Brexit News: European Commission Presents Rules For EU - UK Trade Deal

The European Commission on Monday warned the United Kingdom it could face fines or lose preferential access to continental markets if it violates terms of its deal with the European Union.

The U.K. is scheduled to make its formal exit from the EU Jan. 31 but will have a year to negotiate a new duty-free, quota-free trade agreement with the economic alliance.

The Financial Times reported the EU has developed a set of enforcement rules that will govern any deal between the U.K. and EU. The rules allow each side to protect itself in the event the other side violates the rules.

Brussels is using its experience with Switzerland in developing its approach to London. Though Switzerland is outside the alliance, it enjoys many of its benefits through a series of piecemeal agreements, which don’t incorporate any way to settle disputes.

France and other EU members want Britain to continue to abide by the alliance’s environmental and labor policies, as well as state aid and tax policy to keep a level playing field.

However, U.K. Chancellor Sajid Javid told the Financial Times last week Britain has no intention of accepting EU regulatory constraints.

“In the end it is all rather simple: If Britain wants to diverge from EU rules, it will diverge,” an EU official told the Times. “Such an approach would obviously lead to new trade hurdles between Britain and the EU and in consequence less trade, less investments, less jobs.”

The EC outlined its proposed dispute settlement procedures, which include arbitration. The rules, which include a monitoring and compliance mechanism, would be backed by sanctions that could lead to the agreement’s suspension or “financial compensation,” the Times said.

Northern Ireland is not yet on board with the U.K. exit. The Assembly Monday adopted a motion to withhold consent – at least temporarily. The region is in a precarious position because of its border with the Republic of Ireland.

Former Secretary of State for Northern Ireland Peter Hain said it remains unclear what impact Brexit will have on the region.

"I don't think the government is being fair with Northern Ireland -- either its businesses or its politicians -- by telling them they have to reform and on the other hand making it more difficult for them to do so by weakening the economy," Hain said.