Here, in the first of a series of assessments of the key issues in Theresa May’s 585-page draft Withdrawal Agreement, Lawyers for Britain Chairman Martin Howe QC explains the so-called ‘backstop’ or Northern Ireland Protocol which occupies 175 pages of the text.
- No unilateral exit clause. The Protocol can only be stopped from coming into force if the EU agrees with the UK to replace it before the end of the transition period with a trade agreement. If the Protocol comes into force, the UK cannot exit from it without a “joint” decision (meaning the EU has a veto) in the ‘joint committee’ (article 20 of the Protocol). This absence of a clause allowing withdrawal on notice is unprecedented in trade treaties including the EU’s own trade agreements with non-member countries. Under international law, future governments and Parliaments would be locked in and bound by the treaty concluded by this government.
- Because of this lock-in, the Protocol would not operate just as a ”backstop”. In negotiations on the future trade treaty, the EU would have no incentive to offer the UK terms which are any better than the Protocol – since if the UK fails to agree to the EU’s demands the Protocol automatically comes into effect and lasts indefinitely, giving the EU tariff-free access for its £95bn trade surplus in goods and keeping up the EU’s external tariff wall around the UK market as a barrier against competing goods from non-EU countries.
- It will require the whole UK to remain in a Customs Union at the end of the transition unless there is agreement between the UK and the EU to the contrary.
- It will require Northern Ireland (unlike Great Britain) to be subject to a large number of EU single market regulations and directives, and customs and tax rules.
- Under the backstop the UK would have to follow the EU’s external trade policy and import tariffs. It would not be possible for the UK to implement trade agreements with non-EU countries
- The Protocol includes ‘level playing field’ measures in areas such as state aid, environment and employment rights. Since these are locked into the Protocol, the EU is certain to insist on the same or more stringent restrictions in any replacement trade agreement.
What is this Protocol?
Within the draft Withdrawal Agreement (“WA”), 175 pages consists of a Protocol whose formal title is “Protocol on Ireland/Northern Ireland”, together with 10 detailed Annexes which form part of it. Informally it is called the Northern Irish “backstop” protocol. Neither its formal nor its informal title really describes it. It should be called “the whole UK permanent lock-in protocol with extra lock-in for Northern Ireland.”
Most of its provisions do not come into force until the end of the transition period. However at that point and in the absence of an agreement between the UK and the EU to the contrary, the whole Protocol will come into force and will require the whole of the UK to stay in a customs union with the EU – a customs union in which the UK has no vote on the tariffs to be charged, or on who to do or not to do trade deals with, but will be obliged to follow the EU’s tariffs at all times. Further, it obliges the UK not to deviate from EU rules on a wide range of so-called “level playing field” areas of policy, including environment, workplace rights, state aids and competition law.
Secondly, it will require Northern Ireland (unlike Great Britain) to be subject to a large number of EU single market regulations and directives, and customs and tax rules.
Finally – and this is the most important point – the UK has no right under the treaty either to prevent the Protocol coming into effect or, once it is in force, to leave it, unless the EU agrees. In this regard, the Protocol is unique amongst trade agreements, which invariably contain clauses allowing each party the right to withdraw on notice.
Is it just a “backstop” which will never come into effect?
The government argue that the Protocol is just a “backstop” which they intend not to come into effect, and if it does come into effect it will only be temporary.
It is true that the Protocol will not come into effect if, before the end of the transition period in December 2020, the UK and the EU have agreed a wider trade deal which, among other things, deals with the Irish border issue to the satisfaction of the EU.
But it is utterly naive to argue that the terms of this “backstop” do not matter because it is likely to be replaced with something else. The Protocol will have a profound effect even if it never comes into force. Its very existence will mean that the EU will have no reason to offer a trade agreement with better terms than the Protocol. The Protocol will be the baseline or benchmark for the terms which the EU will offer in a trade agreement.
The Protocol includes the obligation for the whole UK slavishly to apply EU-dictated tariffs to imports from outside the EU, and to follow the EU’s external trade policy. This keeps the UK a captive market for EU goods exports, so the EU will be able to carry on selling their huge £95bn a year surplus of goods into the UK market, at above world prices protected by the EU tariff wall against third country competition. It will also kill stone dead any ability of the UK to conclude our own trade agreements with non-EU countries.
In addition, the Protocol includes the so-called “level playing field” measures on the environment, state aids, workplace rights and other areas which are designed to suppress the competitiveness of UK industry. It is obvious to a 5-year old child, but not apparently to our Prime Minister, that by conceding all these rights to the EU in the so-called backstop, we ensure that we will get the same terms or worse in any future trade agreement.
