Britain and the EU clinched a deal on Monday to settle the toxic dispute over post-Brexit trading rules in Northern Ireland in a watershed moment for the two sides.

Rishi Sunak, UK prime minister, and Ursula von der Leyen, European Commission president, sealed the deal in the shadow of Windsor Castle after months of talks.

“We have now made a decisive breakthrough,” Sunak said at a press conference with von der Leyen. In words echoed by the Commission president, he added: “This is the beginning of a new chapter in our relationship.”

The prime minister claimed he had secured fundamental reforms to the Northern Ireland protocol, part of Boris Johnson’s 2019 Brexit deal and a focal point of tensions between the two sides.

Von der Leyen praised what she said was “a very constructive attitude from the very beginning” in the talks with the UK, adding that the two sides shared the same values.

“We can take pride in the fact that we have delivered,” she said.

The protocol was hated by Northern Ireland’s Democratic Unionist party because it created a trade barrier for goods travelling from Great Britain into the region, which remains part of the EU’s single market for goods.

Sunak claims the deal will slash trade bureaucracy and reduce the role of EU law and the European Court of Justice in Northern Ireland, as well as giving a say over new EU rules to the region’s assembly in Stormont.

He hopes the deal will pave the way for the DUP to end its boycott of the region’s Stormont assembly. Sir Jeffrey Donaldson, DUP leader, said his party would study the fine print.

Sunak also has to sell the deal with Brussels to Eurosceptic Tory MPs, although there were early signs that his high-stakes gamble may not create the big rebellion some had predicted.

Steve Baker, the self-described “hard man of Brexit” and a Northern Ireland minister, scotched rumours he might quit, calling the pact “a really great deal for everyone involved”.

Sunak and von der Leyen hope the deal will resonate beyond Northern Ireland and end years of grim post-Brexit relations between the two sides.

The EU is expected to restart co-operation with Britain under the €95bn Horizon science project, while there is talk of greater defence and security co-operation. France and Britain are also expected to step up efforts to curb cross-Channel migration in small boats. Referring to Horizon, von der Leyen hailed Monday’s agreement as “good news for scientists and researchers” in the EU and UK.

Sunak, in turn, is expected to ditch legislation introduced by Johnson, when he was prime minister, to unilaterally rewrite the protocol.

The signing of the deal was accompanied by controversy as Von der Leyen included a visit to see King Charles as part of her itinerary, sparking claims Sunak had allowed the monarch to be dragged into the political arena.

Although Brussels insisted the meeting was unconnected to the protocol, Lady Arlene Foster, former leader of the Democratic Unionist party, said the move was “crass” and would “go down very badly” in Northern Ireland. 

Sunak will try to sell the reforms to pro-Brexit Tory MPs and the DUP with a statement to parliament scheduled for Monday afternoon. No House of Commons vote is expected on the deal this week.

The revised settlement, which runs to more than 100 pages, is an “implementation agreement”.

Brussels will have to make some changes to existing EU law — as it did last year to resolve an issue over access to generic medicines for Northern Ireland — to give effect to the changes.

The UK has decided to provide full data transparency to the EU and build border control posts at Northern Irish ports — moves expected to simplify the processes needed for traders in Great Britain to send products to Northern Ireland.

It is anticipated that full customs and animal-health certification at the border will not be required for products registered via a trusted trader scheme and labelled for “NI-Only” consumption only.

The EU is also expected to soften its stance over the rules for Northern Ireland residents receiving parcels from Great Britain by post.

Among the other expected changes is a derogation on pet passports that will enable UK residents to take their dogs to Northern Ireland without microchips and pet passports.

Officials are also confident of resolving a spat over steel quotas that led to HM Revenue & Customs warning UK producers last August that some products would be subject to 25 per cent tariffs when shipped to Northern Ireland.

But UK officials conceded that Monday’s agreement would not remove EU law or European Court of Justice jurisdiction from Northern Ireland, as demanded by Brexit hardliners.

Insiders on both sides said Brussels had not moved substantially on the ECJ’s role in enforcing the protocol, although the UK is expected to argue that the amount of EU law being enforced will in effect have been reduced.

Additional reporting by Peter Foster and Robert Wright in London and Andy Bounds in Brussels