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New EU rules could lead to increased friction in NI - GB trade

16 March 2021

Northern Ireland could find itself in the awkward position of being required to apply EU trade sanctions, such as quotas, or higher tariffs, on goods brought into Northern Ireland from the rest of the UK as a result of a combination of a new set of EU rules and the Protocol on Ireland/Northern Ireland.

Report conclusions

This potential situation is set out in the most recent analysis by the Commons European Scrutiny Committee of how new EU rules - in this case an EU 'Regulation' and a 'Decision' taken in December 2020 by the EU Joint Committee established under the EU/UK Withdrawal Agreement - might affect the UK.

The new EU rules are known as The Trade Enforcement Regulation and apply in Northern Ireland under the terms of the Protocol. The Regulation was formally adopted by the EU and came into force on 13 February 2021.

It was brought into play by the EU partly because of the lapsing of a World Trade Organisation (WTO) mechanism for resolving trade disputes. 

The lapsed WTO dispute resolution mechanism, called 'The Appellate Body', is unable to function because the term of office of its members has expired and the United States is blocking the appointment of new members.

This blockage has created a void at the heart of the WTO's dispute settlement system and made it difficult for the EU and other WTO members to take effective action if they perceive that a trading partner is in breach of WTO rules.  

The EU Trade Enforcement Regulation is designed, from an EU perspective, to get round this difficulty. Where disputes are governed by WTO rules, the newly-adopted Regulation allows the EU to take immediate trade 'countermeasures' if the EU has achieved a ruling in its favour from a WTO panel of independent trade experts.

The 'countermeasures' are sanctions such as quotas on goods, increased customs duties, or restrictions on trade in services.  

Usually, WTO panel rulings can be appealed to the WTO Appellate Body but, as this Body is no longer functioning, the EU and 23 other WTO members have agreed a stop-gap measure - the 'multiparty interim appeal arbitration agreement' – which provides an alternative appeal mechanism. The UK is not one of the countries participating in the arbitration agreement.    

The EU has made clear its preference to resolve disputes with other WTO member countries through arbitration rather than proceeding immediately to countermeasures.

However, the Trade Enforcement Regulation can be seen as a more assertive defence of the EU's economic interests, allowing it to impose countermeasures after obtaining a favourable WTO Panel ruling if the UK (or other WTO member) is unwilling to agree to arbitration. 

The Regulation also allows the EU to impose countermeasures if there is a dispute under a trade agreement, such as the Trade and Cooperation Agreement with the UK, and it considers that the UK is unduly delaying the resolution of the dispute under the dispute settlement procedures set out in the Agreement.  

The Regulation applies in Northern Ireland under the Northern Ireland Protocol.

This means, based on the European Scrutiny Committee’s understanding, that the EU's retaliatory tariffs are likely to be payable on most (if not all) goods entering Northern Ireland from outside the EU (including from the rest of the UK) because they will be considered "at risk" of onward movement to the EU even if they remain in Northern Ireland.

Hence the possible scenario of Northern Ireland potentially applying trade sanctions against goods brought into Northern Ireland from the rest of the UK.  

When the European Scrutiny Committee asked the Minister for Trade, Ranil Jayawardena MP, for the Government's analysis of the implications of the EU Trade Enforcement Regulation for Northern Ireland, he said "this is more directly a matter for the Cabinet Office".  

The Committee noted the Minister's reluctance to comment on the application of the EU Trade Enforcement Regulation in Northern Ireland. This, the Committee said in its latest report, was "deeply regrettable".

If most (if not all) non-EU goods entering Northern Ireland which are subject to EU trade countermeasures are to be charged the EU tariff because they are 'at risk' of onward movement to EU territory, it is important for the Government to provide details of the reimbursement scheme for traders it has said it would establish at the earliest opportunity.   

Committee questions Minister’s analysis on Europol   

The House of Commons European Scrutiny Committee has questioned the analysis of the Security Minister, James Brokenshire MP, concerning proposed changes to European policing which could have an impact on the UK. The Committee also noted that the Minister had submitted an "exceptionally brief analysis" of the proposed policing changes. 

The Committee called for more information about how the EU changes would affect the UK.   

