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A new divorce bill danger: why the EU rejects legal process

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The EU seems to be saying that the ‘divorce bill’ is not a matter than can be legally assessed, and that instead it is a moral obligation. This is dangerous for the UK, which risks being accused of defaulting on obligations that have no legal basis, and without recourse to international arbitration.

The EU has argued that, absent the Withdrawal Agreement, the Brexit ‘divorce bill’ is unenforceable. This seems a remarkable admission, particularly given that the British government has taken to arguing that much of the £39bn represents real legal liabilities to the EU.

This gambit has been heralded by European Correspondents of the Daily Telegraph.

European Union judges will block legal action against Britain for refusing to pay the Brexit bill after a no-deal exit, lawyers have told The Telegraph, as Downing Street insisted it would not pay the entire £39 billion financial settlement if the UK crashes out.

The Telegraph repeated the point on 4 February 2019 when reporting on EU Secretary-General Martin Selmayr’s demand that the UK must still pay the £39bn regardless of whether Parliament ratifies the Withdrawal Agreement:

“[T]he EU would find it difficult to sue Britain in international courts for non payment as the European Court of Justice insists it can only rule on EU law and its jurisdiction would no longer apply in Britain.”

The argument is in danger of moving, like so many EU legal assertions, into being established fact. No matter that the only time an EU interpretation of Article 50 (of the Lisbon Treaty) has been tested in Court the European Commission lost. No matter that this radical interpretation had gone unnoticed until a few days ago. The EU is saying it; so it must be true.

Basis of the argument

It starts with an uncontroversial point. Only the courts of a jurisdiction can determine the law of that jurisdiction. The highest court of that jurisdiction has the final say. It is the same with the EU legal order. Every court in the EU is a court of European law, but every court sits below the European Court of Justice. No court outside the EU can determine a question of European law, any more than the US Supreme Court could resolve a question of English law. The logic of the argument then goes like this:

(1) A court determining the Brexit bill will need to determine questions of EU law,

(2) This can only be done within the EU court system, and ultimately by the European Court of Justice.

(3) The exclusivity of the EU legal system means that no international court can have jurisdiction.

(4) The European Court of Justice will have lost jurisdiction over the United Kingdom as it can only hear claims against Member States or arising in Member States, but only the European Court of Justice can have jurisdiction,

(5) It follows no court can legally decide the issue.

Problems with the argument

It is a daring argument as it flies in the face of one of the most ancient legal maxims: ubi ius, ibi remedium. This means that “where there is a right, there is a remedy”. The argument rests on EU law being the source of the right, the first argument. But it then requires EU law to negate all possibility of remedy.

This argument becomes even more daring when we remember the following:

  1. Article 70.1 of the Vienna Convention on the Law of Treaties says that financial obligations owing at the time a state renounces a treaty become international law obligations. It appears to be the EU’s argument that Article 50 says that “[t]he [EU] Treaties cease to apply to the state in question” upon withdrawal, therefore EU law ceases to apply, therefore no obligations arising out of EU law can apply. As Vienna Article 70.1 states that its rule will not apply if the Treaty being ended made different provision, it is therefore argued that Article 50 excludes the application of the Vienna Convention.

    The difficulty with this argument is obvious. Vienna Article 70.1 applies precisely when Treaties cease to have effect to one of their parties. Article 50 of the EU Treaty provides for the departing member state to depart the EU legal order. It says nothing about international law consequences. Given that the ECJ has only just held that the Vienna Convention is highly relevant to interpreting Article 50, it is hard to see why the ECJ would hold that Article 70.1 had been excluded.

  2. The point is that EU is thus asserting that it will not agree to any form of international arbitration or mediation because, on its own view of the case, such arbitration would need to decide points of EU law, which the EU would not accept.
  3. There is nothing unusual, however, about courts deciding questions of foreign law. It happens all the time in the English courts. The judges will hear expert evidence on (for example) US law, and decide as a matter of fact what that law is, and then decide how it effects the case before them. The same happens with international tribunals that have to decide whether a contracting state is in breach of its obligations.

