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© Bloomberg. Pedestrians walk on London Bridge as the sun rises over Tower Bridge in London, U.K., on Friday, Feb. 7, 2020. The European Union will consider about 40 equivalence decisions this year, determining how much equity, fixed-income and other investment banking business can remain in London and still serve EU clients. Photographer: Simon Dawson/Bloomberg

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(Bloomberg) — Boris Johnson’s government published legislation Wednesday allowing it to re-write parts of the Brexit divorce deal it signed with the European Union last year. The move to tear up part of an international treaty has sparked consternation in Brussels and could scupper efforts to secure a key trade agreement between the two sides. It puts Britain at risk of becoming a “rogue state,” according to Ian Blackford, a Scottish lawmaker.

Here’s why the new law is so controversial.

Will the U.K. break international law?

Yes, the government says. It is seeking power to undo sections of the Northern Ireland Protocol, part of the legally-binding Withdrawal Agreement it signed with the EU in January.

Crucially, the bill states it will “have effect notwithstanding inconsistency or incompatibility with international or other domestic law.”

Senior Conservatives have warned that reneging on an international treaty could damage the U.K.’s standing in other disputes overseas, including with China over its imposition of a national security law in Hong Kong.

What specifically has Johnson done?

He is rowing back from the policies affecting Northern Ireland he signed up to as part of the Brexit Withdrawal Agreement. The protocol is designed to prevent a hard border on the island of Ireland, at the cost of creating a customs border in the Irish Sea.

The Internal Market Bill will give U.K. ministers powers to:

  • Waive customs paperwork on trade crossing between Northern Ireland and Great Britain
  • Unilaterally define which goods entering Northern Ireland would be liable for tariffs in the event no trade deal is signed with the EU by the end of the Brexit transition period on Dec. 31.
  • Strike down EU state aid rules contained in the Northern Ireland protocol.

These three issues are highly sensitive for the EU and, prior to Johnson’s intervention, were still being thrashed out in joint discussions. The bloc is particularly concerned that goods could enter its single market unchecked via the 310-mile land border with Northern Ireland. It’s also worried that U.K. subsidies will put EU firms at a competitive disadvantage.

How has the EU reacted so far?

With measured anger. The EU has called for emergency talks, and European Commission President Ursula von der Leyen said the move “undermines trust.” The question now is whether it will poison the wider trade negotiations between the U.K. and the bloc. Expect Michel Barnier to comment on the legislation when the latest round of discussions break up later this week.

What more could the EU do?

It could refer a breach of the Withdrawal Agreement to a tribunal and ultimately the European Court of Justice. While such a dispute would last years, a finding in favor of the EU would allow the bloc to suspend any provision of any treaty it has with Britain.

The EU already sees a case for opening infringement proceedings, according to a preliminary analysis of the U.K. bill.

Why Is Johnson taking such a risk?

Johnson has repeatedly said that trade between Northern Ireland and Great Britain must be unfettered after Brexit, and he sees this move as necessary to secure that goal. If the U.K. and EU don’t come to an agreement by the year-end, all goods entering Northern Ireland from Great Britain may have to pay tariffs, a situation the U.K. government says is unacceptable.

But the prime minister also wants to break away from the EU’s state aid rules — a position that has become the biggest obstacle to reaching a wider accord with the bloc over their future relationship.

Downing Street is concerned that the Northern Ireland protocol could threaten its plans to provide state aid to British businesses. Potentially, the EU could block a subsidy to a company in England, Wales or Scotland on the grounds it might help or hurt a business in Northern Ireland, which will still have to follow the bloc’s state aid rules after Dec. 31.

It could also be a negotiating tactic to encourage the EU to back down from its demand that the U.K. sign up to its state aid rules in return for any trade accord.

Could Parliament stop him?

Unlikely, given that Johnson enjoys an 80-seat majority in the House of Commons. But he could face a fight in the House of Lords. Former Deputy Prime Minister Michael Heseltine told Times Radio on Wednesday the legislation hasn’t got “a ghost of a chance” of being approved by the upper chamber — but it doesn’t have an absolute veto; under the Parliament Act, it can only delay legislation approved by the House of Commons for a year.

Could he face a legal challenge in the U.K.?

It’s unlikely, at least in the immediate future. One of the key lawyers who brought the successful challenge against Johnson’s plan to suspend — or prorogue — Parliament last year, say it would be harder this time. Jolyon Maugham said Britain’s unwritten constitution rests upon the concept of parliamentary sovereignty. If lawmakers approve the legislation, the judiciary’s ability to get involved is “very limited indeed, if not non-existent,” Maugham said.

Gina Miller, a campaigner who has successfully challenged the government over Brexit in the courts, said she is on “high alert,” speaking on ITV’s “Peston.” But she also said she is waiting to see what happens, and the government may just be posturing.

Another route might be to question whether any breach of international law infringes the Ministerial Code, the standards of conduct that all government ministers must adhere to. That rulebook is, however, enforced by the prime minister.

What else is in the Internal Market Bill?

The draft law also contains measures to prevent trade barriers being erected within the U.K. after Brexit. When Britain was in the EU, policy areas that were devolved to the administrations in Scotland, Wales and Northern Ireland broadly had to follow EU law. Out of the bloc and able to exercise their powers, Westminster faced the prospect of the different nations setting their own rules — something which could inhibit internal trade. Blackford’s Scottish National Party, which campaigns for independence, has already criticized the bill as an attack on devolution.

©2020 Bloomberg L.P.





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