The EU has begun legal action against the UK over an alleged breach of the Northern Ireland protocol, after the UK unilaterally decided to delay the introduction of checks on goods entering Northern Ireland from Great Britain.
In order to stay in compliance with the Good Friday Agreement after Brexit, the EU and the UK negotiated the Northern Ireland protocol, which came into force on January 1. As part of the terms of this protocol, while Northern Ireland will remain part of the customs territory of the UK, customs checks and controls will apply for goods moving from Great Britain to Northern Ireland, thus avoiding the implementation of a hard border between Northern Ireland and the Republic of Ireland.
In addition, Northern Ireland is obliged to align with the rules of the EU’s single market in areas such as technical regulation of goods, agricultural and environmental production and regulation, state aid, and other areas of north-south co-operation between Northern Ireland and the Republic of Ireland.
To give traders time to adapt to the new rules, a grace period was agreed between the EU and the UK whereby the Northern Ireland protocol wouldn’t go into force until April 1 for certain types of goods – such as grocery produce going from Great Britain to supermarkets in Northern Ireland.
Once that deadline expires, retail agri-food products being transported from England, Scotland or Wales to Northern Ireland would require EU export health certificates (EHCs), while live animal transport will require the sign-off of two vets – one at each end.
Cognizant of the potential impact of the surge in red tape on April 1 and amid fears that many traders in Great Britain would simply stop supplying to Northern Ireland, the UK government has extended that deadline until October 1. In a statement to parliament on March 3, Northern Ireland secretary Brandon Lewis said: “We are taking forward a series of further temporary operational steps which reflect the simple reality that there is more time needed to adapt and implement new requirements as we continue our discussions with the EU.”
Crucially, however, the UK government’s decision was taken without consultation with or the agreement of the EU, and as a result the EU has now begun a formal infringement process against its former member.
Speaking to GTR, Ross Denton, head of international trade at law firm Ashurst, explains the implications of the UK’s actions, and outlines the potential impact on trade as a result.
GTR: What action is the EU likely to take as a result of the UK’s decision to delay the implementation of the Northern Ireland protocol?
Denton: The EU has set out its thinking in relation to legal action against the UK for its decision to delay full application of certain border checks on goods moving from Great Britain to Northern Ireland, and it effectively has the ability to bring an action based on two distinct routes.
First, certain provisions of the withdrawal agreement (WA), including those relating to application of EU customs law to Northern Ireland, remain subject to the jurisdiction of the European Court of Justice (ECJ), even after the expiry of the transition period, which ended on December 31 last year. The EU has therefore notified the UK of its concerns and asked the UK to bring its measures into conformity with the WA. Failure to do that will likely result in the EU issuing proceedings before the ECJ, which could result in enforcement action against the UK by that court.
Second, under the WA, either party can use the procedures set out in article five, where both parties commit to act generally in ‘good faith’. This is a less controversial route as it requires the parties to go through an arbitration system set out in the WA, and only in limited circumstances would it involve the ECJ.
GTR: What will be the UK’s likely response?
Denton: It is likely that the UK will argue that its actions were permissible under the safeguard provisions of article 16 of the WA, however annex seven of the Northern Ireland protocol says: ‘Where the Union or the United Kingdom is considering taking safeguard measures… it shall, without delay, notify the Union or the United Kingdom, as the case may be, through the Joint Committee and shall provide all relevant information.’
Therefore, this is a relatively easy breach to establish, since in that first sentence the protocol establishes that these decisions cannot be taken unilaterally, so I think this will be tricky to defend.
From a political perspective, there may be some mileage in this for the UK government to try to jockey to get some benefit out of this process, but I don’t believe the EU will play ball on that. Essentially, if the UK doesn’t budge, the EU’s position will likely be that they can simply take the UK to court and win.
GTR: How probable is it that the extension of the grace period will be reversed?
Denton: Given how relatively slowly the ECJ system works, the UK could get what it wants simply by doing nothing until October. I don’t think the EU will particularly be happy about dropping the case just because the time has expired, and they will say that the UK has still acted in bad faith. Therefore, this would be quite a risk on the part of the UK government.
I think that the message coming out of the EU is that they want to see this system work and they want to see adherence to the system. Both sides are really just squaring up, and I don’t think that at the moment either party will back down, although it is in both parties’ interest to get this sorted out, because it must affect trade in both directions.
GTR: What does this mean for traders who move goods between Great Britain and Northern Ireland?
Denton: It depends who you are. If you are a major producer, there is an argument to say that if you want the best of both worlds, you could locate in Northern Ireland, because then you will get virtually untrammelled access to the EU single market as well as the ability to send goods to Great Britain. The situation where this becomes a problem is where there are goods going from Great Britain into Northern Ireland, which will be subject to customs and regulatory checks that are at the moment not operating quite well enough. We have seen a reasonable amount of this with supermarkets, which are finding it really difficult to move groceries into Northern Ireland from Great Britain. I think the outcome of this will be that you will see a lot of supply chain optimisation which will effectively separate out the Great Britain and Northern Ireland markets, and there will only be movement between the two when it is strictly necessary.
The post Analysis: Implications of the latest EU-UK disagreement appeared first on Global Trade Review (GTR).