Brexit: What would happen if UK decided not to pay the £39bn divorce bill to the EU?

Boris Johnson's gambit could backfire

Jon Stone
Monday 10 June 2019 16:45 BST
Boris Johnson suggests UK withholds at least half of £39bn divorce bill to 'incentivise' EU negotiators to remove the Irish backstop

Some Tory leadership candidates – most notably Boris Johnson – have said they would withhold the £39 billion divorce bill negotiated by Theresa May as a card in order to force the EU to renegotiate the Brexit agreement. Just how practical is this proposal?

Remind me what the divorce bill is again?

It's mostly the UK's outstanding budget payments that would have been paid in 2019 and 2020 were Britain not leaving the EU, and also some other commitments like pension contributions for civil servants. The £39 billion figure is an estimate, based on the formula agreed in the withdrawal agreement.

Can the divorce bill be legally withheld?

This is contentious. The EU says the sum covers commitments already made by the UK at an international level. Notably, the multi-year EU budget was signed by the UK in 2013, running from 2014 until 2020.

The argument against the payment being binding is that after the UK has left the EU, it is no longer subject to the jurisdiction of the European Court of Justice.

But the argument for it being binding is that the UK has entered into an international commitment as a sovereign state to pay the money.

There are other methods for enforcing international law: the UK is, for instance, part of the international arbitration court in the Hague. This has nothing to do with the EU and could potentially rule on the case. We wouldn't know whether the UK would be legally bound until the tribunal ruled.

How would the EU react?

The EU line is that it would not negotiate any kind of trade deal with the UK after a no-deal, unless three things were settled: the Irish border, citizens' rights, and the financial settlement. So any neglect of any of those things would see the UK locked out of a trading relationship with its largest neighbour. That means the EU strategy in the case of the UK not paying the divorce bill would be to wait for it to be paid.

When the UK was set to leave in 29 March 2019, the EU set up a system that would have allowed the UK to voluntarily pay the divorce bill even in the event it left with a no-deal. The British government would have been given a few weeks - to indicate that it would pay by April 18, and pay the money by April 30. In the end this facility wasn't needed, but you can expect a similar approach to be taken if there is no other extension October.

What would the practical effects of withholding the money be?

The money would probably require emergency cuts to the EU budget - which means EU-funded projects that had planned on the basis of being funded would probably lose their funding. This would be the case unless other EU member states stepped up to cover the gap.

The UK would also be reneging on pension payments for some EU civil servants who had served while the UK was in the EU, some of whom are in fact British. This might be politically difficult for the government.

£39 billion is a lot of money, but not enough to actually cripple the EU. It's unlikely, given the statements of EU officials and leaders, that they would change their red lines to get it back. But you could expect them to sue the UK at the Hague.

Does the UK's delayed departure change anything?

In fact, yes. The post-Brexit payments may end up being significantly less than £39 billion because that figure covers budget commitments for 2019 and 2020 - it was planned on the basis of the UK leaving in March 2019. The UK doesn't look set to leave until at least November, so half a year's payments - numbered in the billions - would no longer be applicable, at the very least. If the UK somehow stays in the EU until the end of 2020 the figure will be substantially depleted.

Watch out for politicians trying to claim they have negotiated the figure downwards, when in fact the UK has simply been paying off the budget while it is inside the EU.

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