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Brussels launches first post-Brexit court case against UK

The European Commission has launched the first post-Brexit court case against the UK in a move that could exacerbate tensions between Brussels and London.

The commission on Wednesday referred the British government to the European Court of Justice, claiming a February 2020 UK Supreme Court judgment ordering the Romanian government to pay compensation to investors who lost out on state subsidies “breached the principle of sincere co-operation” and violated EU law.

The referral comes as London and Brussels are locked in talks over possible changes to the Northern Ireland protocol, which governs post-Brexit trade on the island of Ireland.

Boris Johnson, the UK prime minister, threatened again on Wednesday to trigger Article 16 of the protocol which would suspend some checks on goods between Great Britain and Northern Ireland.

The commission had started infringement proceedings over the UK’s failure to fully comply with the protocol but paused them during the negotiations.

Under the EU withdrawal agreement, the UK is subject to the ECJ and its rulings for four years after the transition period that ended on December 31, 2020.

The court also adjudicates disputes in Northern Ireland as long as the protocol is in effect, since the region remains effectively in the single market for goods. The UK wants to change that arrangement since pro-Brexit Conservative MPs are unhappy with what they say is the imposition of a foreign court.

The ECJ is already considering a case brought by the commission against the UK in 2020 for alleged failure to comply with rules on lower-taxed red diesel, but it concerns the enforcement of a pre-existing judgment.

The Romanian case predates the country’s EU membership. Romania revoked an investment incentive scheme in 2005, four years before its scheduled expiry, to align its national legislation with EU state aid rules.

Ioan and Viorel Micula, two investors with Swedish citizenship, challenged the decision in Romania and, subsequently, in Brussels, where they lost a compensation claim. The Miculas challenged the decision before the General Court of the European Union, one step below the ECJ. But they also asked the UK courts to enforce the compensation award.

The commission now wants the ECJ to determine whether the UK broke the law by adjudicating a legal question that was already before EU courts, and misapplied the law.

The ECJ could fine London. Commission officials say the decision to launch the case was unconnected to Northern Ireland talks.

The UK government declined to comment.

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