The Brexit budgetary debates II: the budgetary consequences of no agreement

Fast-forward to April 2019. Uncompromising negotiation positions in both parties have the unforeseen outcome that no withdrawal agreement has been signed, let alone entered into force. Under such a scenario, what would be the status of mutual financial liabilities?

  • Would projects in the UK continue to receive EU financial support?
  • Would the UK be legally obliged to keep on sending remittances to Brussels?

The answer to this question has prompted certain disagreement among scholars. Some have expressed their views that the multiannual commitments previously agreed upon (by the UK and other Member States) within the Multiannual Financial Framework run, at best, until late 2020, and even later, given that concrete budget appropriations often take place several years after commitments. To that end, they draw on two principles of Public International Law, namely, pacta sunt servanda (art. 26 of the 1969 Vienna Convention on the Law of the Treaties, VCLT) and of bona fides interpretation of the treaties (art. 31 VCLT), as well as article 43 VCLT, under which “The […] denunciation of a treaty, the withdrawal of a party from it […] shall not impair the duty of any State to fulfil any obligations embodied in the treaty to which it would be subject under international law independently of the treaty”.

This view cannot be sustained from a strict legal perspective. In our view, the Vienna Convention must be rejected as the legal basis for continuing mutual budget obligations, for various reasons among which two stand out:

  1. a) As an international organization, the EU is not legally bound by the VCLT. It is not and cannot be a party to the Convention. The CJEU has unilaterally resorted to the VCLT to solve conflicts of interpretation on international agreements concluded by the Union but there is not a legal basis that obliges it to keep on doing so in the future.
  2. b) Even if the EU was legally bound by the VCLT provisions, the choice of the relevant law would not focus on the above mentioned provisions, but on its article 5, which declares the VCLT applicable to constitutive treaties of international organizations “without prejudice to any relevant rules of the organization”. Article 50 TEU is the relevant rule when it comes to withdrawal from the EU, and therefore would prevail over other provisions of a more general scope.

This brings us back to square one. Article 50 orders that, failing a withdrawal agreement, the treaties “cease to apply” to the UK. The collapse of the treaties would bring about the collapse of all secondary legislation hanging therefrom, with unforeseeable consequences in the budgetary field. If article 288 TFEU collapses in the UK, the binding nature of budgetary regulations will disappear for the UK, meaning that the Multiannual Financial Framework, the Financial Regulation, and the myriad of lower level regulations governing the spending programmes of the EU would collapse. But that would also imply the collapse of individual spending decisions adopted by the Commission, and other institutions and agencies.

Besides, Treaty provisions offering a solid ground for the exclusive jurisdiction of the CJEU over EU related matters (and the basic features of legal remedies before it) would collapse for the UK, which would no longer enjoy active standing (as plaintiff but also as defendant) to defend its interests before the CJEU.

All in all, from a strictly legal perspective, the UK might well invoke article 50 TEU not only to withdraw from the Union, but also to reject the validity of previous budget commitments and stop sending remittances to the EU, drawing on the lack of jurisdiction of the CJEU (or any other international jurisdiction, for that matter). The UK would obviously be subject to retaliation from the EU side, and experience an immeasurable loss of international prestige.

Maria-Luisa Sánchez-Barrueco



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