BRUSSELS / LONDON – The European Union (EU) filed a lawsuit against the United Kingdom on Thursday in breach of their previous divorce agreement, with the UK Prime Minister saying disagreements remained over negotiations on a post-Brexit trade agreement.
Controversy over the UK’s Great Internal Markets Bill has thrown the painful Brexit program into a new crisis while disagreements over corporate sponsorship, fishing and dispute resolution mechanisms bar us from similar trade negotiations.
“We have invited our British friends to remove the issues of the draft Internal Market Bill by the end of September,” said Ursula von der Leyen, head of the EU Commission. “The deadline expired yesterday.”
London is not moving, he said, adding that the Commission has initiated so-called violations, the EU’s legal process against countries that violate the organisation’s laws, while continuing to work on a divorce agreement, or a Cancellation Agreement.
“We are still committed to our commitment,” said von der Leyen.
London now has a month to respond to the Commission’s official letter of complaint and more time to change course before a Brussels-based official can file a lawsuit in the bloc’s highest court. The case could lead to a hefty fine, but that would take years.
“We think this is the next step as the law has passed a number of stages in the UK Parliament,” Dutch Prime Minister Mark Rutte said in an interview with EU counterparts.
The Internal Market Bill has passed the UK’s lower house in parliament and is now awaiting debate in the House of Lords.
Sterling is being watched closely following the announcement, which came as 27 EU leaders began a two-day summit in Brussels that would review progress on negotiations for a new trade agreement, which is reaching a critical stage.
Cash flows were up 0.6% against the euro and dollar in a report that the parties had failed to close the gap. It then gained 1% of the reported confidence in trade talks from UK executives before retreating to 0.2% back after an EU official said the optimism was unfounded.
“We have not seen a sign yet that the settlements can be seen, be it at the level of play or fish,” said the official, who has been in talks with the UK.
The United Kingdom says its nations cannot trade freely after Brexit if there is no new trade agreement with the EU without violating the divorce agreement on the sensitive Irish border. A government spokesman said on Thursday he had made that clear.
However, the EU is adamant that it will not apply to any new UK agreement as long as London undermines the divorce agreement.
“It is the result of EU-UK long negotiations and the only way to secure a Good Friday Agreement, which ensures peace and stability on the island of Ireland,” Brexit EU negotiating officer Michel Barnier tweeted.
UK Prime Minister Michael Gove has previously said “differences still exist” between Britain and the EU in trade talks, but London will work hard to reach an agreement.
EU officials and media outlets have talks that they have failed to close the gap on a key state aid issue, in which the EU wants London to ratify its corresponding laws.
The bloc wants the British independent regulator to decide on government assistance there, as well as the new EU-UK dispute resolution process that will form a Joint Committee and an Arbitration Panel to adjudicate.
If one party fails to respect the decisions made in that process, the Arbitration Panel may impose a fine and the other party may retaliate by hitting trade between the two countries.
Britain seeks control of its subsidized state and says state aid clauses are rarely included in free trade agreements. “We have proposed appropriate dispute resolution procedures, including mediation where it begins,” said a UK government spokesman.
As time goes on until the end of the year-end deadline, pressure is mounting to enter into an agreement to avoid damaging the estimated $ 1 billion in trade annually.
The ninth round of talks this week – which ends on Friday morning – is the last scheduled one so far and EU leaders will review progress on October 15-16.
They can switch to more destructive economic segregation events without new arrangements or agree to final, operational or stop negotiations known as “tunnel”.
The EU says the agreement should be approached by early November to give the European Parliament and other national parliaments enough time to ratify it before the end of the British revolution after Brexit by the end of the year.