That the EU believes it can use these concessions as the benchmark for the future relationship, and intends to use them in this way, has been confirmed in a leaked diplomatic note from Sabine Weyand. As reported in The Times on 14 Nov 2018:
Sabine Weyand, the deputy to Michel Barnier, Europe’s chief negotiator, told European ambassadors that this concession would be used as the basis of the future relationship with the EU. She also said that Britain “would have to swallow a link between access to products and fisheries in future agreements”, in a leaked note of the meeting on Friday.
“We should be in the best negotiation position for the future relationship. This requires the customs union as the basis of the future relationship,” Ms Weyand said. “They must align their rules but the EU will retain all the controls. They apply the same rules. UK wants a lot more from future relationship, so EU retains its leverage.”
What is said in that note is clearly right. The EU can sit solid in the future trade negotiations, refusing to agree to any terms which are better for the UK than the Protocol, knowing that if there is no deal the UK will be forced into the Protocol and have to submit to its terms anyway. Then the EU can keep the UK bottled up inside the Protocol as long as it wants, because the Protocol gives the UK no legal right to withdraw from it.
So the Protocol gives to the EU both the right and the incentive to force the UK to comply with its terms. So the only way the UK could escape the Protocol is by agreeing to the same terms (or worse) in a trade agreement. So the terms in the Protocol will bind the UK, whether formally as part of the Protocol if it comes into force, or as terms of the replacement trade agreement which the UK will be forced to include as a result of the binding commitments it has made in the Protocol.
Is the Protocol temporary?
The Protocol contains wording in Art.1(4) that it is “intended to apply temporarily”. But in reality this is just comfort wording included for window-dressing that will have no legal effect. This is because the Articles which govern how the Protocol can be replaced or reviewed give the EU a complete right of veto on the UK leaving the Protocol. This right is not subject to any effective judicial or arbitral challenge .
Remarkably, the government has capitulated on any attempt to secure an independent mechanism permitting the UK to leave the Protocol, let alone the unconditional right to leave after a period of time which it originally asked for.
Art.2 of the Protocol provides for it to be replaced by a subsequent agreement. However, the EU is under no legal obligation to conclude a subsequent agreement, so the UK cannot leave the Protocol under this clause without the EU’s consent. And that consent, as I have explained, could only be obtained by submitting to the same terms or worse in the replacement agreement with the EU.
Art.20 of the Protocol sets out a “review” process whereby the Protocol can “in whole or in part” be made no longer to apply. This requires the UK to give reasons saying why it should no longer apply because the Protocol “is no longer necessary to achieve the objectives set out in Article 1(3)” of the Protocol. Those objectives are:
“… to address the unique circumstances on the island of Ireland, maintain the necessary conditions for continued North-South cooperation, avoid a hard border and protect the 1998 Agreement in all its dimensions.”
Having given its reasons why the Protocol is no longer necessary, the UK could then theoretically be released from it under Art.20, but only by a “joint decision” of the UK and the EU within the Joint Committee. This wording, “joint decision”, means that both the UK and the EU must agree in order for the UK to be released from the Protocol. The words “joint decision” do not mean that somehow there is a friendly discussion in which a consensus view is reached. These words give to the EU a complete and unqualified right to veto the UK’s exit from the Protocol.
Art.20 refers to Art.5 of the Withdrawal Agreement, which requires the parties to act in “good faith”. The government may argue that the EU are obliged to participate in this review in “good faith” and that this provides some kind of protection for the UK. This is not so for the following reason.
The criteria in Art.1(3) of the Protocol quoted above are broad, vague and involve questions of political judgement as well operational judgements about e.g. the effectiveness or otherwise of alternative customs arrangements. Further, the criteria do not just relate to the hard border issue but encompass wider issues including “the necessary conditions for continued North-South cooperation” which would allow a wide range of matters to be taken into consideration.
The EU would therefore be able to justify any refusal to release the UK from the Protocol by a myriad of potential arguments. It would be impossible to challenge the refusal as based on bad faith. In practice, such a refusal could not be challenged by judicial or arbitral processes and the UK would be stuck in the Protocol as long as the EU wanted to keep us there.
Further, the “solution” offered by this “backstop” to the Irish border issue is to have no controls at all on goods crossing the land border, and compensate for that by imposing regulatory controls on goods entering Northern Ireland from Great Britain and tariff controls on goods entering the UK. This is a crazy solution which hampers 100% of the UK’s external trade when less than 1% of that trade goes across the Irish land border.
