Brexit Institute News

An Overview of the No-Deal Brexit Omnibus Bill

An Overview of the No-Deal Brexit Omnibus Bill

Clíodhna Joyce-Daly and Chloé Papazian (Dublin City University)

Last Friday 22 February, the Irish Government published the Omnibus Bill also called the Consequential Provisions Bill 2019 for the Withdrawal of the United Kingdom Without a Deal which will enter into force if the UK leaves the EU without a deal.  The exit of the UK overnight from the EU Customs Union and Single Market, as well as its status of ‘third country’ will require a series of essential measures to immediately and temporarily address the modification of the UK’s status and its relationships with the EU and more specifically with Ireland from 30 March 2019.

The Omnibus Bill aims to complement and constitutes a legal instrument consistent with the EU preparations to a UK disorderly exit, notably the European Commission’s Contingency Action Plan and the associated legislative measures. The 70-page legal document intends to preserve Ireland from Brexit by protecting Irish citizens, supporting businesses and jobs and ensuring access to essential products and services such as healthcare services and education.

The Irish Government, nevertheless, emphasised that the priority remains to conclude a withdrawal agreement with the EU. While Tánaiste and Minister for Foreign Affairs Simon Coveney hopes the Omnibus Bill will remain redundant, Leo Varadkar stated that the focus of the Government and the EU is to see the UK ratifying the Withdrawal Agreement which was concluded after intense and lengthy negotiations between the EU and the UK.

The present blog summarises the overarching objectives of the Omnibus Bill recently published, as well as the key measures that are envisaged to cope with the risks and consequences of a hard Brexit.

  1. Key Overarching Objectives of the Omnibus Bill

Three overarching objectives drive this Omnibus Bill; they constitute the pivotal rationale behind the temporary measures that would enter into force should the UK exit the EU on 29 March without a deal.

First, leaving without a deal, the UK would suddenly exit the EU legal framework, notably the EU Single Market and Customs Union. To address this legal void and abrupt breakup, the Irish Government will urgently need to put measures in place such as measures to avoid the risk of the disestablishment of the Single Electricity Market that permits to guarantee the security of electricity supply on the island of Ireland. Similarly, the Irish Government plans to adopt temporary measures regarding the payment of VAT for goods imported into and exported to the UK, as well as financial services.

Second, as emphatically repeated by both the EU and the UK since the beginning of the negotiations, a no-deal scenario would seriously jeopardise the Peace Process between Northern Ireland and the Republic of Ireland which has emerged thanks to the Good Friday Agreement. The preservation of an invisible border between the North and the South of Ireland constitutes a central – and perhaps the most controversial – element of the Withdrawal Agreement. Should the UK precipitately leave the EU on 29 March 2019, many measures would prove necessary. Examples include the measures that would be taken for bus and passenger coach services between Ireland and the UK. Interestingly, however, the Omnibus Bill remains silent on the customs and regulatory checks that should take place at the border and on the taking of measures that could mitigate these checks. On this point, the Irish Government has had a firm and clear stance: nothing will be done on the North/South border that leads to the destabilising of the stability of the island. The Irish Finance Minister, Paschal Donohoe told the Financial Times that, “[a]s the minister that actually has responsibility for the implementation of customs policy through the revenue commissioners, I can categorically say that we have no plans to put in place infrastructure on the border.” (Financial Times, Varadkar Beset by Backstop worries as Brexit no-deal Rises)

Third, the Irish and the UK Governments are committed to maintain in the event of a hard-Brexit the Common Travel Area (CTA), a long-standing arrangement between the UK and Ireland predating their membership to the EU. The CTA permits not only free, unrestricted and without control access on a reciprocal basis to the Irish and UK territory to the British and Irish citizens but also access to employment, healthcare, education, social welfare and benefits, as well as the rights to vote in certain elections. Hence, the created area “holds special importance to people in their daily lives” and “goes to the heart of the relationship between these islands.” (Guidance of the UK Government, Travelling Within the Common Travel Area and the Associated Rights of British and Irish Citizens if There is no Brexit Deal). Numerous measures prove necessary to protect the good functioning of the CTA. For this purpose, the Omnibus Bill envisages to amend several laws to guarantee continued student support and thus access to education, as well as to ensure social welfare and protection of employees.

  1. Temporary and Precautionary Measures Against the Risk of a Hard Brexit

The following points summarize the main immediate temporary and precautionary measures that the Government of Ireland or designated bodies will need to adopt to mitigate the risks and consequences of a hard Brexit. As Taoiseach Leo Varadkar pointed out, “[t]his special law enables us to mitigate against the worst effects of no deal by protecting citizens’ rights, security, and facilitating extra supports for vulnerable businesses and employers.”

