Sunday, 10 November 2019

Withdrawal Agreement ~ The Ireland / Northern Ireland Protocol

Addendum 12 January 2020 - House of Lords EU Select Committee considered the Northern Ireland Protocol

The Key documents:

The New Withdrawal Agreement (541 pages pdf), New Political Declaration (31 pages pdf), the Declaration on Consent in Northern Ireland (8 pages pdf), and a Statement that Political Agreement has been reached (7 pages)  may be seen at - UK Government 19 October

Introduction:

The Withdrawal Agreement contains Protocols on Ireland / Northern Ireland, the Sovereign Base Areas in Cyprus, and Gibraltar.  The protocols are an integral part of the withdrawal agreement - WA Art 182.

This post considers only
the Ireland / Northern Ireland protocol and it is here where marked differences arise from the proposed arrangements under the earlier (2018) withdrawal agreement.  The "backstop" arrangements of the earlier withdrawal agreement have been replaced.

The Protocol contains 19 Articles and seven Annexes. The Annexes are an integral part of the Protocol. With some exceptions, the Protocol applies from the end of the transition period - (WA Art 185).

The transition (or implementation) period is defined in WA Art 126 as the period from the entry into force of the WA until 31 December 2020.  By WA Art 132, the Joint Committee may, before 1 July 2020, adopt a single decision to extend the transition period for up to 1 or 2 years.

The Joint Committee is addressed by WA Art 164 (and Annex VIII). The committee is empowered by WA Art 166 to make certain decisions binding on the EU and the UK.

Preamble:

The Protocol begins with a Preamble comprising 23 paragraphs setting out what is essentially the background to the Protocol. For example, it is Affirmed that the Good Friday or Belfast Agreement of 10 April 1998 ("the 1998 Agreement") should be protected in all its parts.

The preamble highlights matters such as avoidance of physical infrastructure or related checks and controls and states that nothing in the protocol prevents the UK from ensuring unfettered market access for goods moving from Northern Ireland to the rest of the UK's internal market. 

Article 1 Objectives:

Clarifies that the protocol is without prejudice to the provisions of the 1998 Agreement in respect of the constitutional status of Northern Ireland and the principle of consent. Also, the protocol sets out arrangements necessary to address the unique circumstances on the island of Ireland, to maintain  the necessary conditions for continued North-South cooperation, to avoid a hard border and the protect the 1998 Agreement in all its dimensions.

Article 2 Rights of individuals:

Seeks to ensure that no diminution of rights, safeguards or equality of opportunity, as set out in the 1998 Agreement results from withdrawal from the EU.  The UK commits to continuing to facilitate the work of the institutions created by the 1998 Agreement.

Article 3 Common Travel Area:

UK and Ireland may continue to make arrangements between themselves relating to the free movement of persons between their territories ("the Common Travel Area"), while full respecting the rights of natural persons conferred by EU law.

Article 4 Customs territory of the UK:

Northern Ireland is part of the UK's customs territory. Nothing in the protocol shall prevent the UK from including Northern Ireland in the territorial scope of any agreements it may conclude with third countries, provided that those agreements do not prejudice the application of the protocol.  Further, UK may conclude agreements with third countries that grant goods produced in Northern Ireland preferential access to that country's market on the same terms as goods produced in other parts of the UK.  The UK may also include Northern Ireland in the territorial scope of its Schedules of Concessions annexed to the General Agreement on Tariffs and Trade 1994 - (GATT).

Article 5 Customs, movement of goods:

Article 5 is concerned with customs duties. The Article has 7 paragraphs - Arts 5(1) to 5(7).  Art 5(4) has to be read with Annex 2.

Basically, the EU’s Union Customs Code  will apply to all goods entering Northern Ireland but a distinction is drawn between those goods entering Northern Ireland which are at risk of entering the EU Single Market and those which are not.   Where there is such a risk EU customs duties will apply.

Under Article 5(2), goods will be assumed to be at such risk unless they pass both parts of a two-part test: (a) they are not subject to commercial processing in Northern Ireland (b) they meet criteria established by the Joint Committee  The Joint Committee will decide on criteria for these risk assessments by the end of the transition period. Clearly, those criteria will be of crucial importance.

Art 5(4) states that provisions of EU law listed in Annex 2 to the protocol shall apply, under conditions set out in that Annex, to and in the UK in respect of Northern Ireland.  Annex contains 47 areas with extensive lists of EU Regulations, Directives etc.  This is not analysed further here.

