UK publishes post-Brexit Internal Market Bill

The Internal Market Bill, if passed in its current form, would enshrine the principle of 'mutual recognition' in UK domestic law. This would mean that goods and services made available and sold legally in one part of the UK, in that they meet relevant applicable requirements in that part of the UK, may be made available and sold legally across the whole of the UK.

International businesses would therefore be able to trade with the UK as a whole, provided that they comply with the regulatory standards and specifications applicable to one part of the UK.

The Bill would also enshrine a 'non-discrimination' principle in UK domestic law, prohibiting the introduction of rules favouring goods and services from one part of the UK over those from another. The Bill would also reserve for central government the right to regulate the grant of subsidies "which are or may be" distortive or harmful to competition in the internal market.

"This Bill will protect our highly integrated market by guaranteeing that companies can continue to trade unhindered in every part of the UK after the transition period ends and EU law falls away," he said.

The fact that one government might legislate for different regulatory standards and specifications which are not provided for elsewhere in the UK would not constitute a barrier to the free circulation of goods and services in the UK’s internal market, in line with the mutual recognition principle.

The Bill also contains provisions enabling the UK government to provide financial assistance that among other things, promote the UK’s economic development, equivalent to that previously administered by EU structural funds. These provisions will allow the UK government to create a 'UK Shared Prosperity Fund' and other funding streams which replace existing EU programmes.

Brexit advisory expert Clare Francis of Pinsent Masons, the law firm behind Out-Law, said: "For businesses, the Bill means that trade within the UK would be unhindered. However, commentators have argued that the implementation of the Bill has the potential to divide the UK’s devolved nations by limiting their ability to regulate in a way that may favour their domestic businesses."

The Bill has also caused controversy because it also proposes to grant ministers powers to override parts of the Brexit Withdrawal Agreement that the UK concluded with the EU last year, in particular, in relation to the terms of the Northern Ireland Protocol.

Competition law expert Totis Kotsonis of Pinsent Masons said: "The government has acknowledged that this is a breach of the UK’s obligations in international law. Commentators have also argued that this may impact the UK’s ability to negotiate international trade agreements with third countries".

"At the time of writing, the EU has made it clear that it expects the UK government to amend the Bill so that it does not lead to the UK breaching its obligations under the Withdrawal Agreement.  A potential stand-off on this issue could lead to the two sides failing to reach an agreement on a trade deal by the end of the transition period".

Francis added: "Ultimately, this raises more uncertainty about future trading relationships and what practical challenges there will be to UK-EU trading going forward. With the end of the transition period looming and the impact of the Covid-19 pandemic still at the fore, businesses must have a clear understanding of the type of Brexit they face so they can plan, adjust and future-proof where necessary".

The government has also announced the creation of a new Office for the Internal Market (OIM) to monitor and report on the smooth running of UK trade. The OIM, which will be set up within the Competition and Markets Authority (CMA), will also provide independent technical advice to the UK parliament and the devolved administrations on regulation that may damage the UK's internal market.

Competition law expert Alan Davis of Pinsent Masons said: "The CMA has had a long-standing advocacy role in advising and making recommendations to the government on the impact on competition arising from legislative proposals. Its OIM role will be advisory and non-binding, with any disputes that arise needing to be resolved politically, or in the courts".