  • The Single Electricity Market

Part 4 of the Omnibus Bill amends the Electricity Regulation Act 1999 with the view of protecting the good functioning and continued operation of the Single Electricity Market within the island of Ireland to avoid major electricity disruptions between the North and the South territories. For this purpose, Section 8 allows the Irish Commission for the Regulation of Utilities to amend the licences of electricity market participants for a period of one year without making use of the normal amendment procedure. What is the Single Electricity Market and why the modification of the Electricity Regulation Act 1999 proves necessary? The Single Electricity Market was established in 2007 to deliver secure electricity supplies to citizens on the island of Ireland. It has constituted a success for the integration between the electricity markets of Northern Ireland and the Republic of Ireland. Its dislocation after a possible no-deal Brexit may prompt worrying delayed delivery on the North-South electricity interconnector and thus important shortages of supply.

Tanya Harrington recently wrote a blog post on the Single Electricity Market (The Future of the All-island Single Electricity Market Post-Brexit) in which she underlines that the most important threat poses to the continued operation of the Single Electricity Market following a hard Brexit is the perspective of a regulatory divergence between the UK and the Republic of Ireland. The absence of regulatory alignment of participants to the electricity market between the two countries may severely jeopardise the Single Electricity Market. The temporary and expeditious amendment of the market participants’ licences hence represents a precautionary measure to avoid during a limited period the risks of regulatory discrepancy. As most of the measures envisaged under this Omnibus Bill, it constitutes a contingency and time-limited measure in the event of a no-deal Brexit that will necessitate advanced approval of the competent Minister. Most importantly, it will not represent a long-term solution; more solid medium- to long-term solutions to address the governance of the electricity market within the island of Ireland would have to be found.

  • Student Support

Eligible students studying in the UK and UK nationals studying in Ireland, currently qualify for Student Universal Support Ireland (SUSI) grants as the UK is an EU Member State. According to Part 5 of the Bill amending the Student Support Act 2011, these arrangements can continue to apply even after the UK exit without a deal to eligible Irish students studying in the UK, as well as to UK students benefiting from SUSI grants in Irish higher education institutions.

  • Taxation

The most important part of the Omnibus Bill relates to Taxation which is contained in Part 6 of the Bill. It covers not only income tax and corporation tax but also capital gains tax, capital acquisitions tax, value-added tax and stamp duties.

A series of amendments to the Tax Consolidation Act 1997 aims at permitting a continuation of existing arrangements in the immediate future in the field of corporation tax. Most of the amendments either envisage to include the UK within the definition of relevant Member State so that certain tax provisions apply to the UK or to extend the tax provisions applying to EEA States to also encompass the UK. As a result, should a no-deal scenario occur, provisions in the Irish Tax Consolidation Act 1997 relating to not only relief from corporation tax in respect of non-yearly interest paid to recognised banks, stock exchange members or discount houses carrying business in the UK but also group loss relief, loans to participators, relief from Capital Gains Tax on a transfer of assets under a scheme of reconstruction or amalgation of companies, as well as tax credit for R&D expenditure will continue to apply to the UK. Likewise, having exited the EU without a deal, the UK will benefit under the Omnibus Bill the relief for Irish tax for certain start-up companies normally applicable to the EEA States.

Very importantly, the Bill addresses the issue concerning the VAT levies on third country goods imported into Ireland and thus into the EU. Indeed, VAT on goods originating in non-EU countries must be paid at the point of entry within the EU territory. Conversely, VAT on goods circulating within the EU must be paid under the normal returns made every second month. Without a specific arrangement in the event of a hard Brexit, many SMEs established in Ireland and doing business with the UK would face a sudden and significant cash flow problems (See Analysis and Comment by Sean Whelan on RTE News, The Omnibus Bill: A Legal Fix to Anticipated Problems). Section 51 of the Bill amends Section 53A of the VAT Consolidation Act to permit all importers registered for VAT in Ireland to use postponed accounting for VAT. The same provision specifies that such postponed accounting scheme should be modified at a later date as criteria and conditions should govern the authorisation for the scheme.

Chapter 7 of Part 6 of the Bill interestingly shows the scale of measures that are required in the event of a no deal Brexit to remedy issues that may arise at the border between Northern Ireland and the Republic of Ireland. Section 60 of the Omnibus Bill amends Section 89 of the Capital Acquisitions Tax Consolidation Act, 2003 laying down a reduction in the inheritance tax or gift tax that must be paid in respect of agricultural property. Following this amendment, such reduction should continue to apply to agricultural property situated in the United Kingdom, notably in Northern Ireland. Indeed, in calculating the value of agricultural property owned by a farmer to determine entitlement to the tax relief, the UK property must be considered.

  • Financial Services

Financial Services: Settlement Finality: Part 7 of the Bill serves as a complement to the European Commission’s decision of 19 December 2018 to grant temporary equivalence to the Central Securities Depositories, as well as to the Central Counterparties based in the UK in European legislation.

