Britain can legally walk away from the European Union without paying a penny if there is no post-Brexit agreement, a House of Lords inquiry has concluded.
The Lords EU Financial Affairs Sub Committee said the UK would be in a “strong” legal position if the two-year Article 50 withdrawal negotiations ended without a deal.
It warned, however, that failure to reach an agreement Bon financial terms would undermine the Government’s aim of securing continued favourable access to EU markets.
“Although there are competing interpretations, we conclude that if agreement is not reached, all EU law - including provisions concerning ongoing financial contributions and machinery for adjudication - will cease to apply, and the UK would be subject to no enforceable obligation to make any financial contribution at all,” it said.
“This would be undesirable for the remaining member states, who would have to decide how to plug the hole in the budget created by the UK’s exit without any kind of transition. It would also damage the prospects of reaching friendly agreement on other issues.
“Nonetheless, the ultimate possibility of the UK walking away from negotiations without incurring financial commitments provides an important context.”
While it has been reported that the European Commission’s chief Brexit negotiator Michel Barnier is seeking a 60 billion euro (£52 billion) “exit bill” from Britain, the committee said all estimates of the cost of withdrawal were “hugely speculative”.
Some member states could seek to bring a legal action against the UK for outstanding liabilities if it refused to pay, although the committee said it was “questionable” whether any international court could have jurisdiction, while international law was “slow to litigate and hard to enforce”.
The sub-committee chairman, Baroness Falkner of Margravine, said: “Even though we consider that the UK will not be legally obliged to pay into the EU budget after Brexit, the issue will be a prominent factor in withdrawal negotiations.
“The Government will have to set the financial and political costs of making such payments against potential gains from other elements of the negotiations.