NI Protocol Windsor Framework Client Alert

Brexit is back in the news, and it’s good news (so far). On 27 February 2023, negotiations between the United Kingdom (UK) and the European Union (EU) concluded with the “Windsor Framework” to amend the text and provisions of the original Northern Ireland Protocol agreed as part of the UK’s exit from the European Union.

The changes under the Windsor Framework include easements to goods traded from Great Britain to Northern Ireland, VAT rules, parcels and includes new governance mechanisms.

If your organisation is affected by these changes, please reach out to understand the expertise we have and how we can help.

A new deal, a new hope?

Overview

The Northern Ireland Protocol had set out specific legal arrangements agreed by both the UK and the EU to protect the institutions and implementation of the Belfast (Good Friday) Agreement, including continued unfettered economic and trade links with the Republic of Ireland. However, the Protocol had come under criticism by some in both Northern Ireland and Great Britain. The UK and EU had entered into intensive negotiations over the previous four months.

Both sides have said that “these joint solutions reflect the unique circumstances and challenges on the island of Ireland” and that “they ensure both the integrity of the European Union Single Market, to which Northern Ireland has a unique access, and the integrity of the United Kingdom’s Internal Market.”

The Windsor Framework is made up of a number of important documents including a UK Government Command Paper, a Joint UK-EU Political Declaration, draft decisions to be taken by the Joint Committee under the Withdrawal Agreement and unilateral measures to adopted by each party respectively.

The key documents from the UK Government can be found here and those from the EU here. Additional detail has yet to be published, but further EY analysis will follow as this is published.

Customs

The Windsor Framework establishes a new “green lane” for goods moving from Great Britain to Northern Ireland based on an expanded trusted trader scheme. The aim of this is to cut considerably the necessary customs procedures and checks on goods. Goods using the “green lane” will need to be labelled “Not for EU”. Under the “green lane” minimal checks will remain based on risk assessments and intelligence to prevent smuggling and other criminal activities.

According to the compromise, in order to qualify for the expanded trusted trader scheme for moving goods subject to processing, two conditions are in place to consider processing to be non-commercial: either the processor has a low turnover (i.e. below an agreed threshold), or it belongs to specific sectors (sale of retail food to consumers, construction, health care, not-for-profit and use of animal feed).

For those traders unable to access the “green lane”, a new tariff reimbursement scheme is to be established for those traders which can demonstrate that their goods did not ultimately enter the EU, supplementing the existing customs duty waiver scheme. Goods destined for the Republic of Ireland will continue to undergo full EU customs checks.

For traders moving goods from Northern Ireland to Great Britain, most export declarations have been removed.

The compromises under the Windsor Framework also resolve the ongoing issue of Tariff Rate Quotas implemented as part of the EU’s trade remedies safeguard action on steel which would have seen 25% tariffs placed on covered steel products from Great Britain into Northern Ireland.

The aim of the “green lane” is to enter into force in autumn 2023. Labels for meat and dairy products will come into force from 1 October 2024. All relevant products must be marked by 1 July 2025.

The EU has said that these new customs arrangements “require effective safeguards”, with both sides agreeing that this will be based on three pillars:

1. The trusted trader scheme will be accompanied by robust authorisation and monitoring processes
2. Data-sharing on movements of goods allowing risk-assessments to be performed
3. Reinforced monitoring procedures such as market surveillance
   

Specific safeguards have been provided for agri-food products including the “Not for EU” label and functioning of relevant Border Inspection Posts for sanitary and phytosanitary purposes. The European Commission will be able to suspend part, or all, of these trade easements if the UK fails to comply with the new safeguards.

Parcels

Northern Ireland consumers ordering from GB businesses will be able to continue to order and receive goods through the post, the same as the rest of the UK with no customs declaration required. Parcels sent between businesses will be able to move through the “green lane”, where the goods are remaining in the UK.

The UK Government has said that it will work with parcel operators and HMRC to ensure any risks to the EU single market are dealt with. Parcel operators will have to regularly submit standard commercial data to HMRC, that they hold as a matter of routine such as the place of delivery, when moving parcels to a consumer.

VAT & Excise

Under the Northern Ireland Protocol, EU rules for VAT and excise apply to goods in Northern Ireland. Under the revised rules set out in the Windsor Framework, EU rules on VAT rates will not apply to a list of goods for consumption in NI in certain circumstances. The UK Government notes the Framework means it can bring forward legislation to apply the zero-rate of VAT to energy saving materials in NI, e.g. solar panels and heat pumps. In addition, a number of other flexibilities should enable UK-wide VAT changes to apply in Northern Ireland. In the area of excise, upcoming changes to alcohol duty would also apply in NI.

