This morning’s UK Government White Paper drops the sensible but apparently politically unacceptable mutual equivalence idea. Chapter 1, headed “Economic Partnership”, has fourteen paragraphs (58-71) which deal with financial services. There is a lot of double-speak, probably inevitably in the circumstances, e.g.:
- on the one hand each side should have autonomy of decision-making and the ability to legislate for their own interests, including as regards market access, but on the other hand a coordinated approach leading to “compatible” regulation is essential for financial stability and avoiding regulatory arbitrage
- on the one hand the EU’s existing equivalence regimes are insufficient to “deal with a third country whose financial markets are as deeply interconnected with the EU’s as those of the UK are” and need expansion, but on the other hand this will not be the same as passporting.
It proposes reciprocal recognition of equivalence under all existing third country regimes, taking effect at the end of the implementation period (this covers MIFID, but there is no equivalence regime under CRD IV, and no proposal here to have one, possibly surprising).
The UK and the EU would agree “a shared intention to avoid adopting regulations that produce divergent outcomes in relation to cross-border financial services”, and to that end be able to comment on each other’s proposals “at an early stage through a structured consultative process of dialogue at political and technical level, while respecting the autonomy of each side’s legislative process and decision-making”. If either side wants to withdraw equivalence, there should be an initial period of consultation on possible solutions to maintain equivalence, and then clear timelines and notice periods “appropriate for the scale of the change before it takes effect” (not the present 30 day period) and with “a safeguard for acquired rights”. Intractable disputes between the UK and the EU would ultimately be resolved by independent arbitration (not any European court).
Head of Knowledge Management (Finance and Projects)
Mark Daley joined DLA Piper in 2015 after over thirty years’ experience as a debt finance lawyer in private practice in London and Hong Kong.