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Stephenson Harwood | The UK Internal Market Bill: the clash over State aid

With the publication of its Internal Market Bill on 9 September 2020, the UK government has set itself on a potentially irreconcilable collision course with the EU over the issue of State aid. Indeed, this move is less a shot across the bows as it is a coach and horses driven through the current negotiations with the EU on an EU-UK free trade agreement (“FTA”), which are at a particularly delicate stage given that the Brexit transition period expires in less than 100 days.

Introduction:

With the publication of its Internal Market Bill1 on 9 September 2020, the UK government has set itself on a potentially irreconcilable collision course with the EU over the issue of State aid. Indeed, this move is less a shot across the bows as it is a coach and horses driven through the current negotiations with the EU on an EU-UK free trade agreement (“FTA”), which are at a particularly delicate stage given that the Brexit transition period expires in less than 100 days.

The EU State aid rules (the so-called “level playing field” principle) are the bedrock of its internal market and, since the start of the negotiations on a future trade deal with the UK, the EU has consistently rejected any proposed arrangement which would give access to its markets without the UK signing up to this principle. However, the publication of the Internal Market Bill significantly “ups the ante” in this regard: no longer just a question of a stalemate in negotiations, the provisions on State aid (along with some other provisions in the Internal Market Bill) directly contradict commitments made under the Northern Ireland/Ireland Protocol (the “Protocol”) contained in the UK’s Withdrawal Agreement Treaty (“WAT”) with the EU. Specifically, the UK government has empowered itself with the sole discretion to apply (and monitor) State subsidy measures applying in the entirety of the UK, whereas it had previously agreed with the EU that the latter’s State aid rules would apply to Northern Ireland and to the movement of goods across the Irish border. In light of this, it remains to be seen not only whether any EUUK FTA is still possible, but also what any future UK State aid regime would look like, and how closely it would tally with the EU’s.

Read the FULL article here: The UK Internal Market Bill: the clash over State aid

Author:

  • Marta Isabel Garcia, Partner | marta.garcia[at]shlegal.com

Compliments of Stephenson Harwood – a member of the EACCNY.