True (Bad) Faith 2020? Part Two: Excavating the Legal Rationale for the ‘Emergency Clauses’ in the UK Internal Market Bill

Introduction: Brexit Denouement?

1 November 2020 saw the expiry of the time-limit for the United Kingdom to respond to the European Commission’s notice of infringement proceedings for breach of the EU-UK Withdrawal Agreement. On 9 November 2020, the House of Lords voted in favour of removal of the relevant clauses from the UK Internal Market Bill (UKIMB).

The denouement of this epilogic Brexit drama may be approaching. At the domestic level, the House of Commons will be faced with the decision whether or not to re-instate the ‘emergency clauses’. At the supranational level, the Commission will be faced with the choice whether to prosecute the infringement claim against the UK before the Court of Justice of the European Union (CJEU).

All of this will take place against the backdrop of attempts by the United Kingdom and the European Union to finalise a Future Relationship Agreement before the end of the transition period on 31 December 2020.

This post follows up the legal analysis of the Commission’s claim of breach of good faith on this blog. The objective is to analyse the UK government’s justifications for providing itself with a permission to breach the Withdrawal Agreement.

The hypothesis is advanced that the UK government has based its policy on an interpretation of Article 5 of the Protocol on Ireland/Northern Ireland (NIP) that would enable the EU to enforce its customs law on all goods movements from Great Britain (GB) to Northern Ireland (NI), rather than such EU law only being triggered by the limited condition of onward movement into the EU single market.

UK government conditions for perceived bad faith by the EU

This section will consider whether the EU conduct that the UK government claims justifies use of the emergency clauses would be permitted under the legal text of the Protocol on Ireland/Northern Ireland.

The argument will focus on the UK government claims that the EU may insist on charging tariffs on goods moving between Great Britain and Northern Ireland even when the ‘risk on onward movement’ test in Article 5(1) NIP is not fulfilled.

The UK government has sought to justify the emergency clauses as an insurance policy against perceived future EU conduct that could threaten trade between Northern Ireland and Great Britain. The most recent such justification came in the House of Lords on 9 November 2020. Cabinet Minister Lord True stated that ‘the United Kingdom government will never accept that a foreign power, in the form of the EU, could unduly disrupt the free movement of goods within the United Kingdom’s customs territory. It is solely and specifically against such an unwarranted, disproportionate and unnecessary potential intervention that the… [emergency clauses] are designed’.

The initial fragments of a legal argument may be excavated from the government statement on notwithstanding clauses issued on 17 September 2020. The paper provides a non-exhaustive and non-cumulative list of five examples of behaviour that the UK government asserts would see the EU ‘engaged in material breach of its duties of good faith or other obligations…undermining the fundamental purpose of the Northern Ireland Protocol’.

The five examples provided in the paper are:

  1. insistence on charging GB-NI tariffs in ways not related to real risk of goods entering EU single market;
  2. such insistence leading to failure to reach agreement in Joint Committee leading to default provisions on tariffs between GB and NI;
  3. insistence on export declarations for NI goods moving to GB, compromising the principle of ‘unfettered access’ in Article 6 NIP;
  4. insistence that EU state aid provisions should apply to GB in circumstances when there is no link or only a trivial one to commercial operations in NI; and
  5. refusal to grant third country listing to UK agricultural goods for manifestly unreasonable or poorly justified reasons.

The following section focuses on example 1 and the text of Article 5 NIP, and considers whether the provision may permit the EU to engage in conduct that the UK would regard as ‘material breach of its duties of good faith’ through insistence on charging tariffs even when there is no real risk of onward movement into the single market.

The UK government’s interpretation? Article 5 of the Protocol on Ireland/Northern Ireland as a legal ‘backdoor’

This section presents an interpretation of Article 5 NIP which would permit Union customs law applying to the United Kingdom notwithstanding the real risk of goods moving into the EU single market.

The legal sources

Article 5(1) NIP prescribes that

‘no customs duties shall be payable for a good brought into Northern Ireland from another part of the United Kingdom by direct transport, notwithstanding paragraph 3, unless that good is at risk of subsequently being moved into the Union’ (emphasis added).’

The second sub-paragraph of Article 5(1) NIP states that

‘[t]he customs duties in respect of a good being moved by direct transport to Northern Ireland other than from the Union or from another part of the United Kingdom shall be the duties applicable in the United Kingdom, notwithstanding paragraph 3, unless that good is at risk of subsequently being moved into the Union’ (emphasis added).

Article 5(3) NIP states that

‘Legislation as defined in point (2) of Article 5 of Regulation (EU) No 952/2013 shall apply to and in the United Kingdom in respect of Northern Ireland (not including the territorial waters of the United Kingdom)’ (emphasis added).

This 2013 EU legislation prescribes itself as ‘laying down the Union Customs Code (UCC)’. Point 2 of Article 5, which is referred to in Article 5(3) NIP, provides a definition of ‘customs legislation’:

 (a) the Union Customs Code;

(b) the Common Customs Tariff;

(c) the legislation setting up a Union system of reliefs from customs duty; and

(d) international agreements containing customs provisions, insofar as they are applicable in the Union.

