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Brexit explainer - what is the Internal Market Bill and why does it matter?

Words by:
Account Manager
September 14, 2020

For avid Brexit-watchers, the headlines from the past week may seem like the country has been transported back to October 2019. With restless backbenchers, strongly worded statements from EU Chief Brexit negotiator Michel Barnier, and journalists running to the nearest legal expert, Westminster is suffering from a collective case of déjà vu. For those just tuning back into the Brexit negotiations, here’s what you need to know.

What is the Internal Market Bill?

The Internal Market Bill is intended to create a framework for trade to operate across the four UK nations post-Brexit. The Bill attempts to ensure the whole UK operates as its own single market. It would establish two legal principles – mutual recognition and non-discrimination – to ensure there are no new barriers for businesses trading across the UK, allowing a good or service to be sold anywhere in the UK without any internal standards blocking the movement of goods.

Why is the Bill so controversial?

The principal issue is that the Bill would reverse the Northern Ireland protocol contained in the Withdrawal Agreement, which was signed by Boris Johnson and passed by the current Parliament on 24 January 2020. The protocol settled the issue of post-Brexit trade across the Irish border by applying some EU customs regulation to goods travelling between the rest of the UK and Northern Ireland to avoid checks at the Irish border. The Bill would contravene the Agreement in three ways:

  1. It gives ministers powers to not to apply EU standards on paperwork for goods leaving Northern Ireland going to the rest of the UK.
  2. It gives ministers the power to disapply or modify state aid rules in Northern Ireland, which the Withdrawal Agreement stated would continue to be governed by EU state aid rules. Those powers also allow the UK Government to ignore decisions of the European Court of Justice and EU legislation on state aid.
  3. It would prevent individuals from enforcing the provisions of the Withdrawal Agreement in UK courts by stating the measures in the Bill are ‘not to be regarded as unlawful on the grounds of any incompatibility or inconsistency with relevant international or domestic law’.

The second issue with the Bill is the decision to apply mutual recognition to the devolved nations without their consultation. Mutual recognition means goods lawfully produced in England according to English standards can be sold in Scotland, even if Scotland has higher (and thus more expensive) standards. This means the devolved nations are not allowed to exclude goods from other UK nations made to lower standards, undermining their ability to set their own regulations.

What has the reaction been?

Reaction has been strong from both sides of the Brexit debate, fuelled by Northern Ireland Secretary Brandon Lewis admitting in the Commons that the Bill ‘does break international law in a specific and limited way’. Domestic opponents of the Bill suggest that it will damage the UK’s international reputation, preventing it from being taken seriously when addressing illegal acts conducted by other nations and making trade talks harder.

Scottish First Minister Nicola Sturgeon has described the Bill as an “assault on devolution”, an accusation that is unlikely to hurt the SNP’s standing going into the Scottish Parliamentary elections next year. Sturgeon has now pledged to campaign to demand a new independence referendum as “the only way to protect the Scottish parliament from being undermined and its powers eroded”.

The European Commission has threatened the UK with legal action and trade sanctions if it does not withdraw the controversial clauses in the Internal Market Bill by the end of September. Irish Taoiseach Micheál Martin has also personally criticised the Bill, stating that he is now pessimistic about the chances of agreeing a trade deal with the UK. Despite this, the EU has no intention of immediately shutting down  its talks on the UK/EU future-relationship, saying it would amount to falling into a trap set by the UK.

Across the Atlantic, US Speaker Nancy Pelosi has warned that there is “no chance” of the US signing a trade deal under a Biden presidency if the UK goes ahead with the Internal Market Bill in its current form because it undermines the Northern Irish peace process.

Why has the government done this?

The government has stated that the Bill is merely its way of tidying up “loose ends” in the Withdrawal Agreement that it says were caused by passing the Agreement “at speed”. The policy is described as a ‘safety net’ by ministers, to protect Northern Ireland’s position if a deal on future relations with the EU cannot be reached.

The UK has also claimed Michel Barnier has threatened not to include the UK on the list of “third countries” on food standards, which would effectively make it illegal to move food from Great Britain to Northern Ireland.

This defence has been met with scepticism by political commentators, the EU and some UK politicians, who believe the UK Government is either trying to force more concessions from the EU, attempting to force the EU to walk away from negotiations or simply did not realise the implications of the Withdrawal Agreement during the negotiations.

Of course, more than one of these reasons can be true at the same time, and it is entirely possible the UK Government feels it is a necessary action to take to protect trade with Northern Ireland, while also using the Bill as a way of shaking up, or perhaps deliberately destabilising, the trade talks.

What happens now?

The government has told the EU it doesn’t intend to withdraw the Bill, meaning it will be debated in Parliament. Conservative MP Bob Neill has tabled an amendment that would give parliament a veto on any decision to breach the Withdrawal Agreement. A significant number of other amendments are also expected. The passage of any amendment would require a significant Conservative rebellion, as well as the support of Labour, the SNP and the smaller opposition parties.

The Bill must also pass in the House of Lords, where it has been widely condemned, including from Conservative peers. The Lords are highly unlikely to block the Bill but may introduce amendments to force the Bill back to the Commons. It is almost certain to back any amendments passed in the Commons designed to water down the Bill. The Bill can’t pass into law until both Houses pass the same version of the Bill in full.

What happens if the Bill passes?

The passage of the Bill in its current form is likely to cause a serious impasse between the UK and the EU. European Parliament leaders, representing a majority of MEPs, have issued a statement declaring they will block the EU-UK trade deal if there is any breach of the Withdrawal Agreement. This marks a line in the sand from which neither side is backing down and makes the possibility of leaving the transition period without a trade deal significantly higher.

While it is highly unlikely the Bill will be voted down, it may be passed with amendments that either remove or significantly waters down the current provisions. The government is considering implementing sanctions, including a ‘nuclear option’ of withdrawing the whip from rebel Conservative MPs.

The Bill also has implications for the union. The Scottish and Welsh Governments have set out strong opposition to the Bill and with Scottish Parliamentary elections on the horizon in 2021, the Bill is set to further provoke anti-Westminster sentiment among Scottish nationalists. Polls have consistently shown a majority in favour of Scottish independence since the onset of the coronavirus pandemic, and this Bill is likely to cement opposition to the current Westminster Government in Scotland.

The matter may well be settled in the courts. Although the UK Supreme Court is unlikely to have jurisdiction over the issue due to parliamentary sovereignty, the EU may choose to take the case to the European Court of Justice which has jurisdiction over the interpretation and implementation of the Withdrawal Agreement.

Whatever happens over the next week, the UK Government has chosen a provocative approach that will have significant implications for the outcome of the UK-EU trade negotiations, its relationship with its own MPs, the strength of the union and its international reputation.

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