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Discussion > How Strong is the EU's Case For a Brexit Payment from the UK?

Earlier on this thread Alan K (Supertroll) raised the analogy of a golf club member leaving the club while a building or refurbishment programme (to which the member had agreed) was ongoing. This is how the lawyers in the paper I have just linked to, respond to that argument:

"The UK’s position is analogous to that of a member of a club which has an ongoing expensive programme of refurbishing its premises. The member resigns and his membership dues are then no longer available to fund the expensive programme. Instead of revising its budget to take account for its reduced membership dues or increasing the subscriptions of the other members to cover its activities, the club chooses to keep spending at the same level and
not to ask for increased dues from other members. The club argues that the ex-member should carry on paying because the expenditure was in its forward plans at the date of withdrawal, even though the ex-member derives no benefit from the refurbishment programme.

The Commission’s claims are equally weak as those of the club. Liabilities which will arise in the future under forward programmes are simply not accrued rights or obligations at the date of withdrawal. The apparent attempt by certain Member States to expand this claim beyond RAL “committed” funds to general programmed expenditures takes the argument beyond even the absurd."

No offence, Alan - their words, not mine!

Oct 14, 2017 at 11:34 AM | Unregistered CommenterMark Hodgson

The authors of the paper effectively squash any suggestion that the UK, on leaving the EU, is entitled to a share of its assets:

"There is certainly no general rule or practice in international law that when a state voluntarily but lawfully ceases to be a member of an international body, it then makes or receives a payment to reflect some notional share of net assets. Indeed, the practice is generally that the state pays its membership dues up to the date of leaving and that is that...".

Regrettably I did not study international law, so I'm still learning.

Oct 14, 2017 at 11:41 AM | Unregistered CommenterMark Hodgson

I found the authors' practical conclusions to be of interest:

"Finally, there is the question of whether paying money would be justified for practical reasons, even if it is not owed legally and there is no moral obligation to pay. Obviously there could be an argument for some payment to sweeten an overall deal which is in other respects a good deal for the UK (and for the EU). But this needs to be kept in proportion. A study by Civitas81 indicates that UK exports to the EU would face about £5.2 billion tariffs in the event of exit without an agreement, but on the assumption that the UK were to maintain the same tariff schedules as the current EU common customs tariff, EU exports would face about £12.9 billion because of the trade balance and because EU exports are more heavily concentrated in high-tariff sectors. If a UK-EU deal is to contain payments for market access then arguably the EU should be paying the UK, not vice versa. However it is not the practice for international trade agreements to contain payments for market access.

There may be no legal or moral basis to making a financial payment to the EU on departure. Nevertheless it may be that in order for the UK to leave the EU on a positive note and to focus on building deeper relationships with the rest of the World, making a payment would speed things along. There is value for the UK in achieving a departure with goodwill and to achieve that departure speedily so the UK can concentrate on trade with the rest of the world which will account for over 80% of future global growth - as opposed to getting stuck in a rut haggling over figures with an important trading partner. There is therefore likely to be value in making a payment – but clearly not of the kind of levels the EU Commission might like to imagine."

Oct 14, 2017 at 11:51 AM | Unregistered CommenterMark Hodgson

I think goodwill went out of the window when Mr Barnier opened his mouth.

Any remaining goodwill is reducing daily.

The EU is missing a trick here, but they are not the sharpest tools in the box.

Oct 14, 2017 at 12:34 PM | Unregistered CommenterSteve Richards

Mark. I take no offence. I too wish to learn. However, my gut feeling is that if we have signed up and are committed to paying for something that, when we leave we derive no benefit, we still have some obligation. I'm sure that the legal judgement you quoted from will not the the only or the final word. EU lawyers in particular will have a quite different chapter and verse. Since we are still within the EU I assume that until the second we leave we are bound by EU law and British opinion is subordinate.
I am becoming more and more sure that we are destined for a complete and perhaps acrimonious break, followed by a, hopefully brief, episode of economic chaos, then followed by wiser and more pragmatic heads getting together. I also think that the EU economy will suffer.

Oct 14, 2017 at 1:01 PM | Unregistered CommenterSupertroll

Mark the analogy I used is not exactly the same as that examined by the paper you read.

"The UK’s position is analogous to that of a member of a club which has an ongoing expensive programme of refurbishing its premises. The member resigns and his membership dues are then no longer available to fund the expensive programme."

My analogy is not that future dues were to be used to build a new clubhouse, but that an extra financial commitments was to be committed to, and to which the departing club member had agreed. My opinion is that the club has no right to future fees, but special committments, signed up to, might still have to be paid.

Oct 14, 2017 at 1:11 PM | Unregistered CommenterSupertroll

Mark Hodgson, thank you for this thread, and for this most recent update.

