How does the NI Protocol entangle the UK in the EU's state aid rules? Here's an attempt to explain the issues:
1/ As NI will be a de facto member of the single market, it is subject to EU state aid law. The British government can't subsidise companies there that would give them an unfair advantage over, say, competitors south of the border...
2/ What's more, the European Commission has made it clear that it interprets that provision also applying if the UK govt subsidises a company which has significant subsidiaries in NI. In other words, the effect of state aid in NI via the Protocol would have a reach across to GB
3/ The part of the Northern Ireland Protocol dealing with state aid is Article 10. It takes as its reference point Article 107(1) of the EU treaties...
4/ Article 107(1) says that "any aid granted by a Member State...which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between MS, be incompatible with the internal market"
5/ So, according to the European Commission, EU state aid rules can apply to the UK because of their presence in Northern Ireland - this is all regardless of what the EU and UK negotiate (or not) on state aid in the current future relationship negotiations
6/ How will this work in practice? This is where it gets tricky. At stake is what is called "the effect on trade test". This is part of the EU's definition of state aid and it is taken up in the Protocol and again it comes directly from the EU treaties
7/ The European Court of Justice would refer to this as "an objective notion," meaning that it’s something that only the ECJ itelf can authoritatively interpret, and it will follow ECJ case law.
8/ This case law is what the Commission relies on in all state aid contexts. However, senior officials point out that Member states can take a different view, and so might the UK, depending on what kind of case is taken and what state aid measures are allegedly in play
9/ That means there could be a long legal dispute involving the UK and Commission over a state aid complaint via the backdoor of the NI Protocol and it would have to be resolved at the ECJ.
10/ Likewise you could have private enforcement, whereby complainants take the UK to court in the UK, or who cd take the Commission to court, all over whether state aid is legal or not. Again, such cases are likely to end up in the ECJ.
11/ The ECJ would then rule what this criterion - the "effect on trade" test - really means and how far this reach across from the NI Protocol really is. The Commission would have its views, the UK would have its views, but the ECJ would have to decide.
12/ Public enforcement would be the Commission acting on its own initiative and taking a case when, say, the UK announced it was subsidising a company. If that results in a Commission decision which the UK doesn't like it can apply for an annulment by the ECJ.
13/ If a private company takes action it can use the UK domestic courts because, as one source points out, all of this is directly applicable law. Again, this would end up being referred to the ECJ for an initial interpretation
14/ Or the company can complain to the Commission and it can decide whether or not to start an investigation. If it reaches a decision or decides not to investigate, the complainant can sue the Commission for having taken the wrong decision etc, and again it ends up at the ECJ
