The draft laws also cover the application of EU law in the United Kingdom after “exit day” on 29 March 2019.
The UK government has begun publishing draft statutory instruments and accompanying explanatory memoranda and guidance in pursuit of the objectives of the European Union (Withdrawal) Act. So far, three of particular relevance to the financial markets are available for review:
- Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018
Binding Technical Standards (BTS) set out very specific requirements and standards to ensure that financial services institutions are able to comply with the EU’s financial regulation. European supervisory authorities are currently responsible for drafting BTS. An appropriate UK body will need to take on responsibility for these standards after exit from the European Union. This draft legislation seeks to ensure that BTS and rules made by UK financial services regulators under the Financial Services and Markets Act 2000 (FSMA) continue to operate effectively after the UK’s withdrawal from the European Union (EU). Read the draft regulations here, and the Explanatory Memorandum here.
- The Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018
Under the European Market Infrastructure Regulation (EMIR), third-country central counterparties (CCPs) that intend to provide clearing services to clearing members or trading venues established in the EU must be recognised by the European Securities and Markets Authority (ESMA). This draft legislation seeks to ensure the retained EMIR operates effectively after the United Kingdom withdraws from the EU by transferring the equivalence and recognition functions to relevant UK authorities; and ensuring that all non-UK CCPs, including CCPs established in the EU, are considered as third-country CCPs for the purpose of the United Kingdom’s post exit-day third-country regime.
- EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018
This draft legislation seeks to amend references to EEA passporting rights in domestic legislation, which will become deficient as a result of the United Kingdom’s exit from the EU, and to implement a “temporary permissions regime”.
Application of EU Law After 29 March 2019
In its White Paper published on 24 July, Legislating for the Withdrawal Agreement between the United Kingdom and the European Union the UK government confirmed its intention that on “exit day” (29 March 2019), the EU (Withdrawal) Act 2018 will repeal the European Communities Act 1972 (ECA). However, to ensure that EU law continues to apply in the UK during the implementation period (as things stand, until 31 December 2020), a transitional provision in the European Union (Withdrawal Agreement) Bill will amend the EU (Withdrawal) Act 2018 so that the effect of the ECA is saved for the time-limited implementation period. This is intended to provide legal certainty to businesses and individuals by ensuring that there is continuity in the effect that EU law has in the United Kingdom during the implementation period. The government states that the European Union (Withdrawal Agreement) Bill will also make provision to end this saving of the effect of the ECA on 31 December 2020.