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1.     This week the Secretary of State for Business, Energy and Industrial Strategy published the United Kingdom Internal Market Bill (‘the Bill’). The Bill has attracted a high degree of attention, and no little criticism, for its purported rupture with the terms of Article 10 of the Northern Ireland Protocol. What has perhaps received less attention is the sheer width of the powers conferred by Clauses 42 to 45.

2.     Clause 45 purports to entrench against any form of legal challenge the provisions of what will become sections 42 and 43 of the Act, together with any regulations made under sections 42(1) and 43(1). (We will continue to refer to these as sections for convenience). Section 42(1) empowers a Minister of the Crown by regulation to make provision about the application of exit procedures to goods moving from Northern Ireland to Great Britain. Section 43(1) authorises the Secretary of State to make regulations “for the purposes of domestic law in connection with Article 10 of the Northern Ireland Protocol (State aid).” Jack Williams in a compelling blog has analysed how the Courts may address the attempted ouster of their jurisdiction. We propose to look at what the Government is hoping to achieve through Clause 45; and explain why it is acting unconstitutionally in doing so.

3.    Article 10 of the Northern Ireland Protocol recorded the UK’s agreement to the ongoing application in Northern Ireland of EU law provisions governing State aid. To avoid a hard border between Northern Ireland and Ireland, the EU essentially agreed with the UK that goods could move freely across the Northern Irish border with Ireland without payment of customs duties, but that any movement of goods via Northern Ireland from Great Britain to the EU would be subject to the payment of any applicable duties (and the consequent need to develop controls to secure this). But that free movement would also mean that goods manufactured in Northern Ireland would be competing directly (and on a level playing field) with EU goods manufactured in Ireland (and elsewhere). The EU would not be able to impose anti-dumping duties or anti-subsidy countervailing duties on goods manufactured in Northern Ireland, since those measures are only applied where goods cross an external EU border. If the UK Government, for example, gave a substantial sum of money to support a car manufacturer based in Belfast, that would give that manufacturer a distinct competitive advantage over car manufacturers based in Ireland, France and Germany. Manufacturers in EU Member States are subject to strict controls on the nature and extent of any government subsidies they might receive. Accordingly, the EU required EU State aid law to be applied in Northern Ireland, as a quid pro quo for allowing Northern Ireland to remain functionally in the EU customs union.

4.     The EU and UK agreed that EU rules on State aid would be applied in respect of “measures which affect that trade between the EU and Northern Ireland” which is the subject of the Protocol. That phrase was widely drawn. Given the case law of the Court of Justice of the European Union on how a measure might affect trade, there was always a risk that subsidies given on a non-discriminatory basis by the UK Government following the end of the implementation period would, through having a material impact on actual or potential trade between Northern Ireland and the EU (principally Ireland), engage EU rules on State aid. Take the car manufacturing subsidy, for example. If the UK Government made a large subsidy available for UK based car manufacturers (who employed local workers and established a plant in the UK), such a measure might entice a manufacturer to build a plant in Northern Ireland. Sales of the manufactured cars would doubtless be made cross-border into Ireland. Such a subsidy would almost certainly have an actual effect on trade between Member States. It would distort or risk distorting competition with manufacturers established in Ireland. The availability of such a subsidy regime would accordingly trigger the obligation in Article 10 of the Northern Ireland Protocol for EU State Aid principles to be applied to the measure. 

5.    Commentators have for some time recognised that EU law might accordingly still constrain UK government decision-making post-Brexit. Similarly, commentators have long recognised the practical complexities of the dual customs union “membership” of Northern Ireland. It is by no means easy to determine which goods leaving Great Britain for Northern Ireland are destined solely for consumption in Northern Ireland (and so are wholly within the UK’s customs territory); and which goods were intended for onward travel into the territory of the EU proper (so as to come within the Union’s customs territory). It was therefore inevitable that the UK Government would need to legislate to make detailed provisions governing the trade in goods between Northern Ireland and Great Britain following the end of the implementation period.

6.    What is extraordinary, however, is the means which have been deployed to do so. Section 43(2) specifically states that the Secretary of State’s regulations may make provision not just about the interpretation of Article 10, but also for disapplying it or modifying its effect. The Secretary of State may by delegated legislation nullify a Treaty obligation entered into by the UK Government, seemingly in good faith, as recently as January 2020.

7.    Under section 43(3), the Bill proposes to allow the Secretary of State to make regulations which enable standard EU law rules on State aid to be modified or eliminated. There is no temporal restriction on the provision. It does not purport to apply only to aid granted after the end of the implementation period. Among other things, the regulations to be made by the Secretary of State may: (a) direct that State aid is not to be recovered; (b) remove any rights of action of any sort which any person may otherwise have; (c) direct that Article 10 of the Protocol is not to be interpreted in accordance with otherwise binding principles of EU law which are retained under the European Union (Withdrawal) Act 2018 (‘EUWA 2018’); and (d) abolish rights, powers, liabilities and entitlements to a remedy which might otherwise exist under international or domestic law. The relevant definition for “international or domestic law” in section 45(4) makes clear that this extends to acquired rights which individuals might otherwise hold under EUWA 2018.

