What has the Italian government prepared in case of a no-deal Brexit? On 25 March 2019 the government issued Decree-Law 22/2019 aimed at, among other things, ensuring the security, financial stability and integrity of financial markets in the event of the United Kingdom's withdrawal from the European Union without an agreement with the European Council (a so-called 'hard Brexit').
In this scenario, the United Kingdom would become a third country with the subsequent termination of bilateral relations with the European Union. The decree-law provides the necessary measures to avoid a cliff-edge effect on financial activities.
In particular, the decree-law sets out an 18-month transitional period, along with a number of transitional measures depending on:
- the nature of the business carried out in Italy;
- the relevant regime (ie, freedom to provide services (FOS) or freedom of establishment) on the date of a hard Brexit; and
- the type of clients regarding whom the activity is carried out.
The application of the transitional measures requires prior notice to operate to be served to the Bank of Italy no later than three days before a hard Brexit comes into effect in accordance with the procedures laid down by each of the above competent authorities .(1)
The decree-law will be converted into law by Parliament within 60 days of its publication. Therefore, Parliament may introduce further amendments which, if not approved, will render the decree-law retroactively ineffective subject to specific ad hoc legal provisions to be issued with respect to interim legal relationships that arise during the 60-day period.
UK banks that carry out activities subject to mutual recognition on the United Kingdom's withdrawal date can continue carrying out their activities in Italy by serving notice to the Bank of Italy. This measure will not extend to UK banks that collect savings under the FOS regime. Their activity will be limited to the management of relationships that exist before the withdrawal date with no possibility to enter into new contracts or renew existing ones.
Further, Italian branches of UK banks may continue to carry out their activities by serving notice to the Bank of Italy. For UK banks that provide investment services or activities on a FOS basis under the EU Markets in Financial Instruments Directive (2014/65/EU), the decree-law provides that they can continue to carry out their activities during the transitional period regarding eligible counterparties and professional clients (ie, starting from the withdrawal date they will no longer be entitled to carry out their activities regarding retail and professional clients on request).
If UK banks intend to carry on their activities in Italy beyond the transitional period, they must submit a specific application to the Bank of Italy within six months to be authorised to perform such activities in Italy or establish an Italian entity.
(1) For UK banks, e-money institutions, payment institutions and asset managers reference is made to the templates provided by the Bank of Italy available here. For UK investment firms reference is made to the templates provided by CONSOB (the Italian Companies and Exchange Commission) available here.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.