The European Union is starting legal proceedings against the United Kingdom over Prime Minister Boris Johnson’s plans to breach terms of its Brexit divorce deal and break international law. The pound dropped by 0.7% against the dollar on the announcement of the news in Brussels.
Ursula von der Leyen, the European Commission president, announced on Thursday that, “we had invited our British friends to remove the problematic parts of their draft Internal Market Bill by the end of September,”. “The deadline lapsed yesterday. The problematic provisions have not been removed, therefore this morning, the Commission has decided to send a letter of formal notice to the U.K. government. This is the first step in an infringement procedure.”
She said that “This draft bill is by its very nature a breach of the obligation of good faith laid down in the Withdrawal Agreement.” The matter could result in a lawsuit against the U.K.’s Internal Market Bill at the European Court of Justice.
The impacts of the Brexit bitter separation are of paramount interest for the British Overseas Territories (OTs). The future is long and uncertain as the Brexit deal goes through a transition period which ends on 31 December 2020. Although not directly involved, the OTs are connected and will have to look on and lobby from the outside with “absolutely no clout.”
Von der Leyen gave the U.K. government one month to reply while a statement from Johnson’s office indicated the government would “respond to the letter in due course.”
The European Commission sends several of these kind of notices to member states every month over various instances of alleged breaches of the EU law. This latest action highlights the high and chaotic tension between the E.U. and the U.K. as trade negotiations enter a critical phase.
Despite the legal proceedings, officials on both sides expressed that they do not wish for legal action to overshadow negotiations on future trade deals.
The Internal Market Bill cleared its final stage in the House of Commons on Tuesday and will move to the House of Lords. Johnson’s Conservative Party does not have a majority in the House of Lords which may pose a challenge.
Johnson’s plan to introduce legislation that would override parts of the Brexit withdrawal agreement would be in conflict with international law which critics feel may damage the U.K.’s position in other international disputes.
While both the EU and the U.K. may now have some time, a resolution is possible but a solution is currently nowhere in sight as the two parties remain distance on critical issues. The bill is being viewed as an attempt by the U.K. to get better terms from the EU by threatening the status of Northern Ireland. A spokesperson for the U.K. Government stated that they need to “create a legal safety net to protect the integrity of the U.K.’s internal market in order to ensure ministers can always deliver on their obligations to Northern Ireland and protect the gains from the peace process.”
Treaty obligations breached before the end of the transition period is subject to rulings by the European Court of Justice for another four years which the U.K. could choose to ignore them, especially if they include financial penalties. This in itself would constitute another breach of treaty.
The Withdrawal Agreement has provision for an arbitration panel consisting of five members to rule on matters of noncompliance from next year. The panel can impose financial penalties. Should the U.K. refuses to pay, the EU can suspend the Withdrawal Agreement, except for the sections on citizens’ rights.
The EU is the U.K.’s largest trading partner. The greatest penalty would be for the EU to refuse to enter into any trade or other agreement with the U.K. The OTs will be impacted either way.