Lawyer warns of Brexit passporting complications
Written by Peter Walker
Passporting into the European Union (EU) can continue after Brexit, but one expert has warned that it will “become a lot more complicated”.
Paul Anning, a partner in the financial institutions group at law firm Osbourne Clarke, told delegates at the PayExpo conference in London that companies must start considering exactly which European countries are most crucial to their business.
“You need to carry out a cost/benefit analysis when thinking about launching into new jurisdictions, as it’s going to be harder to maintain the same seamless customer journey,” he warned.
“Automatic passporting rights will currently cease at midnight on the 29th of March, there’s no transition period in place, so you’ll need to find another solution,” explained Anning, noting that many firms have opted for second authorised entities, often based in places like Ireland, Luxembourg or The Netherlands.
He cautioned that while these countries were seen as places where a license could be obtained faster before Brexit, companies need to think about where they want to make a longer-term base outside of the UK for passporting purposes.
“You still need to get those passporting rights ready by the deadline though - and this takes a minimum of two months - along with migrating customers.”
Earlier today, the Financial Conduct Authority (FCA) published two consultation papers, setting out its proposals in the event the UK leaves the EU without an implementation period.
These focus on amendments to the FCA Handbook and Binding Technical Standards - detailed EU rules which the FCA will have responsibility for after exit - resulting from leaving the EU, and the Temporary Permissions Regime (TPR), which will allow European Economic Area (EEA) firms and funds passporting into the UK to continue operating here for a limited period after Brexit while seeking full UK authorisation.
The FCA stated that it taken a proportionate approach to enable firms to comply with its requirements from day one, with the aim of preserving existing arrangements as far as possible for both firms and consumers.
In August, the government stated that electronic money and payment institutions from the European Economic Area (EEA) will be able to continue passporting into the UK for three years under government plans for a no-deal Brexit.
In one of 25 technical notices, plans were set out for dealing with the consequences for financial services and cross border contractual arrangements if the UK exits the EU without a negotiated deal next March.
The paper outlined a commitment to offer financial services firms based in EU countries which are currently passporting into UK markets the chance to operate under a temporary arrangements for a period of three years following the day of exit.
Anning explained that the UK was hopeful that this offer of TPR rights to EU companies would be reciprocated by Brussels, but that has not happened yet, so British companies must prepare for the worst.