Why the UK has no financial obligations to the EU legally, but they do politically

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November 6, 2017 by Paul Goldsmith

In the end it comes down to money and uncertainty. The one big card the UK has to play is the amount of money they give to the EU as they leave – the so-called ‘divorce bill’. The EU have many more cards to play, given they are losing one customer and the UK stand to lose 27. But the biggest card the EU have is the creation of uncertainty in the UK. Every major business, unless they are utterly incompetent, is making preparations for the ‘cliff-edge’ of a hard Brexit. No doubt they, and individuals who could also be negatively affected by this uncertainty, will be putting pressure on the UK Government to make a deal, some sort of deal, whatever it is.

But let’s go back to the money. The EU keep talking about ‘financial commitments’ here, but they seem to stop short of using the word ‘legal’. That’s because there is actually no legal obligation to pay anything to the EU as a result of Brexit. The political obligations are a different thing. The reason Britain will probably have to pay a lot more money than we think without being legally obliged to pay anything is the wording of Article 50.

Let’s start with Article 70 of the Vienna Convention on the Law of Treaties. This states that the termination of a treaty “does not affect the right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination”. This can be translated by the EU as meaning that Britain’s obligations only come to an end when the international treaty ends, and there is no get-out clause for obligations made before Britain leaves, which includes supporting the EU budget up until 2021.

There is, however, a crucial caveat. These terms apply under the Vienna Convention “unless the treaty otherwise provides or the parties otherwise agree”.

The treaty in question is the Treaty on European Union (TEU), otherwise known as the Lisbon Treaty. Article 50 is how this treaty does, in fact, provide otherwise, thus trumping Article 70 of the Vienna Convention.

The problem for the EU if this goes to court, and it could well do so, is that Article 50 was rather hastily and vaguely written, because the writers themselves admit that they didn’t think it would ever be used. There is thus a sin of omission, which is that Article 50 says nothing about money or rights or obligations. Therefore the UK would not be required to pay anything should there be no withdrawal agreement.

What Article 50 does say is that “the treaties shall cease to apply to the state in question” once a withdrawal agreement takes effect or two years after Article 50 has been invoked by the leaving member. This is the ticking clock, and it ticks for the EU if it wants it’s money as well as for the UK if it wants no cliff-edge.

The House of Lords is not a pro-Brexit chamber, but it produced an in-depth report on all this. Whilst acknowledging ‘competing interpretations’ on what the UK should pay, the report admits there is no enforceable obligation to make the UK pay anything, because the EU treaties (Article 50) don’t say anything on the matter.

So, legally the UK would be free to walk away without responsibilities should there be no agreement. Yes, the remaining 27 member states (not the EU as it is not a sovereign state) can appeal to the International Court of Justice (ICJ) in The Hague, but according to the House of Lords, they would struggle to win.

That doesn’t mean there would be no price to pay for the UK. Leaving the EU is not just about money. It is about the rights of citizens, the future of the border between a Northern Ireland and the Republic of Ireland, and its about a trade deal. Put simply, if Britain walks away from its financial obligations then why should it be trusted on future obligations?

This is the thing. In complete isolation from anything else, the UK has no legal obligation to pay anything at all. But refusing to pay would be a highly provocative move, causing many more problems than it would solve. If the UK wants a good deal on everything else, including securing a ‘transitional agreement’ that smooths the path to a final deal without the problem of a ‘cliff-edge’, then it will need to pay something as a gesture of goodwill.

The trouble is that the EU sees the money the UK could pay as a prerequisite for any deal to almost be discussed, let alone succeed. The UK Government knows to get a deal it will have to pay, but because Article 50 didn’t even mention financial obligations, let alone give a mechanism for calculating them, there is no way to work out what those obligations are.

So, like everything with Brexit, things are just not as simple as they seem.

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