UK fined in precedent-setting case by the European Court of Justice

The EU’s highest court has fined the UK €32mn for allowing pleasure boaters to use red diesel that is lower in tax. Lawyers say this case sets a precedent for other disputes.

The European Court of Justice has imposed a penalty that was higher than expected in an attempt to warn the country that, although it left the EU, it remains bound by certain of its rules as Northern Ireland is still part of the EU Single Market.

The court calculated the fine based on the UK economy, not Northern Ireland.

Alexander Rose, a specialist in competition and subsidy law at the law firm DWF, said: “This case is important because it sets a precedence for how the ECJ approaches other infractions.”

The ECJ was given discretion to determine the amount of fine but chose a figure higher than the standard £27.6mn to avoid a’repetition of similar infringements’ of EU law. This is a reference to the obligations in the Northern Ireland Protocol and the withdrawal agreement.

The EU has a number of exceptions to the rules that Northern Ireland must adhere to.

The UK has also committed to “level playing fields”, meaning that any new regulations or subsidies which save money for businesses in certain areas, such as the environment, could be subject to legal action from the European Commission.

Brussels has already forced Britain to scrap plans to encourage the domestic production of Wind Turbines.

James Webber, a partner in the law firm Shearman & Sterling said that the UK is still under the jurisdiction of ECJ, and it can be fined if it fails to implement EU directives correctly in Northern Ireland. This has been the case in this instance in relation to fuel levy duties.

The Luxembourg-based court said that it imposed a higher penalty because London had taken so long to comply a 2018 judgment.

According to EU law, only commercial vessels are permitted to use fuel with a lower tax rate. However, by dyeing all marine fuel red, it is impossible to tell if pleasure boats were paying full price, the report said.

It will be October 2021 before the UK changes the laws governing marine fuels in Northern Ireland.

The court said that the UK should pay a fee similar to what a member country would have paid for breaking the law.

It added that a penalty based solely on the GDP of Northern Ireland “would not be dissuasive enough and would therefore not allow the goal of effectively preventing similar violations of EU law to occur in the future” to be achieved.

Billy Melo Araujo is a professor at Queen’s University Belfast who specializes in European law. He said that he didn’t think the case of the pleasure boat would set a precedent for post-Brexit trading rules within the region. This framework, also known as Windsor, was the result.

He said: “The real test comes if the EU ever feels that the safeguarding mechanisms envisaged by the Windsor framework aren’t being implemented adequately by the UK. This is possible because we’ve experienced it for the last three years.”

The UK government stated: “This case is a historical one that began when the UK was still a member of EU. We are now gone.

“Since that time, we’ve negotiated with the EU the largest deal in the world for zero tariffs and no quotas, and now, our focus is on using the Brexit freedoms of the British people to their benefit.”