A deal on the Northern Ireland Protocol

The deal

The UK Prime Minister and the President of the European Commission announced on 27 February a deal to change the text of the Northern Ireland Protocol and related arrangements for its implementation. The new arrangements will officially be known as the “Windsor Framework”. The UK government and the European Commission have published the various legal texts and explanatory documents.

The Windsor Framework is being presented as a sustainable and definitive solution to the difficulties with the Protocol. In the Prime Minister’s view, the Windsor Framework is a big step forward in three main areas. First, he said it ensures a smooth flow of trade between Great Britain (GB) and Northern Ireland (NI), removing any sense of a border in the Irish sea. Second, he presented it as protecting NI’s place in the UK, reducing the application of EU law in certain respects (such as VAT and excise, medicines and food and drink regulation). And finally, he believed it would safeguard sovereignty in NI: Members of the Legislative Assembly in NI (MLAs) will be able to trigger a veto, preventing new EU legislation from being applied in NI (the “Stormont brake”). Although this is perhaps a somewhat optimistic assessment of the effect of the deal, it is clear that significant improvements have been made. We summarise below the substance of what has been agreed.

The UK government will not now proceed with the controversial Northern Ireland Protocol Bill, which would have given it power unilaterally to override parts of the Protocol. In the light of the Windsor Framework, the government no longer believes the Bill is justifiable under international law. The EU, for its part, will not proceed with its various legal actions against the UK concerning the Protocol.

The Protocol as originally agreed

Brexit meant that the border between NI and the Republic of Ireland (RoI) became an external border of the EU. Ordinarily, the EU controls such borders for a range of purposes, including customs duties, health and safety and other regulatory compliance. But in the interests of continuing peace on the island of Ireland, both sides agreed early in the Brexit negotiations to avoid the need for border infrastructure. The Protocol, which forms part of the Withdrawal Agreement, sets out arrangements to give the EU the protections that it would ordinarily have had from a hard border. In very broad terms these amount to NI remaining within the EU single market for goods. Goods produced within NI or imported into NI must comply with EU law. EU state aid restrictions and VAT and excise rules apply. The EU Customs Code applies to imports into NI. The controls and checks that would ordinarily have been carried out at the EU’s external border are instead carried out at NI ports and airports (the so-called “border in the Irish sea”).

There is an exception to this general scheme for EU customs duties: where it is established that imported goods are “not at risk” of moving from NI into the RoI, EU customs duties are not payable. Although under the UK/EU Trade and Cooperation Agreement no customs duties are payable on UK goods moving into the EU in any event, this is only the case if they comply with rules of origin requirements.

The wider customs bureaucracy - the need for customs declarations, evidence of origin etc, whether or not duties are payable - is in itself an obstacle to trade. And there is an even more acute problem for agri-foods, where an additional layer of sanitary and phyto-sanitary (SPS) controls applies for protection against diseases, pests and contaminants. These controls require costly and officially-signed certificates and extensive checks. Some imports are in principle banned altogether. “Grace periods” (agreed between the EU and the UK, or unilaterally applied by the UK) deferring the application of some Protocol requirements, and some specific EU concessions, mitigate these difficulties in some respects.

There is an opportunity for the Northern Ireland Assembly to vote, every four or eight years, on whether the entirety of the Protocol provisions dealing with the application of EU single market rules to NI should continue.

Deeper problems

The Protocol has always been deeply problematic, not just because of the practical difficulties created by the border in the Irish sea. For the Brexit hard-liners, the basic issue is sovereignty. Even though the UK has left the EU, substantial areas of EU law continue to apply in NI, and any new EU law that amends or replaces existing applicable provisions will automatically also apply. The European Court of Justice (ECJ) is the ultimate arbiter of whether these laws are being complied with in NI, and in principle the European Commission has power to enforce them. Seen from another angle, this also creates a “democratic deficit”, with the people of NI being subject to laws over which they have no control, except for a periodic opportunity to reject the whole scheme of the Protocol in its entirety.

