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What does the Northern Ireland Protocol Bill mean for trade with Northern Ireland?

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Published: 14 Jun 2022 Update History

The government’s recently published Northern Ireland Protocol Bill could have a significant impact on trade between Great Britain and Northern Ireland. What specifically could change?

The Northern Ireland Protocol Bill (the Bill), sponsored by the Foreign, Commonwealth and Development Office, had its first reading in the House of Commons on Monday (13 June).

The Bill disapplies specific areas of the Northern Ireland Protocol (the Protocol) in domestic law and gives ministers power to both disapply further areas of the Protocol and make new domestic law in connection with it. The Bill does this by removing the effect (at least in domestic law) of certain provisions of the Protocol and the European Union (Withdrawal) Act 2018 (EUWA), replacing them with new provisions where applicable.

Movement of goods

Perhaps the biggest change relates to the movement of goods between Great Britain and Northern Ireland. At present, customs duty is only due on goods moving to Northern Ireland from Great Britain that are ‘at risk’ of entering the EU.

The Bill proposes that this is replaced by a new model. It is suggested in the explanatory notes to the Bill that the new model may involve a ‘red channel’ and a ‘green channel’, which will determine the customs and tariff treatment of the goods.

The Bill allows ministers to determine which movements would qualify for a ‘green channel’. It is suggested that the movement of non-commercial goods (such as personal baggage) would always qualify for the green channel. The Bill, if enacted, would also remove sanitary and phytosanitary controls on goods moving from Great Britain to Northern Ireland through a "green channel".

It is also suggested that the conditions for moving goods through the ‘green channel’ would include meeting the requirements of a ‘trusted trader’ scheme. No further detail on the scheme is currently available.

VAT, Excise Duties and other taxes

The Bill also allows for the Treasury to make provision in relation to VAT, excise law and any other taxes it considers appropriate in connection with the Protocol. This would include implementing VAT measures UK-wide that might otherwise not be permitted in Northern Ireland.

For example, the recent introduction of the zero rate for the installation of energy-saving materials only applies in Great Britain and not Northern Ireland as this change is not compatible with EU law. This Bill would, in theory, allow such a change to VAT to apply across the whole of the UK.

Regulation of goods

At present, goods that meet UK regulatory requirements but not EU requirements cannot be placed on the market in Northern Ireland. The Bill aims to resolve this by allowing goods to be placed on the market in Northern Ireland if they meet either EU requirements or UK requirements.

Businesses would still need to comply with EU regulations when placing goods on the market in the rest of the EU, and UK regulations when placing goods on the market in the rest of the UK. Of course, in some cases, goods may meet both sets of regulations and could then be placed on the market in both jurisdictions.

Role of the European Court

Disputes between the UK and the EU in relation to the Protocol or related provisions of the EUWA (or domestic law relating to either) are currently required to be resolved by the Court of Justice of the European Union (CJEU).

Under the Bill, domestic courts and tribunals would not be required in domestic law to follow jurisprudence of the CJEU and cannot refer cases to the CJEU in relation to the Protocol or related provisions of the EUWA.

Subsidy control

The final substantive change proposed under the Bill is to subsidy control, or ‘state aid’. The Bill provides the basis for a single UK-wide subsidy control policy. As things stand, Northern Ireland currently follows EU state aid rules regarding measures that affect trade in goods (and wholesale electricity) between Northern Ireland and the EU. Under the Bill, UK subsidy control rules will apply to Northern Ireland instead.

Other considerations

The Bill does not currently state an effective date. This is likely to depend on its progress through parliament. It is important to note that the proposals contained in the Bill may be subject to change.

Furthermore, the EU is expected to launch legal action against the UK government in relation to the Bill. The UK government has accepted that the Bill does not meet its obligations under international law but has stated it considers that this non-performance is lawful under the "doctrine of necessity".

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