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Why We're Sleepwalking Into An EU 'No Deal' Scenario

12/10/2017 18:00
Ian Forsyth via Getty Images

One of the features of the British media's handling of the Brexit negotiations, and indeed of the way that British politicians have approached them so far, is that it's massively UK-centric. It seems that questions are asked constantly over the British position, yet the EU position is fundamentally unchallenged.

The EU position is that the UK is obligated to make payments across various different areas: meeting outstanding financial commitments, the European Development Fund, to meet a portion of EU liabilities, EU pensions, etc.

They appear to be claiming that the European Union has its own legal personality, and that therefore the UK is not entitled to a share of the European Union's assets.

The EU speaks of legal obligations - politicians on the EU side speak of the UK's 'debt' to the European Union, money that the UK is purportedly legally obliged to pay.

On the UK side, the British government speaks of 'political' or 'moral' obligations. It argues that there is no legal responsibility to pay anything, though in a divorce settlement it essentially is offering what it sees as a huge gesture of goodwill to unlock talks.

The British government, in the third round of negotiations, challenged the EU's position on legal obligations. In the fourth round, following Theresa May's Florence speech, the British government made financial concessions.

But unless there is a meeting of minds, even that huge proposed payment means nothing: to the UK, we are offering a huge amount of money and would expect to get something in return. To the EU, the UK is grudgingly paying only part of a debt.

I put this point to Guy Verhofstadt earlier this week: that unless both sides are able to broadly agree on what the legal position is, when it comes to future negotiations all discussions will be built upon a foundation of sand.

The European Union has an arbitrary timeline which requires 'sufficient progress' on a 'single financial settlement' before talks on a deal can begin. When one side in a negotiation seeks to dictate the terms, the nature of how a discussion must proceed, then negotiation becomes constrained.

They're trying to get the numbers close enough to each other so that they can unlock 'sufficient progress', but at its most basic level there's a fundamental problem here. This isn't about getting numbers closer to each other. It's important to establish what the UK owes, and where concessions are being made.

If we make a concession in one area, we should be entitled to expect a quid pro quo somewhere else.

I believe the UK government is on pretty safe ground when it comes to legal commitments. I gave evidence to a House of Lords Select Committee at the start of this year on this point: the hierarchy of norms in EU law is pretty clear. Regulations made under the Treaties cannot override the Treaties themselves. When the EU speaks of its Multiannual Financial Framework, that is essentially a financial plan. Financial plans can, and do, change. The Regulation itself recognises that it can be changed in unforeseen circumstances, and those unforeseen circumstances are usually much less of a change than Brexit. Article 50(3) of the Lisbon Treaty is clear: the Treaties shall cease to apply.

In one sense I agree with the EU position: they are correct to assert that the EU has legal personality. For that reason, they cannot seek to recover a share of EU liabilities when we leave (indeed, it's their own argument against giving us a share of EU assets). Even on pensions, where they've spectacularly failed in the most basic financial planning to ensure that pensions are ringfenced, they have no legal case against the UK.

As golf club analogies seem to be de rigeur at present, if I resigned my membership of my local golf club they wouldn't be able to chase me for a share of their mortgage. Nor would they be able to bill me for things that they'd already made plans to build in the next couple of years. There's precedent here with the League of Nations: countries leaving weren't expected to pay any such divorce bill or to pay for future projects, though they were expected to pay their unpaid dues up to the date of withdrawal (though even that didn't always subsequently materialise).

The UK could also argue that the European Investment Bank is up for discussion: it does not (like the EU) have its own legal personality but is made up of its members. In that case, we could even argue that we're entitled to a share of the Bank's reserves.

Finally, it's worth noting that if the UK took the 'you're getting nothing' position, the onus would be upon the European Union to prove its case against the UK. It has nothing legally watertight.

We need to know the legal position. I believe that position is far stronger than the EU's position, but the EU still hasn't presented us with an itemised bill. It almost certainly doesn't intend to do so. The British government, likewise, doesn't want to put a figure on how much it's giving away because it's scared of public opinion: many people don't want to hand over money that we're not legally obliged to.

Even as an MEP, spending time out in Brussels and Strasbourg, on the Budget and Budgetary Control Committees, I'm unable to get hold of any real figures. They intend, I'm sure, to keep it that way.

But we need to sort out what our 'legal' obligations are, as soon as possible. Otherwise we'll continue to see this bait and switch between 'legal' and 'moral' obligations, and we'll end up sleepwalking into a 'no deal' scenario.

In the meantime, the UK should be getting on and preparing for that outcome. If we're seen to actually preparing for a 'no deal' situation, rather than just paying lip-service to it, then we're in a much better position not to be bounced into accepting a poor deal - and therefore, to get a good one.

The British government's negotiating strategy so far has been appalling, but even the word 'strategy' places an undue burden upon the English language: we should not confuse 'strategy' with 'lethargy'.

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