Art 5(5) applies Articles 30 and 110 of the Treaty on the Functioning of the EU (TFEU) to the UK in respect of Northern Ireland. Article 30 states that customs duties on imports and exports, and charges having equivalent effect, are prohibited between Member States, which prohibition also applies to customs duties of a fiscal nature. Article 110 prohibits Member States from imposing, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.

Art 5(6) provides for a system of rebates for goods which can be shown not to have entered the EU. The UK may also compensate or waive other costs for traders which they would face because of having to apply the Union Customs Code. Such UK government schemes of tariff duty reimbursements and compensation for other customs-related costs would be subject to EU state aid rules set out in Article 10.

There is an exemption from duties in Article 5(7) for “consignments of negligible value, on consignments sent by one individual to another or on goods contained in travellers’ personal baggage”

The practical implementation and operation of this system appears to be likely to be complex.

Article 6 The protection of the UK internal market:

Article 6(1) states - "Nothing in this protocol shall prevent the UK from ensuring unfettered market access for goods moving from Northern Ireland to other parts of the UK's internal market."  Provisions of EU law made applicable by the protocol which prohibit or restrict the exportation of goods shall only be applied to trade between Northern Ireland and others parts of the UK to the extent strictly required by any international obligations of the EU. 

By Art 6(2) - the UK and the EU will use their ‘best endeavours’ to ‘facilitate’ trade from Great Britain to Northern Ireland.  The Joint Committee is to keep the application of Art 6(2) under review and shall adopt appropriate recommendations with a view to avoiding controls at the ports and airports of Northern Ireland to the extent possible.  According to this BBC article (16 November 2019) tariffs could be applied to 60% of goods moving from Great Britain to Northern Ireland.

Article 7 Technical Regulations, Assessments, Registrations, Certificates, Approvals and Authorisations:

This article creates a ‘UK(NI)’ product branding that identifies products from Northern Ireland as being compliant with EU law for the purposes of movement across the border.

Conformity assessments carried out by UK authorities will no longer be recognised in the EU27 after Brexit.

The EU will supervise any conformity assessment processes that must be carried out in Northern Ireland.

It also precludes the UK from rejecting, for safeguard reasons, any products approved or authorised in an EU Member State from entering the Northern Ireland market.

Article 8 VAT and excise:

Article 8 has to be read with Annex 3 to the protocol - Union Law Referred to in Article 8 - those are provisions of EU law relating to VAT and Excise.

Article 8 provides that EU’s VAT rules for goods “shall apply to and in the United Kingdom in respect of Northern Ireland.”  However, the UK may apply to supplies of goods taxable in Northern Ireland VAT exemptions and reduced rates that are applicable in Ireland in accordance with provisions listed in Annex 3 to the protocol.

The UK authorities will be responsible for the application and implementation of the provisions in Annex 3 to the protocol including the collection of VAT and excise duties.

Under conditions set out in those provisions, revenues resulting from transactions taxable in Northern Ireland shall not be remitted to the EU.

The Joint Committee has to regularly discuss the implementation of Article 8 and shall, where appropriate, adopt measures for its proper application, as necessary.

This is likely to be a complex area.  The Association of Accounting Technicians (AAT) in an article dated 21 October 2019 comment:


VAT 

Another interesting feature of the revised agreement is that EU law on Value Added Tax will continue to apply in Northern Ireland as far as goods are concerned, but not services.
This could lead to the curious scenario whereby Northern Ireland could have different VAT rates to the rest of the UK. Something that currently would not be entertained under existing EU law.

For example, if the UK decided to reduce the general rate of VAT on welfare items, such as smoking cessation products or air source heating pumps to, say, 2.5% Northern Ireland would still have to keep it at 5%. As the latter percentage is the EU minimum.

It also means that Northern Ireland may get the same VAT rates on certain goods as the Republic of Ireland, to stop there being an unfair advantage on either side of the border.


Article 9 Single Electricity Market:

The provisions of EU law governing the wholesale electricity markets listed in Annex 4 apply to the UK in respect of Northern Ireland.

Article 10 State Aid:

Article 10 states that EU state aid law shall apply to the United Kingdom “in respect of measures which affect that trade between Northern Ireland and the Union which is subject to this Protocol.”

EU state aid law will only apply to state aid measures affecting trade between Northern Ireland and the EU.

Article 10 retains powers of the European Commission to enforce state aid rules, but only with respect to NI and EU trade. The Commission will keep the UK “fully and regularly informed” of the progress and outcomes of its assessment procedures.

