United Kingdom Internal Market Bill 2019-21

This briefing refers to the UK Internal Market Bill as introduced, before amendments made during its Committee consideration and its adoption as an Act of Parliament.

Background to the Bill

At the end of the transition period, the UK will leave the EU single market. The EU legal underpinnings for free trade in goods and services between the four nations will fall away. To prevent new barriers to intra-UK trade from emerging the Government has proposed a new legal framework: the United Kingdom Internal Market Bill. The Bill was introduced into the House of Commons on 9 September 2020.

The overarching policy objectives of the Bill are to provide continuity for businesses and citizens and improve competitiveness and business environment across the UK. The Government says that the Bill would contribute to general welfare and prosperity in all nations of the UK. The Government has also argued that a UK internal market would help the UK in reaching international trade agreements and allow the benefits of those agreements to extend to all parts of the UK.

The provisions of the Bill set out general principles for market access and support, affecting trade in goods and services. The UK internal market principles would apply to all nations of the UK equally.

Taking into account that trade in goods between Northern Ireland and the rest of the UK is subject to the Northern Ireland Protocol in the Withdrawal Agreement, the Bill introduces special provisions to avoid that goods travelling from NI to GB are discriminated against and can gain unfettered access to the rest of the UK.

The clauses with regard to Northern Ireland (market access for goods and state aid) have attracted considerable attention because of their impact on the UK and EU negotiations on their future relationship. The issue of state aid/ subsidies, which is also regulated under the Northern Ireland Protocol, and addressed by this Bill, has become one of the most contentious areas in the negotiations.

What is in the Bill?

The proposals set out in the Bill have proven controversial with the Scottish and Welsh Governments. They have repeatedly raised concerns about the impact of Internal Market legislation on their respective devolution settlements.

The Bill proposes to change the “competence” of the three devolved legislatures by adding a reservation on the provision of subsidies, and by protecting the Act itself from modification by the Scottish and Welsh Parliaments or the Northern Ireland Assembly.

Parts 1 and 2: UK market access (goods and services)

The Bill sets out two principles that will govern access to the UK market for goods and services. The principles aim to allow people and businesses to trade across the UK without having to face different barriers in its different nations.

The first principle means that if a good or service can be legally sold in one part of the UK (as it meets the relevant regulations) then it can be sold in any part of the UK. This is the principle of mutual recognition.

The second principle prevents parts of the UK treating goods coming in from other parts of the UK less favourably than local goods. This is the principle of non-discrimination.

The Bill provides some exclusions to these principles. For instance, taxes are excluded from both mutual recognition and non-discrimination.

Part 3: Mutual Recognition of professional qualifications

This part of the Bill introduces a unified system for the recognition of professional qualifications across the UK for professions that are regulated by law (regulated professions), such as architects or accountants. Professionals regulated in one part of the UK will be able to seek recognition of their qualifications in another, allowing them to provide services. The principle of equal treatment is introduced to protect practitioners qualified in one part of the UK from less favourable treatment than locally qualified providers.

Part 4: Office for the Internal Market (OIM)

The Government intends to establish an independent Office for the Internal Market (OIM) within the Competition and Markets Authority (CMA). Part 4 of the Bill (clauses 28–29) would give new powers to the CMA to monitor, advise and report on the internal market, supported by enforceable investigatory powers.

The reports and advice of the CMA are the non-binding. The Government would be for the respective legislatures and administrations to resolve disputes through existing intergovernmental processes.

Part 5: Northern Ireland Protocol

The Northern Ireland Protocol, an integral part of the Withdrawal Agreement, sets out how goods will be traded between Northern Ireland and Great Britain (the rest of the UK) after the transition period ends. It applies the EU’s customs code (the rules on how goods are traded in and out of the EU) to Northern Ireland. Despite also containing a principle of unfettered market access for goods moving from NI to GB, the application of the customs code means that certain checks and processes will be required when moving these goods.

Part 5 of the Bill empowers Ministers to prevent the application of, and unilaterally re-interpret and disapply parts of the Protocol, as well as ignore their legal obligations under both domestic and international law to enact the Protocol. Specifically, Part 5 does this by:

• Restricting UK authorities from using their powers after the transition period in a way that might result in the introduction of checks, controls or administrative processes for goods moving from Northern Ireland to Great Britain (Clause 41).
• Giving a power to Ministers to make regulations to change how exit procedures for goods operate when moving from Northern Ireland to Great Britain (Clause 42).
• Giving the Secretary of State an enabling power to make regulations that can interpret Article 10 of the Protocol, and further disapply and modify its effects, including disapplying it entirely. Article 10 applies EU state aid rules to ‘measures which affect that trade between Northern Ireland and the EU’ (so not just subsidies given in NI). (Clause 43)
• Stating that only the Secretary of State may notify the European Commission of state aid or proposed state aid, and give information about it, if this is required by Article 10 of the Protocol (Clause 44).

Clause 45 deals with the incompatibility with domestic law and international law that might arise from the inclusion and exercise of powers under clauses 42 and 43. It does this through a series of extraordinary measures that build upon one another. The Clause

• States that the powers given to Ministers under Clauses 42 and 43, as well as Clause 45 itself will be regarded as legally effective notwithstanding any incompatibility or inconsistency with “any relevant international or domestic law”.
• Picks apart the foundations of how the Withdrawal Agreement is given supremacy and direct effect in domestic legislation through the EU (Withdrawal) Act 2018.
• Ensures domestic courts would still have to give full force and effect to these regulations made even if those regulations were in conflict with all relevant domestic and international laws, and international law as a whole.
• Restricts and potentially precludes entirely domestic judicial review of section 42 or 43, a so called “ouster clause”.

Part 6: Financial assistance powers

The Bill creates a new power allowing ministers to provide financial assistance for a wide range of different purposes. This power is intended to be used to replace the funding that the EU currently distributes within the UK. It seems likely that funding provided under this power will come directly from the UK Government rather than via the devolved administrations, as is often the case at present.

The Bill also contains provisions on government financial assistance and clauses that in effect give the UK Parliament the exclusive right to legislate on how subsidy controls will work in the future.

Other issues raised

On 16 July 2020 the UK Government published a White Paper seeking views on its proposals to legislate on the operation of the UK Internal Market. The consultation raised various issues, for example if the proposed framework would help maintain existing standards when the UK signs new free trade agreements with other countries. A concern was also raised that the size of England relative to the other nations could mean that standards adopted in England would dominate throughout the UK.

Section 3.6 of this briefing was updated on 14 September 2020 to include recent commentary and help ensure clarity.

Further information:

• United Kingdom Internal Market Bill (Bill documents)
• Principles of International Law: a brief guide, House of Commons Library
• The “Internal Market” and the Union, House of Commons Library
• Intergovernmental relations and the UK “Internal Market”, House of Commons Library
• EU powers after Brexit: ‘Power grab’ or ‘power surge’? House of Commons Library
• Update: Can the UK Government spend in areas devolved to Scotland? House of Commons Library
• Internal Market Bill: Reactions from Scottish and Welsh Governments, House of Commons Library