Following discussion on Unthreaded, here are my thoughts.

The UK is departing from the EU, having served notice to that effect pursuant to Article 50 of the Lisbon Treaty. The logical starting-point when considering whether the UK owes any continuing obligation to the EU following departure is Article 50 itself, since this is the Article which provides the mechanism for departure. It reads as follows:

1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it.

A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.

5. If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.

It can readily be seen that Article 50 contains no mechanism for obliging a departing member state to continue making financial (or other) contributions to the EU from the date of its departure. On the contrary, Article 50 (3) provides clarity to the opposite effect - “The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.”

Logically, if the Treaties cease to apply to a departing member state, then so do the member state's obligations pursuant to the Treaties. It seems, therefore, that some ingenuity must be required to develop a convincing argument that the UK will continue to have any continuing obligation to the EU following the date of its departure from the organisation, given the clear words of Article 50 (3), which support the opposite contention.

Ingenuity is the order of the day when it comes to the EU's argument in this regard. The EU's Position paper "Essential Principles on Financial Settlement" is to be found here:

https://ec.europa.eu/commission/sites/beta-political/files/essential-principles-financial_settlement_en_2.pdf

The starting point is arguably reasonable enough, in principle:

“The Union and the United Kingdom should both respect in full the financial obligations resulting from the whole period of the United Kingdom membership in the Union.”

The difficulty follows from the EU's rather one-sided interpretation of that basic principle, along with its disregard of the obvious lack of continuing obligations on the part of the UK, consequent on the very clear wording of Article 50 (3).

The first general principle enunciated in the EU's position paper also looks reasonable at first glance:

“There should be a single financial settlement related to:
The Union budget;
The termination of the membership of the United Kingdom of all bodies or institutions established by the Treaties;
The participation of the United Kingdom in specific funds and facilities related to the Union policies.”

Again, difficulties arise only from the EU's one-sided and unreasonable view of how this principle should be applied, as set out in their second general principle:

“This single financial settlement should be based on the principle that the United Kingdom must honour its share of the financing of all the obligations undertaken while it was a member of the Union. The United Kingdom obligations should be fixed as a percentage of the EU obligations calculated at the date of withdrawal in accordance with a methodology to be agreed in the first phase of the negotiations.”

The key words are clearly these: “...the principle that the United Kingdom must honour its share of the financing of all the obligations undertaken while it was a member of the Union.”

The next two general principles are less contentious:

“On this basis, the United Kingdom should continue to benefit from all programmes as before the withdrawal until their closure under the condition that it respects the applicable Union legal rules.”
And:
“Accounts shall be established in euro and all payments from the United Kingdom to the Union should be made in euro.”

However, it should be noted that this final principle also works to the UK's disadvantage, given the weakness of sterling against the euro. On the assumption that EU accounts are prepared in euros, and accepting that exchange rate fluctuations can work both ways, the UK should probably accept that this is just the UK's misfortune. In any event, if no payment is due from the UK to the EU on departure, the currency of (non-)payment becomes academic.

The second general principle, however, is neither reasonable, nor can acceptance of it be put down to misfortune. Should it be accepted, it would indeed be unfortunate for the UK and its taxpayers, but more than that, it would represent a dereliction of duty on the part of those conducting the negotiations with the EU.

On what basis do I make such a strong claim? Simply on the basis that the legal argument put forward by the EU to justify this principle is so extraordinarily weak. One short paragraph in the EU's position paper, following on from the general principles, and being under the heading “Methodology for calculating the United Kingdom obligation vis-à-vis the Union budget” contains the sole legal argument advanced in the position paper, and is as follows:

“Through its approval of the successive Multiannual Financial Frameworks (MFFs) and the Own Resource Decision (ORD), the United Kingdom committed to fund a share of the Union obligations defined by the ORD rules in all its dimensions. In particular, through the adoption of the basic acts (legal base), each programme has been allocated a reference amount to be spent according to a financial programming over the period 2014-2020.”

