Spotlight on the European Commission’s launch of infringement proceedings against the UK for the Internal Market Bill (1 October 2020)

On 1 October 2020, the European Commission sent a “letter of formal notice” to the UK, commencing a formal infringement procedure against the UK in respect of the UK Internal Market Bill (see our Brexit Insight of 11 September (here)).  The European Commission alleges that the UK government’s introduction of the Internal Market Bill and its failure “to withdraw the contentious parts of the Bill” is in and of itself a breach of Article 5 of the Withdrawal Agreement.  Article 5 requires the EU and the UK “in full mutual respect and good faith” to “assist each other in carrying out tasks which flow from [the] Agreement”.  The Commission also alleges that, if the Bill is adopted, it would “impede the implementation of the Withdrawal Agreement”.

A UK Government spokesperson has said that the UK will “respond […] in due course”, but that it is necessary for the UK “to create a legal safety net to protect the integrity of the UK’s internal market, ensure ministers can always deliver on their obligations to Northern Ireland and protect the gains from the peace process.”

Infringement proceedings are an administrative process of EU law through which the European Commission “identifies possible infringements of EU law” and requests (EU) countries to take measures to rectify their non-compliance with EU law.  Ultimately, the European Commission may refer alleged infringements to the Court of Justice of the European Union (CJEU).  According to the Commission, however, “[m]ost cases are settled before being referred to the court.”  As at 1 December 2019, there were 800 pending infringement proceedings, 33 of which involved the UK (see here).  Readers will recall that this is not the first infringement procedure the Commission has launched against the UK during the transition period.  The Commission also launched an infringement procedure against the UK in May 2020, for its decision not to sign the multilateral treaty terminating intra-EU BITs (see our Brexit Insights of 5 and 14 May 2020).  So far as we are aware, the procedure commenced yesterday is the only one involving allegations of the UK’s non-compliance with the Withdrawal Agreement.

The UK has one month to submit its observations to the letter of formal notice.  After that, if the Commission concludes that the UK has still failed to fulfil its obligations, the Commission may decide to issue a Reasoned Opinion (i.e., a formal request to comply).  If the Commission is of the view at that point that the UK remains in breach of its obligations, it may decide to refer the matter to the Court of Justice.

The European Commission’s press release issued upon the sending of the letter of formal notice observes that “[t]he Withdrawal Agreement provides that during the transition period, the Court of Justice of the European Union has jurisdiction and the Commission has the powers conferred upon it by Union law in relation to the United Kingdom, also as regards the interpretation and application of that Agreement.”  This is likely to be a reference to Part Three, Title X of the Withdrawal Agreement; Article 87 of which allows the European Commission to bring before the CJEU, within 4 years after the end of the transition period, allegations that the UK “has failed to fulfil an obligation under the Treaties or under Part Four of this Agreement before the end of the transition period” (Article 87(1)).  Article 87(1) further provides that the CJEU “shall have jurisdiction over such cases”.

Part Four of the Withdrawal Agreement is entitled “Transition” and contains provisions setting out the UK’s obligations during the transition period.  Much of this flows from the general position set out in Article 127 that, unless otherwise provided in the Withdrawal Agreement, “Union law shall be applicable to and in the United Kingdom during the transition period.”  Article 5 – the specific provision the European Commission considers the UK to have breached by virtue of the Government’s introduction of the UK Internal Market Bill – appears in Part One (Common Provisions) of the Withdrawal Agreement.  It remains to be seen whether the UK will take issue with the European Commission’s stance that the CJEU would have jurisdiction over a dispute between the Parties concerning Article 5.  There appears to be a strong argument that the mechanisms for dispute settlement set out in Part Six, Title III (which include the establishment of an independent arbitration panel) would apply to this dispute to the exclusion of the administrative and judicial procedures (including a referral to the CJEU) foreseen in Part Three, Title X.

 

The European Commission’s press release regarding the letter of formal notice is available here.  Its guide on infringement procedures is here.

This Insight was subsequently published on LexisNexis, available here.

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