The applicable EU state aid regulations are listed in Annex 5, and cover effectively the whole body of EU state aid rules.

State aid for agriculture - Article 10 specifies that EU state aid regulations listed in Annex 5 will apply to “measures supporting the production of and trade in agricultural products” in Northern Ireland, where these measures affect trade between Northern Ireland and the EU.

However, Article 10(2) states that state aid rules will not apply until a certain maximum level of aid is reached. The “maximum exempted overall annual level of support” and the minimum percentage shall be set by the Joint Committee according to procedures described in Annex 6.

Article 11 Other areas of North-South cooperation:

The protocol shall be implemented so as to maintain the necessary conditions for continued North-South cooperation.  The Joint Committee has review function and may make recommendations.

Article 12 Implementation, application, supervision and enforcement:

UK authorities are responsible for implementing and applying the EU law that is required to operate in Northern Ireland under the Protocol, but EU has the rights to effectively supervise the UK authorities where they deem it necessary, under ‘working arrangements’ specified by the Joint Committee.

There will be ongoing Court of Justice of the European Union (CJEU) jurisdiction over UK actions with regard to EU law in Northern Ireland, that relevant EU law will have the effects it currently has (e.g. direct effect) in Northern Ireland, and that UK qualified lawyers will continue to be recognised for these purposes before all Member State courts and the CJEU, if their qualifications were recognised before Brexit.

Article 13 Common provisions:  

EU law as applicable to Northern Ireland shall be interpreted in conformity with the case law of the CJEU. Unless explicitly stated otherwise, the EU law that applies in Northern Ireland under the Protocol will do so on a ‘rolling basis,’ including amendments and changes.

Where the EU adopts a new act that falls within the scope of the Protocol, but does not replace an existing act listed in the Annexes, the UK and the EU will debate that act in the Joint Committee and within six weeks determine on whether they wish to append that act to the Annexes, or otherwise ensure that the Protocol continues to function. Where neither proves possible, after six months, the EU is entitled to take ‘remedial measures’.

The UK remains precluded from access to EU networks, databases or information systems after Brexit, unless the operation of the Protocol proves impossible without such access (in full or in part).

UK authorities cannot take the lead in any risk assessment, examination, approval or authorisation processes listed in the Protocol.

When a new future relationship agreement/agreements are negotiated, the EU and the UK will set out, what parts, if any, supersede the Protocol in whole or part. As this new Protocol is more limited in scope and no longer UK-wide, this provision will be less relevant than in the previous Agreement.

Article 14 Specialised Committee:

Article 14 refers to the committee established by WA Art 165.  Article 14 states the role of the Specialised committee: 

(a) facilitate the implementation and application of the protocol;

(b) examine proposals concerning the implementation and application of the protocol from the North-South Ministerial Council and North-South Implementation bodies set up under the 1998 Agreement;

(c) consider any matter of relevance to Article 2 of the protocol brought to its attention by certain bodies the Northern Ireland Human Rights Commission, the Equality Commission for Northern Ireland, and the Joint Committee of representatives of the Human Rights Commissions of Northern Ireland and Ireland;

(d) discuss any point raised by the EU or the UK that is of relevance to the protocol and gives rise to a difficulty; and

(e) make recommendations to the Joint Committee as regards the functioning of the protocol.

The Specialised Committee is one of six specialised committees established by the Withdrawal Agreement. Their remits are set out in Article 165 of the Agreement. They sit below the Joint Committee, but the UK or the EU can refer matters directly to the Committee.

The Specialised Committee comes into being from exit day.

Article 14 does not, however, give the Specialised Committee any specific enabling powers to enforce any solutions. It will rely on escalating matters to the Joint Committee for action to be taken.

Article 15 Joint Consultative Working Group:

The Working Group is a third tier of governance sitting under the Specialised Committee, which the Working Group will report to, and the Joint Committee.

The Working Group’s main function will be as a forum for sharing information and mutual consultation. The Working Group comes into being on exit day, but the provision that it meets “at least once a month” does not come into force until the Protocol is enacted.

The Working Group can make no binding decisions on matters before it; these will have to be escalated to the other Committees.

Article 16 Safeguard measures:

Sets out that the EU and the UK will be able to apply safeguard measures if the Protocol leads to “serious economic, societal or environmental difficulties that are liable to persist, or to diversion of trade.”

The measures must be proportionate to the difficulties occurring.

