The uncertain legal status of the Northern Ireland Protocol could lead to major confusion and the UK becoming de facto bound by EU subsidy rules, according to a report by UK lawmakers published on Friday (9 April).
The report by the House of Commons European Scrutiny committee warned that different interpretations of state aid rules by the UK and the EU under the Protocol, which was a key part of the agreement that took the UK out of the EU last year, could impact the willingness of companies to accept subsidies, or of state authorities to grant them.
The Protocol’s provisions are “complex, controversial and have given rise to various practical difficulties”, said the MPs.
Under the terms of the Protocol, Northern Ireland remains in the EU single market for goods and is still subject to EU subsidy rules for trade in goods.
However, Article 10 of the Protocol potentially widens this scope by stating that the UK as a whole should also follow EU rules if a UK-wide subsidy is determined to affect trade in goods between Northern Ireland and the European Union.
That “could, in theory, result in the EU assuming competence to intervene directly with respect to UK subsidies that only have a limited link to Northern Ireland and, potentially, minimal impact on the trade between Northern Ireland and the EU,” the committee warned.
In December, EU and UK officials agreed a compromise whereby Article 10 would only apply if a UK subsidy were to have “real and foreseeable” impact on NI-EU trade.
The Protocol, and its implementation, was one of the thorniest issues throughout the negotiations on the UK’s Withdrawal Agreement and then the post-Brexit trade pact that entered into force in January, and remains controversial, particular among Conservative lawmakers.
By introducing customs checks on goods travelling from Britain, Unionists say the Protocol separates Northern Ireland from the rest of the UK in trade terms. The four main Unionist parties, including the governing Democratic Unionist Party and Ulster Unionist Party, want the Protocol to be abolished.
Northern Ireland has seen a week of rioting in predominantly pro-British unionist and loyalist communities, with many citing public anger over the Protocol as one of the causes.
In January, the European Commission used the Protocol to block delivery of COVID-19 vaccines to Northern Ireland, although it quickly backed down following an angry reaction from London and the Irish government.
The report stated that “the continued application of EU state aid rules under the Protocol on Northern Ireland was always likely to be controversial. However, it is worrying that the extent to which such rules will continue to be binding on the UK under Article 10 of the Protocol are still interpreted very differently by the government and the European Commission”.
[Edited by Zoran Radosavljevic]