The suggestion is, in effect, because the UK agreed to a budgetary methodology, and under that methodology, to budgets covering the period 2014-2020, then the UK is obliged to make all the contributions that would follow from the application of that methodology and the implementation of the budget to its end date of 2020. As a general principle, this offends the obvious general principle of basic fairness. A member of a club might agree to the basis on which members' fees are calculated, and also to a budget projected into the future, but nobody would expect a departing member to continue contributing to the club's budget after the member had left, and no reasonable continuing club member would argue that his/her having agreed to the budget before he/she contemplated leaving, amounted to a binding obligation to make contributions until the end of that budget period, even though the budget period extends to a date beyond the member's departure.

However, life isn't always fair, and if a binding obligation has been accepted, then it should be honoured. But is their such a binding obligation? The EU relies for its argument on the “Multiannual Financial Frameworks (MFFs) and the Own Resource Decision (ORD)”. What are they, and how do they impact on the situation?

The EU's website helpfully provides us with a page under the heading “The Multiannual Financial Framework explained”:

http://ec.europa.eu/budget/mff/introduction/index_en.cfm

It offers us an explanation as to what the Multiannual Financial Framework is. I don't set it out in full detail, because it is too long for this post. Do read it for yourself, though. You will see that despite its length, there is nothing in that explanation to suggest that “the United Kingdom committed to fund a share of the Union obligations” as claimed in the EU position paper. On the contrary, the key words are at the beginning of the explanation of what the MFF is, and bear repetition, given their failure to support the EU's contention:

"The multiannual financial framework (MFF) lays down the maximum annual amounts ('ceilings') which the EU may spend in different political fields ('headings') over a period of at least 5 years. The upcoming MFF covers seven years: from 2014 to 2020.
The MFF is not the budget of the EU for seven years. It provides a framework for financial programming and budgetary discipline by ensuring that EU spending is predictable and stays within the agreed limits. It also allows the EU to carry out common policies over a period that is long enough to make them effective. This long term vision is important for potential beneficiaries of EU funds, co-financing authorities as well as national treasuries.
By defining in which areas the EU should invest more or less over the seven years, the MFF is an expression of political priorities as much as a budgetary planning tool. The annual budget is adopted within this framework and usually remains below the MFF expenditure ceilings in order to retain some flexibility to cope with unforeseen needs."

What then of the Own Resource decision? This is foot-noted in the EU position paper as follows:

“Council Decision (2014/335/EU, Euratom) of 26 May 2014 on the system of own resources of the European Union, OJ L 168, 7.6.2014, p. 105–111.”

Given that the reference is so specific, it is worth looking at it in detail, in case it actually provides a clear justification for the EU's position, rather than merely the fig-leaf which it appears to be. It is too lengthy to quote in full, but it can be found here:

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:JOL_2014_168_R_0004

It describes itself as a Council Regulation for “laying down implementing measures for the system of own resources of the European Union”.

The recitals to the Regulation are worth quoting, but they are too extensive to do so here. They set out the reasoning behind the implementation of the Regulation. If you read them, it can readily be seen that the recitals do not remotely suggest that the Regulation was implemented with a view to “the United Kingdom [or any other member state] committ[ing] to fund a share of the Union obligations defined by the ORD rules in all its dimensions” as claimed in the EU's position paper.

I can also confirm that the detail of the Regulation contains no such commitment as alleged by the EU. For the avoidance of doubt, I set out below the individual Article headings within the Regulation, from which it can readily be seen that Regulation does not in any way justify the EU's claims:

Calculation and budgeting of the balance
Control and supervision measures
Powers and obligations of the authorised agents of the Commission
Preparation and management of inspections
Reporting fraud and irregularities affecting entitlements to traditional own resources
Reporting by Member States of their inspections of traditional own resources
Committee procedure
Final provisions
Entry into force

None of these headings suggest the commitment alleged by the EU. Furthermore, so significant would be such a serious financial commitment that one would expect it to be stated with precision, and to be obvious. That is undoubtedly not the case here. Thus the legal support for the EU's position disappears, and with it so does the claim on anything other than a moral basis.

