireland in the Withdrawal Agreement which provides for the continuation of EU rules in the province (in order to maintain an open border on the island of Ireland, as required by the Good Friday Agreement). The government say these are ‘limited and reasonable steps to create a safety net’ if the UK/EU negotiations fail but – in my view – even if the FTA negotiations do fail, the Protocol remains in force, and these Bill powers are contrary to it.

Indeed, the government has admitted in parliament that these legislative proposals amount to a breach of international law, albeit in the Secretary of State for Northern Ireland Brandon Lewis’ words:

‘Yes, this does break international law in a very specific and limited way. We’re taking the powers to disapply the EU law concept of direct effect … in a certain very tightly defined circumstance.’

The breach arises because of the conflict between what the government agreed in the Withdrawal Agreement, and how it is now legislating domestically. Under the dispute resolution mechanism in the Withdrawal Agreement, the EU could bring proceedings against the UK in the European Court of Justice for breaching that agreement. That court could impose a heavy fine on the UK, suspend part of the withdrawal agreement, launch trade wars and impose tariffs or even sanctions on British exports.

More generally, the government’s move potentially threatens a fundamental constitutional principle – the rule of law. It undermines the UK’s position as a nation which complies with international rules and honours its commitments with other countries and international institutions. Undermining that could  threaten how the wider international community sees the UK as a good place to do business. Joe Biden’s camp have already indicated that they would look unfavourably on any action by the UK which would undermine the Good Friday Agreement.

Not for the first time, Brexit is testing the limits of the UK’s constitutional settlement and the legality of the government’s actions to give effect to it.

‘So much for the golden future, I can’t even start … Breaking the law’ (Judas Priest, Breaking the Law)

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