Leaving the Euro

B. The Lisbon Treaty exit clause: a critical assessment

1. Description of the exit clause

The idea of a Member State's withdrawal from the Union was to take a new turn with the introduction of Article I-59 of the draft Treaty on establishing a Constitution for Europe, (whichbecame, Article I-60 of the Treaty establishing a Constitution for Europe). The differences in this respect between the now defunct draft Constitution and the recently ratified Lisbon Treaty are only minor and of a technical nature. Article 50 of the Lisbon Treaty explicitly makes provision for the voluntary secession of a Member State from the EU. Specifically, the exit clause provides that a Member State wishing to withdraw from the EU must inform the European Council of its intention; the Council is to produce guidelines on the basis of which a withdrawal agreement is to be negotiated with that Member State; and the Council, acting by a qualified majority and after obtaining the consent of the European Parliament, will conclude the agreement on behalf of the EU. The withdrawing Member State would cease to be bound by the treaties either from the date provided for in the withdrawal agreement or, failing that, two years after notification of its intention to withdraw. A former Member State seeking to rejoin the EU would have to follow the same admission procedure as any new candidate country.

2. Assessment of the non-EMU-specific concerns raised by the exit clause

The exit clause, as formulated, raises at least three concerns. First, despite the references in it to a negotiated agreement on the details of the withdrawing Member State's departure, the exit clause recognises, effectively, a unilateral right of withdrawal as well as a possibility for a Member State to negotiate its agreed exit from the EU. Second, the exit clause only appears to be appropriate if only one or two Member States were to withdraw at a time, but not if there were to be a mass exit from the EU. A third, and perhaps the most serious, concern, is that the exit clause contains no special provisions on the requirements for the withdrawal of a Member State which has adopted the euro. Even if the Lisbon Treaty had not been ratified, its guidance on how to address the possibility of a Member State's withdrawal would remain useful, and ventilating concerns connected with the exit clause could contribute to a more functional withdrawal mechanism being adopted upon any future amendment to the EU Treaty.

Starting with the first of these three concerns, there are at least three clear indications that the exit clause embodies a unilateral right of withdrawal. These are: (i) the reference, in Article 50(1), to a Member State's withdrawal 'in accordance with its own constitutional arrangements'; (ii) the fact that a Member State's withdrawal is not conditional on the conclusion of a withdrawal agreement, since a Member State can withdraw even if negotiations with the Council break down, provided that two years have elapsed since the notification to the Council of its decision to withdraw; and (iii) the fact that 'the right to withdraw is not connected with the adoption of a constitutional change that a Member State cannot accept, but introduced without such restrictions'. This third consideration is crucial since it is not the element of negotiation that would make a Member State's withdrawal consensual (as opposed to unilateral), it is the absence of restrictions on a Member State's right to withdraw that is decisive. Negotiations would, in any case, be necessary to organise a Member State's departure. If this assessment is correct, that Member States have a unilateral right of withdrawal under the Lisbon Treaty, the exit clause would appear to represent a notable departure, rather than a mere codification of international or Community law on the right of Member States to withdraw from their treaty commitments. For the reasons explained earlier, this does not sit comfortably with the fundamentally integrationist rationale of the treaties, with the sui generis nature of the Community legal order and, not least, with Article 48 TEU and with the specific procedure for amending the treaties that this provides (of which a Member State's withdrawal would be a prime example).

Why the drafters of the Lisbon Treaty introduced such an abuse-prone provision into the treaties can only be a matter of speculation. Whatever the rationale of the recognition of a unilateral right of withdrawal, and however valid the questions that this raises, it has perhaps two redeeming features. First, the introduction of this new possibility may prepare the ground so that, should there be a unilateral withdrawal, it will not find the EU institutionally unprepared, helping bring a semblance of order to what would be bound to be a dramatic event and averting the risk of that event affecting the continuation of the integration process by the remaining Member States. Second, the exit clause recognises the practical reality that, politically, a sovereign Member State cannot be coerced into honouring commitments it no longer has an interest in. This would, in turn, help the EU avoid the legal wrangles that too legalistic an approach to a Member State's withdrawal might entail. The introduction of the exit clause indirectly confirms the validity of the conclusion drawn above, that such a right did not exist under Community law pre-Lisbon Treaty, and that nothing short of a treaty agreement between the Member States could bring it into being (if such a right existed already, the exit clause would be redundant).

The second of the three concerns identified above relates to the fact that the exit clause is conceived with a view to the withdrawal of one or two Member States at a time. While, on the face of it, it is not unreasonable for the Council to represent the EU in withdrawal negotiations, since it is the Council that negotiates EU accessions, if a more substantial number of Member States were to withdraw, this role of the Council could not work for the purely practical and conceptual reason of the limited legitimacy of the Council representing a 'depleted' EU in a mass exit scenario. The exit clause's failure to cater for a mass exit raises concerns because, as currently drafted, the exit clause does not preclude multiple withdrawals, an eventuality that would defeat the objective of orderly withdrawal, presumed to be the aim of the introduction of the exit clause; however unlikely a mass withdrawal, the drafters of the Lisbon Treaty should, perhaps, have catered for it. At the same time, the requirement, in the exit clause, for a qualified majority is difficult to account for, given the requirement for unanimity for EU accessions.

The third and, perhaps, most serious concern raised by the proposed exit clause is that it does not make any special provisions for the withdrawal of EU Member States which also participate in the euro area. Because of the particular features of EMU, this concern will be addressed separately in the following section.

