UK Internal Market Bill

Posted in The Withdrawal Agreement UK and EU legal framework

On the 9 September 2020, the UK Government introduced the United Kingdom Internal Market Bill (the Bill) to the House of Commons, with the aim to protect the UK’s integrated market “by guaranteeing that companies can continue to trade unhindered in every part of the UK after the Transition Period ends”.

The Bill proposes to introduce measures to create a coherent approach to market access and support for the UK internal market by establishing principles of mutual recognition and non-discrimination of goods and services. The intention is to allow any goods that meet relevant regulatory requirements relating to sale in the part of the UK it is produced in or imported into, to be sold in any other part of the UK without having to adhere to relevant regulatory requirements in that other part. It also will prohibit differential treatment of local or incoming goods based on direct or indirect discrimination.

On the issue of services, the Bill proposes to introduce similar rules complementing those found in the Provision of Services Regulations 2009 to ensure the continued free flow of services between England, Wales, Scotland and Northern Ireland.

Importantly, the Government have recognised that legal services should be exempt from the mutual recognition rules, highlighting the historic differences in the legal system in the different parts of the UK. This exemption equally applies to the Bill’s proposed system for the recognition of professional qualifications across the UK internal market. For those applicable, the recognition of professional qualifications allows professionals qualified in one of the four UK nations to access the same profession in a different nation without needing to requalify. The Bill does allow for the disapplication of the automatic recognition process but there must be an alternative process for recognition instituted that complies with certain principles laid out in clause 24.

The section of the Bill which has seen the most commentary is that in regards to Northern Ireland. Clause 41 requires the devolved Ministers and Ministers of the Crown not to exercise any function in any way that would result in a “kind of NI-GB check, control or administrative process being used”. Clause 42 gives Ministers of the Crown the power to disapply or modify the requirement for export declarations or other exit procedures. The UK Government believes this is necessary as without these modifications the Northern Ireland Protocol provides that EU customs legislation will apply to and in the UK in respect of Northern Ireland, meaning goods leaving Northern Ireland and travelling to other parts of the UK would be subject to export declarations.

Furthermore, on the issue of State Aid, Article 10 of the Northern Ireland Protocol currently states that EU State aid rules will apply in relation to trade in goods and electricity between Northern Ireland and the EU. The Bill looks to support a uniform approach across the UK to the application of EU state aid rules, rather than having separate consideration for Northern Ireland. It therefore introduces new powers for the Secretary of State for Business, Energy and Industrial Strategy to make regulations setting out how the Secretary of State considers Article 10 of the Protocol is to be interpreted.

The EU has raised concerns about how the provisions in the Bill affecting the Northern Ireland Protocol will impact the Withdrawal Agreement so far and, in particular, the declaration in Clause 45 that these provisions are to have effect “notwithstanding inconsistency or incompatibility” with international or other domestic law. On Thursday 10 September the EU Commission issued a statement declaring that “if the Bill were to be adopted, it would constitute an extremely serious violation of the Withdrawal Agreement and of international law.” They stated “the draft bill would be in clear breach of substantive provisions of the Protocol: Article 5 (3) & (4) and Article 10 on custom legislation and State aid, including amongst other things, the direct effect of the Withdrawal Agreement (Article 4). In addition, the UK Government would be in violation of the good faith obligation under the Withdrawal Agreement (Article 5) as the draft Bill jeopardises the attainment of the objectives of the Agreement.” They therefore have urged the UK to “withdraw these measures from the draft Bill in the shortest time possible and in any case by the end of the month.” The UK Government has argued that the measures are necessary to ensure the proper functioning of the UK’s internal market in case an agreement on the future trading relationship between the EU and the UK is not concluded. Negotiation talks continued to secure a post-Brexit trade deal on Friday 11 September.

The Bill has its second reading in the House of Commons on 14 September 2020.

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