The basic fallacy

The truth is that the size of the Brexit bill is not a matter of European law, because there is no European law on whether there should even be such a bill. There is in Article 50, however, a European law which says that European law does not extend to such disputes.

If Article 70.1 of the Vienna Convention applies, as it almost certainly does, then the question is first of all a matter for the correct construction of that Treaty. There is no reason why the parties (the UK and the EU) could not in the usual manner of civilised international relations appoint an arbitration panel or accept the jurisdiction of the International Court of Justice to hear evidence on EU law obligations and decide what are the rights and obligations which translate into obligations on the UK under Article 70.1.

If the Vienna Convention is excluded, as the EU seems to want, then the ‘divorce bill’ question ceases to be one of legal obligation, whether EU or international. The question would instead be one of moral obligation. The principles of the ’divorce bill’ as determined in the Withdrawal Agreement can be easily stated:

  • no EU Member State should pay more or receive less because of the UK’s withdrawal from the EU;
  • the UK should pay its share of the commitments taken during its membership; and
  • the UK should neither pay more nor earlier than if it had remained a Member State.

These are moral principles, not legal obligations. They are a more systematic version of EU assertions as to “Britain’s bar bill” or that “what was agreed as 28 must be paid for by 28”. They are imminently capable of being referred to international arbitration. Determining whether these principles should govern the divorce bill does not require any determination of EU law. The UK and EU are perfectly capable of agreeing terms of reference for an impartial arbitration, even if this is to copy the Swiss civil code and direct the tribunal to find according to its sense of justice if it can find no applicable international legal principles.

If a tribunal were to hold that agreeing the EU’s Multiannual Financial Framework created a moral obligation on the UK to meet all relevant payments, then that does not require any rulings on what that Framework requires of Member States. Alternatively, an arbitration tribunal might reject the “agreed as 28” mantra and hold that the UK has no moral obligation to pay for pre-Brexit EU commitments where such commitments could be reversed. There need not be any disputes as to actual EU law. The UK could quite happily accept the EU’s case as to which obligations arose under EU law, e.g. how the UK’s share would have been calculated had it remained a Member State.

The crux of the matter is that the UK’s dispute is not one of EU law. The UK’s dispute is as to whether and how far EU law should still matter to the UK. This is not a question of EU law – because Article 50 says that EU law no longer applies to the UK-EU relationship. So no invocations of “ECJ exclusive jurisdiction” can justify a refusal by the EU to arbitrate.

So why is the EU even considering this argument?

The EU’s argument is that Article 50 expressly terminates all of the EU’s legal right to redress – or, indeed, the Member State’s rights against the EU. It argues that Article 50 has removed all legal remedy, but has left behind the moral obligation.

Whilst this might seem a self-defeating argument for the EU to raise, it is in fact a cynically self-interested one.

What the EU is trying to do is strip the UK of any legal means of determining the ’divorce bill’ in a no-deal scenario. It can then talk about the UK breaking its moral obligations. The UK can be threatened with being treated as a defaulter on its debts. The Daily Telegraph talks of such a default giving the EU a justification for making life difficult in matters from haulage to passenger flights from the UK to the EU. Even if the international community fails to understand how it is possible to default from a debt which has no legal existence, the danger is that the EU will feel free to apply sanctions against the UK.

None of this would be possible were the UK to offer to take the matter to the International Court of Justice or to offer international arbitration.

Conclusion

Ultimately, this latest gambit seems to be about two things. Firstly, the EU does not really believe that it can justify the ’divorce bill’, for in that case it would be only too happy to propose going to international law or revising the ECJ’s statute to allow it to accept references on this matter. Secondly, the EU would far rather keep strong arm tactics in its armoury than deal with disputes with third parties by civilised arbitration or by consenting to put the matter before the International Court of Justice.

So much for EU’s boasts of being dedicated to the rule of law. The British government should be very wary of accepting these arguments. They should be nipped in the bud and not allowed to enter into received wisdom, as has happened with so many of the EU’s doubtful legal interpretations.

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Briefings For Brexit