MNI EXCLUSIVE: UK Draft Bill Not Block On EU State Aid Deal

Large chunks of the UK's draft Internal Market Bill (UKIM) could easily be amended or even shelved in order to facilitate a trade deal with the European Union, removing a potential stumbling block lawmakers and parliamentary experts told MNI.

The government has championed the legislation on the grounds that it would ensure a seamless single market with a common state aid policy, preventing devolved administrations in Northern Ireland, Scotland and Wales creating divergent regimes that could create frictions.

Andrew Dunlop, a Conservative member of the House of Lords and a former minister for Scotland and Northern Ireland told MNI that ministers already have the power to restrict the ability of the devolved administrations to change EU retained law as far out as 2027.

POWERS EXIST

"The point is the Government already has powers to prevent the devolved administrations legislating or regulating in a way that causes damaging divergence … the Government doesn't need to rush the UKIM Bill so far as the devolution aspects are concerned," he said.

The UK government has highlighted concerns about Article 10 on the Northern Ireland Protocol (NIP), which applies EU state aid law to measures which could affect trade between NI and the Union, raising fears it could capture state subsidies if recipients have a presence in Northern Ireland.

"If the UK and the EU reach an agreement on state aid … then the EU would have a mechanism to resolve disputes on UK-wide subsidies granted by the UK government. This could either supersede article 10 of the protocol entirely or, more likely, limit its scope to Northern Ireland only," Jess Sargeant, at the Institute for Government, told MNI.

This would allow dropping some of the more controversial aspects of the IM Bill that give Westminster the power to override the Withdrawal Agreement.

"The primary purpose of the provisions is to influence the negotiations," Sargeant said.

REGULATOR

An idea championed by IfG among others, is for the UK to construct an independent state aid regulator, beefing up the existing Competition and Markets Authority, to reassure the EU that it will have robust regulation which would allow the NIP to be amended.

Alexander Rose, a former Government lawyer specialising in state aid, told MNI this could work, but said things would get more difficult if an EU-UK trade deal was struck, but the domestic UK State aid regime was inadequate to meet Article 13(8) of the NIP.

In that case there would be "a tension between what is legally possible and what is politically acceptable … Politically, though, I can't see why the EU would be satisfied with the UKIM Bill not being amended," Rose said.