Brexit and the EU budget Contents
Should Article 50 TEU be determined in the light of the Vienna
The legal liability of the UK in the event of a withdrawal without an
Appendix 3: Advice by the Legal Adviser to the European Union Committee—The UK’s obligations under the EU Budget on withdrawal from the EU without a withdrawal agreement
https://www.publications.parliament.uk/pa/ld201617/ldselect/ldeucom/125/12511.htm
Legal Opinion
Introduction
1.This advice
concerns the UK’s legal obligations arising under EU Budget and related
financial instruments on its withdrawal from the EU. It takes account of
the evidence provided to the inquiry by Professor Tridimas and Dr
Sánchez-Barrueco, and Rhodri Thompson QC.
2.Two issues fall
to be determined in the light of the evidence received. The first is
whether Article 50 of the Treaty on European Union (TEU) should be
interpreted in the context of the 1969 Vienna Convention on the Law of
Treaties (the Vienna Convention). The second is the legal effect of
Article 50 TEU on the UK’s obligations under the EU budget, and related
financial instruments, after its withdrawal from the EU.
Should Article 50 TEU be determined in the light of the Vienna
Convention?
The relationship between EU law and international law
3.The Vienna
Convention is part of international law, which is comprised of
international treaties for the most part, but also of customary
international law (the practice of inter-State relations), and the case
law of international courts and tribunals. The Vienna Convention is an
international treaty which in 1969 consolidated in large part customary
international legal practice on treaty-making between States.
4.By contrast,
the EU has what the Court of Justice of the EU (CJEU) describes as an
“autonomous legal order”, which is separate and distinct from
international law, and over which the CJEU has sole jurisdiction.225
Within that autonomous legal order is a “hierarchy of norms”, at the
pinnacle of which are the EU Treaties. From these all EU legislation
derives: every Regulation, Directive or Decision is made pursuant to an
Article in the EU Treaties. The EU Charter of Fundamental Rights has the
same status as the EU Treaties.
5.The
relationship between EU law and international law is now set out in the
EU Treaties themselves, as well as the judgments of the CJEU. In a
judgment in 1992226
the CJEU ruled that “the European Community must respect international
law in the exercise of its powers.” Since the entry into force of the
Lisbon Treaty in 2009, Article 3(5) TEU declares that the EU “shall
contribute to [ … ] the strict observance and the development of
international law.” Consistent with this, CJEU judgements on
international law and EU law, though few in number, have tended to
interpret EU law in the light of relevant international law when the
rules in each legal jurisdiction overlap.227
6.Importantly, the CJEU has in the past relied on the Vienna Convention to interpret EU law. In a judgment in 2010228 it stated that, whilst the Vienna Convention did not legally bind the EU, or all of its Member States,229 provisions of the Vienna Convention that reflected customary international law were binding on the EU:
“The Court has held that, even though the Vienna
Convention does not bind either the Community or all its Member States, a
series of provisions in that convention reflect the rules of customary
international law which, as such, are binding upon the Community
institutions and form part of the Community legal order.”230
7.In this case,
the CJEU ruled that the EU must respect the principles of customary
international law set out in Article 34 of the Vienna Convention.231
8.It follows,
therefore, that that the meaning of Article 50 TEU, should, as a matter
of EU law, be determined in the light of rules laid down in the Vienna
Convention, to the extent that those rules reflect customary
international law.
The relationship between Article 70 of the Vienna Convention and Article 50 TEU
9.Both Articles
set out the consequences of withdrawing from a treaty, the former under
international law, the latter under EU law. For the purposes of this
advice it is assumed that Article 70 of the Vienna Convention reflects
customary international law.
10.Article 70, entitled “Consequences of the termination of a treaty”, provides:
“1. Unless the treaty
otherwise provides or the parties otherwise agree, the termination of a
treaty under its provisions or in accordance with the present
Convention:
a) releases the parties from any obligation further to perform the treaty;
b) does not affect any right, obligation or legal
situation of the parties created through the execution of the treaty
prior to its termination.”
11.The general
rule of international law, codified in Article 70(1)(b), is, therefore,
that the termination of a treaty does not affect any right, obligation
or legal situation which arise as a result of participation in that
treaty. This applies as much to the remainder States participating in
the treaty as to the withdrawing State. In other words, existing rights
and obligations under the treaty must be respected until they are
fulfilled.
12.The relevant extracts of Article 50 TEU are as follows:
“1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.
“2. [ … ] In the light of the guidelines provided by
the European Council, the Union shall negotiate and conclude an
agreement with that State, setting out the arrangements for its
withdrawal, taking account of the framework for its future relationship
with the Union. [ … ]”
“3. The Treaties shall cease to apply to the State
in question from the date of entry into force of the withdrawal
agreement or, failing that, two years after the notification referred to
in paragraph 2, unless the European Council, in agreement with the
Member State concerned, unanimously decides to extend this period.”