3. Assessment of the EMU-specific concerns raised by the exit clause

While the silence of the exit clause on the procedures for the withdrawal of a euro area Member State is, at first sight, understandable, it has been criticised for threatening the stability of the euro as well as for the possibility that it might lead to a proliferation of 'disaster clauses' to cater for changes in the composition of the euro area. More importantly, the exit clause's silence is problematic because it leaves room for speculation on the extent to which there is also a right of withdrawal from EMU and whether such withdrawal would necessarily be linked to a Member State's withdrawal from the EU or could be independent from it. There appear to be two alternative approaches to the absence of any guidance in the exit clause on the existence of a separate right of withdrawal from EMU. One is to see it as evidence that a Member State's right to withdraw from EMU is implicit in its right to repudiate the treaties in their entirety, so that no special procedure for it is required in the exit clause; the other is that no right of withdrawal from EMU was ever intended to exist. These two alternative interpretations of the silence of the exit clause on procedures for the withdrawal of a euro area Member State are examined in the following.

The first interpretation would be consistent with the view that withdrawal from EMU without a parallel withdrawal from the EU would be legally inconceivable. As seen above, unlike EU participation, EMU participation is a legal obligation for all Member States. While a Member State may be free to denounce its EU participation and repudiate its treaty obligations in their entirety, it would not be free to go back on its decision to join EMU without breaching a binding obligation, under the EC Treaty, unless it were also to withdraw from the EU. Consequently, the only way to withdraw from EMU is to withdraw from the EU. This interpretation would nevertheless be problematic; it postulates the possibility of unilateral withdrawal from EMU under the same conditions as those applicable to a Member State's withdrawal from the EU, i.e. even if no withdrawal agreement had been concluded between the Council (with the full involvement of the ECB) and the departing Member State. Such a genuinely unilateral right of withdrawal would be unthinkable in the context of EMU, not least on account of its open conflict with the plain language of Articles 4(2), 118 and 123(4) EC and Protocol 24 on the Transition to the Third Stage of Monetary Union and, in particular, with the references therein to the 'irrevocability' of the substitution by the euro of the currencies of the participating Member States and to the 'irreversibility' of the monetary union process.

The only alternative interpretation is that there was never intended to be a right of withdrawal from EMU, among other things because of the complex network of rights and obligations that EMU entails for its participating Member States and their NCBs and which cannot easily (and certainly not automatically) be unwound through a unilateral act ofwithdrawal. The necessary implication of accepting this alternative interpretation is that only an agreed exit from the euro area is possible. However, this argument is also problematic since, reasoning a maiore ad minus, to recognise, as the exit clause does, the possibility of unilateral withdrawal from the EU is to also recognise the possibility of unilateral withdrawal from a sub- set of the EU (namely EMU). Moreover, to accept this alternative as valid would postulate the existence of two different withdrawal procedures, depending on whether the Member State involved is part of the euro area or not. This would mean that EU Members could withdraw unilaterally and without the need to negotiate their departure once the two year period referred to in the exit clause has expired, while euro area Members would need to negotiate their withdrawal, at least from EMU. However reasonable, such a distinction might produce the perverse effect of encouraging Member States to delay indefinitely their accession to EMU in order to benefit from the apparently more lenient withdrawal requirements applicable to non-EMU participants.

Both of the foregoing interpretations of the silence of the exit clause on the existence (or otherwise) of a possibility to withdraw from EMU are so unsatisfactory that it would be unwise to attempt to choose between them on the basis of deductions, however logical or informed these may be. A potential right of withdrawal from EMU and the procedures for such withdrawal are too serious to be left to mere inference. For this reason, the author agrees with Smits that the exit clause is 'one of the major faults of the Constitution' (and, by extension, also of the Lisbon Treaty). As for how the exit clause's weaknesses might be rectified, it is argued that nothing short of the express inclusion in the exit clause of a requirement for a negotiated withdrawal from EMU (involving both the Council and the ECB) would suffice because: (i) withdrawal from EMU is too far-reaching and complex a matter to be amenable to the exercise of a right of unilateral withdrawal (such as the right to which the Lisbon Treaty's exit clause rightly or wrongly amounts); and (ii) the EC Treaty is clearly opposed to the possibility of unilateral withdrawal, at least in the context of EMU.

4. Intermediate conclusion

The conclusion is that Member States could not, pre-Lisbon Treaty, withdraw unilaterally either from the EU or, a fortiori, from EMU, and that the only way for them to do so legally would be by means of a negotiated agreement with their fellow Member States. Such an agreement would necessarily involve a Treaty amendment and require the unanimous consent of its partners, in accordance with Article 48 TEU. How likely some Member States are to wish to withdraw voluntarily (however heartily their partners may desire their departure) can only be a matter of speculation. What is clear, however, is that given the serious legal and practical difficulties that the withdrawal of a Member State would entail, and which even negotiations in good faith may not suffice to overcome, those who supported the withdrawal of Member States accused of having 'thrown a spanner in the works' of European integration may well have advocated a step which, though politically imaginable, would be legally inconceivable (at least pre-Lisbon Treaty).

This conclusion inevitably raises the question of whether, in the absence of its willingness to withdraw or of an agreement on the procedure for withdrawal, a Member Statecould be expelled against its will, either from the EU or EMU. Part Two of this paper will examine these questions.