Press briefings and leaked (deliberately?) info from the UK Government and EU suggest that both sides are coming to realise that the EU's legal position is not quite as solid as either side thought six months ago.

Hard v Soft BREXIT were terms coined by Remainers, however EU arrogance seems to have pushed "No Deal is better than a Bad Deal" to the fore.

As the EU has always treated the UK as a cash cow, the prospect of "No Deal" is possibly scaring the EU.

Macron and Merkel are now aware of the extent of anti-EU sentiment within their own countries, and can only exercise political power domestically with a curious and fragile alliance of coalitions. Merkel probably has a better idea about what she faces politically, as I am not sure that Macron is fully aware of what his own aides promised, the various semi-congealed fractions of factions, apart from keeping the EU intact, as required by his financial support.

Barnier seems to have accepted that his bargaining power is reduced. Juncker still seems to be in denial about his lack of diplomacy.

Hammond referring to the EU as "the enemy" may have been a deliberate slip, as Conservative Brexiteers are seeing him as the problem.

Oct 14, 2017 at 2:48 PM | Unregistered Commentergolf charlie

Oct 14, 2017 at 1:11 PM | Supertroll

I am sympathetic to the attitude of both sides seeking an amicable divorce, but the EU's adoption of bullying tactics seems to be backfiring, and the UK electorate are hardening in their opposition to the EU.

"Not a penny more" than legally obliged, is where this is currently headed, without goodwill on both sides. The EU has always struggled with goodwill towards the UK, as Cameron found out.

Oct 14, 2017 at 3:13 PM | Unregistered Commentergolf charlie

Since we are still within the EU I assume that until the second we leave we are bound by EU law and British opinion is subordinate.
I am becoming more and more sure that we are destined for a complete and perhaps acrimonious break, followed by a, hopefully brief, episode of economic chaos, then followed by wiser and more pragmatic heads getting together. I also think that the EU economy will suffer.

Oct 14, 2017 at 1:01 PM | Unregistered Commenter Supertroll

The first sentence is undoubtedly correct. However, as the paper I referred to makes clear, even under EU law, the EU's demands for payment are legally flawed. Although it's (inevitably) a bit legalistic it is written in clear language, isn't all that long, and IMO is worth reading in full.

As for your other observations I quote above, I am in total agreement. It's sad, but our domestic politicians are making a dog's dinner out of it, and the EU is behaving disgracefully. The net result will be mutual hostility when we should have been capable of an amicable separation and positive ongoing relations after March 2019.

It hadn't occurred to me previously, but the EU's budget is much smaller than that of the UK Government - because for all its grandiose projects, it doesn't have to spend money on things that national Governments do - such as social security, NHS, education, infrastructure, defence etc. Thus £10Bn+ p.a., although a lot of money on any basis, is proportionately hugely more important to the EU than it is to the UK. Presumably that is why the EU is being so unreasonable and difficult about it, while the UK politicians are being a little more emollient, even though no payments will be due beyond March 2019. At least I hope that's the explanation. Corbyn's undermining of the UK's negotiating position yesterday reminded me why, after years of voting Labour, I can no longer do so.

Oct 15, 2017 at 8:53 AM | Unregistered CommenterMark Hodgson

Oct 15, 2017 at 8:53 AM by Mark Hodgson

I saw a post, elsewhere, some time ago, pointing out the very practical problem that we need to negotiate our future outside the EU while still being in the EU.

It is similar to the teenager who want to make a career choice, while still at home, and dependent. I think the main problem with that analogy is that Britain has been an independent sovereign nation before, and quite successful at it, and the EU lacks maturity, and no rational plan because there are too many leaders, presidents, cultures and industries, and no connection with their voters. There is also the problem, as Daniel Hannan has written, that the EU is renowned for making up rules and 'reinterpreting' law to suit its own interests, which means that any EU jurisdiction over Britain is not just a risk to Britain's well being, it is a certainty - and brings us back to what sovereignty means to a country!

To her credit, Theresa May started off the negotiations in a very cooperative mood (after being 'landed in it' by the previous PM) and we are still waiting for any public reciprocity from the Continentals, so. I think that we are already in an 'acrimonious break'.

I would say that their vindictiveness would mean that any deal would need to be very simple and not dependent on any goodwill. Look how Tony Blair was promised a CAP 're-organisation' in exchange to a reduction in our rebate and all we got was the reduction in the rebate.

Oct 15, 2017 at 11:47 AM | Registered CommenterRobert Christopher

Mark. I skim read parts of the document. I'm unsure if 1) the UK has any agreements to contribute to the funding of specific projects that the entire EU had committed to, and 2) if the arguments in the document specifically refer to such commitments. I would have hoped that our negotiators would be pushing the button labelled "funds owed to the EU" a bit more than they seem to be. And I still can't see how any final figures can be resolved without audited EU accounts. I've not heard this mentioned in any fora except BH (but perhaps I haven't been reading widely or carefully enough).