There is the further problem that this arrangement divides NI from the rest of the UK. This is of course keenly felt by the Unionist community in NI, especially as it aligns NI more closely with the RoI. But not only by them. It was only five years ago that Theresa May, then UK Prime Minister, said such an undermining of the UK internal market and threat to its constitutional integrity was something no UK Prime Minister could ever agree to.

The key elements of the Windsor Framework

The terms of the deal are to be found spread across a number of documents (mostly drafts at this stage), which include joint and unilateral declarations and statements by the UK government and the European Commission, a decision and recommendations of the Withdrawal Agreement Joint Committee, and proposals for EU Council Decisions and EU legislative acts. Amendments to the text of the Protocol itself are made by a decision of the Withdrawal Agreement Joint Committee, using powers conferred by the Withdrawal Agreement itself to correct errors, address omissions or other deficiencies or to address situations unforeseen when the Withdrawal Agreement was signed. On the basis that the amendments have been made within the existing Withdrawal Agreement framework, it might be claimed that the EU has not renegotiated the Withdrawal Agreement.

The Windsor Framework addresses obstacles to GB/NI trade, the place of NI within the UK, and the democratic deficit in NI. For the first two of these broad issues, a major part of the solution has been essentially to extend the principle (currently applicable only to customs duties) that EU single market rules should not apply to goods which are not at risk of being moved into the EU. The increased risks to the integrity of the EU single market arising from potentially greater regulatory divergence between NI and the RoI and greater opportunities for smuggling across the border will be managed by enhanced information sharing and market surveillance.

Obstacles to GB/NI trade

Customs formalities – A new green lane and red lane system will enable goods coming into NI not to be subject to full customs procedures if they are destined for NI. The red lane will be used for goods at risk of moving to the RoI (and therefore the EU’s single market). The range of firms generally eligible to use the green lane will be significantly expanded compared with those currently able to use the UK Trader Scheme. Firms that are too large to qualify may nevertheless use the green lane for goods for use in animal feed, healthcare, construction and not-for profit sectors. Firms using the green lane will be able to move goods (if they can show they will stay in NI) on the basis of commercial data-sharing, not international customs processes: customs codes will not need to be provided, rules of origin will not need to be satisfied, customs checks will be reduced, and there will be no need for burdensome post-movement supplementary customs declarations. The UK will establish a new tariff reimbursement scheme to reimburse traders for tariffs paid on goods initially treated as being at risk of moving into the RoI but which do not in fact do so.

Tariff rate quotas – NI companies will be able to use the EU’s tariff rate quotas for steel, to access the most sensitive categories of UK-origin steel. And the UK and EU have committed to work together to find a solution for other goods subject to tariff rate quotas.

SPS controls – The green lane can also be used to avoid or reduce the need for SPS controls. Traders moving agri-foods for the final consumer are eligible to use the green lane, including retailers, wholesalers and caterers. There will be no more bans on products that meet UK health and safety standards. A truckload of goods can move with a single document confirming compliance with relevant requirements, without the need for separate certificates for each product line or official veterinarians and plant inspectors on site as at present. In general, UK health and safety standards will apply for food and drink in NI, including for such things as marketing, labelling, organics and genetic modification. However, where relevant, these goods will still need to meet EU standards on animal and plant health diseases. For some high-risk products such as meat and dairy special product-level “not for EU” labelling requirements will be phased in from October this year. These labelling requirements will be extended to composite products, fruit vegetables and fish, on a UK-wide basis, from 2025. As these labelling requirements take effect, the UK will scale back the visual identification checks it currently applies under grace period arrangements.

Parcels – Parcels sent to NI residents by post from GB on a consumer-to-consumer basis will continue to be free of customs requirements as at present. E-commerce businesses movements of goods to NI consumers will continue to be free of most requirements, but the businesses will have to manage a process of data-sharing on a batch basis to monitor and control smuggling risks.

