After concluding the latest round of Brexit talks, the UK’s chief negotiator David Frost said, ‘considerable gaps remain in the most difficult areas’ and that on the sticking point of fisheries the EU has failed to understand that the UK position are ‘not simple negotiating positions but expressions of the reality that we will be a fully independent country.’ Frost added that the UK was looking for a deal ‘similar to the one the EU already has with Canada’ but that it is ‘unclear why this is so difficult for the EU.’ Many Brexit supporters may stop reading at this point and will, in the words of Margaret Thatcher, just rejoice at that news. But perhaps they should have listened more carefully to Government Ministers when they said there won’t be a “no-deal” scenario because they had already passed an agreement.
In the Brexit deal signed last year the government agreed to the Northern Ireland Protocol – an arrangement for what will happen to the province after the Brexit transition period ends. In it, the UK has agreed to EU State Aid rules applying in Northern Ireland.
The EU’s State Aid rules were supposed to prevent unfair competition amongst Member states which met two criteria: 1) If it distorted competition and 2) if it affected trade. If, for example, the German government provided big hand-outs to a German car firm it would distort competition internally. But it would only meet the second criteria, and therefore be illegal under EU law, if the firm used the money to export cheaper cars into France, or if French exports to German suffered, undercutting French auto-manufacturers.
In practice, however, the European Court of Justice has expanded its definition significantly. It now includes any infrastructure spending which could make money like toll roads and airports (something even the World Trade Organisation doesn’t count as State aid). Under the EU’s ever expanding definition, building an airport with public money is illegal unless the EU grants an exemption. This means after the end of the transition period if the UK government wanted to build an airport in Northern Ireland, or provide money for a toll road on Boris’s bridge from Scotland to Ulster, the EU can say no. This is currently true whether or not the EU agrees to a trade deal. That’s what the government has explicitly agreed to, and it’s the policy Michael Gove is implementing.
One might be forgiven for imagining the EU only has a small part of the UK on the hook, but it is highly likely that the rest of the country will also be stung by the rules.
The protocol could give the EU a veto on the UK government’s space programme
For example, in 2015 the minicab company Addison Lee claimed that London bus lanes amounted to State Aid to black cabs – since minicabs weren’t allowed to use them. Transport for London argued that there was no effect on competition or trade between Member States but the ECJ said this didn’t matter – it was sufficient that the bus lane rules strengthened their competitive position in their home market and made it more difficult for other Member States to enter the minicab market in London.
This ruling was bad news for Britain at the time but its significance now could be far greater. The UK has recently purchased Space firm OneWeb, which is based in London. Imagine, for argument’s sake, OneWeb begins providing GPS services across the UK and in Northern Ireland. By the logic of the Addison Lee case, the EU could challenge the UK’s acquisition of OneWeb by arguing that a Government-funded firm was making it more difficult for EU Member States to enter the GPS market in Northern Ireland. In effect, the Northern Ireland protocol could give the EU a veto on the UK government’s plans for a rival to Galileo. There would be no arbitration – the UK has already agreed to be bound by the ECJ on matters of State aid in Northern Ireland.
It’s even possible, as some have suggested, that the ECJ declares UK subsidies to Nissan’s Sunderland plant illegal, since cars could theoretically be sold in Northern Ireland (indeed, can be without let or hindrance, as Boris Johnson has repeatedly claimed), thus disadvantaging other Member states’ chance to sell cars there.
Of course, it’s true that the EU won’t necessarily use an agreement signed by its nearest competitor to prevent them from gaining any advantage. But so far the British negotiating team have shown no acknowledgement of the risks they are running to the independence of their own government by not looking for an exit strategy to the Withdrawal Agreement. After all, Dominic Cummings once wrote in his blog that the Government could easily rip up the backstop in Theresa May’s Withdrawal Agreement, so why not at least look for a legal way out? (It’s curious that Cummings is apparently hoping to rip up all anti State Aid rules whilst the Government is going full steam ahead with the NIP) Some suggest if the EU continues to make demands on the UK’s fishing rights, the EU Commission would have failed to use “best endeavours” to look at alternatives to the NI protocol which would be grounds to declare the whole Withdrawal Agreement null and void. But the fear for Brexiteers, as ever, is that they’re not even trying. At the moment, no evidence has emerged either from within the UK camp that they are, quite the reverse as the Gove-led implementation of the NIP ploughs onwards. Perhaps more tellingly, as to the lack of UK efforts to overturn the NIP, there have been no squeals of outrage from either Brussels or Dublin that such moves are being attempted.
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