The moral basis for a financial claim is also tenuous. First of all, the primary obligation of all UK politicians, which they should never (though some seem to from time to time) forget is to act in the best interests of the people of the UK. Any moral claim by the EU can therefore be safely ignored, save as a useful bargaining chip to ensure a decent settlement in the interests of both parties.

In any event, we must not forget the utterly one-sided and unfair approach adopted by the EU:

“...the principle that the United Kingdom must honour its share of the financing of all the obligations undertaken while it was a member of the Union. The United Kingdom obligations should be fixed as a percentage of the EU obligations calculated at the date of withdrawal...”

When the United Kingdom joined the (then) EEC, it was not the case, so far as I am aware, that the UK was immediately allowed to deduct from its contributions any sums which would help to finance all the obligations undertaken before it was a member of the Union. Logically, and as a matter of general fairness, the UK should not have to contribute to obligations entered into while it was a member of the EU but which will come to fruition after it leaves, if it was on accession expected to pay towards obligations entered into before it became a member, but which came to fruition during its period of membership.

Furthermore, if one wishes to talk about moral obligations, then what of the fact that as a major net contributor to EU funds for 45 years (and still continuing for now) the UK has made a major contribution to numerous capital projects within the EU? Should the UK not receive a return of capital since the remaining member states will continue to benefit from that historic capital expenditure, but the UK will receive no such benefit after it departs?

I do not actually advocate such a claim being made, but it would carry with it as much logical, legal and moral coherence as the claim by the EU against the UK for continuing payments once the UK has left the organisation.

Similar arguments can be made regarding the detail of the EU claim for financial settlement, but if the legal basis for any such claim falls away, as it does, then there is no need to consider the detail of the claim. Needless to say, the detail is as dubious as the legal basis claimed to underpin the demand in the first place.

Finally the EU position paper says that:

This single financial settlement should be based on the principle that the United Kingdom must honour its share of the financing of all the obligations undertaken while it was a member of the Union.

One only has to contemplate what the EU's position would be were the departing member a net recipient of EU funds rather than a net contributor. It is inconceivable that its position would be:

"This single financial settlement should be based on the principle that the EU must honour the financing of all the obligations undertaken while [Poland, say] was a member of the Union, with the result that the EU would happily offer up continuing payments to, say, Poland, according to a financial programming over the period 2014-2020."

Whilst this is a rhetorical, rather than a legal, point, I think the difference in likely approach is sufficiently stark to make clear the absurdity of the EU's attempts to extract money from the UK beyond the date when the UK ceases to be an EU member.

Mark. I need to study your post in all its detail, but I did skim read it to see if it covered one of my main questions. As far as I can see it doesn't. I believe that no European budget has never passed an audit. So theoretically there are no valid accounts upon which to base any estimates of any moneys owed by the UK to the EU. If this is true, why haven't our negotiators been banging this particular drum?

Alan, I didn't go into the audit question, because it seems to me that the claim for money falls at the first hurdle, having no legal basis at all. Like you, I am of the belief that the EU has never succeeded in producing audited accounts, so I regard that as a valuable additional weapon in the UK's armoury.

Sorry to bang on about the BBC again, but it may be that the UK negotiators are making all these points, and it may explain why the EU are becoming so irritable and why the negotiations are apparently making no progress. I don't expect the BBC to report any of this (assuming it to be true) however, given their excessively pro-EU stance. They certainly never question whether a payment is justified, they only ever ask how big the payment is to be. The other day, on Radio 4, on being told firmly by the interviewee (annoyingly I can't remember who it was) that there was no legal case for any payment being demanded of the UK, the BBC interviewer then smoothly moved on to suggest that there was a moral case. Enough said, I think.

http://www.express.co.uk/news/politics/820234/Brexit-bill-what-is-EU-divorce-bill-how-much-cost-UK-exit-payment-European-Union

If it is assumed that £60 Billion is what the EU want, and that the UK population is 60 Million, it puts the "benefits" of ever being in the EU into perspective.

