As we have reported previously, the result of the European Union referendum (Brexit) was announced on 24 June 2016 with a vote in favour of the United Kingdom exiting.
We have issued a series of Brexit updates since the date of the referendum. To access such prior alerts, please visit our Brexit page.
UK government publishes technical notes detailing plans in the event of a no-deal Brexit
The UK government has published 24 technical papers that set out plans for various sectors in the event that no Brexit deal is agreed with the EU when the UK departs on 29 March 2019.
The technical papers, which are designed to give advice to citizens and businesses, are broad in scope and cover areas including financial services and trade. A further 60 technical papers are expected to be published by the end of September 2018.
Dominic Raab, the UK’s Brexit secretary, has described the advice contained within the technical papers as “practical and proportionate”, whilst opining that an agreed Brexit deal with the EU “is the most likely outcome”.
A summary of the key points detailed in the technical papers concerning financial services and trade in the event of a no-deal Brexit are laid out below.
Banking, insurance and other financial services
- A Temporary Permissions Regime will be introduced to allow EEA firms currently passporting into the UK to continue operating in the UK for up to three years after exit.
- A Temporary Recognition Regime will be introduced to allow non-UK central counterparties to continue to provide clearing services to UK firms for a period of up to three years while those central counterparties apply for recognition in the UK.
- EEA clearing members and trading venues will no longer be able to use UK central counterparties to provide their clearing services. EEA customers may no longer meet the requirement to centrally clear for certain products, such as interest rate swaps, that fall within the scope of the EMIR clearing obligation by clearing through UK central counterparties.
- EU securities may no longer be able to be directly settled in the UK.
- UK-based payment services providers would lose direct access to central payments infrastructure, including TARGET2 and the Single Euro Payments Area (SEPA), which means customers could face increased costs and slower processing times for Euro transactions.
- The cost of card payments between the UK and EU is likely to increase, as cross-border payments will no longer be covered by the surcharging ban that prevents businesses from being able to charge consumers for using a specific payment method.
- The UK government is willing to agree cooperation agreements with EU regulators as soon as possible to enable fund managers to delegate portfolio management services to a third party in another country, which can be outside the EU.
- UK trading venues will no longer qualify as EU trading venues, which means that EEA firms may not be able to be members of UK venues.
Trading with the EU
- Customs declarations will be needed when goods enter the UK (an import declaration) or when they leave the UK (an export declaration), whilst the EU will apply customs and excise rules to goods that it receives from the UK.
- Businesses are advised to learn how to classify their goods in relation to World Trade Organisation tariffs, such as the Most Favoured Nation tariff, which will apply to consignments between the UK and the EU.
- Businesses exporting and importing UK goods are advised that they will face additional customs procedures, including the need to register for a UK Economic Operator Registration and Identification (EORI) number and update their contracts and International Terms and Conditions of Service (INCOTERMS) to reflect their change in status.
- The UK government will seek to transition all EU Free Trade Agreements in order to ensure continuity for both goods imported to the UK and for UK exports, subject to the agreement of each of the countries that have signed such deals with the EU.
- The UK government will respect the “unique relationship with Ireland” and engage constructively to meet its commitments to the people of Northern Ireland. More advice relating to businesses operating in Northern Ireland that trade with Ireland will be published at a later date.
In the blur of mega firms, Brown Rudnick stands out as a “global boutique” and has in place a multi-disciplinary, international Brexit Team. We are monitoring and analysing the consequences and considerations for businesses and are ready to advise on the potential legal implications of Brexit. The Brown Rudnick Brexit Team is available to advise on the issues across a broad range of sectors within our areas of expertise.
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