Despite President Biden’s encouragement, a key aspect of the Windsor Framework remains on hold

It also evaluates the practical importance of the recent Parliamentary approval of The Windsor Framework (Democratic Scrutiny) Regulations 2023 given the unanimous rejection by the DUP, as recently reaffirmed by Sir Jeffrey Donaldson who stated that Biden’s visit “doesn’t change the political dynamic in Northern Ireland”.

Trade developments and general opportunities for business

The Windsor Framework’s objective of restoring the smooth flow of trade within the UK internal market is addressed via trade provisions seeking to simplify the import of goods from Great Britain to Northern Ireland (“NI”). The Framework also aims to improve legal clarity, certainty and predictability for businesses operating in NI.

Goods exported from Great Britain to NI

Broadening the "trusted traders" scheme

In the area of customs, the Framework broadens the scope of the “trusted traders” scheme, which simplifies the transport of goods from Great Britain to NI.

• Goods from Great Britain for end use in NI will benefit from the “green lane”, a smoother process consisting of reduced customs checks and controls, relying on ordinary commercial information only; and
• Goods from Great Britain to NI but ultimately destined for/at risk of entering the EU will go through the “red lane” and will be subject to standard rules for imports coming from non-EU countries (i.e. full range of customs and Regulations on sanitary and phytosanitary (“SPS”) checks). Businesses which had to go through the “red lane” but can later prove that the imported goods did not ultimately enter the EU will be reimbursed tariff costs.

Businesses already registered for the trusted trader scheme should be able to automatically form part of the new scheme, while other businesses will need to formally apply.

The new trusted trader scheme is expected to be in place around September 2023, and will rely on a new database tracking shipments of goods in real time.

Facilitating certain types of imports

• The import of certain goods from Great Britain to NI will be streamlined, including agri-food (ensuring people in NI will have access to the same foods as in the rest of the UK), chilled meats, plants, shrubs, trees and seeds.
• Agri-food will be subject to specific labelling requirements to clarify that they are not for the EU, in order to protect the EU single market.
• Bypassing the EU steel safeguard tariffs: UK-origin steel importers in NI will not be subject to the EU’s 25% steel safeguard tariffs.
• Pharmaceuticals and medicine for human consumption for distribution in NI will be subject to authorisation by the UK Medicines and Healthcare products Regulatory Agency, as opposed to the European Medicines Agency.
• Travelling with pets will also be simplified (a single document will suffice).

Value Added Tax ("VAT") and excise

In the area of VAT and excise in NI, the Framework offers the UK more flexibility. The key provisions as are follows:

• Expansion of the categories of goods which qualify for reduced VAT rates, including goods supplied and installed in immovable property (such as a heat pump for a house or a wind turbine for a residential property);
• Exempting NI from the EU VAT scheme for small enterprises and for distance sales (for goods from Great Britain);
• Allowing the UK to tax beverages based on their alcoholic strength, thereby diverging from the EU-prescribed duty structure on alcohol (provided that (i) minimum EU excise rates are respected and (ii) EU products are not discriminated); and
• Creation of the “Enhanced Coordination Mechanism”, a review process aiming at, in the long term, removing VAT restrictions for goods consumed in NI which do not raise risks of fiscal fraud or distortion of competition between EU and NI suppliers.

Addressing the democratic deficit

An overview of the Stormont Brake

Parliament has passed the Windsor Regulations, a key step towards securing the necessary domestic power to implement the Stormont Brake, a UK veto to new EU law in Northern Ireland. Under the new mechanism, the Northern Ireland Assembly members (“MLAs”) will be empowered to trigger a veto mechanism with respect to the implementation of certain new EU laws in Northern Ireland; this new mechanism will be referred to as the “Stormont Brake”, inserted at Article 13(3a) of the Framework, and generally applies to new EU laws with respect to reliefs from customs duty on personal property, some EU customs rules, and most new laws with respect to goods. 

The process in which the Brake can be triggered

The Brake can be triggered when the following, high, legal threshold has been met (highlight added for effect):

• “(a) the content or scope of the Union act as amended or replaced by the specific Union act significantly differs, in whole or in part, from the content or scope of the Union act as applicable before being amended or replaced; and
• (b) the application in Northern Ireland of the Union act as amended or replaced by the specific Union act, or of the relevant part thereof as the case may be, would have a significant impact specific to everyday life of communities in Northern Ireland in a way that is liable to persist.”

The key procedural aspects are outlined in Annex 1 to the Withdrawal Agreement Joint Committee’s Decision 1/2023 “laying down the arrangements relating to the Windsor Framework”. In summary, 30 MLAs from two or more parties must notify the UK Government of their wish for the Brake to be triggered, having:

• provided a public explanation as to why these circumstances are “most exceptional”, this act is a “last resort”, and the conditions in 13(3a) are satisfied;

• consulted with businesses, civic society and other traders; and

• demonstrated all reasonable use of the applicable European consultation processes for new Union acts.

Part 2 of the Windsor Regulations establish a new Windsor Framework Democratic Scrutiny Committee of the Northern Ireland Assembly; it would ordinarily be the case that the Brake would not be triggered before the Committee had published an inquiry report, but the MLAs have the autonomy to review and consider further sources beyond the Committee’s advice and report.

If the MLAs decide to notify the government of their intention to trigger the Brake in accordance with the correct process, the government is legally obliged to notify the European Commission of the exercise of the veto. Alternatively, if the Brake has been trigged by the UK but there is EU contention with regard to its proper use, the ECJ will have no jurisdiction; an independent arbitration panel will decide whether the legal standard and proper process for triggering the Brake has been met.

Subsequent consultations following the use of the Brake

Once the Brake has been triggered, the UK must proceed to partake in subsequent “intensive consultations” with the EU, under the procedure previously provided for in Article 13(4) of the Northern Ireland Protocol. However, the Windsor Regulations introduce new limits to the government’s discretion at this stage; essentially it cannot agree to any new law arising from this process which has been subject to the Brake, except where the Northern Ireland Assembly has passed a cross-community applicability motion in support. However, the Regulations introduce two exceptions to this rule:

• when there are “exceptional circumstances” – such as the non-functioning of the Northern Ireland Assembly; and

• when “the EU Act would not create a new regulatory border between Great Britain and Northern Ireland” –aside from providing a broad definition of “new regulatory border” there is very little guidance provided with respect to this exception.

It is important to note that the EU has always reserved its right to take “appropriate remedial measures” if alternative legislation / agreements with the UK cannot be achieved under the Article 13(4) process; a key drawback of the Brake is clearly that this process potentially enables the EU to overrule a UK veto.

Is the Brake now in effect?

Although the Windsor Regulations were passed by a large majority in Parliament, the DUP provided a unanimous rejection. Crucially, clause 1(a) of Annex 1 of the Joint Committee’s Decision requires the Northern Ireland Executive to be restored for the Brake to function. Therefore, Parliament’s approval will lack practical importance until the DUP are willing to restore a functioning executive. 

Authored by Owen Robinson, Robert Gardener, Auriane Negret, and James Furneaux.