A Tweet from the chief Brexit coordinator in the European Parliament Guy Verhofstadt:
Boris Johnson threatens not to pay the Brexit bill. This would not only hurt the UK’s credibility as an international partner, but it is absolutely unacceptable and contradicts what almost every lawyer in the UK thinks about it.https://t.co/cfpzGxttjG
— Guy Verhofstadt (@guyverhofstadt) June 9, 2019
A day or so earlier, French president Emmanuel Macron said Britain’s refusal to pay the £39bn negotiated by Theresa May would amount to a sovereign debt default. Naturally, this has been held aloft by Remainers in the UK who for some reason want it paid even in the absence of a deal.
They’re wrong. One of the crucial elements of any negotiation is understanding who all the players are, particularly those who are not sat around the table. For instance, if you’re negotiating a large corporate takeover you don’t want to forget about the competition commission, who is not represented in the negotiations but who very much gets a say on the final outcome. Another golden rule is you must understand who is able to negotiate what. When Pirelli attempted a takeover of Continental in the early 1990s, they didn’t fully appreciate than even if they owned more than 50% of the stock, they wouldn’t have full control of the company thanks to German law stipulating employees must be represented on the board.
The £39bn “divorce bill” was agreed between Theresa May’s negotiating team and that of Michael Barnier, who leads the EU’s negotiation efforts. However, this is not a stand-alone agreement and instead is incorporated into the draft withdrawal bill which Theresa May failed to get ratified by parliament. No serious negotiator would believe the £39bn has been finalised while knowing full well the withdrawal agreement needs to be ratified by parliament. All they’ve done is negotiate a rough figure to move things forward and agreed some more stuff before May’s gone back to “ask her people”. This is the consensus approach to negotiation whereby you make sure everyone is on board with everything before celebrating an agreement. As the European Union itself has made clear “nothing is agreed until everything is agreed”. I suspect the EU mouthpieces are trying to be clever here, hoping they can get Remainers to scupper Brexit altogether, but the more they cling to this approach the more amateur they look.
Nobody negotiating a future deal with Britain will take this divorce bill as a serious agreement which they’ve reneged on, and nor will it be viewed by ratings agencies as a debt default. Britain might owe the EU a sum of money, but it does not follow that they are legally obliged to pay this £39bn in the absence of any deal ratified by parliament. People are not stupid, and they will understand this was never a proper deal, more of an agreement drawn up between one negotiator and another that was never endorsed by the people who mattered. This is also why Trump’s scrapping of the Iranian deal and his withdrawal from the Paris Agreement didn’t matter. Despite all the howls that America was proving itself untrustworthy, people looking to do serious business with the US knew these two deals were unilaterally signed by Obama and never put before Congress. In other words, they were not proper, binding agreements at all.
The lesson here is if you wish to make a deal that sticks, make sure you secure the agreement of everyone that matters. Signing deals with emissaries with no lasting authority is something any half-decent negotiator knows to avoid. The EU might be simply trying it on here, but in doing so they’re making themselves look like rank amateurs. I’m starting to get the impression they are.