Since the UK’s withdrawal from the EU on 31 January 2020, in
accordance with the Withdrawal Agreement concluded between
the UK and the EU to ensure an orderly departure and legal
certainty, EU law continues to apply to and in the UK in important
areas during the transition period ending 31 December 2020. The UK
having refused an extension as allowed by the Withdrawal Agreement,
the transition period will necessarily end on 31 December 2020.
In July 2020, the European Commission issued a Communication on
readiness at the end of the transition period between the EU and
the UK (see the link here) as well as a Brexit Readiness
Checklist (see link here). Indeed, even if the EU and
the UK conclude a partnership by the end of 2020 covering all areas
agreed in the Political Declaration relating to their
future relationship, the UK’s withdrawal from the EU acquis,
the internal market and the Customs Union will, at the end of the
transition period, inevitably create new barriers to trade.
Regarding financial services, it results from the Communication
that, contrary to what was foreseen in the Political Declaration,
the Commission could not conclude its equivalence assessments by
the end of June 2020. At this stage, it seems highly unlikely that
the Commission will adopt equivalence decisions which would allow
UK entities privileged access rights for the provision of financial
services in the EU Internal Market in those areas where this is
envisaged by EU financial regulation.
With regard to investment services, the Commission clarifies in
the Communication that it will not adopt an equivalence decision in
the short or medium term. However, as far as derivatives central
clearing counterparties (“CCPs“) are
concerned, the Commission adopted Implementing Decision 2020/1308
determining, for a limited period, that the UK regulatory framework
applicable to CCPs is equivalent to the requirements set out in
Regulation (EU) 648/2012 (EMIR). Since this decision expires on 30
June 2022, EU clearing members thereby get an additional 18 months
to reduce their exposure to the UK market infrastructures and
develop their capacity to clear relevant trades.
As regards market surveillance, investment services and asset
management activities, the European Securities and Markets
Authority (“ESMA“) confirmed in
a publication of 17 July 2020 that the
“no-deal Brexit” Memoranda of Understanding
(“MoUs“) on cooperation and information
exchange concluded with the UK’s Financial Conduct Authority
(“FCA“) on 1 February 2019 (see
link here ) remain relevant and will come
into effect at the end of the transition period. In particular, a
multilateral MoU between EU/EEA securities regulators and the FCA
will allow fund manager outsourcing and delegation to continue to
be carried out by UK-based entities on behalf of counterparties
based in the EEA.
A helpful briefing published by the European
Parliament on 8 October 2020 gives a global overview of the
repercussions of the UK’s withdrawal from the EU on financial
services and recalls the guidance issued by EU supervisory and
resolution authorities in this respect.
At a general level, negotiations on the future EU-UK partnership
are ongoing. The most recent EU statements confirm that, although
significant progress has been made, differences in certain key
areas must still be overcome in order to allow for an agreement on
the future relationship with the UK in due time.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.