On 5 November 2019, the Financial Markets Law Committee (FMLC) published an addendum to its July 2017 paper (see previous blog here) which focused on issues of legal uncertainty arising out of the UK’s withdrawal from the European Union without retaining access to the Single Market under any other legal provision.
The addendum provides key updates on developments that have transpired since the result of the 2017 referendum. These include descriptions of the no-deal contingency plans prepared by the UK and individual EU Member States as well as providing updates on general points across: banking, investment services, central counterparties and trading venues, alternative investment funds and fund management, insurance and reinsurance, benchmark administration, and securities.
Additionally, the addendum provides an analysis of the impact of Brexit on access to the EU market. The FMLC states that the anticipated level of third country market access for UK firms is still relatively limited irrespective of the UK leaving with or without a deal. In terms of equivalence, the FMLC highlights that the European Commission’s recent communications suggest a stricter approach towards equivalence regimes resulting in more delays to the equivalence process, or in the worst case, a negative finding of equivalence. This is exacerbated by the UK regulators piecemeal approach to track or diverge from EU technical standards on a case-by-case basis, the collective effect of which may affect firms’ access to EU markets via minimum requirements in EU law on adequacy and equivalence.
The FMLC recommends that the EU should adopt an expanded or enhanced framework for equivalence decisions to mitigate market access issues between the UK and the EU. In addition, the FMLC suggests that the UK and the EU should agree transparent methodologies for equivalence determinations acceptable to both sides, as the consequence for not doing so would risk the regime being too unreliable to be used as a stable basis for cross-border operations.