North Carolina Journal of International Law

"Connecting North Carolina to the World of International Law"

The Cost of Brexit

By: Ariella Zulman

 

 

 

 

 

 

 

 

 

 

 

As BREXIT negotiations continue, citizens of the United Kingdom are being forced to come to terms with the fact that they may be obligated to pay billions of dollars to the European Union. Settling the terms of how much the UK will need to pay upon leaving has been one of the major sticking points in the BREXIT negotiations because Article 50 of the Lisbon Treaty does not provide detailed instructions on how these costs will be calculated.[1] Therefore, the question has become: how much is it actually going to cost the UK to successfully exit the EU pursuant to Article 50?

 

How does a member state exit the European Union?

The European Union is “a unique economic and political partnership” whose legal foundation is “built on a complex system of treaties among its members, which have been adapted over the years to meet the needs of a changing world and an evolving and expanding EU.”[2] One of these adaptations is the Lisbon Treaty. Article 50 of the Lisbon Treaty contains the guidelines for when a member state wishes to withdraw from the EU.[3] The treaty mandates a two-year period in which negotiations will take place and for a vote by a “qualified majority” on the final deal.[4] This time frame can only be extended by a unanimous agreement from all EU countries and if one is not reached then a member state will automatically leave the EU and all existing agreements will cease to apply.[5] One of the factors to be discussed during negotiations is the “divorce bill.” Currently, “EU countries pay into a shared multi-year budget to finance things like infrastructure projects, social programs, scientific research and pensions for EU bureaucrats.”[6] Withdrawal will create a “hole in the EU budget,”[7] therefore, if a country decides to leave the EU, an exit deal must include provisions that honor a country’s remaining monetary commitment.

 

How much does the United Kingdom owe?

On March 29, 2017, the United Kingdom became the first country to implement Article 50; starting the clock on the two-year countdown to the UK’s exit from the EU.[8] Negotiations for BREXIT have been underway since this summer and have been focused on reaching an agreement “for the amount of money the UK has to pay the rest of the EU to ‘settle its accounts,’ when it leaves.”[9] It is currently estimated that the UK will owe at least 50 billion pounds (the equivalent to 62.4 billion dollars) in order to satisfy the country’s obligations to the EU budget, which runs until 2020.[10] Despite statements from various figures in the British government that the figure is outrageously large, the UK can expect to fight a hard battle with the rest of the EU. Michael Barnier, the lead EU Negotiator, has stated that although they are not trying to punish the UK for leaving the EU, they do “intend to teach people . . . what leaving the single market means.”[11] Members of the EU argue that the original budget was calculated when 28 countries agreed to pay and that it would be unfair for only 27 of the countries to pick up the tab.[12]

 

In order for the UK to successfully exit the EU according to the bylaws set forth in Article 50 of the Lisbon Treaty, a deal must be made. Although the terms of BREXIT remain murky, it is crystal clear that no matter the outcome, the cost to the UK will be significant.

 

[1] Brexit: Article 50 has been triggered-what now?, BBC News (Mar. 29, 2017), , http://www.bbc.com/news/uk-politics-39143978 [https://perma.cc/KZE9-4NY9] [hereinafter Article 50].

[2] How the EU Works, Delegation of the European Union to the United States, http://www.euintheus.org/who-we-are/how-the-eu-works/ [https://perma.cc/3FK2-3YDV] (last visited Sept. 15, 2017).

[3] See Article 50, supra note 1.

[4] Id.

[5] Id.

[6] Ivana Kottasova, What Brexit will Cost Britain: More debt, weaker growth and a final bill, CNN (Mar. 29, 2017), http://money.cnn.com/2017/03/29/news/economy/brexit-article-50-cost-economy-debt/index.html [https://perma.cc/96YS-M8YN] [hereinafter Kottasova, What Brexit will Cost Britain].

[7] Alex Hunt & Brian Wheeler, Brexit: All you need to know about the UK leaving the EU, BBC News (Sept. 5, 2017), http://www.bbc.com/news/uk-politics-32810887 [https://perma.cc/4T86-U2N7] [hereinafter Hunt, Brexit: All you need to know].

[8] See Article 50, supra note 1. The UK referendum to leave the EU took place on June 23, 2016.

[9] See Hunt, Brexit: All you need to know, supra note 7.

[10] See Kottasova, What Brexit will Cost Britain, supra note 6.

[11] Brexit: UK to be ‘educated’ about consequences, says Barnier, BBC News (Sept. 3, 2017), http://www.bbc.com/news/uk-politics-41140564 [https://perma.cc/HQ9S-497A].

[12] Jennifer Rankin, UK backtracking on Brexit divorce bill, says Michael Barnier, The Guardian (Sept. 7, 2017), https://www.theguardian.com/politics/2017/sep/07/brexit-michel-barnier-says-uk-appears-to-be-in-reverse-over-divorce-bill [https://perma.cc/5F99-UHEM].

 

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