The ‘notwithstanding’ clause in Article 5(1) is subject to a caveat:

’the Joint Committee shall establish the conditions, including in quantitative terms, under which certain fishery and aquaculture products…brought into the customs territory of the Union….by vessels flying the flag of the United Kingdom and having their port of registration in Northern Ireland are exempted from duties’ (emphasis added).

This defines a permission for the UK representative, the Chancellor of the Duchy of Lancaster, and the EU representative, Commission Vice-President Maroš Šefčovič, in the Joint Committee to establish rules whereby fishery and aquaculture products may be exempt from Union customs duties.

The ‘backdoor’ interpretation

Ostensibly, customs duties shall only be applicable to goods moving into Northern Ireland from Great Britain if the goods are at subsequent risk of being moved into the Union single market, for example across the Northern Ireland/Ireland land border.

However, the UK government seems to have interpreted the recursive legal structure of Article 5(3) NIP, and the wording of ‘notwithstanding’ as a backdoor whereby the Union Customs Code continues to apply to the UK prima facie and notwithstanding the test.

This interpretation reconstructs Article 5(1) NIP as stating: ‘notwithstanding the test that customs law will only apply to goods moving from Great Britain to Northern Ireland if there is a real risk on onward movement into the single market, all of the customs law defined in the 2013 regulation will apply to and within the United Kingdom’.

On this reading of the ‘notwithstanding’ clause in Article 5(3) NIP as a ‘backdoor’ for EU customs law, the EU institutions could claim that it is permissible to charge tariffs on goods entering Northern Ireland from Great Britain, even if the test established in Article 5(1) of risk of subsequent entry into the EU single market is not fulfilled.

This may explain the rationale for the strategy pursued by the UK government of creating de facto emergency powers in domestic law so as to disapply the effect of these obligations, in tandem with a political commitment to commence formal dispute resolution procedures against the EU.

The alternative interpretation of ‘notwithstanding’ and teleology

It may be suggested that a more orthodox textual interpretation of the interaction between Article 5(1) and Article 5(3) NIP would provide a contradistinct outcome to the argument presented above. The ‘notwithstanding’ clause may be regarded as functioning so as to declare that no customs duties shall be payable unless a good is at risk of being moved into the Union, and this takes precedence notwithstanding the statement in paragraph 3 that the Union Customs legislation shall apply in the United Kingdom in respect of Northern Ireland.

On this construction, Articles 5(1) and 5(2) apply notwithstanding Article 5(3), rather than Article 5(3) applying notwithstanding Articles 5(1) and 5(2) NIP. Thus, Article 5(3) would function as the general norm, and Articles 5(1) and (2) mandating the ‘risk of entry’ test would function as the exception.

The alternative possible interpretations of ‘notwithstanding’ may indicate a fundamental linguistic ambiguity in the text. A ‘penumbra of uncertainty’ may have been reached whereby purely textual analysis cannot reasonably yield either result. In such an event, the relevant adjudicator may need to look beyond the text of Article 5 NIP and engage in alternative complementary forms of interpretation.

If one were to look at the intentions of the parties to the Withdrawal Agreement and its Protocol in the abstract, it may be reasonable to deduce that the UK and the EU would have intended to mandate the alternative interpretation – customs duties should only apply when the narrow condition of risk of onward movement is fulfilled.

As the Court of Justice would be the relevant adjudicative body under a Commission infringement claim, it can be predicted that the Court would engage in its patented teleological interpretation to divine the purpose and objectives behind Article 5. This determination may be detached from the actual or constructed intentions of the parties, and instead draw upon interpretative canons such as ‘EU law as a whole’ (Wightman).

The Wightman judgment also suggests that the CJEU would only draw upon public international law sources and interpretative methods to supplement its own interpretative method, especially as international agreements are regarded as a source of secondary EU law within the EU’s ‘autonomous new legal order’.

Therefore, if both possible interpretations were presented before the Court of Justice in the Commission’s infringement claim, it may be suggested that the Court would decide to confirm the reading that it perceives as best serving the interests, values, and telos of the EU constitutional order, rather than the interpretation that most closely coheres to the principles of textual interpretation.

Conclusion: Festive tidings from Luxembourg?

The potential dispute over breach of good faith by the United Kingdom may remain hypothetical. The House of Lords, the UK’s ‘upper chamber’ in the legislature, has voted resoundingly to remove the ‘emergency clauses’ from the UK Internal Market Bill. If, however, the UK government decides to re-insert the clauses before the next readings in December in the House of Commons, the alleged infringement will remain live.

This post has sought to excavate the legal interpretation of the Protocol on Ireland/Northern Ireland that would provide a basis for the forms of EU conduct that the UK argues would necessitate the use of emergency powers to disapply the relevant provisions of the Withdrawal Agreement in domestic law.

Focusing purely on the example of charging blanket tariffs on GB-NI goods movement, the text of Article 5(1) and 5(3) NIP may be open to conflicting interpretations. The ‘backdoor clause’ interpretation may suggest that Union’s custom law applies to and in the UK notwithstanding the test of risk of onward movement. The ‘orthodox alternative’ interpretation may suggest that the test of risk of onward movement applies notwithstanding the application of Union customs law. Such an interpretative conflict may need to be resolved by the Court of Justice of the EU, if the infringement claim makes it to Luxembourg.