Howlin outlines concerns on no deal Brexit Omnibus Bill

26 February 2019

Speaking on the Government’s no deal Brexit Omnibus bill, Labour Party Leader Brendan Howlin TD outlined a number of technical concerns with the bill as drafted, and the economic and political ramifications for Ireland that would follow from a no deal Brexit.

On granting special consession to the UK on tax, Deputy Howlin said:

“Part 6 of the UK Withdrawal Bill treats the UK as an EU (or EEA or EFTA) country for most if not all tax purposes. British companies, shares, trusts, insurers, residents, ships, colleges, and so on, all benefit from this status. This is presumably done in order to preserve the status quo in trade insofar as it gives rise to taxable consequences here.

“But other third countries and their companies, insurers, residents, ships, and so on, do not get these benefits. This appears to be preferential tax treatment extended to just one so-called “third country”, and not available to others. Is this compatible with our obligations under the WTO’s GATS treaty?

“I look forward to hearing the Government’s explanation of how Part 6 is compatible with WTO rules.”

On the Henry VIII powers being granted to the Minister for Health to amend primary legislation by statutory instrument Deputy Howlin said:

“In Part 2, the Government has proposed to give the Minister for Health power to make “such adaptations and modifications to the Health Acts 1947 to 2019 or any regulations made under those Acts as the Minister considers necessary for the purpose of bringing those Acts or regulations into conformity with this Part”.

“This would clearly involve the Minister for Health changing primary legislation without bringing it through the Dáil.

“The specific section where the power is described is in section 4, which proposes to insert section 75B (2) (c) into the Health Act of 1970.

“This is an unconstitutional proposal.”

In a no deal Brexit, Deputy Howlin warned:

“Economic problems will very quickly lead to a sour political atmosphere and it is likely that Ireland will be blamed, especially by those Brexiteers who have lied to the British people about the EU for many years, and who have lied about their fantasy of unregulated trade after Brexit.

He also asked for advise on how unforeseen problems will be addressed:

“I would like for the Government to explain how it intends to deal with gaps and problems that have not been anticipated in this Bill in the event of a no deal Brexit.”

ENDS

Full text of remarks by Brendan Howlin on 2nd stage of Withdrawal of the UK from the EU (Consequential Provisions) Bill 2019

26 February 2019

This is important, technical legislation, which is necessary to ensure that our laws are not punched full of holes by the changed status of the UK as a “third country”, outside of the EU.

There is a lot covered by the Bill.

But I want to focus on the economic side of the legislation.

A major concern with this Bill is to allow the continuation of trade with the UK as smoothly as possible; although it will never be as smooth as with both our countries in the EU.

And that underlines a central truth that has been missing from the debate on the European Union in the UK throughout recent years.

Modern trade is managed, regulated and organised through legislation and agreements.

It is worth stressing this point.

Die-hard supporters of Brexit in the UK seem to entertain a fantasy of unregulated trade.

Whether it is in relation to the type of free trade deal they wish to have with the EU, or whether it is in relation to trading on World Trade Organisation rules, they assume that trade agreements are simply about opening up markets, as opposed to regulating the flow of goods and services entering markets, and regulating on-going economic activity.

Trade policy, with respect of the United Kingdom, has been a settled matter since the Anglo-Irish Free Trade Agreement of 1965, followed eight years later by our entry into the European Economic Community.

The 1965 agreement expanded on the 1938 Anglo-Irish Trade Agreement.

This historical perspective is important to remind us that if the UK leaves the EU without a trade deal, this will bring about a situation we have not had to deal with in decades.

Hopefully, it won’t happen now.

Hopefully, the EU and UK will conclude a comprehensive trade agreement and something close to free trade with the UK will continue.

In fact, we can be clear that our real preference would be for the British people to be allowed to reconsider what they want, in light of all the new information that is now available.

And we hope the UK could yet remain in the European Union.

But the legislation we are examining today is designed, in part, to prepare for a “no deal” outcome.

