UK's Sunak says Northern Ireland Brexit deal must address EU role

By Alistair Smout and William James

LONDON (Reuters) -British Prime Minister Rishi Sunak said on Wednesday any deal with Brussels over Northern Ireland's post-Brexit trade would address the issue of the British province being subject to the European Union's rules.

After the leader of Northern Ireland's Democratic Unionist Party (DUP) Jeffrey Donaldson asked if Britain would seek to address issues with the trade rules - known as the Northern Ireland protocol - by rewriting the Brexit treaty text, Sunak said he had heard Donaldson's concerns "loud and clear".

"He raised the question of practical issues, and it is vital that these are addressed but he also raises ... a vital question about the constitutional and legal framework in which these arrangements exist, and I can assure him that I agree," Sunak told lawmakers in parliament.

"Addressing the democratic deficit is an essential part of the negotiations that remain ongoing with the European Union ... this is at the very heart of the issues that must be addressed."

The exchange came as Britain and the EU edge closer to resolving their dispute over the protocol, which sets out the conditions for post-Brexit trade with the British province to avoid creating a hard border with EU member Ireland and to help protect the bloc's single market.

While recent media reports have speculated a deal is imminent, both Britain and the EU have repeatedly said over the last few days that they remain in "intensive" discussions after having made progress in talks.

Sunak spoke to European Commission President Ursula von der Leyen by phone on Tuesday evening and they will speak again in the coming days, Sunak's spokesperson said.

Sky News reported the proposed deal being discussed would see the London-based government, rather than Brussels, set Northern Ireland's state aid policy and VAT sales tax rates.

British foreign minister James Cleverly addressed a meeting of lawmakers from the governing Conservatives on Wednesday, but did not give any detail on the possible deal, according to one lawmaker present.

"He said there's a number of hurdles to overcome yet. So I wouldn't hold your breath," Conservative Michael Fabricant told reporters after the meeting.

Northern Ireland has been without a devolved government, like in Scotland or Wales, since last May due to the DUP's refusal to be part of the government over its issues with the protocol. Northern Ireland's 1998 peace deal says its main parties must form a power-sharing government.

Donaldson told Conservative lawmakers on Tuesday that his party was concerned with the application of some EU regulations or laws to goods produced in Northern Ireland.

Donaldson has also told Conservatives it was "quite wrong" for goods produced in Northern Ireland and destined for Britain to be subject to EU rules, especially when those rules might change over time and the province would still have to adhere to them without having any input in their creation.

(Reporting by Alistair Smout and William James, Writing by Sachin Ravikumar and Kylie MacLellan, Editing by Andrew MacAskill and Christina Fincher)