Prime Minister Theresa May has been warned that the UK could be taken to the International Court of Justice in the Hague by an EU member state if she walks away from Brexit talks without paying up to €60 billion in outstanding budget contributions.
A House of Lords committee has said a lengthy legal wrangle could follow a decision to abandon talks in Brussels, with “profound” implications for future relations between the UK and the European Union.
Under the EU’s complicated multi-annual funding framework (MFF), budget contributions are calculated on a seven-year basis. The European Commission-led team that will negotiate with the UK is believed to be seeking anywhere between €15bn-€60bn (about £12.9bn-£51.7bn) in agreed budget commitments, including payments towards EU officials’ pensions.
The report from the Lords EU finance committee warned that while the UK will no longer be subject to the European Court of Justice after Brexit, breaching the MFF would be seen as a sign of bad faith by the EU, which considers its budget agreement to be a legal document.
Some experts believe any dispute could come under the UN Vienna Convention on the Law of Treaties and be ruled on at The Hague, although the committee said the government’s legal position would be “strong”.
The Prime Minister has previously said “no deal is better than a bad deal” and threatened to walk away from negotiations if the terms offered by the EU aren’t acceptable.
UK ministers said they are willing to pay for access to European programmes such as the Erasmus student exchange system and scientific research collaborations, but “vast contributions” have been ruled out.
The Lords report said: “The political and economic consequences of the UK leaving the EU without responding to claims under the EU budget are likely to be profound.”
Baroness Falkner, the committee chairwoman, said: “The EU is going have a very immediate problem upon Brexit, because it will have a rather large hole to the tune of 12.5 per cent in its budget.
“If we were to try and walk away, we would be leaving in the first instance a 21-month gap in the budget. The only way that the remaining member states could hope to deal with that is for other countries to pay more, or to cut programmes. There would be a great deal of frustration if the UK were to do that.”
She added: “When countries work together, particularly when they commit to any kind of obligations, particularly those that are legally enforceable, they do so under their bona fides, their intention of goodwill.
“The UK, when it signed up to the MFF back in 2013 after two and half years of negotiation, did so in good will. I don’t think even the UK government envisaged that within the course of the framework it would be leaving the EU.”