If that happens, we have to be ready for a period of time – hopefully short – where we do not have a trade agreement with the UK for the first time in decades, and where we would have to rely on World Trade Organisation rules.

The WTO’s multilateral trading system is founded on five basic principles: trade without discrimination; gradually freer trade through negotiation; predictability; promoting fair competition; and, encouraging development and economic reform.

Built on those foundations, the WTO trade agreements are complex documents, covering a wide range of detail as relevant to different sectors of the economy.

Crucially, for our purposes today, the Withdrawal of the UK from the EU (Consequential Provisions) Bill 2019 must be consistent with WTO rules.

We cannot legislate for post-Brexit trade with the UK in a way that contradicts our own commitments, as well as British commitments, under the WTO agreements.

Trade without discrimination is one of the WTO principles.

What that means is that Ireland and the UK, indeed the whole EU and the UK, cannot alter the basic rules of trade that we offer any other country that is trading under WTO rules.

In the absence of a formal trade deal with the UK, we cannot have more favourable trading arrangements with the UK than with any other WTO member.

In future, the EU can and hopefully will have a comprehensive trade agreement with the UK.

If the Withdrawal Agreement currently before Parliament is passed, we will continue to have free trade as part of the agreed transition period.

But if there is a hard Brexit on 29th March, or if the UK enters a transition period but fails to conclude a trade deal with the EU, then we will find ourselves trading on WTO rules.

For the most part, the Government’s legislation seems to prepare for this.

But I want to question Part 6 of the Bill.

Under Article 2 of the WTO’s General Agreement on Trade in Services treaty, known as GATS, each member must immediately and unconditionally give other members treatment that is no less favourable to like services, and service suppliers, of any other country.

Part 6 of the UK Withdrawal Bill treats the UK as an EU (or EEA or EFTA) country for most if not all tax purposes.

British companies, shares, trusts, insurers, residents, ships, colleges, and so on, all benefit from this status.

This is presumably done in order to preserve the status quo in trade insofar as it gives rise to taxable consequences here.

But other third countries and their companies, insurers, residents, ships, and so on, do not get these benefits.

This appears to be preferential tax treatment extended to just one so-called “third country”, and not available to others.

Is this compatible with our obligations under the WTO’s GATS treaty?

If not, what is the alternative?

It would obviously be a lot easier for Irish businesses if we can proceed as outlined in Part 6, as this would mean less disruption.

But it is our job in the Dáil to “stress test” the Government’s legislation.

It would cause even more disruption to business if Part 6 was ruled to be in breach of our obligations under the WTO GATS treaty and needed to be changed in a hurry.

I look forward to hearing the Government’s explanation of how Part 6 is compatible with WTO rules.

On a different issue, there is a matter of constitutional concern in the Bill.

In the UK, the Brexit legislation in Westminster has relied heavily on so-called “Henry VIII clauses”.

These clauses confer a delegated power under which a Minister may, by secondary legislation, amend primary legislation.

In other words, a Ministerial order can amend an Act of Parliament.

They reverse the usual rule that legislative power is vested in the legislature.

These clauses are controversial in the UK.

But in our own context, such clauses are constitutionally prohibited, except where necessitated by EU membership, which has already been permitted by referendum.

One Government Department – Health – is seeking to create a “Henry VIII” clause as part of our own Withdrawal Bill

Whether or not they have drawn inspiration from the UK’s legislation, the Government will need to re-think this section of the Bill.

In Part 2, the Government has proposed to give the Minister for Health power to make “such adaptations and modifications to the Health Acts 1947 to 2019 or any regulations made under those Acts as the Minister considers necessary for the purpose of bringing those Acts or regulations into conformity with this Part”.

This would clearly involve the Minister for Health changing primary legislation without bringing it through the Dáil.

The specific section where the power is described is in section 4, which proposes to insert section 75B (2) (c) into the Health Act of 1970.

This is an unconstitutional proposal.

Under Article 15 of the Constitution, the “sole and exclusive” law-making power of the State is vested in the Oireachtas.