A forward-looking mechanism in the area of VAT and excise will be established between the UK and EU to address future issues as and when they arise in order to manage any divergences in policy.

State Aid

EU state aid rules applied in cases where any aid provided to companies could “affect trade” in goods and electricity between Northern Ireland and the EU under the Northern Ireland Protocol. The Framework introduces new tests regarding this application, setting out that there must now be a “proven real, genuine and material link” to trade between Northern Ireland and the EU.

The UK Government has stated that this “ensures” that the UK-EU Trade and Cooperation Agreement services as the overall framework governing subsidy control issues between the UK and EU.

Food and plants

With regards to agri-food standards, UK public health and safety standards will apply to all retail food and drink in the UK internal market. This means current GB rules on marketing, organics, labelling and genetic modification will apply in Northern Ireland as long as the UK government applies the safeguards referenced above. Additional detail is expected clarifying the exact rules and how operationally the checks will take place.

The European Commission has put a proposal forward to the European Parliament and Council of the EU for a new regulation which provides for specific rules for the entry into Northern Ireland from other parts of the United Kingdom of certain consignments of retail goods, plants for planting, seed potatoes and machinery and vehicles which have been operated for agricultural or forestry purposes, as well as non-commercial movements of pet animals.

Human Medicine

Patients in Northern Ireland will be able to access the same medicines as in GB, with a bridging solution for novel medicines.

Under the compromise reached, new and innovative medicines lawfully placed on the market in Northern Ireland are to be only covered by a valid marketing authorisation issued by the UK. The placing on the market of these medicines will therefore no longer be regulated by EU-wide authorisations granted by the European Commission.

It also removes the obligation for EU safety features to appear on packs of medicines made available to patients in Northern Ireland.

These solutions are to be accompanied by safeguards to ensure that medicines made available in Northern Ireland will not enter the EU Single Market. These include labelling UK packs with a specific label: “UK only” and continuous monitoring by the UK competent authorities. Medicines sent from Great Britain to Northern Ireland will travel via the “green lane”.

Governance

The Windsor Framework also includes a new democratic safeguard, the “Stormont Brake” on “significant” changes or new EU rules applied in Northern Ireland relating to customs, goods and agriculture within the scope of the original Protocol.

A specific process to trigger it based on the “Petition of Concern” within the Belfast (Good Friday) Agreement.¹ What would follow is a consultation with local parties to ensure appropriate scrutiny measures are implemented for a restored Northern Ireland Assembly. Once the “Stormont Brake” has been triggered, the rule in question would be suspended pending agreement in the UK-EU Joint Committee.

Any dispute between the UK and EU over this would then be governed by independent arbitration, but accepting that a permanent veto of any rule could lead to the EU taking “appropriate remedial measures”.

The new governance arrangements in the Windsor Framework also include:

• Establishing regular engagement with Northern Ireland stakeholders at each level of the Withdrawal Agreement’s structures and with the co-Chairs of the Joint Committee.
• New sub-groups to be set up to support the work of the Joint Consultative Working Group which was established by the Withdrawal Agreement.

Finally, the Windsor Framework includes the reciprocal commitment to drop NI Protocol Bill on the UK’s side and EU’s legal proceedings on the other.

Horizon Europe

The UK’s participation in the science research programme Horizon Europe had been stalled over the long-running disagreements around the Northern Ireland Protocol.

During the press conference announcing the Windsor Framework, European Commission President, Ursula von der Leyen stated that once the Windsor Framework has been implemented, the EU will immediately start on an association agreement for the UK, which is the pre-condition to join Horizon Europe.

Next steps

The UK Prime Minister, Rishi Sunak, confirmed on 27 February when addressing the UK Parliament House of Commons that there would be a vote on the Windsor framework in parliament. However, the exact timing of this has not yet been confirmed as the government has said that MPs will have “time and space” to consider the details of a deal. The reaction of political parties in Northern Ireland to the deal is also being monitored closely.

In order to take effect, the Windsor Framework will require the Joint Committee of the Withdrawal Agreement to meet and adopt the draft decisions. For those changes which require changes to domestic law, the appropriate legislation will need to be passed in the UK and EU respectively. Ratification by member states is also likely, and as a result, the full implementation could take many months.

The UK Government has committed to working with business groups, traders and other operators to set out more detail on the arrangements set out in the Windsor Framework in order to provide additional clarity and guidance.