Friday 5 May 2017

EU Withdrawal ~ "divorce fee"

Updated 9th May

Remember the EU red bus?  "We send the EU £350 million a week - let's fund our NHS instead."  The £350 million per week was misleading and the statement regarding the NHS almost certainly had no true political intent behind it.

UK contributions as a member to the EU:

In February 2017 the government published European Union Finances 2016.  This is the 36th such document and describes the EU budget. 
For the calendar year 2015, the UK's gross contribution to the EU was £19,560 m (or £376.1 m per week).  Allowing for the UK's rebate and public sector receipts the net amount paid was £10,763 m or £206.98 m per week.  Figures for 2016 are not finalised but are said to be gross contribution £16, 996 m (£326.85 m per week) with rebate of £3,878 m and public sector receipts of £4503 m resulting in a net contribution of £8616 m (£165.7 m per week).  These are considerable sums and the bulk of the EU's budget for 2016 is made up by the contributions of Germany (19%), France (16.63%), the UK ( 13,45%) and Italy (12.49%) leaving 38.43% of the budget to be made up by the other 24 members.

EU Council Guidelines:

The European Council Guidelines for the Brexit negotiations address orderly withdrawal of the UK and include this statement:

"A single financial settlement - including issues resulting from the MFF as well as those related to the European Investment Bank (EIB), the European Development Fund (EDF) and the European Central Bank (ECB) - should ensure that the Union and the United Kingdom both respect the obligations resulting from the whole period of the UK membership in the Union. The settlement should cover all commitments as well as liabilities, including contingent liabilities."  [My emphasis and links].

Referring, as it does to the whole period of UK membership, this has the making of an enormous bill.  Various figures have been mentioned including one of €100 billion (about £85bn).  This amounts to about 3.8% of the UK 2015 GDP.  Whilst much remains to be negotiated it appears from the guidelines that agreement on this financial settlement is seen by the EU as a pre-condition to further agreement regarding Brexit.

It is no surprise that the question has arisen as to whether this single financial settlement is legally payable.  It is also no surprise to find alternative views.

The House of Lords EU Committee:

The House of Lords EU Committee 15th Report for session 2016-17 "Brexit and the EU budget" examines the potential financial demands in Chapter 3 and the UK's legal obligations in Chapter 4.

The EU Committee, on the basis of the legal opinions it had received from Professor Takis Tridimas (Chair - European Law at KCL), Dr Sanchez-Barrueco, Rhodri Thompson QC and its own legal adviser, concluded:

"135.  On the basis of the legal opinions we have considered we conclude that, as a matter of EU law, Article 50 TEU allows the UK to leave the  EU without being liable for outstanding financial obligations under the EU budget and related financial instruments, unless a withdrawal agreement is concluded which resolves this issue.

136.   Individual EU Member States may seek to bring a case against the UK  for the payments of outstanding liabilities under principles of public international law, but international law is slow to litigate and hard to enforce. In addition, it is questionable whether an international court or tribunal could have jurisdiction.

137.   However, the political and economic consequences of the UK leaving  the EU without responding to claims under the EU budget are likely to be profound. If the UK wants a preferential trading relationship with EU, including a transitional arrangement, the EU partners may well demand a financial contribution post-Brexit."

A point about which they can be no argument is that if there is a withdrawal agreement concluding this issue then that agreement will govern the situation.  I would expect there to be such an agreement because it is in the best interests of all parties to agree.

An alternative view:

Whether the EU Committee is correct has been challenged. Writing on the blog of the European Journal of International Law 4th May 2017, Dr Michael Waibel (Cambridge University) comments that:

"... the House of Lords rightly noted the considerable uncertainty about the UK’s financial obligations arising out of its departure from the EU. Like other aspects of their past and future relationship, the UK’s financial obligations are primarily a matter for negotiation between the EU27 and the UK. The EU27 and the UK will bargain about the UK’s financial obligations in the shadow of the UK’s legal obligations. And if the EU 27 and the UK were to fail to reach agreement on this point, the legal position is even more important."

Waibel goes on to argue that both the conclusions of the House of Lords, and the UK government’s apparent position, are likely erroneous. First, the UK is liable, in principle, for a share of the EU’s budget commitments which all current EU member states (incl. the UK) have assumed, as well as for pensions of EU officials. Secondly, the European Court of Justice  may well have jurisdiction over the UK’s financial obligations arising out of its membership in the EU."

All of this is interesting legally and may have to be resolved if agreement on the "single financial settlement" is not forthcoming.  The better course by far would be to reach agreement.  The House of Lords was surely correct to say that failure to do so could have profound consequences for the future UK-EU relationship and that will be vital for the future prosperity of millions.

Update 9th May - View of Dr Gunnar Beck:

Dr Gunnar Beck (University of London) argues that the Court of Justice of the EU is not impartial and should have no role to play in post-Brexit EU-UK relations - Policy Exchange 7th May.   In this article, Dr Beck also states that - " ..... as a matter of law, Britain can leave the EU without any liability for allegedly outstanding sums under the EU budget and other EU legal instruments. Whether or not it is politically wise for the UK to do so, is, of course, another question."

Media and links:

House of Lords - EU Select Committee

EU Select Committee Publications

In March 2017, Germany indicated that it would take the UK to The Hague if it refuses to pay its Brexit "divorce bill" - The Independent 28th March.

BBC News 28th March 2017

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