If it is based on loss of income over expenditure, then as Supertroll notes, EU maths is infinitely flexible to suit whatever result is required, just like Climate Science.

Presumably any Legal Dispute would have to resolved in the European Courts.....

I am hoping that as this is an international dispute, there is no place for the ECJ to rule on it.

The NATO point is a good one. One can always point to basic legal situations to suggest how the claim should be dealt with - e.g. members of a club aren't expected to pay contributions after they have left; partners don't make continuing payments after they have left and indeed obtain a return of their capital - but arguably such examples aren't relevant to an international law situation. The problem is the almost unique of this situation, which lacks clear precedent. But the departure of France from NATO can be offered up as a precedent of sorts, and it's also useful since France is involved in both cases.

Would those countries that voluntarily left the British Commonwealth be another precedent? Or countries leaving the Warsaw Pact?

Surely the EU sees itself as a superior Authority to both the Commonwealth and NATO, neither of which it had any control of.

If the EUs approach is simply Breach of Contract, Legally Binding Committments etc to pay €billions per annum, without any guarantee of getting anything back in return, this will simply fuel more anti-EU sentiments in France and Germany etc, as they can see the EU as simply a wealth redistribution scheme.

The problems with any Wealth redistribution scheme start, when the redistributors take most of the wealth, and the EU is now reinforcing many of the issues raised by Farage, for which he was demonised, and now the UK is being demonised by the EU.

The last lines of Hotel California:
"Relax", said the nightman, "We are programed to receive."
You can check out any time you like, but you can never leave.

Countries leaving the Commonwealth might be a good precedent, save for 2 things:

1. Most, if not all, of those countries were probably not net contributors to the organisation (or, if they were, then we would be discussing much smaller sums of money and an organisation with much smaller plans and a smaller budget than the EU).

2. The Commonwealth is a much more benign organisation than the EU.

I have no doubt that the EU, having made plans to 2020 in the belief that they could spend UK money to implement those plans, is determined not to scale them back one iota; rather the UK must pay as planned. They seem unable to understand that there is another way of looking at the situation.

Sep 8, 2017 at 12:07 PM | Mark Hodgson

If it is being looked at, as an early termination of a contract, then it is quite clear that the EU takes more from the UK, than the UK has ever received, which disproves most of the Remainer arguments, and is now causing the Labour Party to readjust its position, again.

David Cameron asked the EU for some assistance in the run-up to BREXIT, and was sneered at by the EU.

If there are Legal grounds for the UK compensating the EU for Loss of Income, are their Legal grounds for a counter claim about the EU not acting in Good Faith, and contributing towards the UKs decision on BREXIT?

I was, on balance, pro-BREXIT, on the basis that the EU was never going to mend its ways. I am now more pro-BREXIT than I was, as the EU is proving itself incapable of mending its ways.

golf charlie

As is so often the case, our views are in close harmony. Like you, I was on balance in favour of Brexit before the vote, though a few months before it I could have been persuaded to vote to stay in. Pretty much all developments since the vote, especially the extraordinary arrogance of the Eurocrats, have convinced me that I voted the right way.

GolfCharlie, Mark. I have had a more difficult and longer journey than you. As you know I was strongly in favour of remaining, still seeing potential benefits and believing that necessary changes within the EU would be better pursued with the UK within. Like you Mark, as time has passed my position has slowly changed, mostly as a result of the extreme arrogance of the EU elite. I still believe, however, that Brexit could still be an economic disaster and will lead to a massive decrease in our global influence.

