The UK government has decided not to pull the so-called "Stormont Brake" that would have prevented the implementation of a new EU regulation in Northern Ireland.
Northern Secretary Hilary Benn said the application by 35 unionist members of the Stormont assembly did not meet the necessary criteria.
The application to implement it - the first time it has been tried - over proposed changes to EU labelling of hazardous chemical products.
It means the new rule will now apply in Northern Ireland which continues to follow EU rules on goods.
In a letter to the Stormont speaker this afternoon, Mr Benn said he did not believe the bar to trigger the mechanism had been reached.
The move will anger unionists, some of whom had expressed concerns about the effectiveness of the so-called brake mechanism.
There are strict rules on its use.
It cannot be deployed for trivial reasons, and MLAs must be of the view that it will have a significant and persistent impact on everyday life.
Once the decision is made to pull the brake, the matter passes to the Northern Secretary for a final decision.
Mr Benn based his decision on several factors, including existing regulatory differences between Northern Ireland and the rest of the UK on chemicals and the fact that most companies supplying Nothern Ireland market also trade with the EU and would be adopting the new regulation.
The Northern Secretary said that when it came to chemical labelling, the UK would consider aligning the system in Britain with that in Northern Ireland, in order to prevent market disruption.
That is likely to anger Brexiteers, who will point out that it is equivalent to the UK aligning with EU rules.
The Stormont Brake was part of a package of measures agreed in the Windsor Framework to give Northern Ireland's politicians some say in the continued application of EU law after Brexit.
Northern Ireland follows EU regulations on goods as part of a wider EU/UK deal to prevent a hard border on the island of Ireland.
The amended EU legislation will change safety warnings and font sizes on labelling.
Unionist MLAs made the case that it would impact goods coming into Northern Ireland from Britain, where the rules would not be enforced.
A Stormont committee set up to examine new or amended EU laws held an inquiry into the impact of the changes.
Having taken evidence and legal advice, the committee concluded that the replacement EU act significantly differed from that which it was replacing.
MLAs were unable to reach a consensus on whether it would have a significant impact on everyday life in Northern Ireland.
Evidence from UK's Department for Work and Pensions found that there would be "limited Northern Ireland specific implications" due to phased roll-out and various derogations.
It said the UK was also currently considering similar changes to its chemical labelling regime.
