The Withdrawal Agreement seriously risks compromising national security

The Withdrawal Agreement seriously risks compromising national security

I believe those concerned with UK defence should be wary of supporting the EU Withdrawal Agreement proposal that is before Parliament for the reasons I set out below.

You may be aware of an issue I have identified with the Withdrawal Agreement that could seriously affect our defence manufacturing industries and our sovereign ability in defence – namely that much of our UK defence manufacturing industry would not sufficiently be exempt from state aid provisions as it currently is under the EU treaties, if we enter the “backstop”.

I have raised this in the House of Commons with the Prime Minister, the Home Secretary and the Secretary of State for Defence, in the International Trade Committee with the Secretary of State for International Trade, and in joint session of the European Scrutiny Committee and Defence Committee with the Minister for Defence Procurement. In answers, so far I have only been told that the official advice is that they don’t think there is a problem, or that they are not aware of the issue.

Apologies for the complex legal detail below but it is necessary given the cross provisions of the Withdrawal Agreement to set it out in detail to show how exactly my concern arises, from which I have not yet been dissuaded. At the end I include what seem to me to be the very possible practical effects.

In the Northern Ireland protocol of the Withdrawal Agreement (the “backstop”), there is not any (or any adequate) security exemption for a state aid given to a GB (i.e. the UK minus NI) undertaking which might affect trade with the EU. However, there is with respect to state aid given to a Northern Ireland undertaking.

The NI Protocol in the WA distinguishes between:

  • (a) state aid that might affect trade between NI and the EU (Article 12(1) and Annex 8); and
  • (b) state aid anywhere in the UK designed to maintain a level playing field between the UK and the EU (Article 6(1) applying Annex 4 Article 7(1) which in turn applies the EU state aid legislation listed in Annex 8 to the UK in respect of measures which affect trade covered by Annex 2 i.e. within the backstop customs union).

Article 15 of the Protocol applies Articles 346 and 347 of TFEU (the security exemption) to “…measures taken by …the United Kingdom in respect of Northern Ireland.” This would only benefit aid given to an NI undertaking. This should in practice cover (a) above.

I can find no similar provision in respect of state aid described in (b). It might be argued that the list of EU state aid legislation is implicitly subject to Articles 346 and 347. This is not convincing given that other Treaty Articles are listed in Annex 8.

Finally in explanation of Article 2(4) of Annex 2: this Annex sets out the high level rules applicable to trade in goods between the UK and the EU and between the customs union created by the Protocol and third countries (where so provided), and concerns matters which pertain to requirements for tariffs on imports (the EU’s common external tariff) and the EU’s right to make policy and treaties in that respect (the EU’s common commercial policy). Article 2(4) echoes, but is slightly different to, Article 346 and 347 of TFEU. For example, it applies to production and trade in arms, munitions etc. only “as is carried out directly and indirectly for the purpose of provisioning a military establishment.” This is consistent with external tariff barrier requirements being able to be waived for national security reasons.

Annex 2 does not apply to state aid rules applicable to GB undertakings and designed to provide a level playing field – given the specific provisions of Annex 4. Nor does Annex 2 Article 2(4) provide a general security exemption from state aid. However the existence of Article 2(4) highlights the absence of anything similar in Annexes 4 or 8; which might be taken as an indication of a deliberate decision not to provide a security exemption in these latter Annexes. It looks like this may go beyond sloppy drafting.

Parties could have a strong case against state aid being allowed to GB defence industries if the UK were to be in the backstop condition of the Withdrawal Agreement, and the 123,000 jobs in that industry which benefit from UK Government support would therefore be hostage to negotiation of any future Defence and Security or trade agreements between the EU and UK, at a time when the EU’s declared intent is for centrally planned EU forces, operations and defence industrial capabilities.

The meaning of the above mentioned provisions would be interpreted by the European Court of Justice, not UK courts, as per the governance terms of the Withdrawal Agreement.

The practical effect is that defence companies and the UK Government will have to consider whether anything they do together could be considered state aid and make applications to have it permitted. The EU Commission could take cases in UK courts on whether state aid had been applied to anything conceived as qualifying support by the UK Government, and those UK courts would need to refer interpretation of the Withdrawal Agreement and related EU law to the European Court of Justice. Hence our defence capability would be under the direct influence of jurisprudence of the ECJ, which we know takes a purposive approach to evolving the meaning of legislation.

I therefore believe the Withdrawal Agreement is a serious risk and compromise to national security and the UK’s sovereign ability in defence. Only on negotiating further agreement terms with the EU would GB be released, and the EU have already shown how they are prepared to mess with the UK on defence issues such as Galileo, even as the UK Government speaks of the “closest possible” future defence cooperation.