8.    Article 1 of the First Protocol of the European Convention on Human Rights (‘A1P1’) offers protection to established legal rights as a species of property. The A1P1 obligation is binding on the Government as a result of the Human Rights Act 1998 (‘HRA 1998’). It is somewhat surprising to see that the Bill has been certified, without any caveat, as being compatible with the HRA 1998 by the Secretary of State. That can only be justified on the basis that there is no formal requirement for the Secretary of State to exercise the extremely wide powers of expropriation that will be conferred by the enacted Bill.

9.     The very wide powers must also be construed against the backdrop of a clear attempt by Clause 45 to render them immune from legal challenge. Ordinarily, delegated legislation may be reviewed by the Courts for compatibility with domestic public law requirements and for compatibility with the HRA 1998. Delegated legislation which infringes a fundamental common law right, such as access to the Courts, for example, is liable to be struck down: R (Unison) v Lord Chancellor [2017] UKSC 51. Delegated legislation made under one Act which improperly curtails rights conferred by another Act is also ultra vires and liable to be quashed: R v Secretary of State for Social Security, Ex p Joint Council for the Welfare of Immigrants [1997] 1 WLR 275; R (Totel Ltd) v. HMRC [2013] 2 WLR 1136, CA. The HRA 1998 recognises that delegated legislation may be quashed for infringing Convention rights, unless primary legislation requires the subordinate legislation to be in the terms used: section 3(2)(c) HRA 1998. EUWA 2018 maintains a relatively limited set of acquired EU law rights which may also be protected for a time.

10.   Section 45(1) nonetheless states that any Regulations made by the Secretary of State under section 43(1) shall have effect “notwithstanding any relevant international or domestic law with which they may be incompatible or inconsistent.” Parliament, if it enacts this clause, will be seeking to give the Secretary of State a free hand to enact irrational Regulations, if he wishes to do so. The usual Wednesbury constraint on the exercise of a power to make legislation only for a proper and rational purpose would be removed at a stroke. Indeed, Regulations could, in principle, be made which have no bearing on State aid at all, but where the Courts could not rule them ultra vires. Section 45(2)(b) also seeks to remove rights, liabilities and remedies which might otherwise arise from the operation of section 7A EUWA 2018 but with which the proposed Regulations might be incompatible. Delegated legislation under one Act will remove rights conferred under another.

11.   It is wrong to say that such sweeping powers are needed to give certainty to Northern Irish business, for they do nothing to that end. The fundamental questions, such as how to secure “unfettered access” for Northern Ireland to the GB market and the definition of “qualifying status” for Northern Irish products remain unanswered. The Government’s approach has simply been to arrogate to itself sweeping powers to make decisions contrary to the provisions of the Protocol, when what has been called for by stakeholders is urgent and detailed engagement on its implementation.

12.   It has become increasingly fashionable to talk of Henry VIII powers when examining the legislative thicket that Brexit has precipitated. But it is worth recalling the limitations which existed on the Statute of Proclamations passed in 1539 under the rule of Henry VIII (Act 31, Henry VIII, c. 8). This statute formally empowered the Crown to legislate by means of proclamations. It stated:

“The King for the time being, with the advice of his Council, or the more part of them, may set forth proclamations under such penalties and pains as to him and them shall seem necessary, which shall be observed as though they were made by Act of Parliament; but this shall not be prejudicial to any person’s inheritance, offices, liberties, goods, chattels, or life; …”

13.   In other words, the legislation which was famously subjected to the control of the common law by Coke CJ in The Case of Proclamations (1610) 77 E.R. 1352 was itself drafted in more limited terms than the powers conferred on the Secretary of State through a combination of sections 43 and 45. And the Secretary of State is seeking to keep Coke’s judicial successors firmly out of the picture.

14.  Professor A.V. Dicey, frequently championed by those who resent judicial interference with the legislative function, in Introduction to the Study of the Law of the Constitution, said of the Statute of Proclamations that it marked “the highest point of legal authority ever reached by the Crown, and, probably because of its inconsistency with the whole tenor of English law, was repealed in the reign of Edward the Sixth.” Dicey considered that had it remained in force, “an English king would have become nearly as despotic as a French monarch.” The wisdom – and constitutionality - of Parliament setting the Secretary of State on an even higher pedestal must surely be questioned.

This analysis was written by Kieron Beal QC and Emily Neill.

Clerks

Staff