Insurance and wealth management expert Tobin Ashby of Pinsent Masons, the law firm behind Out-Law.com, said the Commission's new contingency action plan, which was published on Wednesday, shows that it is focused on ensuring structural financial stability but not on facilitating continuity of existing customer contracts in the event of a 'no deal' Brexit.
The Commission published its contingency action plan just 100 days before the UK is scheduled to leave the EU, on 29 March 2019 and with the prospect of a 'no deal' Brexit increasing. While the UK government and EU27 negotiators have agreed a draft deal to smooth the withdrawal of the UK from the EU, there is uncertainty over whether that agreement will be ratified in the UK following heavy criticism of it by government backbenchers and opposition parties.
The EU's contingency plan sets out the Commission's proposed legislative measures for a 'no deal' scenario in a number of different sectors, including air transport and road haulage, while further measures have been outlined on climate change policy and customs and exports.
In financial services, proposals have been outlined to ensure no disruption in the central clearing of derivatives for 12 months after a 'no deal' Brexit, and for 24 months in relation to services provided by UK central securities depositories. In addition, the Commission set out plans to facilitate the transfer of certain over-the-counter derivatives contracts from UK-based counterparties to ones based in an EU27 country.
The proposals need to be approved by MEPs and representatives of the governments of the EU and will only apply from the date of the UK's withdrawal from the EU "if the Withdrawal Agreement is not ratified", according to the Commission's plan.
The Commission said: "If the Withdrawal Agreement is not ratified, financial operators established in the United Kingdom will lose, as of the withdrawal date, the right to provide their services in the EU27 member states under the EU financial services passports. UK operators and their counterparts in the EU27 must therefore take action to comply with Union law in all scenarios and in time for the United Kingdom’s withdrawal"
Tobin Ashby of Pinsent Masons said: "The European Commission’s latest proposals build on their previous pronouncements, which means there is still no suggestion of EU-wide help for people living in the EU with accounts, investments or insurance with UK firms, or for those firms. The focus of the contingency plan is entirely on macro-level stability of the EU27, with nothing to replicate the temporary permissions regime and related proposals of the UK regulators."
"Whilst there has been localised movement more recently, for example from regulators in Germany and France that may help with some specific scenarios, firms generally will still need to plan for there being no allowance for cross-border retail contracts from the end of March," he said.
EU law expert Guy Lougher of Pinsent Masons said: "The measures proposed by the Commission are very targeted and they are generally temporary in nature, limited in scope and adopted unilaterally by the EU. The measures envisaged by the EU are the minimum necessary to provide limited, continued basic connectivity between the EU and the UK in a 'no deal' scenario. They are no substitute for businesses undertaking their own structured contingency planning, to minimise as far as possible the likely impacts of a 'no deal' outcome."