Brexit and the "in-flight" financial services legislation
"Brexit" is not short on buzz-words and a new one has been spawned by the Financial Services (Implementation of Legislation) Bill introduced into the House of Lords on 22nd November 2018 - the notion of "in-flight" financial services legislation and how one should deal with it.
"In-flight" financial services legislation, as described in the H.M Treasury Policy Note which accompanied the Bill, means "pieces of European Union financial services legislation agreed or in negotiation at the point of exit [from the European Union ie 29th March 2019 at 11pm ("exit day")],with implementation dates falling in the two years after exit".
In the context of a "no deal" Brexit, the European Union (Withdrawal) Act 2018 provides for the retention within UK domestic law of many aspects of EU law which was "operative" in the UK immediately prior to exit day.That Act does not, however, deal with EU law which had not come into force in the UK prior to exit day.
The new Bill would enable the Treasury in a "no deal" Brexit scenario to make regulations to retain within UK law a list of "specified EU financial services legislation" which has been adopted but not yet come into force by exit day. The Bill would also cover certain specified EU financial services proposals published prior to exit day but only adopted within a period ending two years after exit day.
The specified EU financial services legislation concerned deals with important practical issues relating to the workings of the international financial markets and also to the raising of funds under newly modified Prospectus laws.
The detailed thought that must have gone into this slim but succinct new Bill is clear but, in a week that is somewhat low on Brexit news as the afterglow of the Christmas and New Year festivities still lingers, the Financial Markets Law Committee (the "FMLC") has written a letter dated 3rd January 2019 to the Treasury making a number of interesting comments on the Bill.
In particular, the FMLC has pointed out that it would not be possible to introduce certain important "binding technical standards" regulations through the Bill's mechanisms and also that the narrowness of the specified EU legislation covered by the Bill would exclude enactments contained in other EU laws ( such as the so-called "Shareholder Rights Directive II") which are not expressly "financial services" laws but nevertheless could have a significant impact on the financial markets.
The new Bill contains a "sunset" provision ensuring that no regulations can be made under it later than two years after exit day. There is natural sensitivity about giving the Treasury too much delegated power for a period longer than that.
The enormity of the challenge faced by the legislators in dealing with the detailed work-out of Brexit is well illustrated by the story told in this Article and some may feel that next Christmas cannot come soon enough!