The alternative is to keep the Irish land border as a conventional customs and regulatory border – as it already is a border for excise taxes and VAT – and enforce it through “behind the border” measures rather than via physical customs posts on the border (which are ineffective anyway unless you want to engage in Soviet-style searching of every vehicle). An open border with reasonable enforcement of tariffs and regulatory controls can demonstrably be achieved by existing technology but this kind of alternative solution is not reflected in the legally binding arrangements in the Protocol.
There is a mention in one of the Recitals of the Protocol of unspecified “alternative arrangements”. This is in the 5th Recital (p302) which reads:
RECALLING the Union’s and the United Kingdom’s intention to replace the backstop solution on Northern Ireland by a subsequent agreement that establishes alternative arrangements for ensuring the absence of a hard border on the island of Ireland on a permanent footing;
There are a number of problems with this as a basis for the UK arguing for behind-the-border controls as an alternative to the backstop-style alignment of tariffs and regulations. First, this is in a Recital and not in the actual substantive text of the Protocol so it is not a legally binding provision. Secondly, it merely records an “intention”. Thirdly, the alternative arrangements are not described, even in broad terms. It does not even mention that the alternative is away-from-the-border control measures.
This allows the EU to say that there are going to be problems with any alternative border control regime which the UK proposes, and that only the tariff and regulatory alignment regime is satisfactory in order to meet (in the EU’s view) the criteria in Art.1(3) of the Protocol (quoted above). As mentioned above, there would be no legally effective way of challenging the EU’s view on this issue.
Given the EU’s (and also Ireland’s) strong economic incentive to force the UK to maintain customs and regulatory barriers against competing imports from non-EU countries, this will ensure that the UK will only be offered a replacement long term trade agreement incorporating the same alignment “solution” to the Irish border issue as is in the Protocol. The EU will simply have no obligation nor incentive to negotiate a different solution to the hard border issue.
The government apparently argues that the UK can escape from the Protocol because of a “best endeavours” clause in Art.184 of the draft WA (which is also echoed in Art.2(1) of the Protocol). This reads:
Negotiations on the future relationship
The Union and the United Kingdom shall use their best endeavours, in good faith and in full respect of their respective legal orders, to take the necessary steps to negotiate expeditiously the agreements governing their future relationship referred to in the political declaration of [DD/MM/2018] and to conduct the relevant procedures for the ratification or conclusion of those agreements, with a view to ensuring that those agreements apply, to the extent possible, as from the end of the transition period.
“Best endeavours” clauses sometimes appear in commercial agreements – such as for example an obligation by a distributor to use “best endeavours” to sell a manufacturer’s products. Even in that kind of context they are notoriously difficult to litigate, because a court is faced with measuring the efforts of a party against a yardstick which is not clear: how good is “best”?
But in this treaty provision the “best endeavours” clause is effectively meaningless and certainly non-justiciable. This is because it is an obligation to use best endeavours to agree. Legal obligations on parties to agree with each other are recognised as being unenforceable because if two parties fail to agree with each other, it is generally impossible to pin the blame on one or the other.
The political declaration referred to is short on detail and vague. This means that without provably acting in bad faith or failing to use their best endeavours, the EU could propose terms which are unacceptable to the UK and also string out the negotiations for a number of years.
As explained in the section below on the customs union clauses of the Protocol, the EU would have a strong incentive to keep the Protocol in place for as long as possible or indeed for ever, since it guarantees the exclusion of competing goods from non-EU countries from the UK domestic market, and contains “level playing field” clauses designed to suppress the competitiveness of UK industries.
Can future Parliaments be bound for ever by this Protocol?
At present, the so-called “backstop” is just a joint statement by negotiators in two paragraphs of the December 2017 Joint Report, and is not legally binding. By contrast, if this draft agreement is ratified, the UK will be obliged under international law to comply with the Protocol.
Some people believe that the doctrine of Parliamentary supremacy – under which one Parliament cannot bind its successor – would give a future government or Parliament the ability to leave the Protocol regardless of what it says. This is a dangerous confusion.
The doctrine that one Parliament cannot bind its successor is part of the UK’s internal law. It forms no part of the international law of treaties. Quite the contrary – it is firmly established in international law that if a State enters into a treaty, then that State continues to be bound by it, regardless of changes of legislators, governments or even revolutions which totally replace the State’s internal constitutional order.
So there should be no doubt that if this treaty is concluded and ratified, the United Kingdom will be bound to comply with it under international law, regardless of the wishes of a future government or Parliament. For the UK in future just to breach a treaty would have the gravest consequences, since as a trading nation we rely on other states honouring their treaties with us.
I think that the incredulity in some quarters about it being possible for a treaty like this to bind a country indefinitely is because trade treaties never do bind their participants indefinitely. In practice they all routinely contain termination clauses giving each party the right to withdraw on notice – commonly one year. This is only common sense. All sorts of conditions may change over time and countries do not want to be bound without their consent into trade relationships which become inappropriate or burdensome over time.
