01 October 2020

With the Brexit transition period due to end this year, the UK Government has brought forward its United Kingdom Internal Market Bill. However, the proposals have led to friction. Litigator Will Cole explains.

With the Brexit transition period due to end on 31 December this year, the UK Government has brought forward its United Kingdom Internal Market Bill, with the stated aim of delivering “continued fair, coherent, frictionless trade across all parts of the UK” after Brexit. Whilst there has been little resistance to the aim, the details have proved to be a source of friction.

Much of the media commentary on the Internal Market Bill has focused on the provisions which have the potential to breach the Northern Ireland Protocol and thereby breach international law. However, there are other provisions within the Bill which have been met with equally vociferous objections. Two areas of contention for the UK’s devolved governments are the allegedly detrimental effects of the Bill’s provisions on their exercise of devolved power and product standards.

Common Frameworks: The EU has used the harmonisation of common or minimum rules and standards by way of numerous regulations and directives as a means of preventing the proverbial “race to the bottom” among Member States, to gain competitive advantage. In order to replace these harmonised EU frameworks after Brexit, the UK, Scottish and Welsh Governments have been discussing the adoption of “Common Frameworks”. A consensual process has been envisaged, although the UK Government will be able to dictate the terms of the Common Frameworks if agreement cannot be reached.

Mutual Recognition and Non-Discrimination: By means of the Internal Market Bill, the UK Government has now confirmed that it proposes to supplement the Common Frameworks with legally enforceable principles of “mutual recognition” and “non-discrimination” in relation to goods: put simply, if goods can be sold legally in one nation of the UK, they must be allowed to be sold in the others. Whilst similar principles apply under the EU regime, the scope for making exceptions to these principles would arguably be narrower under the Bill than it is under the EU regime.

Exceptions: Under the EU regime, laws prohibiting or restricting the sale of goods can be permitted on grounds such as public policy, public security and public morality. Under the Internal Market Bill such laws are only permitted to deal with taxation, threats to animal and human health, and chemical regulation.

Devolution: The devolved governments therefore maintain that the Bill would constrain the exercise of their devolved powers to pursue their bespoke policy objectives through regulation. For example, the Scottish Government contends that it would not have been able to introduce its minimum alcohol pricing legislation, if it had been subject to these constraints at the time - although the UK Government disputes this.

Standards: There is also a concern that the narrowness of the exceptions to mutual recognition and non-discrimination would mean that if lower standards were adopted in one nation of the UK, this would inevitably confer a competitive advantage, forcing the governments of the other nations to lower their own standards. That effect could be particularly marked for lower standards set by the UK Government for England, given its economic size relative to the other nations.

The Internal Market Bill is currently progressing through the UK Parliament. It was passed by the House of Commons by 340 votes to 256 on 29 September and will soon be debated in the House of Lords. The UK Government has not yet shown any appetite for compromise on the exceptions issue. It remains to be seen whether the development of the Common Frameworks will address concerns about minimum standards. We will be monitoring the development of the Bill and the Common Frameworks and will be ready to help our clients plot their way across the new regulatory landscape.

Will Cole wco@bto.co.uk / 0131 222 2947