European judges have ordered the UK to pay a €32 million (£28 million) fine over its failure to impose EU rules on diesel, in a ruling the Government fears could set a precedent for future rows over Brexit.
The European Court of Justice (ECJ) imposed a penalty almost double than initially recommended by advisers as a warning that it will clamp down on potential breaches of EU rules in Northern Ireland.
It set the fine based on the UK’s economy rather than Northern Ireland’s because that “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”.
The Telegraph understands that senior figures within the Government have warned the case sets a worrying precedent for future disputes over the province.
Under the Windsor Framework, Northern Ireland is bound to swathes of EU rules for goods, which are governed by the European Commission and enforced by the ECJ, to prevent a hard border with the Republic.
EU law states only commercial boats are allowed to use lower-taxed fuel, while private yachts, boats and canal boats must use white diesel, which attracts a higher rate of VAT.
A ruling in 2018 found that Britain had failed to implement an EU ban on use of red diesel, which is taxed at 5 per cent, in private pleasure craft, such as canal boats or yachts.
The rule change forces boat owners to use white diesel, which attracts the full rate of fuel duty and VAT at 20 per cent.
Britain argued it needed more time to enforce the diktat as a result of the coronavirus pandemic and the 2019 general election.
The laws governing marine fuels in Northern Ireland were not changed to comply with the Brussels diktat until October 2021.
The initial legal case was opened against the UK in 2020, while the post-Brexit transition period was still in place.
The ECJ said the rule had applied for the entire UK for almost three years since the original ruling, insisting that it could only apply to Northern Ireland because Brexit only entered into full force in January 2021.
The ECJ also said it increased the fine because the UK took so long to comply with the 2018 judgment.
An advocate general at the Luxembourg-based court had previously recommended a €17 million fine be levied for the infraction. Their advice, while not binding, is traditionally followed by judges.
Using NI as ‘leverage’
Brexiteers said the ruling was a sign that Brussels would continue to use Northern Ireland as leverage to stop Britain diverging from EU rules.
David Jones, a former Brexit minister, said: “The attitude is what it always was. The EU has always wanted to punish the UK for daring to exercise its treaty right to leave. NI is the EU’s continuing leverage over the whole of the UK. It is exercising that leverage and will continue to do so until we take steps to break it.
“This simply underlines that the Windsor Framework is a huge ball and chain that prevents the entire UK from diverging from EU regulation. It needs to be renegotiated.”
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.”