13.From these provisions it is clear that:
(a)a Member State can unilaterally withdraw from the EU (paragraph 1);
(b)it can do so
on the basis of an agreement “setting out the arrangements for its
withdrawal” and taking account of the future relationship (paragraph 2);
(c)but it can also do so without an agreement (“failing that”) (paragraph 3);
(d)the withdrawal
takes place either when the withdrawal agreement enters into force, or
two years after the notification to withdraw, whichever is the earlier
(paragraph 3); and
(e)the two year period can be extended by agreement between the withdrawing State and the other EU Member States (paragraph 3).
14.Unlike Article
70 of the Vienna Convention, Article 50 TEU does not preserve in terms
the rights, obligations or legal situation of the withdrawing State that
have arisen as a result of participation in the EU. Nor does it
preserve the rights, obligations or legal situation of the EU as a
result of the withdrawing State’s participation in the EU. In other
words, there is no express provision in Article 50 which states that
existing rights and obligations under the EU Treaties must be respected
until they are fulfilled, by both the withdrawing State and the EU. On
first reading, therefore, there may appear to be a conflict between
Article 70 of the Vienna Convention and Article 50 TEU.
15.On closer
inspection, however, it is clear that there is no such conflict. Article
70(1) of the Vienna Convention is introduced by the all-important
exception “unless the treaty [in question] otherwise provides”. The
Commentary on the draft of this Article, prepared by the UN’s
International Law Commission, makes clear that the intention of these
words is to ensure that the rules laid down in the treaty in question
prevail over Article 70 of the Vienna Convention:
“Clearly, any such conditions provided for in the
treaty or agreed upon by the parties must prevail, and the opening words
of paragraph 1 of the article (which are also made applicable to
paragraph 2) so provide”.232
16.The rules on
withdrawing from a treaty in Article 70(1) only apply, therefore, if the
treaty in question does not have any provisions on withdrawal.
Manifestly, this is not the case for the EU Treaties: Article 50 sets
out the provisions on withdrawal from the EU.
17.Reliance has
been placed on Article 5 of the Vienna Convention as a further reason
why the Vienna Convention is not relevant to the interpretation of
Article 50 TEU. This Article provides:
“The present Convention applies to any treaty which
is the constituent instrument of an international organization and to
any treaty adopted within an international organization without
prejudice to any relevant rules of the organization.”
18.If the
expression “relevant rules of the organisation” were to be read to
include rules laid down by the treaties establishing that organisation,
Article 5 would add further force to the conclusion that there is no
conflict between the Vienna Convention and Article 50 TEU. That said,
the wording of Article 70(1) alone is enough to lead to that conclusion.
The effect of Article 50 TEU on the UK’s rights and obligations under the EU budget after its withdrawal from the EU
19.It follows
from the above that Article 50 TEU does not need to be interpreted in
the light of the Vienna Convention, but on its terms alone.
20.The analysis
of Article 50 TEU above demonstrates that two options for withdrawal
from the EU are possible. The first is withdrawal on the basis of an
agreement. By using the phrase “setting out the arrangements for its
withdrawal”, the drafters of Article 50 TEU no doubt intended the
agreement to cover all of the issues whose resolution is necessary for
an orderly withdrawal from the EU. In Vienna Convention terms, “any
right, obligation or legal situation of the parties created through the
execution of the treaty prior to its termination”.233
Such issues would include ongoing legal and financial obligations under
the Own Resources Decision, the Multiannual Financial Framework, and
the Annual Budget. The withdrawal agreement could also include a dispute
resolution mechanism, in case of future disagreement. Once the
withdrawal agreement enters into force, Article 50(3) TEU makes clear
that the EU “Treaties shall cease to apply to the State in question.”
21.The second
option is stark: if no agreement is reached within two years, the effect
is exactly the same as if a withdrawal agreement had been agreed and
entered into force: the EU “Treaties shall cease to apply to the State
in question” (Article 50(3) TEU). The second option allows, therefore,
for the most disorderly of withdrawals. The travaux préparatoires
explain that the two-year cut-off was inserted to ensure that the right
of a Member State to withdraw from the EU was unilateral, rather than
dependent on the conclusion of a withdrawal agreement. Indeed, the
drafters of Article 50 foresaw the two-year period being extended:
“The Praesidium considers that, since many hold that
the right of withdrawal exists even in the absence of an explicit
provision to that effect, withdrawal of a Member State from the Union
cannot be made conditional upon the conclusion of a withdrawal
agreement. Hence the provision that withdrawal will take effect in any
event two years after notification. However, in order to encourage a
withdrawal agreement between the Union and the State which is
withdrawing, Article I-57 [now I-60] provides for the possibility of
extending this period by common accord between the European Council and
the Member State concerned.”234
22.The expression
the “Treaties shall cease to apply to the State in question” in Article
50(3) TEU is unqualified by any condition about ongoing liabilities
under EU law, no doubt because this is exactly what the withdrawal
agreement is intended to cover. The meaning of the words are clear: the
foundation of the whole edifice of EU law—the acquis communautaire—is
abruptly removed for the State in question. Given that the EU Treaties
are at the pinnacle of the hierarchy of EU norms, once they cease to
have effect, the legal base for every aspect of the UK’s membership of
the EU comes to an end. This will include all of its legal obligations
under the Own Resources Decision, the Multiannual Financial Framework,
and the Annual Budget. It will also include the supremacy of EU law over
UK law, and the jurisdiction of the CJEU over the UK.235
23.It follows
that, under EU law, Article 50 TEU allows the UK to leave the EU without
being liable for outstanding financial obligations under the EU budget,
unless a withdrawal agreement is concluded which resolves this issue.