Oct 15, 2017 at 12:47 PM | Unregistered CommenterSupertroll

Alan

I think the main problem with the EU's position is that, while they berate the UK for not being specific about what we might pay, the EU has failed to be specific about what sum it wants us to pay. The EU has fallen back on statements of principle regarding what the EU thinks (or claims to think) is fair - if we agree the principle, then we are writing a blank cheque, because the EU will use the principle to serve its own ends and preserve flexibility over just what it wants us to pay.

I assume that the failure to produce a detailed schedule, broken down by precise sums, is due to the fact that any schedule would need to refer to the legal basis in support of the claim - and there is no legal basis for such claims. Secondly, as you point out, there do not seem to be any audited accounts, and it wouldn't be unreasonable of the UK to demand audited accounts to back up the specific claims. So, in the absence of audited accounts and in the absence of a legally valid claim, I guess the EU will continue to make vague noises, and adopt inappropriate analogies like the group going out for the night and one party leaving before it's their round (conveniently overlooking the fact that we have already bought several rounds, while a number of the party-goers haven't bought any, and have no intention of doing so).

I am a lawyer, albeit retired, and I believe in the rule of law. Like you, I believe that if we have made a firm commitment to part-fund one or more projects, then we should honour any such commitment(s). The other side of the coin is that in the absence of any such commitments, and in the absence of any legal justification for the EU's claims, I don't think we should pay anything, unless we are clearly getting something in return for such payment (I would have included EU goodwill in the "something in return" column, but I think we've moved beyond that now).

Oct 15, 2017 at 7:53 PM | Unregistered CommenterMark Hodgson

Oct 15, 2017 at 7:53 PM | Mark Hodgson

Thank you for that, particularly the last sentence of your second paragraph! English may not be Juncker's first language, but his analogy will have meant something throughout the EU.

I am not a Lawyer, but have (through work) become involved with trying to resolve/clarify some legal "confusions", involving bits of Law lacking a textbook answer. If the EU are trying to claim "compensation", for breach of contract, it does seem they would struggle to justify their legal case. Then they need to prove their financial claim, which in the absence of accounts capable of being audited or verified, may reveal further embarrassments for the EU, at an inconvenient time.

Oct 16, 2017 at 12:03 AM | Unregistered Commentergolf charlie

Oct 15, 2017 at 7:53 PM by Mark Hodgson

If the EU think we have agreed to funding these future projects, does it matter that we may have agreed under duress?

The biggest problem that we have had is that not agreeing to a small decision leads to being punished to a smaller or greater degree.

Oct 16, 2017 at 1:43 PM | Unregistered CommenterRobert Christopher

Mark Hodgson & Robert Christopher

If not "under duress", what about decades of false assurances by the EU that they would improve their working practices?

Oct 16, 2017 at 2:01 PM | Unregistered Commentergolf charlie

There appears to be a lot that we can do to help ourselves without the problems of trade deals:
JohnRedwood: Farming for our future

Oct 16, 2017 at 6:57 PM | Registered CommenterRobert Christopher

Robert C, I'm not an international lawyer, so have to confess to not knowing enough about, but I don't think duress would be a runner as an argument to be made by a sovereign state seeking to avoid its obligations.

More positively, I'm increasingly confident, the more I read, that we have not entered into such binding obligations, or any such as we may have agreed are small beer in the scheme of things.

The main worry continues to be our domestic politicians, and their ability to throw away a winning hand.

Oct 16, 2017 at 8:03 PM | Unregistered CommenterMark Hodgson

Martin Selmayr, he steers and stirs for Juncker. He also provides support whenever necessary.

http://www.politico.eu/article/monster-at-the-berlaymont-martin-selmayr-european-commission-jean-claude-juncker/

Oct 23, 2017 at 12:26 PM | Unregistered Commentergolf charlie

Oct 16, 2017 at 8:03 PM by Mark Hodgson

"... I don't think duress would be a runner as an argument ..."

I wasn't thinking that Britain was under duress, more the invalidation of the belief that Britain 'went a long with the decisions' so needs to pay up.

If they didn't go along with it, there would have been duress.

If you consider the Golf Club scenario: if you knew that you were leaving the club, because your job took you to another country, indefinitely, for example, but you couldn't tell anyone about it for legal reasons, yet the club was going to build an expensive extension, expecting that you were there to 'contribute', it would be difficult, especially if you campaigned very strongly against the extension, and then didn't get the new job!

Often, as Hannan says, Britain has agreed with policies to which they objected, just so other, even worse, policies were not passed.

Oct 23, 2017 at 1:35 PM | Registered CommenterRobert Christopher