Supertroll

I share your pain! I am firmly of the view that the UK should stay in the EU if the EU was capable of reforming itself and if the Eurocrats behaved better and were more responsive to the requirements of democracy. Sadly they have proved (to my satisfaction) that this will never be the case.

To be honest, I do not think leaving will make much difference to our economy, being in neither of the warring camps (it will be a disaster/it will be a brilliant success once we are set free). I am not bothered about losing global influence. I am not a little Englander, but I do think we might do better to mind our own business and interfere less in others' business. Free trade with the rest of the world (not permitted by the EU while we remain members, as we have to impose the common external tariff) could be beneficial. If the EU is stupid enough to refuse free trade with us, they have much more to lose than we do.

I still believe, however, that Brexit could still be an economic disaster and will lead to a massive decrease in our global influence.

Sep 8, 2017 at 7:49 PM | Supertroll

I think the EU is trying to ensure it is an economic disaster, as so far, all the forecasts have been wrong. I presume this prompted Mark Hodgson to start this thread. Which is why I am curious to know the Legal basis, framework or assumptions being made to calculate Punitive Damages, Business Interruption, Loss of Profit, Compensation or whatever it is, if Mark Hodgson says there don't seem to be any formal procedures or conditions.

If the EU are just trying to threaten and bully the UK, it is only going to encourage other Europeans to feel anti-EU, even if they have no sympathy for the UK.

The EU are shooting themselves in both feet, again.

Many years ago, The Sun said "Up Yours, Delors!" They had a point.

It was Jacob Rees-Mogg who stated in the recent R4 interview that there is no legal basis for further payments to the EU after we leave, as determined by a Lords investigation.

To bring clarity to the EU thought process I would suggest that the government publish a detailed plan B.

Plan B is where we would just leave.

We should outline all of the consequences to the UK and to the EU27.

For potential negative consequences to the UK, they should publish UK workarounds that mitigate the consequences.

Such as loosing healthcare to the 1 million Brits in the EU27, we stike out healthcare to the 3.2 million EU27 in the UK AND pay for the health insurance costs of the Brits with the savings we make on not paying for the 3.2 million.

The trade imbalance: the EU27 hit us with WTO tariff on eg cars and car parts, we do the same, since we sell more, we claim more tax which is used to refund the 10% to our importers/

And so....

If it is spelt out in crystal clear language that even a frenchman for German worker could instantly understand, I think we will rapidly move forward with these negotiations.

However, the world of politics, especially EU politics is not straight forward. People have agendas, they think in irrational ways, they inflict pain to win a point etc.

So plan B needs to be implementable.

It should help clarify the treasonous MPs who are trying to ruin UK business by talking down UK business prospects to win cheap political points.

If a few more MPs could understand that a clean exit can be very beneficial to the UK, it could change UK politics.

I wish for a plan B, as ST states, he has come round more to Brexit now he has seen just what the EU are like now they are showing their true colours.

Thank you Steve Richards - yes, it was Jacob Rees-Mogg who pointed out on Radio 4 that there is no legal case for making a Brexit payment to the EU. I remember now that you've reminded me!

No deal is better than a bad deal IMO, though obviously I would prefer a deal that benefits both sides. I agree it would be useful if the consequences of no deal to both EU and UK were spelled out to both sets of public. I hope our negotiators have already done so with their counterparts from the EU.

Steve, please do not assume I have seen the light/error of my former ways re Brexit. My preference still would be to remain and work for change from within. But I acknowledge what slightly over half the voting population opted for, and so, when it comes to a dispute I am firmly on the UK side. I'm uncertain whether the EU is the same post-referendum. Brexit presents the greatest challenge the EU has ever faced. It is imperative to them not to make Brexit easy or profitable, for otherwise other nations might be encouraged to leave. I think the arrogance wasn't really there to begin with, but has been adopted as a shield to ward off their own insecurities.