Therefore this Protocol in locking in the UK without a right to leave is quite unique and unprecedented. I am not aware of any trade agreement between the EU and a non-Member state which does not contain a right for that state to withdraw from the agreement. Even the humiliating and degrading Association Agreement between the EU and Moldova which I discuss in my note on ECJ jurisdiction (shortly to be published) contains in Art.460 a normal each-party termination clause on 6 months notice.
The Customs Union clauses
The Protocol provides for a customs union with the EU which will cover the whole UK. There are certain differences in the way in which it works in Northern Ireland which I will cover in a separate note on the parts of the Protocol which are specific to Northern Ireland.
The scheme is very similar to that of the EU-Turkey Customs Union agreement, save that the Turkish agreement excludes agricultural products but the UK-EU customs union under the Protocol would include them. I have written in detail about the terms of the EU-Turkey customs union and how it entails a loss of sovereignty over internal laws as well as external trade relations in Staying in the EU Customs Union after Exit
The main point is that this will not be a customs union between equal parties, under which we and the EU collectively decide what external tariffs we should charge and which countries we should do trade deals with. Instead, this customs union would create an entirely marsupial relationship between the EU and the UK, under which the UK will be required slavishly to follow EU tariffs and trade policy without having a vote. (The difference is that marsupials care for their young in their pouches, but we would be inside the EU’s pouch when we have every reason to fear that they would not care for us at all.)
The nature of the relationship is made clear by Art.3(4) of Annex 2 of the Protocol:
“4. The United Kingdom shall be informed of any decision taken by the Union to amend the Common Customs Tariff, to suspend or reintroduce duties and any decision concerning quotas, tariff-rate quotas or duty suspensions in sufficient time for it to align itself with that decision. If necessary, consultations may be held in the Joint Committee.”
Thus, the UK will have a mere consultation right with no decision making power whatever, and a duty to comply with whatever the EU decides.
The basic problem with the EU’s Common Customs Tariff is that it is still based on the EEC’s customs union which was designed and built before we joined the EEC in 1973. The tariffs were set in order to protect Continental producer interests, notably French farmers, German car makers, and Italian clothing and footwear manufacturers. Those were – and still are – the areas where the EU’s external tariffs are very high.
The high food tariffs were and continue to be very damaging to us as a net food importing nation. Our consumers pay 100% of the elevated prices for food inside the EU’s tariff walls, but only part of the benefit goes to British farmers. The rest of the benefit of the higher prices goes to farmers in other EU countries.
The nature of the EU’s Common External Tariff (CET) has two effects. One is that it is damaging for the UK – particularly UK consumers – because it forces us to pay well over the odds for types of products which we do not produce, or in which we have comparatively little domestic production.
Secondly, it creates a massive incentive for the EU to force the UK to keep up these tariff barriers against third country imports of goods which the EU sells into the UK market. This means that if the EU are given the legal right under this Protocol to force the UK to operate the CET indefinitely, they are going to exercise that right. Once they have that in the bag, why on earth should they agree to change the relationship with the UK to one of a Free Trade Agreement which would give the UK the right to set its own external tariffs?
This customs union arrangement would kill stone dead the chances of the UK following an independent trade policy after Brexit. We would not be able to offer tariff concessions to free trade partners, so they would have no incentive to offer us concessions on say services which we would want to export to them.
Further, it will render the theoretical right to negotiate third country trade agreements during the transition period totally meaningless. Since we will be unable to tell prospective free trade partners when we will be free to implement such an agreement, or indeed whether we will ever be free to do so at all, they will have no interest in spending time and effort on serious negotiations with us.
This subordinate relationship also applies to so-called trade remedies, where the EU takes action to impose anti-dumping or countervailing duties under WTO rules on non-EU countries. The EU will take these actions in order to protect its own interests, regardless of any negative impacts on UK consumers, and the UK will be obliged to comply with those measures by imposing higher tariffs even where this is contrary to the UK’s interests. Under Art.4(3) of Annex 2, we will have merely the right to be consulted.
Where dumping affects UK industries, the UK will have no right to take anti-dumping action to protect its own interests. The UK would be totally dependent on the EU to take action. If UK industries but no EU industries are affected, why should we expect the EU to do that?
It is quite extraordinary for one of the leading trading nations of the world to be a complete rule taker on its trade policy in this way. This one-sided customs union arrangement would destroy the ability of the UK to take advantage of the freedom brought by Brexit to forge a new independent trade policy and would shackle us permanently to being a dependency of the EU.