As a result, regulations that modify primary legislation are necessarily beyond the authority vested in ministers.

In a legal case, Laurentiu v Minister for Justice, Equality and Law Reform in 1999, counsel for the State conceded that power to amend primary legislation could not be delegated by the Oireachtas.

Specifically, the Oireachtas “is constitutionally prohibited from abdicating its power”.

…“in accordance with the democratic basis of the Constitution, it is the people’s representatives who make the law, who determine the principles and policies”.

Chief Justice Murray gave a relevant judgement in 2004, in the case of Mulcreevy v Minister for Environment, Heritage and Local Government.

He said that “It is well established that the exclusive role assigned to the Oireachtas in the making of laws by [Article 15] does not preclude the Oireachtas from empowering Ministers or other bodies to make regulations for the purpose of carrying into effect the principles and policies of the parent legislation. […] But it is also clear that such delegated legislation cannot make, repeal or amend any law and that, to the extent that the parent Act purports to confer such a power, it will be invalid having regard to the provisions of the Constitution.”

The sole exception to this rule is in the European Communities Act 1972, which enables a Minister by regulations to implement an EU Directive.

The power to make regulations under that Act has been held to be necessitated by the obligations of membership of the EU and therefore immune from constitutional challenge.

I have raised two technical matters, in what is technical legislation.

But they are both of major consequence to the robustness of the Bill before this House.

They pose serious questions about whether the Government’s legislation has been sufficiently considered before being presented to the Dáil at this very late stage.

We only have one month to get this right.

I would like to come back to the substantive issue of the overall Bill.

This Bill is designed to prepare our statute books for a disorderly exit of the UK from the European Union.

It is equally designed to prepare us for the possibility that the UK and EU will be unable to conclude a comprehensive free trade agreement in the time available, even if the existing Withdrawal Agreement is passed.

I want to quote something said by the Taoiseach, in 1938, at the debate on the Trade Agreement, which ended the six-year Anglo-Irish trade war.

Éamon de Valera said: “One of the things, then, that makes this Agreement possible is that you have at this moment in England a Conservative Government that can, in Parliament, make its will effective.”

Our problem today is that the Withdrawal Agreement – including the Ireland/Northern Ireland Protocol known as the border “backstop” – has been paralysed by a British Parliament that is deeply and hopelessly divided on the issue of the European Union.

Prime Minister May’s Conservative Government is internally divided.

Even if it wasn’t, it is incapable of making its will effective in Westminster.

The net result of this situation is that we have to be very careful not to assume that we can make sensible or purely technical administrative agreements with the UK, once they are outside of the European Union.

It is also very likely to be the case that if the UK leaves the EU without a deal, there will be very serious economic consequences for them.

Economic problems will very quickly lead to a sour political atmosphere and it is likely that Ireland will be blamed, especially by those Brexiteers who have lied to the British people about the EU for many years, and who have lied about their fantasy of unregulated trade after Brexit.

If we need to use this legislation, due to the UK leaving the EU without a deal, we are also likely to be in a situation that is unfriendly if not actively hostile to the development of bilateral agreements on administrative matters.

And these “administrative matters” are hugely important.

They are important to Irish patients in British hospitals who need to access health care without incurring huge personal costs.

They are equally important to British patients in the Irish healthcare system.

These administrative matters affect Irish students in British universities.

They affect commuters crossing the border on buses or trains.

People don’t expect to have to think about all of the background law and regulations that allow them to get on with their lives.

It is extremely important that we get our legislation in order so that the level of disruption to people’s lives is minimised.

I would like to conclude by inviting the Government to explain how it intends to deal with gaps and problems that have not been anticipated in this Bill.

There will undoubtedly be issues that have not been anticipated.

Even the complexity of this Bill is nothing compared to the complexity of Brexit itself.

What process will be put in place to allow for a rapid response when gaps in law are discovered post-Brexit?

Presumably a permanent Brexit Unit will need to be established to keep all of these issues under constant review as we move through the unknown waters that lie ahead.

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