Sep 10, 2017 at 10:42 AM | Supertroll

I had already given up waiting for the EU to change its "institutional bias and corruption", having realised the EU had no intention of trying. Other than that, I see little to disagree about your post.

The EU is determined not to reduce expenditure, despite losing one of its biggest sources of income. For any commercial business, this would represent the first stage in going bust.

The EU have assured themselves and all interested parties that they WILL obtain a substantial settlement. I have no reason to trust the EU's judgement on finance, or even fair play.

GolfCharlie. Brexit still seems to me like giving up because the task (of reforming the european experiment from within ) is considered too hard. I consider it to be a failure of the first magnitude of British diplomacy. British diplomacy used to be without parallel, yet now we can't recruit Ireland, Cyprus or even Malta to our side.
I also regret giving up what was good about the association - the myriad ways in which we became enmeshed into cooperative projects and became part of something bigger than ourselves. We run the very real risk of going back to being "little englanders", but with little clout.

Supertroll, the EU have been telling us we have "little clout", for over two decades, and our politicians have agreed.

The EU have now put a "value" on the UK's contibution to the EU. The EU are treating the UK as cash cows and little clowns.

Time the UK showed the EU some bullocks.

If that means starting negotiations from £zero€, and working upwards, based on what the UK has legally committed to, then so be it. We can treat them as little clowns. When will the EU realise it can't keep spending other people's money without accountability?

Ireland, Cyprus and Malta have all done better financially over recent decades by aligning themselves with the EU. On balance, it has not done the UK any favours.

We are where we are, now. The politicians and bureaucrats (whatever their Nationality) who have encouraged AND benefitted from this mess developing, for over two decades, are not the ones to be trusted to get us out. I don't see any reason to trust their maths, if the basis of their Legal claim can not be verified.

Alan, you say "Brexit still seems to me like giving up because the task (of reforming the european experiment from within) is considered too hard. I consider it to be a failure of the first magnitude of British diplomacy."

Why is it a failure of BRITISH diplomacy, when it is the EU which refuses to reform despite repeated requests? Why is the failure British, and not EU failure?

I think there is only so long that you can keep banging your head against a brick wall.

Mark, It is a failure of British diplomacy simply because the UK has totally failed to establish a collection of states within the EU who might hold similar values and form a power bloc. We know that there are deep divisions within the EU that could have been nurtured for positive advantage, but the UK has seemingly stood aloof, to its ultimate disadvantage. Only a few months ago we were led to believe the EU was seething with resentment and Danxit, Dutchxit and even Franxit were on the horizon. Even revolt within Germany was considered, once they realized they might become the only European cash cow. Were these illusionary or did the UK fail to act in its own interests?

My guess is that, if there is an ultra-hard Brexit, the EU will shatter in recriminations over money. If the UK were able to set up a few trade deals that slightly damage the EU, the whole pile will collapse. But then there will be only losers.

Supertroll

Interesting analysis - thank you. I think the EU may yet implode, but if it does, the seeds of that implosion will have been sown internally IMO. You have the unhappiness of the Visegrad Group countries, which is nothing to do with the UK. You have the continuing Greek debt crisis, and massive youth unemployment among the Med countries, which has much to do with them joining a Euro which is overvalued for their economies, and nothing to do with the UK. You have seething resentment about mass immigration foisted on the EU countries by Germany without consultation, which has nothing to do with the UK. And you have the rise of the far right, which is linked to the immigration issue, but which also has many other causes, but is nothing to do with the UK. With Macron's popularity plummeting in France, there could yet be a Frexit.

If the EU implodes, I think it will only have itself to blame. It has become unwieldy, insensitive to regional issues, and too many of the shots are called by Germany. It is certainly not a happy place at the moment. Had we managed to form a power bloc within the EU, my own suspicion is that it would have led to deadlock, rather than to reform, though I could easily be wrong. My personal belief is that it all adds up to evidence that the EU project has gone badly wrong, and that there isn't much we could do about it, other than leave.