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 last month 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 caused major frenzy last month 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 Maroš Šefcˇovicˇ, the EU Vice President in charge of overseeing the implementation of the divorce deal released a hard-hitting statement which called on the UK Government to withdraw the conflicting measures from the draft Bill by the end of September at the latest. The statement was concluded with an indirect warning to 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 and 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”.