I fought the law....but who won?

The government has announced that its Internal Market Bill, published today, will break international law – specifically, the Withdrawal Agreement that it signed with the EU last October – in a “limited and specific” way. Why has the government taken this incendiary step, which undermines the UK’s defence of international commitments against China, Russia and Iran (just for starters), while negotiations are still ongoing for an EU trade deal?

There are probably two plausible explanations. The first is that the government now expects no deal, and is taking the domestic legal steps to prepare for that in terms of protecting Northern Ireland’s position within the UK internal market. The second is that it is a negotiating ploy, to show the EU what the government will do if there is no deal, and so shore up the UK negotiating position for the endgame talks – linked to that, you can also see this move as a way to placate restive and Eurosceptic Tory backbenchers.

Either – and both – can be true as of this moment. Boris Johnson may genuinely not have decided on deal or no deal, but be happy to try to crank up the pressure on the EU.

The key to what is going on may lie buried deep in clause 43(3)(c)(i) of the Internal Market Bill. This gives the Secretary of State for Northern Ireland power to scrap the Withdrawal Agreement provisions which tie the UK to EU State aid rules, not just in his region but, crucially, “in respect of activities outside Northern Ireland” as well. Why bring in the rest of the UK if – as the government claims – this law-breaking is purely to provide clarity for business in Northern Ireland? The likely answer is that the wider EU trade talks are stalled on this exact issue – how much autonomy will UK State aid policy have in future? No10 seem to have belatedly realised that holding out for full independence on State aid in any EU trade deal would be hugely undermined by the ‘oven ready deal’ Boris Johnson signed last October. The Withdrawal Agreement makes clear that EU State aid law binds the UK in perpetuity, in respect of anything which “affects” trade between Northern Ireland and the EU. That bar is set very low by established EU law; so, for example, a new UK-wide furlough scheme after January would probably need the EU’s permission if it extended to businesses with Northern Ireland operations. No10 may simply have decided to show that they are willing to close off that large State aid loophole, the better to threaten no deal in EU talks.

This is also, by the way, why Northern Ireland Secretary Brandon Lewis’s statement that the Bill would break the law was no slip of the tongue. The UK courts interpret legislation on the assumption that Parliament intended to respect the law – which would take us back to the supremacy of EU law in the Withdrawal Agreement. To protect against that, anything Ministers say about the Bill in Parliament, which can be used by the courts to interpret Parliament’s intentions – must be absolutely explicit that the government intends to break its international commitments. The Bill achieves this, legally, through CL 45, which gives the law-breaking powers effect "notwithstanding any relevant international or domestic law with which they may be incompatible or inconsistent".

This is not to say that the Northern Ireland provisions are purely a smokescreen. The Bill would give the Secretary of State power to scrap or limit checks on trade across the Irish Sea which the EU might otherwise insist on to protect their Single Market – which would allow Boris Johnson’s promise of no new paperwork to be met. But we think it unlikely that the government would risk no deal over the level of customs checks on trade across the Irish Sea. State aid is the bigger game.

If that is right, then Boris Johnson hasn’t given up on an EU trade deal – yet. However, there is no doubt that this is a reckless, potentially talks-ending move. How will the EU react? Initially, with caution. They will study the Bill, consult closely with Dublin – whose views will be pivotal, and who, for now, seem to regard this move as a negotiating threat – and discuss among the 27. They will be reluctant to walk away, in part because that gives No10 the advantage in the inevitable political blame game. But they will make clear – as European Commission President von der Leyen already has – that any trade deal will require full implementation of the existing Withdrawal Agreement commitments, to the EU’s satisfaction.

The EU will also know that this legislative baseball is not in the government’s hands yet. While rumblings of rebellion among Conservative MPs are probably containable, the House of Lords – where the government has no majority – may well seek to remove the illegal powers of the Bill, and could certainly delay it until after the transition period ends, which would weaken the government’s threat to the EU.

Ultimately, if Boris Johnson does want a deal, he will have to pivot back towards meeting the EU’s concerns on UK State aid policy, pretty quickly. The government have in the space of two days made the job of convincing EU Member States that the UK can be trusted on level playing field issues a lot harder. In that sense, this negotiating move – if that is what it is – is counter-productive. The EU will be even firmer in its demands for a UK domestic State aid regime which is independently regulated, enforceable by businesses in the UK courts – exactly the constraints that the Internal Market Bill gives the government the power to remove. Unless Boris Johnson is willing to agree that, we are heading for no deal. Whatever the thinking in No10, the next move is for the UK.