1. What is the UK proposing?
The legislation would give British ministers the power to unilaterally rewrite the bulk of the so-called Northern Ireland protocol, which keeps the area in the EU’s single market while creating a customs border with the rest of the UK. That was designed to prevent a hard border on the island of Ireland. The new rules would separate goods just flowing between Britain and Northern Ireland from goods intended for the EU and allow businesses in Northern Ireland to choose whether they follow UK or EU standards, or both, for goods. They would also extend UK subsidy controls and tax breaks, including changes to value-added tax, to Northern Ireland and would strip the EU Court of Justice of its role in settling disputes over the Brexit deal in the region, allowing instead an independent arbitration panel to oversee legal issues.
2. What’s prompting the move?
The protocol has angered unionists in Northern Ireland because it treats the region differently to the rest of the UK, but the EU notes that the deal grants Northern Ireland unique access to both the EU common market and the UK. EU member states and senior US politicians have warned that unilateral efforts to scuttle parts of the arrangement risk jeopardizing hard-won peace and stability in the region. UK Prime Minister Boris Johnson’s plan has been panned by legal experts and may face stiff opposition in Parliament, while Irish Prime Minister Micheal Martin said June 8 that the UK has displayed “bad faith” in how it has approached the part of the Brexit treaty dealing with Northern Ireland.
3. What’s the political backdrop in Northern Ireland?
The Democratic Unionist Party balked at the rules Johnson originally signed up to, and is now refusing to take its place in Northern Ireland’s power-sharing government until the protocol is removed. Its opposition is ideological as well as economic, believing Northern Ireland must not be treated differently to the rest of the UK. That’s why Johnson’s ministers have shifted the justification for rewriting the protocol, from focusing primarily on trade disruption to the threat to Northern Ireland’s fragile politics.
4. Why does the EU object?
The European Commission said the proposed bill “is extremely damaging to mutual trust and respect between the EU and the UK.” Maros Sefcovic, the EU’s chief Brexit negotiator, described the UK’s planned legislation on June 15 as a breach of international law, adding that the UK proposal to eliminate the role of the EU Court of Justice in governing disputes was a further breach. The EU is preparing for a drawn-out fight over London’s move.
5. What options does the EU have?
The EU is restarting a case it initiated against the UK in March 2021 over the implementation of the protocol, and is also launching two new infringement cases over the UK’s failure to meet its obligations under the EU’s sanitary and phytosanitary rules and provide the EU with required trade statistics data on Northern Ireland. Infringement proceedings could ultimately lead to financial penalties being imposed on the UK, but the cases will play out over the course of many months. The EU could take things further if it really wants to play hard ball and start imposing tariffs on targeted goods in Britain. The most radical, and ultimately the most risky option given the disruptions to global trade, would be an EU decision to terminate the entire trade and cooperation agreement with the UK, which would further hamper UK companies from accessing the EU single market.
6. How effective would the EU infringement procedure be?
Infringement cases are traditionally triggered when an EU nation persistently fails to comply with the bloc’s rules. It’s a dragged out process. What’s different this time is that the UK is no longer part of the EU and wouldn’t face the same kinds of pressures as an EU member to comply. Time also plays a role in diluting the effectiveness of such cases. Even if the EU Court of Justice decides to fast track cases, they can still take months and by the time a decision has been taken, new developments may have overtaken it.
7. What happens if the UK just ignores any EU orders?
The UK has a so-called dualist legal system, meaning that international law is legally binding only in so far as it’s put into UK law by parliament. So, the UK could be found to be in breach of international law, but it wouldn’t be a breach of UK domestic law. If the UK withdrew its recognition of the EU Court of Justice through legislation and EU judges then decide this violates the arrangement and later fines it, the UK could just ignore such orders, say lawyers, because there is actually no enforcement mechanism for such failures to act.
8. What other dispute settlement mechanisms are there?
Infringement procedures alone might not be enough for the EU to counter what it said is a violation of international obligations. The commission said on June 15 that “a unilateral solution violating an agreement will never be tolerated by the EU.” The EU could also decide to impose tariffs on targeted products, such as Scottish salmon. This would trigger a trade dispute reminiscent of the one the EU had with the US during the administration of then-President Donald Trump and which contributed to more than $18 billion in U.S. and EU exports subject to painful levies. The EU-UK withdrawal agreement also foresees an arbitration process to thrash out disputes, but it’s yet another option that could take a very long time.
9. What if the legal avenues don’t work?
There’s still the political dimension if legal avenues fail to convince the UK to not move ahead with its plans. Soon after the UK announced its new bill, the US urged both Britain and the EU to resolve their differences. Senior US politicians, including House Speaker Nancy Pelosi, have previously warned that such a move from the UK dampens prospects of a UK-US trade deal.
More stories like this are available on bloomberg.com