Brexit: UK 'not obliged' to pay divorce bill say peers

The government would be in a "strong" legal position if the two-year Article 50 talks ended with no deal, the Lords EU Financial Affairs Committee said.

But it warned failure to reach any kind of financial terms would undermine PM Theresa May's aim of securing continued favourable access to EU markets.

It has been reported the EU may demand a "divorce bill" of up to £52bn.

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Mrs May has warned the EU against punishing the UK for voting to leave in last year's referendum but several EU leaders have said the UK cannot enjoy better arrangements outside the EU than it currently has. 

The question of what, if anything, the UK remains financially liable for after Brexit is likely to be one of the flashpoints in negotiations when they begin in earnest.

Potential sticking points are likely to include:

• Whether already-agreed contributions to the EU budget should be honoured and up to what point
• What the UK should pay to continue to participate in EU programmes such as Erasmus
• Whether the UK chooses to pay to retain access to the single market on a transitional basis

The cross-party committee said talk of billions in pounds in liabilities was "hugely speculative" and there was a case that there may be no upfront cost to leaving. 

"Although there are competing interpretations, we conclude that if agreement is not reached, all EU law - including provisions concerning ongoing financial contributions and machinery for adjudication - will cease to apply, and the UK would be subject to no enforceable obligation to make any financial contribution at all," it said.

"This would be undesirable for the remaining member states, who would have to decide how to plug the hole in the budget created by the UK's exit without any kind of transition. 

"It would also damage the prospects of reaching friendly agreement on other issues.

"Nonetheless, the ultimate possibility of the UK walking away from negotiations without incurring financial commitments provides an important context."

'Concrete'

The peers, led by the LibDem peer Baroness Falkner of Margravine, said some member states could take legal action against the UK for any outstanding liabilities but it was "questionable" whether any international court could have jurisdiction.

"Even though we consider that the UK will not be legally obliged to pay into the EU budget after Brexit, the issue will be a prominent factor in withdrawal negotiations.

"The government will have to set the financial and political costs of making such payments against potential gains from other elements of the negotiations."

During their inquiry, the committee was told the UK had signed up to "concrete" commitments under the terms of the Multi-Annual Financial Framework, which sets a ceiling for EU spending up to 2020.

Professor Takis Tridimas, from Kings College London, said he believed these were legally binding under existing EU treaties.

But he said they could be amended in "unforeseeable circumstances", if all member states agreed, and that the Brexit vote would constitute such a circumstance.