Expert View

UK’s obligations won’t go to zero if we quit with no deal

by Pavlos Eleftheriadis | 23.03.2017

Pavlos Eleftheriadis is a barrister at Francis Taylor Building and a fellow of Mansfield College, Oxford.

A Lords committee rejected the opinion of two out of three expert witnesses in coming to the novel conclusion that our financial obligations to the EU would vanish if we leave the club with no deal.

The House of Lords EU Financial Affairs Sub-Committee’s report suggests that if we withdraw without an agreement “it follows that under EU law, Article 50 TEU [Treaty on European Union] allows the UK to leave the EU without being liable for outstanding financial obligations under the EU budget or other financial instruments, unless a withdrawal agreement is concluded which resolves this issue” (par. 133).

In other words, the issue of the enforceability of the EU’s financial claims – something I addressed in a previous column – is moot because there will be no more outstanding legal obligations. The argument is clarified in the legal opinion that accompanies the report by the Committee’s Legal Adviser, who concludes that the end of membership will bring an end to all EU obligations including “all of its legal obligations under the Own Resources Decision, the Multiannual Financial Framework, and the Annual Budget” (par. 22 of the Legal Opinion).

Can this be true? The committee heard three expert witnesses. One expert witness, Dr Maria-Luisa Sanchez-Barrueco of the University of Deusto, Bilbao, took this view. However, two other expert witnesses, Professor Takis Tridimas of King’s College London and Rhodri Thompson QC, argued for the opposite conclusion. The issue dividing them concerns the application of the Vienna Convention on the Law of Treaties. The basis for the Committee’s conclusion was that Article 50 excludes the normal application of the Vienna Convention to Brexit.

Article 70 of the Vienna Convention says: “Unless the treaty otherwise provides or the parties otherwise agree, the termination of a treaty under its provisions or in accordance with the present Convention: (a) Releases the parties from any obligation further to perform the treaty; (b) Does not affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination.”

So under the Vienna Convention, unless the EU treaties provide for a different solution or there is an agreement to the contrary, the rights and obligations created while the UK was a member continue. The House of Lords committee took the view that Article 50 “provides” otherwise. It therefore prevents the application of Article 70. The silence of Article 50 on financial obligations means, for the committee, that the UK’s obligations are retrospectively wiped out on Brexit.

This reading of Article 50 seems to me wholly implausible. Tridimas and Thompson, both eminent EU law experts and practitioners, have the better view. They explain that Article 50 provides for prospective withdrawal and nothing else. They conclude in their written evidence: “If anything, given that the EU treaties envisage a far more intense form of integration than other international agreements, the limitation on retroactive or immediate effect of termination, provided for by Article 70(1)(b) should apply a fortiori to the EU Treaties.” It is surprising that the committee rejected these clear submissions.

When Article 50 provides that the treaty “ceases to apply”, it refers to new obligations arising out of the treaty, but not to vested rights that were created while the UK was a party, including its financial commitments. I think this interpretation of Article 50 is the most natural reading of it. The UK cannot escape its obligations merely by walking away.

This is the second of three articles on the legal implications of quitting the EU without a deal. The first argued that any financial obligations to the EU will be enforceable. The third argues that the vested rights of EU citizens in the UK and Brits in the EU may also continue post-Brexit unless there is an exit deal.

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    Edited by Michael Prest

    2 Responses to “UK’s obligations won’t go to zero if we quit with no deal”

    • You have missed a number of key elements here. Firstly, the Vienna convention does not apply to the EU – it is not (and cannot) be a party to the convention, and not all ERU countries (e.g. France) are parties. Therefore the HoL analysis was correct.

      Secondly, you assume that there are in fact any legal liabilities at all. The mistake made by remainers (and the EU) is that they like to claim that we have a share in the EUs assets and liabilities. Therefore, as the liabilities are greater than the assets, we have to settle up. As the HoL report did make clear, this is not the legal reality. We are members, not shareholders or partners, in the EU. Our legal obligations are restricted to what was agreed under the treaties. For example, we have to pay our contributions until we leave. But the treaties say nothing about payment of liabilities. By far the biggest ‘liability’ is the RAL, the ‘promises’ that the EU has made to pay EU members structural funds in the future. They have no legal basis for the UK – they are promises made by the EU, not the UK. The UKs legal obligation is to pay whatever was actually agreed in the real budget and then, only whilst it is a member. The history of EU accession never even contemplated that it was some kind of shared liability scheme or incoming nations would have needed to pay their share on entry. In the absence of any clauses in the treaties, A50 will prevail, which quite clearly states that the treaties cease to apply at the date of exit. If the UK was in arrears on budget payments you might well argue that this survives the exit, but almost none of the amounts claimed by the EU are of this nature. They are amounts for which the EU (as an independent legal entity) committed to spend, and they can only legally spend this money when its members agree to contribute these funds. Since the UK will not agree, there is no legal liability at all.

    • The other side of the liabilities coin has not been addressed here. Much of the ‘bill’ is based on the UK having agreed to future expenditure plans, most, if not all, of which were for the purpose of benefitting the EU and its member states. If any liabilities survive Brexit they must, surely, bring with them the benefits which were intended when the liability arose.

      Since the EU’s negotiating position is that the liabilities issue ahs to be dealt with before any talks about the future UK/EU relationship can begin it looks as though they will be seeking agreement on their claims without offering the originally intended benefits, one of which was, of course, access to the single market.

      Whether the Vienna Convention comes into play or not, demands for payment from the EU without the offer of the benefits such payments were intended to earn should fail in any judicial environment.