March 7, 2023
UK and EU amend Northern Ireland Protocol with Windsor Framework
On 27 February 2023, negotiations between the UK and the EU concluded with the "Windsor Framework" which amends the text and provisions of the original Northern Ireland Protocol which was agreed as part of the UK's exit from the EU.
The changes under the Windsor Framework include easements to goods traded from Great Britain to Northern Ireland, VAT rules and postal services, and includes new governance mechanisms.
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 Withdrawal Agreement Joint Committee and unilateral measures to be adopted by each party respectively.
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, 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 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 is for the "green lane" to enter into force in autumn 2023. Labels for meat and dairy products will come into the 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:
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.
The UK Government has said that it will work with parcel operators and His Majesty's Revenue and Customs (HMRC) to ensure any risks to the EU single market are dealt with. Parcel operators will have to regularly submit standard commercial data that they hold as a matter of routine, such as the place of delivery, to HMRC when moving parcels to a consumer.
VAT and excise
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.
The UK Government has stated that this "ensures" that the UK-EU Trade and Cooperation Agreement serves as the overall framework governing subsidy control issues between the UK and EU.
Food and plants
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 UK 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, to implement the agreement under the Windsor Framework.
Under the compromise reached between the UK and EU, new and innovative medicines lawfully placed in the market in Northern Ireland are to be only covered by a valid marketing authorization issued by the UK. The placing in the market of these medicines will therefore no longer be regulated by EU-wide authorizations granted by the European Commission but under the UK's Medicines and Healthcare Products Regulatory Agency.
The Framework also removes the obligation for EU safety features to appear on packs of medicines made available to patients in Northern Ireland in addition to the UK ones.
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."
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. The Brake will not be available for trivial reasons: there must be something "significantly" different about a new rule, whether in its content or scope, and it will be necessary to show that it has a "significant impact specific to everyday life" that is liable to persist.
The "Stormont Brake" includes a new process to trigger it based on the "Petition of Concern" within the Belfast (Good Friday) Agreement (as updated by the New Decade, New Approach Agreement in 2020). 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:
Finally, the Windsor Framework includes a reciprocal commitment to drop the Northern Ireland Protocol Bill on the UK's side and EU's legal proceedings on the other.
The UK's participation in the science research program 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 start immediately on an association agreement for the UK which is the pre-condition to join Horizon Europe.
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 Members of Parliament will have "time and space" to consider the details of the deal. The reaction of political parties in Northern Ireland to the deal is also being monitored closely.
To take effect, the Windsor Framework will require the Withdrawal Agreement Joint Committee 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.
The UK Government has committed to working with business groups, traders and other operators to expand upon the arrangements set out in the Windsor Framework to provide additional clarity and guidance.
For additional information with respect to this Alert, please contact the following:
Ernst & Young (Ireland), Dublin
Ernst & Young LLP (United Kingdom)