Within three months of the UK withdrawal from the EU, the operator of a formal arrangement (‘relevant arrangement’) between three or more participants (any settlement agent, any central counterparty, any clearing house or any indirect participant) must when at least one of its participants is an Irish participant notify the Minister and Central Bank of Ireland of its intention to avail of temporary designation up to a maximum period of nine months after that date. Such temporary designation will permit to extend the Settlement Finality Regulations to Irish participants of UK systems for the time period specified, until there cease to be an Irish participant in the arrangement, or until the Bank of Ireland has issued a ‘withdrawal notice’ in respect of the arrangement as provided for by Section 63; it will allow UK systems to avoid a cliff-edge scenario (Section 62 of the Bill).

According to Section 63, the Minister of Finance may issue a ‘designation notice’ in respect of a relevant arrangement if the Bank has notified the Minister that the Bank is satisfied with two conditions. First, the Bank must consider that the rules of the arrangement would, if the arrangement were a system, comply with Regulation 7 of the Regulations of 2010. Second, the relevant laws of the United Kingdom must be judged as equivalent to the laws of the State applicable to those matters. By contrast, should the Bank not be satisfied with those two conditions, the Minister will issue a ‘withdrawal notice’ in respect of the relevant arrangement.

Financial Services: Amendment to the European Union (Insurance and Reinsurance) Regulations 2015 and the European Union (Insurance Distribution) Regulations 2018: Part 8 of the Bill confirms the decisions taken at the EU level regarding insurance issues, namely the adoption of two new regulations to the EU Insurance and Reinsurance Regulations of 2015 and to the EU Insurance Distribution Regulations 2018. The two new regulations will permit insurance undertakings and insurance intermediaries meeting certain conditions to be temporarily authorised for the three years following the UK exit from the EU for the purposes of running off their existing portfolio.

  • Bus and Coach Passenger Services Between Ireland and a non-EU Country

Part 10 of the Bill on Third Country Bus Services is clearly aimed at addressing the problems of UK licenses of bus services from Northern Ireland to the Republic of Ireland which were previously recognised as EU licenses. According to Section 75, the Irish National Transport Authority will be able to grant licenses to third country bus services and to provide for offences and penalties should an operator of bus services fail to comply with the relevant conditions within this Part of the Bill. Every types of licenses of bus services are covered, ranging from licenses of regular scheduled bus services, special regular scheduled bus services to occasional bus services and closed-door tours. Licenses will be issued under the status of third country authorisations or third country journey forms. Section 75 also envisages the situation where Ireland and the UK concludes a bilateral agreement or any form of arrangement relating to bus services. In these circumstances, the competent Minister of the Irish Government may make an order to the third country body(ies) or may prescribe by orders the documents and conditions necessary for an application before the Irish National Transport Authority. As underlined by the Omnibus Bill and the Explanatory Memorandum, however, these provisions are purely precautionary. Should for instance alternative measures be found through an EU or international agreement, Part 10 of the Bill will not need to enter into force. Specifically, the provisions described above will not apply if the third country bus services operating in Ireland are governed by the international occasional carriage of passengers by coach and bus, also named ‘Interbus Agreement’.

  • Social Welfare and Protection of Employees

Part 11 of the Bill amends the Social Welfare Consolidation Act 2005. The amendment evidently serves as a continuation of the CTA. As a reminder, the CTA framework gives the Irish and the UK citizens the right to enter, reside, work and receive social welfare and benefits, healthcare, education, as well as the rights to vote in certain elections in each other’s states. For the purpose of the protection of the CTA, and by the same token, of the Good Friday Agreement, Section 77 of the Bill enables the Minister for Employment Affairs and Social Protection to implement by order the Convention on Social Security between the Irish and UK Governments. Such implementation’s form should nonetheless occur only if necessary, notably if at the time the UK leaves the EU without a deal the ratification process of the Convention has not been completed.

Similarly, Part 12 of the Bill aims to protect employees working in Ireland whose employers are made insolvent under the laws of the UK by amending the Protection of Employees (Employers’ Insolvency) Act 1984 (Section 81 of the Bill).

  • European Arrest Warrant

In a no-deal scenario, the European Arrest Warrant system will cease to apply to the UK. Part 13 of the Bill amending the Extradition Act 1965 therefore provides for the maintenance of arrangements regarding the extradition of citizens between Ireland and the UK under the 1957 Council of Europe Convention on Extradition.

  1. Timeline of the adoption of the Bill

The debate by the Dáil on the no-deal Brexit Omnibus Bill have begun yesterday; it will continue today and tomorrow. Tánaiste and Minister for Foreign Affairs Simon Coveney asserted he welcomed opposition amendments that would help improving the Bill as the Irish Government may have overlooked some elements. On the first week of March, the Brexit Bill will be discussed in Committee before it reaches the final stage in the Dáil. The Omnibus Bill should then be debated during the second week of March in the Seanad.

 

Clíodhna Joyce-Daly is a trainee at the Brexit Research and Policy Institute at the Dublin City University. She is doing a Master Degree in Law within the School of Law and Government at Dublin City University.

Chloé Papazian is a Research Fellow at the Brexit Research and Policy Institute at the Dublin City University.

 

Menu