NI’s place in the UK

VAT and excise – The text of the Protocol itself is being changed to give the UK some scope to apply UK VAT and excise rules in NI. In particular, the UK may apply reduced excise duty rates to alcohol and alcoholic beverages served for immediate consumption in hospitality venues. It may also tax all alcoholic beverages based on their alcoholic strength (rather than the EU basis). As regards VAT, it may apply reduced rates to goods supplied and installed in immovable property (such as heat pumps and solar panels). The UK will not be required to apply in NI the special EU VAT scheme for small businesses. And the UK and EU have agreed to explore establishing a list of goods not at risk of entering the EU which would not be subject to EU VAT rules.

Medicines – The original Protocol applied EU authorisation requirements and other rules in full to medicines in NI. This disrupted UK-wide supply chains and meant that the European Medicines Agency rather than the UK regulator was responsible for the authorisation of new drugs in NI. These problems were mitigated to some extent last year when the EU made changes to its rules. But the new deal now provides a more comprehensive solution: UK regulation will have primacy in this area.

Plants, seeds machinery and trees – The certification requirements, checks and prohibitions mandated by the Protocol for plants and plant-based products will be done away with for items that are to remain in the UK. Instead, these things will be able to move from GB on a “virtually identical” basis to those moving elsewhere within the UK.

State aid – The Protocol provides for EU state aid rules to apply to any aid that “could affect” trade in goods or electricity between NI and the EU. The new deal clarifies this by setting out a number of factors, and tests to be met, to establish that there is a sufficient link to NI/EU trade. Most subsidies will instead be controlled under the UK’s subsidy control regime.

The role of the ECJ – The role of the ECJ gets little mention in the deal documents. This is because its role as ultimate arbiter of whether or not applicable EU law is being complied with in NI remains what it was under the original Protocol. It is true, however, that the scope of its jurisdiction is somewhat lessened to the extent that in some areas (such as VAT and excise, and medicines) EU rules will have a reduced application in NI.

Democratic deficit

The periodic consent mechanism in the Protocol is to be supplemented by a new “Stormont brake” enabling the UK government at the instigation of MLAs to veto the application of particular new EU laws (or elements of them) to NI permanently.

The Stormont brake can be triggered if 30 or more MLAs, from two or more parties, petition the UK government. It is only available if the new law (or the relevant element of it) “significantly differs” from the one it amends or replaces, and its application in NI would “have a significant impact specific to everyday life of communities in Northern Ireland in a way that is liable to persist”. The UK veto can only be exercised within two months of publication of the new EU law in question.

The Stormont brake can only operate if the Northern Ireland Assembly is operational, with a First Minister and Deputy First Minister in post and if the Northern Ireland Assembly has been in regular session. The MLAs triggering it must provide a detailed, written public explanation that their petition is being made “in the most exceptional circumstances and as a last resort, having used every other available mechanism”, that the conditions for the operation of the Stormont brake are satisfied, and that specific prior consultations seeking an alternative solution have failed. If the UK government accepts that these conditions are satisfied, it will be committed to triggering the Stormont brake “without delay”.

Once the UK has triggered the brake, an exchange of views will take place in the Joint Committee. But in the absence of agreement on the way forward to “maintain the good functioning of the Protocol”, the EU will be able to take “appropriate remedial measures”.

Conclusion

It is hard to argue that the Windsor Framework has removed the problems of principle with the Protocol. Issues over sovereignty, the democratic deficit, the dividing of NI from the rest of the UK, still remain. But there are very substantial changes, which will ease GB/NI trade, roll back application of EU law in NI in some important areas, and go some way to addressing the democratic deficit.

The hope is that the improved UK/EU relations evidenced by the fact that this agreement has been reached, and the removal of ongoing UK/EU tensions over the Northern Ireland issue (assuming the deal does indeed prove to be definitive and durable), will open up the possibility of moving forward in a range of other areas of UK/EU cooperation where progress has stalled.