The proposed changes, set out in a new EU 'Regulation', concern the way its agency for law enforcement cooperation, Europol, handles large and complex sets of data – popularly known as 'big data'.

The UK, post-Brexit, no longer participates in Europol. However, the Trade and Cooperation Agreement (TCA) concluded by the UK and the EU in December 2020 envisages continued cooperation with Europol.

Europol’s own strategy for 2021-23 underlines the need to establish "an excellent operational partnership with the UK", describing cooperation with the UK as "essential for all the crime areas falling under Europol’s mandate". 

Europol plays an important role in preventing and combatting serious cross-border crime in the EU. It operates as a hub for processing and analysing information which may assist member states in their criminal investigations.

The agency has several specialised units working on crimes such as terrorism, cybercrime, online incitement to violent extremism and the smuggling of migrants.  

The European Scrutiny Committee report notes that the Security Minister told Parliament in an 'Explanatory Memorandum' that the proposed changes to the Europol Regulation would have no legal, policy or financial implications for the UK following Brexit.

The Committee says it does not agree with this view given that the UK has agreed in the TCA to establish "cooperative relations" with Europol that include the exchange of information and the secondment of liaison officers on both sides to facilitate cooperation.   

The main purpose of the changes proposed in the Regulation is to ensure that Europol has a secure legal base to process big data by carrying out a "pre-analysis" to screen out data, including personal information which the agency is not currently authorised to process, or data relating to individuals who have no direct connection with a criminal investigation.

The EU's data protection supervisory authority has criticised Europol for its current handling of these datasets, highlighting the risk that personal data processed by the agency might wrongfully link innocent individuals to criminal activity.    

The changes proposed are also intended to make it easier for Europol to receive data from private bodies such as travel companies or banks which often hold information on individuals involved in cross-border crimes.

The changes would also allow Europol to share personal data with private parties in limited circumstances – for example, to enable them to take down online content promoting terrorism or violent extremism during a real-time crisis such as a terrorist attack. 

A number of the changes proposed for Europol are relevant to the UK because:  

  • Europol would be able to receive and process personal data provided by private parties based in the UK for the specific purposes set out in the Regulation. Europol could share its analysis of this data with the UK's national contact point, the National Crime Agency, if it is relevant to the UK – but would be under no obligation to do so. 
  • UK authorities would be able to share with Europol personal data relating to a specific criminal investigation, provided it's within Europol's mandate and links to a wider criminal investigation in one or more member states for which Europol is providing operational support. In such circumstances, the data processed by Europol could only be shared within the EU. 
  • Europol would be able to enter data it has received from the UK (and other non-EU countries) to create 'alerts' in the Schengen Information System relating to UK and other non-EU nationals suspected of involvement in serious crime. 
  • Europol would be able to request an appropriate financial contribution to its budget (based on a separate financial agreement) in recognition of the benefit that the UK (or any other non-EU country) receives from its services. 
  • The proposed Regulation would strengthen Europol's relationship with the EU’s Anti-Fraud Office and Public Prosecutor (the so-called "EPPO"). Both of these bodies would continue to have some oversight role in the UK through the UK's participation in EU-funded programmes such as the very large science and environment research project known as 'Horizon Europe'. 

The European Scrutiny Committee has written to the Government saying it is disappointed that the Explanatory Memorandum provided to Parliament did not examine the proposed EU Regulation in the context of the UK commitment in the TCA to establish "cooperative relations" with Europol.   

The Committee noted that the Minister did not state in his memo whether he had consulted stakeholders such as the National Crime Agency, the Information Commissioner and others with an interest in cross-border law enforcement on this matter. The letter asked the Minister to confirm he had consulted relevant stakeholders (or intends to do so) and requested an overview of their responses.  

European Scrutiny Committee reports

One of the key roles of the European Scrutiny Committee is to consider recent approved and draft EU legislation and policy documents.

When these documents are deposited in Parliament by the Government they are accompanied by an 'Explanatory Memorandum' from the relevant Minister.

The Committee examines the legal and political significance of the documents and, where appropriate, asks further questions of the Government about the implications of the EU documents for the UK.

The Committee also has the power to recommend documents for debate. 

Further information

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