Why this Irish border protocol could see the UK face infringement proceedings

The UK will be leaving the European Union on 31st January, but as our latest Institute for Government report sets out, there’s still a lot to do before Brexit is “done.”

By February the focus will be turning to the complex and contentious talks on the future UK-EU relationship, but the UK government still needs to meet the commitments it’s signed up to in the Withdrawal Agreement. One of the most difficult tasks will be implementing the Northern Ireland protocol—the special arrangements aimed at avoiding a hard border on the island of Ireland.

Unlike Theresa May’s “backstop,” which would have been UK-wide, Boris Johnson’s version of the protocol will apply to Northern Ireland only, introducing a trade border between GB and NI.

Northern Ireland will formally remain part of the UK customs territory, but will continue to align with the EU on specific regulations related to trade and follow EU customs rules. Goods moving from Great Britain to Northern Ireland deemed to be “at risk” of moving on into the rest of the EU will be subject to the EU tariff. Some forms of checks will almost certainly be necessary. There will be new obligations, albeit much less significant, for trade going the other way.

The prime minister has committed to not extending the transition period beyond 31st December 2020, which means these arrangements will need to be in place for the same deadline. The timescale is very tight, if not unworkable.

Many of the details of exactly how the arrangements will work are still TBC. The Withdrawal Agreement defers major decisions to the Joint Committee—the body responsible for overseeing the implementation of the agreement—including deciding the criteria for which goods are “at risk” and the implementation of VAT provisions. This will only be set up after the UK formally leaves the EU on 31st January.

The extent to which regulatory processes will be required will also depend on the degree of alignment between the UK and the EU. This will not become clear until a trade deal is concluded, which could be just weeks before the new arrangements come in to force.

Despite this uncertainty, the UK government will need to start working to implement the protocol immediately to have any hope of it being operational by New Year’s Eve this year. Officials will need to start planning, without a clear idea of what they are planning for.

The government will also need to prepare businesses to help them comply with any new regulatory or customs requirements. Traders operating between Great Britain–Northern Ireland may need declarations on animal health, VAT, tariffs, standards, rules of origin and, perhaps, rules of destination. It will be Northern Ireland businesses, as the importers, that are likely to face the majority of the new administrative burden and associated costs.

With regards to the proposed customs arrangement, Jonathan Thompson, former chief executive of HMRC, said that a similar system involving rebates depending on the final destination of the goods would take up to five years to develop and implement. There is a serious question mark over whether arrangements will be ready in time.

So, what happens if they’re not? On a practical level, there is the potential for some major disruption on trade across the Irish Sea. If systems are not fully operational or businesses are not ready for the new regime, ports like Belfast and Holyhead could clog up, damaging UK businesses and the Northern Ireland economy.

There could also be legal consequences. According article 12 of the protocol, the UK is responsible for implementing it, and ensuring the EU law is applied as agreed. The European Commission will, however, be able to supervise the way the GB-NI border works. Failure to deliver would mean the commission could start infringement proceedings and the UK could end up in front of the European Court of Justice and facing a fine.

As well as the implementation challenges, the UK government will need to work to overcome the political challenges. As it stands, all major parties in Northern Ireland are opposed to the Withdrawal Agreement—and with the NI executive back up and running, the UK government faces the prospect of implementing an arrangement that disproportionately affects one part of the UK, despite objections from its government.

The UK government will need to get politicians in Northern Ireland on side, and quickly. As part of the deal to restore Stormont, the UK has agreed to legislate to guarantee unfettered access for NI businesses to the UK internal market—but the precise definition of “unfettered” will undoubtedly be up for debate. It will also need to think about how it can meaningfully include Northern Ireland perspectives from business, communities, and civil society in decision making. Tight timescales do not necessarily lend themselves to extensive consultation, but this is essential if the arrangements are to be sustainable.

Sustainability is critical because, as early as 2024, the Northern Ireland institutions will be asked if they continue to consent to the trade elements of the protocol; if they vote against it, the protocol will cease to have effect after two years. In this case, either new arrangements will need be found, or preparations for a border between Northern Ireland and the Republic of Ireland will need to be begin.