The Internal Market Bill (“IMB“) passed its second reading in the House of Commons tonight (14 September 2020). This means that the IMB will now likely become law in the UK, taking the UK ever closer to substantively breaching the Withdrawal Agreement – and international law.

This blog post serves to outline the scope of the IMB (as introduced to Parliament), as well as explain why it breaches international law.

What does the Internal Market Bill do?

The IMB has been introduced to ensure that there are no internal barriers to trade within the UK following the end of the Transition Period.

Currently, the constituent parts of the UK all uniformly conform to EU standards on goods and services. When the Transition Period ends, the existence of devolved powers (for example on agriculture) means that the countries within the UK will be able to implement their own regulations and policies. To ensure that any divergence in standards does not result in internal barriers to trade within the UK, the IMB introduces the principles of mutual recognition and non-discrimination.

To enforce these principles, the IMB also creates the Office for the Internal Market within the CMA, which will be responsible for monitoring and reporting on the internal market of the UK (Part 4 IMB). The Office for the Internal Market does not appear to have any enforcement powers to directly remedy breaches of the IMB, although it may make reports on such breaches and lay them before the UK Parliament and devolved legislatures).

The IMB also provides the UK Government with powers to in effect amend the Northern Ireland Protocol (part of the Withdrawal Agreement) (see below for more details), as well as the exclusive power to apply state aid in the UK (Ss 46 & 47 IMB).

Mutual recognition

The IMB provides that any goods that are legally sold in one part of the UK may also be freely sold in any other part of the UK. This applies regardless of whether those goods meet the standards required in the other parts of the UK (S2 IMB). For example, goods that meet the standards required in Scotland may be sold in England, Wales or Northern Ireland – even if those goods do not meet local requirements.

Similarly, any services that are authorised in one part of the UK may be offered without any additional authorisation in all other parts of the UK (S17 IMB). Professional qualifications issued in one part of the UK will also be recognised in all parts of the UK (S22 IMB).

There are certain exemptions to the principle of mutual recognition (e.g. goods may not be sold if they do not meet food safety requirements; legal services are still divided between the constituent parts of the UK).

Non-discrimination

The IMB also nullifies any local measures which would directly or indirectly discriminate against goods (Ss5 – 8 IMB) or services (Ss18 & 19 IMB) from other parts of the UK (in favour of local goods or services). Under the IMB, such measures would have no legal effect – and would not require compliance from business entities.

Why does the Internal Market Bill breach international law?

Summary

As part of the Withdrawal Agreement the UK agreed to ensure that the provisions of the Withdrawal Agreement (which include the Northern Ireland Protocol) were directly enforceable in the UK. However, the IMB grants the UK Government powers to unilaterally override the Northern Ireland Protocol in respect of:

  1. the exit procedures for goods moving from Northern Ireland to Great Britain; and
  2. state aid in Northern Ireland.

Such provisions do the opposite of ensuring that the Withdrawal Agreement is directly enforceable in the UK – they create the real possibility that parts of the Withdrawal Agreement will not be directly enforceable in the UK. As such, the UK has breached its obligations under the Withdrawal Agreement in a “specific and limited way” (Brandon Lewis, Northern Ireland Secretary, 8 Sept 2020).

If such powers under the IMB were exercised, this could constitute another breach of the Withdrawal Agreement (a direct breach of the Northern Ireland Protocol). This would be another (more substantive) breach of international law.

More simply, the mere introduction of the IMB could breach the “good faith” clause in the Withdrawal Agreement.

Legislative Detail

The Withdrawal Agreement is directly applicable in the UK, and all legal or natural persons shall in particular be able to rely directly on the provisions contained or referred to in [the Withdrawal Agreement]” (Article 4(1) Withdrawal Agreement). The Northern Ireland Protocol is part of the Withdrawal Agreement. Further, as part of the Withdrawal Agreement the UK agreed to ensure that the Withdrawal Agreement (including the Northern Ireland Protocol) would remain directly applicable in the UK through “domestic primary legislation” (Article 4(2) Withdrawal Agreement).

The IMB provides that UK Ministers may “make provision about the application of exit procedures to goods, or a description of goods, when moving from Northern Ireland to Great Britain.” (S42(1) IMB). “That includes any exit procedure that is applicable by virtue of the Northern Ireland Protocol” (S42(2) IMB). In addition to this the IMB allows the Secretary of State to make provisions in connection to state aid in Northern Ireland (S43(1) IMB). This includes expressly “disapplying or modifying” the effect of Article 10 of the Northern Ireland Protocol (which forms the basis for state aid in Northern Ireland). S45(1) IMB confirms that S42 and S42 IMB, and any provisions arising from the powers granted therein, have effect “notwithstanding any relevant international or domestic law with which they may be incompatible or inconsistent”. Notably, “international or domestic law” expressly includes the Northern Ireland Protocol and any decision of the ECJ and UK courts (S45(4)(a) & (g) IMB).

What happens next?

The House of Commons will now debate the IMB and table amendments for it over the course of the next two weeks (scheduled dates: 14 -16 September 2020, and 21-22 September 2020). After this they will vote on it and pass it on to the House of Lords for their scrutiny.

The schedule and the process of the IMB’s passage can be found here. The IMB itself can be found here.