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[...]Agreeing on the scale of the UK’s divorce bill will not be easy. One reason is that estimates of the bill vary a great deal depending on various assumptions. According to my Bruegel colleague Zsolt Darvas and his co-authors the upfront gross payment that Britain will have to make upon exit could range between €54bn and €109bn. This would translate into a net payment ranging between €25bn and €65bn once the UK receives its share of EU spending, assets and repaid EU loans.
The difficulty in finding an agreement on the Brexit bill should not come as a surprise. Any divorce procedure involving money is complicated for the simple reason that it is a zero sum game: if one sides gets more the other gets less. This is why such procedures typically end up in front of a judge or an arbitrator. And the same should apply to the EU-UK divorce.
Asking a judge or an arbitrator to resolve the size of the Brexit bill would free negotiators from a thorny issue and allow them to concentrate their political capital on what really matters to citizens and business: the future EU-UK relationship. And it’s not just a question of political capital. Time is also of the essence. Michel Barnier, the EU’s chief Brexit negotiator, has rightly underlined that getting a deal done and ratified within the two-year deadline imposed by Article 50 means that negotiations need to be concluded by autumn next year.
Who should the judge or arbitrator be? Viewed from Brussels, the obvious choice would be the European Court of Justice in Luxembourg, but this would clearly be unacceptable to London where the ECJ is viewed as partial.
A more suitable choice would be the International Court of Justice (ICJ) in The Hague. The ICJ is the principal judicial organ of the United Nations, and its role is to settle, in accordance with international law, legal disputes submitted to it by states.
But probably the best choice of all would be the Permanent Court of Arbitration, which is also located in The Hague but is independent from the ICJ. The PCA was established in 1899 to facilitate arbitration and other forms of dispute resolution between states. It is not a court in the traditional sense, but a permanent framework for arbitral tribunals constituted to resolve specific disputes. Currently, the PCA has 121 Contracting Parties including all EU27 states and the United Kingdom.
Arbitration typically involves three or five arbitrators. In the case of three (five) arbitrators, each party appoints one (two) arbitrator(s). The two (four) appointed arbitrators then choose the third (fifth) arbitrator who acts as the presiding arbitrator of the tribunal. [...]
Finally, one may legitimately ask why the two parties should be willing to forego their efforts to find a political settlement and turn instead to arbitration. The answer is that it would save them the type of acrimony that has been building up recently and which is sure to increase as time goes on – given the zero-sum nature of the exercise. The two parties should recognise this and seek arbitration as soon as possible. They would then be able to concentrate their efforts on finding a political solution to the future EU-UK relationship and remove uncertainty about the rights and obligations of citizens and business in the EU27 and in the UK after Brexit. This would be a win-win situation for the two sides compared to the alternative of no deal at the time of Brexit.