Article 17 Financial Interests:

The EU and UK have reiterated their obligations to “counter fraud and any other illegal activities affecting the financial interests of the Union or the financial interests of the United Kingdom.”

Article 18 Democratic consent in Northern Ireland:

Article 18  sets out the process by which the Northern Ireland Assembly’s 90 members can provide “consent” for Northern Ireland to continue to abide by Articles 5 to 10 of the Protocol; that is, arrangements for Customs and movement of goods (Article 5); Protection of the UK internal market (Article 6); Technical regulations, assessments, registrations, certificates, approvals and authorisations (Article 7); VAT and excise (Article 8); Single electricity market (Article 9); and State aid (Article 10).   

These new arrangements – which are envisaged as a permanent state rather than a “backstop”, as in the original Withdrawal Agreement – will come into effect automatically at the end of the transition period without any consent vote in the Northern Ireland Assembly. (Note: This applies even if the transition period is extended).

The initial period:

Article 18(5) defines the "initial period" as the period ending 4 years after the end of the transition period.

Article 18(1) - within 2 months before the end of the initial period and any subsequent period, the UK shall provide the opportunity for democratic consent in Northern Ireland to the continued application of Article 5 to 10.  Hence, this opportunity has to be in November or December 2024.

By Article 18(2), a decision expressing democratic consent has to be reached strictly in accordance with the Declaration on Consent in Northern Ireland - UK Government 19 October

Article 18(4) - if democratic consent is not given then Articles 5 to 10 will cease to apply 2 years after the end of the relevant period referred to in Article 18(5).

Subsequent periods:

The length of subsequent periods will depend on whether the decision was on the basis of majority support of Members of the Legislative Assembly (MLA) or on the basis of cross-community support.

• If a motion is passed by a majority of Members of the Legislative Assembly (MLAs) “present and voting”, then Articles 5 to 10 of the Protocol will “continue to apply” for a “subsequent period” of another 4 years. There would also be an independent review of the Protocol.

• If a motion is passed with cross-community support,  then Articles 5 to 10 will continue to apply for a “subsequent period” of another 8 years. 

Under the revised Protocol, cross-community support is taken to mean: (a) a majority of MLAs present and voting, including a majority of each of the unionist and nationalist designations present and voting; or  (b) a weighted majority (60%) of MLAs present and voting, including at least 40% of each of the nationalist and unionist designations.

MLAs “designate” themselves “nationalist”, “unionist” or “other” at the first meeting of an Assembly following an election and can only change their community designation between elections if they have changed their party-political affiliation.

At this point I recommend reading the post by Professor Colm O'Cinneide (Professor of Constitutional and Human Rights Law, University College London) at Verfassungsblog 19 October.

Professor O'Cinneide notes that the consent mechanism is a skilful piece of legal engineering and that providing for democratic consent is in principle justified.  He wrote - 'Providing for the Protocol arrangements to be in place for four years before a vote will ensure some much-needed stability in the aftermath of Brexit. Providing for the possibility of a simple majority vote will force political parties in Northern Ireland to try and build alliances, and prevent a single party having a de facto veto. Other possible mechanisms, such as a referendum vote, pose considerable risks.'

Nonetheless, the mechanism risks re-igniting political tensions over Brexit and the Irish border issue every four years or so, potentially introducing an additional element of uncertainty into an already unstable political landscape.

Article 19 Annexes:

Provides that Annexes 1 to 7 are an integral part of the protocol.

The Annexes:

These are not covered in detail here.

Annex 1 Provisions of Union Law referred to in Article 2(1)
Annex 2 Provisions of Union Law referred to in Article 5(4)
Annex 3 Provisions of Union Law referred to in Article 8
Annex 4 Provisions of Union Law referred to in Article 9
Annex 5 Provisions of Union Law referred to in Article 10(1)
Annex 6 Provisions of Union Law referred to in Article 10(2)
Annex 7 Procedures referred to in Article 16(3)

End note:

It remains to be seen whether the new UK Parliament will be more receptive to the Withdrawal Agreement / Protocols than the previous Parliament.  If the withdrawal agreement is acceptable to the new Parliament then a Withdrawal Agreement Bill is required to implement the agreement in domestic law.

Further reading:

Queen's University Belfast on Brexit

Democratic Audit - Northern Ireland and the Withdrawal Agreement-

Essentially the Northern Ireland Assembly has not sat for almost 2 years - BBC News 21 October

Graphic: 

For each of the 4 arrows in the diagram describe the arrangements in the Protocol for goods.



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