The political and economic rollercoaster ride we’ve been on here in the UK since the EU referendum in June seems set to continue following Thursday’s High Court judgment in London. The High Court held that the UK government doesn’t have the power to give notice to withdraw from the European Union under Article 50 of the Lisbon Treaty. Only parliament has the power to change domestic law in the UK and, as serving notice to leave the EU will affect rights under domestic UK law, the government can’t serve notice without parliament’s approval.
So, just as we’d started to get used to the idea of notice being served by the government in March 2017, with the UK then leaving the EU by March 2019, the Brexit process has now been thrown up in the air again.
Keep calm and stay in London?
For offshore funds and their managers, the period of uncertainty (as Ollie blogged about recently) over what Brexit means for them in reality seems set to continue for a long while yet. There is however a growing sense among investment managers of offshore funds here in London that, whatever the outcome of the Brexit negotiations with the rest of Europe, a solution will be found to allow managers to keep calm and stay in London (or elsewhere in the UK).
Increasing numbers of alternative structures are being considered, including keeping an existing UK FCA regulated investment manager and using an AIFM platform in eg Luxembourg or Ireland, or setting up a management company in another EU jurisdiction such as Luxembourg which could then delegate or outsource various functions back to the UK. Other parts of the UK financial services industry, including much of the banking industry, are more heavily reliant on passporting rights under the relevant European legislation so moving parts of their operations out of the UK is having to be considered seriously by them. It’s difficult for anyone to finalise a plan at the moment though when no-one can know at this stage what post-Brexit UK will actually look like.
As was widely expected, the government is appealing the court’s ruling to the Supreme Court, with a hearing expected in early December and the judgment hopefully being handed down before Christmas. So Theresa May’s timetable of serving notice before the end of March 2017 could still happen if the government wins its appeal. Given the twists and turns we’ve had so far though, it’s hard to predict what else Brexit has in store for us all before we reach the end of the ride.