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In the current Brexit negotiation process. It seems that the United Kingdom will have to pay some kind of fee or 'divorce bill' as some are calling it, to the EU before they can leave. Jean-Claude Juncker has said the UK would have to pay (or at least agree to) before negotiations can continue. At the time of writing, many different varying numbers are being touted as the fee in question.

What is the reason a country haves to pay? What would happen if a country refused (or in an extreme case did not have the means) to pay?

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A useful breakdown of why there is a divorce bill, and the process for deciding how much it will be, appears here.

What is the reason a country has to pay?

To sum up, items the UK will be expected to pay for include:

  1. Outstanding budget commitments: The EU Budget operates through a multi-annual spending structure, which means projects are paid for over a period of several years. As a result, EU Budget payments are back-loaded and many will be paid out post-Brexit.

  2. EU officials’ pensions: Like the UK civil service pension scheme, the Pension Scheme of European Officials (PESO) is an unfunded scheme and operates on a ‘pay-as-you-go basis’, with costs being covered by the annual EU Budget as they arise.

  3. Contingent liabilities: The EU incurred contingent liabilities while the UK was a member state. These liabilities effectively constitute payments that would be triggered in specific circumstances only, for example, Ukraine defaulting on its EU loan.

  4. Other costs of withdrawal: This would cover the relocation of the two London-based EU agencies after Brexit; the European Banking Authority and the European Medicines Agency. Other costs include the decommissioning of the Joint Research Centre nuclear sites and funding British teachers seconded to European schools until 2021.

(Text of list items is from the above link)

What would happen if a country refused (or in an extreme case did not have the means) to pay?

Theoretically, the EU could impose trade sanctions on the UK or take action through the International Court of Justice. At a minimum, it would probably refuse to conclude any other post-Brexit agreements with the UK, which by itself would have severe consequences for the UK economy.

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  • Interesting. I initially assumed (perhaps naively) that the fee was simply some kind of deterrent being used to deter other countries from considering leaving the European Union
    – user17464
    Oct 13 '17 at 15:19
  • There are already several bids for those agencies, and one has to wonder if eventually other organizations (non-EU) will eventually loose support from the member states in favor of an EU based institution. I'm thinking of examples such as ECMWF and all the multimillionaire contracts depending on ESA.
    – armatita
    Oct 13 '17 at 16:39
  • @armatita: The Banking and Medicine agencies are EU agencies which happen to be physically located in the UK. After Brexit, the EU still needs them, but they have to move somewhere else, hence the costs. AFAIK there is no need and no significant demand for the UK to leave non EU agencies like ESA. Oct 13 '17 at 19:17
  • I didn't say otherwise. I was not arguing against your answer. Just adding a bit more of relevant information. (+1) As for ESA and ECMWF I should have explained better. The problem I foresee might happen is specifically with Galileo. It is a project commissioned to ESA by the EU and, as far as I know, there is still no agreement in place about letting Galileo funding go outside the EU.
    – armatita
    Oct 13 '17 at 21:14