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The UK has been fined €32mn by the EU’s top court for allowing pleasure boats to use lower-tax red diesel in a case that lawyers say sets a precedent for future disputes.
The European Court of Justice imposed a higher than expected penalty in a warning to the country that although it has left the bloc, it is still bound by some of its rules because Northern Ireland remains in parts of the EU single market.
The court based the fine on the size of the UK economy rather than that of Northern Ireland.
“This is an important case because it sets a precedent for how the ECJ will approach other infractions,” said Alexander Rose, a subsidy and competition law specialist at law firm DWF.
“The ECJ had discretion as to the amount of the fine, but chose a higher figure of £27.6mn (€32mn) in order to prevent ‘the repetition of similar infringements of EU law in the future’, a direct reference to the commitments in the withdrawal agreement and the Northern Ireland protocol.”
Under those deals Northern Ireland must follow EU rules for goods with some exceptions, policed by the European Commission and ultimately enforced by the ECJ.
The UK also committed to a “level playing field”, which means new subsidies or regulations that save businesses money in areas such as the environment could lead to legal action by the commission.
Brussels has already forced the UK to scrap proposals to incentivise domestic production of wind turbines.
James Webber, partner at law firm Shearman & Sterling, said: “The UK remains subject to the jurisdiction of the ECJ and can be fined for failing to correctly implement EU directives in Northern Ireland, as has happened here in relation to fuel excise duties.”
The Luxembourg-based court also said it levied a higher fine because London took so long to comply with a judgment dating from 2018.
Under EU law only commercial boats are allowed to use lower taxed fuel, but by dying all marine fuel red it was impossible to distinguish if pleasure craft were paying the full rate, it said.
The UK did not change the law governing marine fuel in Northern Ireland to comply with the EU rules until October 2021.
The court said the UK should be charged a similar fee to that paid by a member state breaching the law.
A penalty based on Northern Ireland’s GDP alone “would not be sufficiently dissuasive and therefore would not make it possible to achieve the aim of effectively preventing the repetition of similar infringements of EU law in the future”, it added.
Billy Melo Araujo, a professor of European law at Queen’s University in Belfast, said he did not think the pleasure boat case would create a precedent under the current post-Brexit trade rules for the region, known as the Windsor framework.
“The real test will come if ever the EU feels the safeguarding mechanisms envisaged in the Windsor framework are not being adequately implemented by the UK, which is possible, because that’s the experience we’ve had for the past three years,” he said.
The UK government said: “This is ultimately a historic case which began at a time when the UK was a member of the EU. We have now left.
“Since then, we have negotiated the world’s largest zero tariffs and zero quotas deal with the EU, and are now focused on using our Brexit freedoms to the benefit of the British public.”
Additional reporting by Jude Webber in Dublin
