Brexit Bulletin, 11 September 2020

Sep 11, 2020

It’s been a week of activity on the Brexit front. Debates over the UK’s Internal Market Bill, the eighth round of negotiations concluding in London, and the possibility of EU legal action against the UK have added pressure onto the fast approaching transition period deadline. In today’s bulletin, we analyse the key points of conflict between the Withdrawal Agreement and the UK’s Internal Market Bill, and how this would impact the future relationship between the EU and the UK. We also bring reports from London as the eighth round of Brexit negotiations concluded yesterday, chief negotiators on both sides have come out to say that significant divergences on essential areas of interest still remain.

 

Withdrawal Agreement in jeopardy as UK releases Internal Market Bill

As reported first by the Financial Times, the UK government has released their widely discussed Internal Market Bill, which has gained quite a bit of traction this week as the legislation that will “eliminate the legal force of parts of the Withdrawal Agreement" in areas such as State aid and the new customs arrangements for Northern Ireland.

 

What is the Internal Market Bill, and why is it important?

The UK Internal Market Bill (explanatory notes) is draft legislation on how the UK wants to manage trade within its borders and territories after Brexit. This Bill has caused major frenzy this week as it essentially “rewrites” parts of the Withdrawal Agreement signed between the EU and the UK. The Bill covers key negotiation areas such as State aid, unfettered access to goods, spending power and devolution.

However, two aspects of the Bill that affect Northern Ireland have caused much debate and commentary – State aid and customs.

The Bill seeks to eliminate customs arrangements in Northern Ireland which could compromise the ability to avoid a hard border on the island of Ireland. The Bill would also give unilateral power to the UK government to change or disapply export rules for goods travelling from Great Britain to Northern Ireland.  

If implemented, this Bill would suggest that the EU would have little ability to influence State aid rules in the UK.  The UK government want to change rules to set aside EU law and ECJ law on State aid. Article 10 of the NI protocol sets out that EU State aid rules will apply in certain cases where relevant to trade in goods and electricity between Northern Ireland and the EU.  The UK government is seeking to override this and instead ensure a uniform approach across the UK to the application of EU State aid law under the Protocol.

The Internal Market Bill will be subject to debate and approval by both chambers of the UK parliament before it becomes law. The UK is however aiming to pass this Bill before the transition period deadline expires on 31 December 2020.

 

What about the Withdrawal Agreement?

The Withdrawal Agreement as it is currently written says that the UK must notify the EU of any State aid decisions that would affect Northern Ireland’s goods market. It also says that special customs arrangements apply in Northern Ireland to protect the EU market. If implemented, the draft Bill would be in clear breach of several provisions contained within the Protocol on Ireland/Northern Ireland not least the good faith provisions.

The EU have stated that the Bill is in defiance of the stated aim of the Bill, which is ultimately to protect the Good Friday (Belfast) Agreement

 

International reactions

In a statement following the “extraordinary” meeting of the EU – UK Joint Committee, Maros Sefcovic, the EU Vice President in charge of overseeing the implementation of the divorce deal released a hard-hitting statement which calls on the UK government to withdraw the conflicting measures from the draft Bill in by the end of the month at the latest. They have also concluded the statement by indirectly warning the UK government of the possibility of legal action as per the mechanisms and legal remedies in place in the Withdrawal Agreement to address violations of legal actions.

US Speaker of the House, Nancy Pelosi has also released a statement on Brexit & a potential US – UK trade agreement, stating that “if the UK violates that international treaty and Brexit undermines the Good Friday accord, there will be absolutely no chance of a US – UK trade agreement passing the (US) Congress”.

 

Round 8 of Brexit negotiations conclude as significant divergences remain

The eighth round of Brexit negotiations between the EU and UK concluded in London on Thursday 10 September. A full agenda of the discussion topics can be found here. With a hectic week on the Brexit front, chief negotiators on both sides have come out to say that significant divergences on essential areas of interest still remain.

In a statement following the negotiations, EU chief negotiator Michel Barnier has said that the EU is still missing concrete guarantees from the UK in areas such as fair competition, and on non-regression from social, environmental, labour and climate standards. He also warns that “nobody should underestimate the practical, economic and social consequences of a “no deal” scenario”. The statement also highlighted the importance of “mutual trust and confidence” in negotiating a future partnership.

Mr Barnier’s UK counterpart David Frost has come spoken out in his own statement that the UK have made proposals in the areas of key divergence, that they believe to be “appropriate to a modern free trade agreement between sovereign and autonomous equals”. They also remain committed to reach the agreement by 15 October, as set out by Prime Minister Boris Johnson earlier this week.

 

Irish Government launches Brexit Readiness Action Plan

The Irish Government has launched the Brexit Readiness Action Plan, that sets out the steps that businesses and individuals need to take now to be ready for the end of the Transition Period on 31 December 2020. The Bill covers readiness measures at Governmental Level, and in key areas such as trade in goods, trade in services, connectivity, transport and north-south & east-west relations.

The Government has also today published the General Scheme of the 2020 Brexit Omnibus Bill which is intended to address a wide range of complex issues that arise post transition period. The Bill will be considered by the Houses of the Oireachtas later this term.

 

Prepare for no-deal Brexit immediately, say Chartered Accountants Ireland

With all the uncertainty surrounding the Brexit negotiations, one thing businesses can be sure of; come 1 January 2021, the trading environment will be vastly different than the simplicity offered by the current EU Single Market. As per a latest press statement released by the Institute, businesses on the island of Ireland are being warned that given the lack of progress in Brexit negotiations, they have no option but to assume the EU and the UK will fail to reach agreement by the end of the year and to prepare accordingly. 

We have outlined eight practical measures that businesses on the island of Ireland should adopt now:

  1. Register online with HMRC or Revenue for an EORI number – you cannot trade without one.
  2. Contact your suppliers and logistics providers about the continuity of goods and services you need for trade.
  3. Check if your non-UK suppliers use the UK as a land-bridge and ascertain whether this will cost and cause delays
  4. Classify the goods that you import or export for customs duties and know their origin
  5. Seek out a customs agent or enhance in house customs knowledge
  6. Ensure that you have a line of credit to deal with the customs duties that will arise on imports from the UK or Ireland.
  7. Check whether your current certifications, licences or authorisations will be valid post-Brexit.
  8. Use the Government supports available.

You can read more about the press coverage of this statement in our “In the Media” section of the newsletter.

 

For all Brexit updates, visit our Brexit webpage