Scotexit and Allocating the UK's Debt

Scotexit and Allocating the UK's Debt Posted: 14 Mar 2017 02:43 PM PDT This is a joint post by Mitu Gulati and Mark Weidemaier. Scotland voted 62% in favor of remaining in the EU in last June's Brexit vote. Now, with nationalism on the rise in Britain, Scotland has begun to rethink the decision to stay in the UK. Fears of a so-called "hard exit," in which Britain foregoes easy access to the common market, have Scottish leaders like Nicola Sturgeon demanding another referendum on Scottish independence. Which has us wondering: What happens to the (rather large) pile of UK debt if one of its members decides to exit? It seems like voters in Scotland ought to care about the answer, if given another chance to vote on UK membership. More broadly, one would think voters would want some idea how the UK's assets and liabilities would be divvied up. Things like the public debt, the crown jewels, pension obligations to veterans, the nuclear arsenal, Balmoral castle, and so on. The UK has a lot of stuff. How should it be divided? Given the number of times countries and empires have broken up, one might expect international law to offer an answer. Perhaps debts and assets might be allocated according to some formula, such as contribution to GDP. Or perhaps there might be a system akin to "fault" (as opposed to "no fault") divorce. For example, if the reason for the break-up was that Britain failed to take Scottish interests seriously in charting the UK's future, then perhaps Scotland should be saddled with less UK debt. Alas, international law provides essentially no guidance on such questions. Why not? One reason is that powerful governments have outsized influence over the development of international law, and these governments have little interest in creating clear rules to govern the break up of sovereign territories. The result is a structural bias against changes to sovereign borders. This bias in favor of the status quo generally is to the advantage of powerful governments. But this system is not inevitable. People around the world are beginning to think more transactionally about these kinds of allegiances. To take a non-random example: The President of the United States is a real estate playboy who ran for office on an avowedly anti-science, anti-minority, anti-immigrant, anti-reading, pro-authoritarian platform. No surprise, then, that people in New York, Oregon, and California are contemplating the pros and cons of their union with other states. Or, to take another example: Puerto Rico experiences a serious debt crisis, and many in the mainland US start to wonder just how much they want to take on the burdens of this "unincorporated territory." (It is easier to have such doubts when one has already realized significant benefits from the relationship...) In general, we each favor a world in which sovereign boundaries are less rigid than they are today. But we disagree on the role international law might play in increasing this flexibility. Mitu and his colleague Joseph Blocher think international law can and should play a key role in facilitating "international divorce." Mark (along with others, like Anna Gelpern and John Coyle) is more skeptical. But we agree that the question is important, and fascinating, and that international law offers nothing coherent to say on the subject. Given the importance of the question, this is a gigantic gap in international law. Certainly it should be of interest to (potential) voters in Scotland--not to mention Spain, and then Catalonia, and then...