Negotiations over the Northern Ireland protocol are in the crucial final phase with a deal possible as early as next week, according to multiple sources. Rishi Sunak is expected to spend the latter half of the parliamentary recess this week looking at the shape of the deal, with calls pencilled in with EU leaders. However, UK sources stressed that talks were at a delicate phase and there was no guarantee of a final agreement. One well-placed source said the drive was to announce a political deal of “agreement in principle” that would have enough to satisfy protocol opponents in the Democratic Unionist party and the European Research Group, the Conservative party caucus of Eurosceptic MPs. The Guardian understands the final shape of the deal would involve a fudge on the European court of justice (ECJ), allowing Northern Ireland courts to adjudicate in disputes over food and agricultural products as they are devolved issues. Sources also say the deal would involve a “carve-out” for retail and possibly wholesalers of farm and agrifood products that remain in Northern Ireland to ensure no customs paperwork or checks beyond pre-existing public health controls. This would allow supermarket chains such as Marks & Spencer and corner shops to sell the full range of products available elsewhere in the UK to Northern Ireland shoppers and would also cover food in hospitals, schools and canteens in other settings. That would be a significant compromise from the EU, which had originally insisted that any products going through a “green” lane would still require customs declarations. A senior EU official confirmed to the Guardian that an agreement on food and animal health checks was “close to being done” as part of a deal that would create red and green lanes at Northern Irish ports to differentiate between goods staying in the region and those moving south to the EU’s single market. Goods from Great Britain destined to stay in Northern Ireland would go through a green lane with lighter checks, although the precise nature of customs paperwork and food and animal health checks remains unclear. There is still discussion on how to deal with what negotiators are calling “intermediary” goods, which go to factories and are at risk of going into the single market in a fully finished product. A new arbitration panel is also being mooted as part of the “architecture” to remove the ECJ as the sole arbiter in trade disputes – outside agrifood. Sources say this could remove the threat of the ECJ launching infringement proceedings but retain it as the ultimate arbiter of matters relating to EU law. Any deal would mean the UK agreeing to drop the Northern Ireland protocol bill, the use of which would unilaterally override the current agreement and prompt legal action from Brussels. The bill is in the House of Lords but its progress has been frozen. The announcement of a deal will depend on time to square off any concerns from EU member states and, most crucially, parties in Northern Ireland, including the Democratic Unionist party (DUP), which is blocking the formation of a power-sharing government at Stormont. An EU source sounded a note of caution, saying Brussels would still insist that the ECJ will remain the ultimate arbiter of any dispute and said now the main work was “to be done in the UK, not between the commission and the UK”. “Weeks ago, the UK government hinted at an imminent breakthrough,” the source said. “But we are still waiting for Sunak. But if there is a deal to be made it should happen in the next days or weeks.” “It could be as early as next week,” said another source who indicated that they would delay further rather than have any standoff if it could not be signed off. “It’s not there yet but it is not far. The idea is that it is a voluntary agreement.” One key question will be whether the treaty will need to be rewritten, which the EU has said is impossible, or whether additions can be made without redrafting, as the UK had insisted needed to take place. If the text is not reopened, it could be agreed by the protocol’s joint committee. Sunak may be able to swerve a Commons confrontation with hardline Brexiters in the Conservative party as the changes are unlikely to necessitate a formal vote in parliament. Two key former organisers in the ERG, Chris Heaton-Harris and Steve Baker, are now at the Northern Ireland Office working for a solution. One source suggested that if the deal had their backing, it would be difficult for the group to mount a protest big enough to damage Sunak. But one key risk for Sunak would be a high-profile intervention by the former prime minister Boris Johnson condemning the deal. The EU is keen on some paperwork to allow it to trace goods that may end up over the border in Ireland or on sale on the continent, while the UK has maintained that no paperwork is necessary if a trusted trader system and hefty fines for smugglers are put in place. Few expect the DUP to accept a deal. It has laid down seven conditions for its return to Stormont, which it has been boycotting for a year in protest at the protocol. The former Irish and British leaders Bertie Ahern and John Major urged the party to compromise, having recently told a House of Commons select committee that no deal would meet the DUP’s seven tests. However, the political capital vested in a continuing boycott was somewhat torpedoed last week when Heaton-Harris delayed new Stormont elections for up to 14 months. Sources say the DUP leader, Jeffrey Donaldson, wants to return to Stormont but the boycott has proved so popular with his base that he will be under pressure to reject any agreement that does not meet their ideals.