EU Considers Legal Action Over U.K. Plan for Brexit Breach
EU Sees Case for Legal Action Against U.K. Over Brexit Plan
(Bloomberg) -- The European Union is studying the possibility of legal action against the U.K. over Prime Minister Boris Johnson’s plans to breach the agreement governing Britain’s exit from the bloc, according to a document seen by Bloomberg.
European Commission vice president Maros Sefcovic is set to hold emergency talks with Cabinet Office Minister Michael Gove on Thursday as the bloc weighs how to respond.
The EU may have a case to seek legal remedies under the Brexit Withdrawal Agreement even before controversial provisions in the U.K. internal-market bill are passed by Parliament, and would have a clear justification once the bill becomes law, according to the bloc’s preliminary analysis of the U.K. legislation.
Johnson is facing a backlash from the EU and from within his own ruling Conservative Party after his government said it is ready to break its commitments to the EU over the Irish border. With negotiations over a trade deal already deadlocked over state aid rules and fishing quotas, the controversy is fueling concern there may be no agreement by the year-end deadline, triggering tariffs between the U.K. and the world’s biggest single market.
“A no-deal is becoming more likely every day,” Manfred Weber, head of the main center-right group in the European Parliament, said Thursday in an interview with Germany’s DLF radio. “We have the feeling that Britain wants a hard Brexit for ideological reasons and as Europeans we need to prepare for the worst.”
The latest round of talks between the EU’s chief Brexit negotiator, Michel Barnier and his U.K. counterpart David Frost is set to conclude in London on Thursday. Irish Prime Minister Micheal Martin told RTE he is “not optimistic” about reaching a trade deal, while European Commission President Ursula von der Leyen said she is “very concerned” and warned Johnson’s move “undermines trust.”
The prime minister’s actions have also triggered a warning from across the Atlantic, with House Speaker Nancy Pelosi saying there would be “absolutely no chance” of a U.K.-US trade agreement if Johnson’s actions threaten peace in Northern Ireland.
A number of Conservative lawmakers and grandees have also weighed in with their concerns over Johnson’s willingness to break international law.
“If we lose our reputation for honoring the promises we make, we will have lost something beyond price that may never be regained,” former Tory Prime Minister John Major said.
While the pound climbed, traders are bracing for a wild ride: the cost of hedging against sterling volatility over the next week climbed to the highest, on a relative basis, in almost five months.
“The events of the past week have introduced a downside tail risk that we had under-appreciated,” Goldman Sachs economist Adrian Paul wrote in a note to clients. “That said, we maintain the view that it is in the fundamental interests of both London and Brussels to secure a deal.”
‘Clear Breach’
Johnson’s office said the proposed law creates a “safety net” and removes “ambiguities” in the text of the withdrawal agreement.
The U.K. Internal Market Bill, published earlier on Wednesday, would allow ministers to override parts of last year’s Brexit agreement to ensure companies in Northern Ireland have “unfettered access” to the U.K. internal market, potentially throwing up obstacles to trade with the rest of the island of Ireland.
That would be a “clear breach of substantive provisions” of the withdrawal agreement, according to the draft working paper prepared by the EU and circulated to member states.
The EU document highlights that the proposed U.K. legislation explicitly allows some provisions to take effect even if they are incompatible with the U.K.’s international commitments under the withdrawal agreement.
It concludes that a breach of those obligations “would open the way to the legal remedies available under the withdrawal agreement.”
Once the U.K. transition period draws to a close at the end of this year, the EU could also trigger the dispute settlement mechanism under the withdrawal agreement, which could ultimately result in financial sanctions, according to the paper.
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