UK bid to circumvent Brexit deal risks far-reaching consequences

The British government is planning legislation that could undermine key elements of last October’s Brexit withdrawal agreement. The move threatens to derail the current EU-UK trade negotiations, which resume in London on Tuesday.

Brexiters fear that the withdrawal agreement, which includes a protocol to avoid a return to a hard border in Northern Ireland, makes it impossible for the UK to be truly sovereign because it leaves London tethered to Brussels in key areas, including state aid and customs policy.

In a sign of rising tensions between the two sides, David Frost, the UK chief negotiator, vowed over the weekend that the UK would not become a “client state” of the EU by agreeing a trade deal that included so-called “level playing field” clauses setting common rules and standards for both sides.

What does the UK government object to?

Two key aspects of the revised protocol on Northern Ireland that UK prime minister Boris Johnson agreed with EU leaders last year.

The first is Article 10, which says that EU law on state aid will apply to the UK in relation to the goods trade in Northern Ireland. This means the British government is obliged to notify Brussels of any state aid decision, including those that relate to businesses in Great Britain, that might affect businesses in the region — a potentially far-reaching obligation that Brexiters say is not compatible with fully reclaiming sovereignty.

The second is a requirement that Northern Irish businesses must complete export summary declarations when they send goods over to mainland Great Britain; Brexiters say this is not compatible with the promise that Northern Ireland will have “unfettered access” to the UK’s internal market.

Why is the Northern Ireland protocol so problematic?

Because last year Mr Johnson promised that his Brexit divorce deal would enable the UK to leave the EU “whole and entire” — even though Northern Ireland would have to continue following the EU’s rules on customs, value added tax, state aid and goods standards.

The protocol created the special arrangement for Northern Ireland as a means of solving the riddle of how to prevent a hard economic border on the island of Ireland, but in recent months the extent of the obligations it contained have become increasingly stark.

As Lord Frost pushed for an increasingly basic free trade agreement, the gap between Great Britain’s future trading relations with the EU and those of Northern Ireland became wider and wider, with state aid and export summary declarations the two starkest examples.

Negotiators on both sides believed that these differences could be resolved by negotiation, but the chances of a deal receded this summer, and they appear to have lost the argument in Whitehall.

How is the government planning to circumvent the protocol? 

People familiar with the plans say that the UK’s internal market bill will contradict both treaty obligations arising from the withdrawal agreement.

On state aid, the bill is expected to include clauses that much more narrowly define the obligation to notify Brussels of subsidy decisions, with the business secretary alone given the powers to decide whether or not to notify the bloc. The new legislation could be used by ministers to limit the ability of litigants to use the English courts to challenge state aid decisions which they argue affect Northern Ireland and which, under the existing terms of the protocol, should be notified to Brussels.

Similarly, clauses are expected to say that “notwithstanding” the obligations in the withdrawal agreement, Northern Ireland businesses will not be required to file export summary declarations when sending goods into Great Britain.

Clauses in the autumn finance bill, used to write the chancellor’s Budget into law, will have much the same effect on the potential obligation to collect tariffs on goods entering Northern Ireland from Great Britain, according to two people familiar with the plans.

James Webber, a partner at the law firm Shearman & Sterling who contributed to a recent report by the Centre for Brexit Policy think-tank calling for a repudiation of the withdrawal agreement, said: “Essentially, the government would be pulling back two pieces of the withdrawal agreement, saying that now, as a matter of UK law at least, the courts should follow what the future UK internal market act says, not the withdrawal agreement,” he said.

What are the potential consequences?

The impact of the legislation could be far-reaching, stretching even beyond the bounds of Brexit. Brussels has repeatedly made clear that full implementation of the withdrawal agreement is a prerequisite for any deal on a future relationship, and there is nothing more sensitive for the EU than the painstakingly constructed protocol on Northern Ireland. 

EU political leaders are unanimous: UK failure to apply any aspects of the protocol would cripple trade talks between the two sides. The bloc could not politically countenance a deal with a government trying to wriggle out of an international treaty it negotiated less than a year ago. 

David McAllister, chairman of the European Parliament’s UK co-ordination group, said that “mutual confidence and trust is key” to the future relationship. He declined to comment on the UK plans, but said the European Parliament, which has a binding say on trade deals, “expects all the commitments made in the Northern Ireland protocol to be implemented”.

The impact of the move on the UK’s international reputation could be wider still. Cases of democratic governments seeking to unilaterally overwrite ratified international agreements are rare. 

Worried UK officials are already considering whether Britain can retain the moral authority to, for example, censure China’s crackdown in Hong Kong as a breach of international treaty if the government seeks to shave off unpopular features of its withdrawal agreement with the EU.

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