The House of Lords EU financial affairs sub-committee report, published at the weekend, concluded that there would be no legal obligation to meet a so-called Brexit divorce bill at the end of the exit negotiaions.
Speculation has surrounded the status of Britain’s financial obligations, with reports claiming the EU’s chief Brexit negotiator Michel Barnier, is preparing a list of up to €60bn of liabilities. Correspondingly, government officials are understood to be drawing up an asset list to which it believes that the UK could be entitled to a share of.
According to the Lords report, the UK contributed £19.1bn to the EU budget in 2014, and received £10.8bn in return, through a rebate and public and private sector grants.
The committee found that, if an agreement was not reached during the Article 50 negotiations, “the UK would be subject to no enforceable obligation to make any financial contribution to the EU budget.”
Individual member states may seek to bring a legal case against the UK for outstanding liabilities, based on the principles of international law, the committee said. But “international law is slow to litigate and hard to enforce,” and it is unclear whether a international court or tribunal would have jurisdiction.
However, the report stressed that all parties sides should understand the gravity of failing to reach any agreement.
Failing to reach agreement on the budget with Europe would also undermine the government’s other negotiating aims, such as access to the single market and removing potential trade barriers. According to the committee, the government must balance the potential financial and political costs to making payments against these benefits.
Elsewhere, the committee said it was almost impossible to predict how much leaving the EU could cost Britain. Estimates in the public domain are “hugely speculative”, it stated, because almost every implication of the exit process was subject to interpretation.
Commenting on the report, Baroness Falkner of Margravine, committee chair, said the UK appeared to have a strong legal position in respect to the EU budget post-Brexit.
She said: “Even though we consider that the UK will not be legally obliged to pay in to the EU budget after Brexit, the issue will be a prominent factor in withdrawal negotiations.
“The forthcoming negotiations will be more than just a trial of strength. They will be about establishing a stable, cooperative and amicable relationship between the UK and the EU.”
