The Financial Markets Law Committee (FMLC) has published a paper entitled Issues of legal uncertainty arising in the context of the UK’s withdrawal from the EU – the application and impact of World Trade Organization (WTO) rules on financial services. The paper focuses on the future of the UK’s cross-border trade with the EU and the potential impact of WTO rules. Section 2 of the paper summarises the WTO rules that are relevant to financial services and section 3 examined the application of the WTO rules to financial services, including the operation of the prudential carve-out and the ways in which they support the negotiation of a free trade agreement (FTA).

Section 4 examined the impact of the WTO rules on the future of the UK-EU relationship, which broadly could take the form of:

  • UK membership of the EEA;
  • a transitional arrangement between the UK and the EU;
  • a new bespoke FTA between the UK and the EU; and
  • the UK trading with the EU on the basis of both parties’ WTO scheduled commitments and the EU’s existing third country provisions.

Section 5 considers the impact of the WTO rules on the UK’s future trade agreements with third countries.

Section 6, the FMLC recommends the following mitigating actions by which the UK might ensure greater legal certainty in the financial markets:

  • agree to a standstill transition under which current market access agreements would be extended for a fixed period of time;
  • negotiate a wide-ranging bespoke treaty, within which the UK and the EU financial services suppliers might be offered the ability to engage in cross-border trade that is as close to current arrangements as possible;
  • become a member of the EEA; and
  • prioritise the agreement with the EU of a mechanism permitting the UK to discuss and provisionally agree future FTAs with third countries during the Article 50 negotiations.

View FMLC paper on Brexit and impact of WTO rules on financial services, 22 December 2017