Negotiating with the UK: types of asset
This article was commissioned by Wikiscot from Craig Dalzell at email@example.com. A fee was paid.
Once it is agreed that Scotland will separate from the remainder of the UK (rUK), there will need to be negotiations over how the UK's assets and liabilities are to be divided between the two nations. These negotiations will deal with different types of assets in different ways. The division is also governed by legal rules, and may be influenced by existing creditors.
Types of assets
Assets are conventionally divided into three types:
- Immovable assets are items that cannot be readily moved between territories, such as government buildings and mineral resources. These assets normally go to the state in whose territory they stand (unless there are disputes over where the borders run).
- Moveable assets are assets which can be transferred between states; they include such items as military vehicles and equipment, and reserves of gold and foreign currency. They are often divided proportionally according to population, or according to GDP, or according to "historic contribution" to the previous political union, or according to other and more complex multiple factors. Art and cultural objects can – depending on the item – be movable or immovable, but since their monetary value may not match their cultural and historical value, these objects are often negotiated for on an ad hoc or per item basis. National debt is a moveable liability, but part of it may be deemed immovable if the money raised was spent on immoveable assets (such as a nationally owned power plant).
- Intangible assets include such items as state data, citizens’ data, software licences for running tax and welfare systems, and historical and statistical archives. This is a complex and emerging area of independence negotiations, because many countries became independent before computers were widely used and when state archives and data were paper-based. Digital data and licences are comparatively easy to copy and transfer, but Scotland may not wish to accept them: it may wish to rapidly diverge from UK tax and welfare infrastructure, rendering existing software unsuitable; it may wish to use Open Source software to avoid security weaknesses, and to prevent the rUK having backdoor keys into Scottish data; and there may be legal difficulties with citizens’ data, on the grounds that the rUK has diverged from GDPR regulations and should therefore not be holding data on Scottish citizens. These problems will be difficult to resolve under a proportional division of assets and liabilities, and will thus have to be dealt with under detailed ad hoc arrangements.
Influence of third parties
When it comes to the actual transfer of assets and liabilities, third parties may have a legitimate voice in the negotiations: a bond holder may or may not want their bond to be transferred to the Scottish Government. This can be avoided if the continuing state takes full ownership of all liabilities and subsequently negotiates a bi-lateral agreement for the separating country to pay to the continuing state a sum equivalent to the agreed share.
- P. Williams and J. Harris, "State Succession to Debts and Assets: The Modern Law and Policy", Harvard International Law Journal, 42, 2, (2001) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2032920 (Free to download.) Accessed 19/10/2020.
- A. Stanič, "Financial Aspects of State Succession: The Case of Yugoslavia", EJIL, 12, 4, pp 751-779, (2001) http://www.ejil.org/pdfs/12/4/1542.pdf Accessed 19/10/2020.