(This advice does not address the political consequences of the UK
withdrawing from the EU without settling outstanding payments to the EU
budget and related financial instruments.)
The legal liability of the UK in the event of a withdrawal without an
agreement under international law and national law
Under international law
24.EU Member
States may seek to bring a case against the UK for the payments of
outstanding debts under principles of public international law, such as
acquired rights, but international law is slow to litigate and hard to
enforce. In addition, it is questionable whether an international court
or tribunal could have jurisdiction. Article 344 TFEU prohibits EU
Member States from submitting the legal interpretation of the EU
Treaties to a court other than the CJEU:
Member States undertake not to submit a dispute
concerning the interpretation or application of the Treaties to any
method of settlement other than those provided for therein.
25.In terms of
substance, a case against the UK in an international court or tribunal
would be hindered by the fact that Article 50 does not conflict with the
relevant rule of international law on withdrawal from treaties, namely
Article 70(1)(b) of the Vienna Convention.
Under national law
26.The Supreme Court in Miller236 has made clear that once the UK withdraws from the EU, EU law will cease to be a source of domestic law:
“Upon the United Kingdom’s withdrawal from the
European Union, EU law will cease to be a source of domestic law for the
future (even if the Great Repeal Bill provides that some legal rules
derived from it should remain in force or continue to apply to accrued
rights and liabilities), decisions of the Court of Justice will (again
depending on the precise terms of the Great Repeal Bill) be of no more
than persuasive authority, and there will be no further references to
that court from UK courts. Even those legal rules derived from EU law
and transposed into UK law by domestic legislation will have a different
status. They will no longer be paramount, but will be open to domestic
repeal or amendment in ways that may be inconsistent with EU law.”237
27.It remains to
be seen to what extent the Great Repeal Act repeals national legislation
implementing the UK’s obligations under the EU budget and related
financial instruments. It can be assumed, however, that the Great Repeal
Act will be amended to reflect the outcome of the negotiations,
including the UK Government’s view on whether it is legally bound to
continue paying into the EU budget. It can also be assumed that the
Great Repeal Act will repeal the European Communities Act 1972 and so
end the jurisdiction of the CJEU over the UK. The Government’s White
Paper, The United Kingdom’s exit from, and new partnership with, the European Union, makes this clear.238
28.Whatever the
content of the Great Repeal Bill, it will not allow the EU or its Member
States to sue in the UK courts for outstanding contributions under the
EU budget.
The legal liability of the EU institutions in the event of a withdrawal without an agreement
29.Any
individual, company or organisation can challenge a decision of the EU
institutions before the CJEU. Nationality of a Member State of the EU is
not a prerequisite. To bring a case they would have to show that they
are individually and directly affected by the decision in question.239
For example, UK organisations whose EU funding was stopped could bring a
case. It may be, however, that the CJEU would rely on Article 50 TEU as
allowing all EU funding programmes to be stopped in relation to UK
institutions, if it decided that that the legal obligation to do so
ended with the UK’s withdrawal.
225 See, for example, Opinion 1/76, or case C-459/03 Commission v Ireland
226 Case C-286/90, Poulsen and Diva Navigation
227
That said, when international law is in direct conflict with a
fundamental right safeguarded in the EU Treaties or EU Charter, the CJEU
has held that, in order to preserve the autonomy of EU law, the EU
Treaties prevail. See Cases C-402 and 415/05 Kadi
228 Case C-386/08 Firma Brita
229 France and Romania have not ratified the Vienna Convention.
230 Para 42. See also C-162/96, Racke, paragraphs 24, 46 and 46
231 Article 34 states that treaties do not impose any obligations or confer any rights on non-party States without their consent.
232 International Law Commission, Draft Articles on the Law of Treaties with commentaries,1966, p 265: http://legal.un.org/ilc/texts/instruments/english/commentaries/1_1_1966.pdf [accessed on 13 February 2017]
233 Article 70(1)(b)
234 Explanatory notes on the Treaty Establishing a Constitution for Europe
235
It is possible under Article 273 TFEU for the CJEU to be asked to
interpret Article 50 TEU before the UK withdraws by means of “a special
agreement”, but the UK would have to give its agreement to this.
236 R (On The Application of Miller and Another) (Respondents) v Secretary of State For Exiting The European Union (Appellant), [2017] UKSC 5
237 Paragraph 80
238 HM Government, The United Kingdom’s exit from and new partnership with the European Union, Cm 9417, (February 2017), pp 7–8: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_Kingdoms_exit_from_and_partnership_with_the_EU_Web.pdf [accessed 21 February 2017]
239
Article 263 TFEU: “Any natural or legal person may […] institute
proceedings against an act addressed to that person or which is of
direct and individual concern to them, and against a regulatory act
which is of direct concern to them and does not entail implementing
measure.”
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