The EU legal action is not the block to a trade deal you may think

On the face of it, the EU’s decision to launch legal action against the UK for threatening to tear up last year’s withdrawal agreement would seem to make a trade deal between them far less likely.

But appearances can be deceptive. The European Commission’s move was inevitable after Downing Street took the incendiary step of including a power to override the Northern Ireland protocol in the Internal Market Bill now going through parliament, and ministers admitted it would breach international law.

Ursula von der Leyen, the commission’s president, said the bill was a “breach of the obligation of good faith,” adding pointedly that the EU “stand by our commitments”. The infringement proceedings were inevitable because Brussels had pledged to act if the UK did not drop the bill’s controversial provisions by the end of the month.

Crucially, suggestions that the EU might walk away from the trade negotiations failed to materialise. They are at a crucial stage, with the ninth round taking place in Brussels this week. 

EU officials rightly saw the UK’s gambit as a trap: the EU would either realise the UK did not fear no deal and make concessions, or angrily draw stumps on the talks, allowing Boris Johnson to blame the collapse on Brussels. So the EU wisely decided to do neither, and to keep calm and carry on negotiating. As one insider told me: “We will be the last to leave the table.”

In London, officials played down the legal action, which will take months if not years to complete. Last year, there were 800 such outstanding cases among EU mender states, with an average of 29 against each nation.

Although the UK refused to drop them from the measure, the bill, having completed its Commons passage this week, is unlikely to reach its crucial stages in the Lords until after the EU leaders’ summit on 15 and 16 October. By then, UK ministers hope the provisions will have been overtaken by events, and progress towards a trade agreement. If so, Johnson could drop the offending part of the bill, saying it was only ever meant to be a reserve power in the event of no deal being reached by the end of transitional period on 31 December.

Differences remain over EU access to British fishing waters and whether the UK will agree limits on state aid to its firms that are acceptable to Brussels.  But the prospects of an agreement are rising. UK ministers are now viewing Brexit and coronavirus together, rather than separately. This has led to a recognition that it would be difficult for British business to face the double disruption caused by the pandemic and no deal.

Ministers also know that a no deal scenario would play into the hands of Nicola Sturgeon, fuelling her campaign for independence ahead of next May’s elections to the Scottish parliament, when she hopes to win a mandate for a second referendum.

Although his allies won’t admit it, Johnson also needs the political success of an EU deal to offset his troubles on coronavirus, amid growing criticism of the government’s mixed messages and complex restrictions that even the prime minister himself failed to understand. 

As one Whitehall insider put it: “If the story  on Covid-19 is a government losing control, can the PM risk looking like he has lost control of the Brexit process at the same time?”