Updated: Mar 12, 2021
The UK is Caught in a Regulatory Web
July 16, 2020
By Jayne Adye
The current arrangements made in the Withdrawal Agreement, the Northern Ireland Protocol and the recent 'Future Relationship with the EU' document, all mean the UK will be subject to continued scrutiny and the jurisdiction of the European Court of Justice, as well as the European Commission in terms of Competition Law after the Transition Period ends later this year. Director of Get Britain Out, Jayne Adye, reveals the severity of the situation.
One of the Government's fundamental 'red lines' throughout the Brexit negotiations has been rejecting the 'Level Playing Field', which means slashing Brussels' red tape and having no regulatory or legal alignment to the European Union to allow the United Kingdom to be a competitive safe haven for businesses all over the world. However, according to the Government's recent 'Future Relationship with the EU' document – as well as the Withdrawal Agreement and the Northern Ireland Protocol – in terms of Competition Law – we will still be well and truly tied to the EU's 'Level Playing Field', regardless of any trade deal agreed in the trade negotiations this year.
Regarding Competition Law: relevant EU legislation was domesticated and transferred into UK law when we formally left the EU on January 31st this year. This is 'oven-ready' and will come into force the minute the Transition Period concludes at the end of this year – meaning we will be using our own legal framework – one which conflicts with the law of Brussels. It is important to note Number 10 has made it clear we will also not be accepting Brussels' State Aid rules. However, we may still be caught in a regulatory web, leading to excruciating legal clashes with the EU well into the future.
There are three key business actions which fall under the authority of Competition Law and will remain subject to legal scrutiny and the EU's 'Level Playing Field' post-Transition Period. These are: mergers, abuse of market power and State Aid. Exiting the Transition Period with these legal frameworks in place – as the Withdrawal Agreement requires – will seriously undermine the UK's ability to be an independent sovereign state.
The first business activity which will remain subject to EU Competition Law scrutiny is mergers, which are a frequent occurrence in the UK. In 2019 alone, there were 4,463. Due to the EU's highly complicated merger test, it is expected more mergers will take place after the Transition Period, as we are supposed to be no longer be under the EU's jurisdiction and the UK's Competition and Markets Authority (CMA) Test is far more efficient. To a certain extent, the 'Future Relationship' document permits some cross-border jurisdiction, and where a merger falls under both the UK and European Commission (EC) jurisdictions, there can be reviews and assessments from both sides, regardless of where the business is located. However, given the substantial differences between both tests, it is likely mergers may be subject to opposing conclusions from each body. This could result in a huge administrative burden for businesses operating in both markets.
Secondly, under the current terms, the EC will preserve jurisdiction over the abuse of market power, which is where large businesses exploit their size and dominance to manipulate a market to their advantage. After the Transition Period, UK-based companies will still be subject to investigation from the EC should any suspected market power misconduct be deemed to affect EU trade. Notably, investigations on abuse of market power – which have already been initiated before the end of the Transition Period – will be permitted to carry on. This means the EC will still maintain some jurisdiction over UK Competition Law for years to come, which again means businesses are likely to be subject to both regulatory bodies' investigations.
The only provision our Government has managed to secure regarding business investigations, comes under Article 102 of the Withdrawal Agreement, in which the European Commission is no longer allowed to physically raid businesses based in the UK post-Transition Period. How kind of them!
Thirdly and most importantly, the European Union classifies State Aid as Competition Law, whereas the UK does not. Should the UK begin to bail out any failing enterprise in the future, Brussels wants to retain the power to review and sanction accordingly.
Under Article 93 of the Withdrawal Agreement, the European Commission will still have jurisdiction to review UK-issued State Aid until December 2024. This may constrain UK businesses while the Government tries to rebalance the economy post-COVID-19 and could give Brussels the capability to utilise this as an ongoing political tool.
Under the Northern Ireland Protocol, EU State Aid rules will apply indefinitely in Northern Ireland until 'Democratic Consent' is withdrawn (ie every 4 years the Protocol will be scrutinised and voted on by the Northern Irish Assembly). The State Aid rules, while active, will seriously affect the UK. They will prohibit the UK from taking any measures to assist businesses which may directly or indirectly affect trade between Northern Ireland and the EU. The Government has already hinted at advising trade should be immediately directed to the Republic of Ireland, rather than taking the traditional route through Northern Ireland, which would now mean crossing the border into the Republic of Ireland via the Irish Sea to avoid goods crossing 2 borders into the Republic, UK exports would thus only be subjected to 1 hard border via this route – as goods can flow freely from the Republic of Ireland into Northern Ireland. The EU are likely to interpret this as the Government assisting businesses which is affecting EU trade.
The UK Government has also insisted it will subsidise tariffs in the form of a refund to British businesses trading with Northern Ireland. This could be interpreted by the EU as a form of State Aid – and given its track record of aggressive protectionism, it is likely they would use such an interpretation in any dispute. Should the UK refute these claims, the litigation would fall under the ECJ's jurisdiction, meaning the EU could leverage the Withdrawal Agreement to continue to maintain political control over the UK.
Under the current legal frameworks set out in the Withdrawal Agreement and the Northern Ireland Protocol, businesses will be subject to a high level of unnecessary scrutiny – such as reviews, investigations and assessments – under the watchful eye of the European Commission, even after the end of this year. This may result in a loss of trade, extensive paperwork and perhaps litigation. All of this means our Government will have to be exceptionally careful when issuing subsidies and advice to businesses, otherwise it will be business-owners who pay the price.
Again, this hardly sounds like 'Taking Back Control'.
This week, the European Research Group and the Centre for Brexit Policy published a report highlighting the severity of these problems and suggested the Government begins to make alternative arrangements, otherwise we will be paying the price for years to come – to the tune of £180 billion. So far there has been no response from the Government to this
It seems the UK has signed up to a regulatory web which will take years to untangle. It has been reported Prime Minister Boris Johnson has considered renegotiating parts of the Withdrawal Agreement and the Northern Ireland Protocol. This is something we would encourage, there are many more aspects of the Withdrawal Agreement which should be renegotiated, including the jurisdiction of the ECJ, treatment of UK citizen's data, sovereignty of our Armed Forces, procurement and security issues, uncertainty over fishing, as well as our liabilities to the European Investment Bank. A renegotiation would be the most sensible option to avoid many serious problems in the future, as well as the chasm of red tape and Competition Rules we are currently signed up to under the Withdrawal Agreement. However, Boris must get on with this as soon as possible, as we must Get Britain Out of the EU with as few strings attached to the EU and the 'Level Playing Field' as possible, otherwise the implications for our security, our lives and businesses will be severe for our plans for a global future.
Jayne Adye is the Director of the Leading grassroots cross-Party Eurosceptic campaign Get Britain Out