The political party conference season has now come to a close in the UK and there had been an expectation that Prime Minister Theresa May would have had some meaningful concession from the EU27 prior to her party conference earlier this month. That wasn’t to be. Instead all eyes turned to this week as there is an EU Council Meeting starting this evening at which the Prime Minister will make her case for the EU27 accepting the ‘Chequers’ proposals. Unfortunately, Donald Tusk (currently President of the EU Council) has already dismissed the core element of those proposals, being the back-stop arrangements for the border between Northern Ireland and the Republic of Ireland. Given this, there hasn’t been any material movement in the position since our last post and the prospects of no-deal are still very much alive even at this late hour. Add to this the fact that any deal will need to be ratified by the UK and all 27 EU Member States, it does really feel that time is about to be called.
The political situation in the UK itself continues to evolve with increasing pressure coming from within the Prime Minister’s Conservative Party as well as from her partners in coalition, the Democratic Unionist Party, who are resolutely against further concession in respect of the Irish border. We have previously mentioned that the negotiating teams do not appear to fully understand each other’s constraints and this may lead to an outcome that all parties would rather avoid. So far as we can tell, Theresa May has conceded about as much as she can without triggering a leadership contest or a new General Election, which might favour the UK’s Labour opposition party.
David Davis, the former Secretary of State for Exiting the EU and one-time contender for the Party leadership, has taken the remarkable step of writing to all Conservative MPs to warn them that the Conservative Party faces “dire” electoral consequences if the Prime Minister continues to pursue her Chequers proposals. Davis stated that “No 10’s stated position that there is only a binary choice between her Chequers plan and no deal is not correct. A third way does exist,” referring to advocating a Canada-style trade deal. The full text of the letter may be found here: https://brexitcentral.com/david-davis-tells-tory-mps-government-immediately-reset-negotiating-strategy/
Even if a deal is reached in Brussels, it is far from clear that it would be approved by the UK Parliament.
More promisingly, the UK FCA and HM Treasury continue to make plans for a no-deal Brexit and to implement legislation to mitigate disruption and provide certainty for market participants. During the first week of this month, HM Treasury published several draft statutory instruments (SIs) to make amendments for EU law to be retained in UK law relating to the EU’s Markets in Financial Instruments Directive (MiFID II) and in respect of Trade Repositories for the purposes of the European Market Infrastructure Regulation (EMIR) as well as EU law relating to collective investment schemes (CIS) and alternative investment fund managers (AIFMs).
The objective is to ensure that the reporting requirements under MiFID II and EMIR and the relevant regulatory regimes created by the EU’s Undertakings for the Collective Investment in Transferable Securities Directive (UCITS Directive) and the EU’s Alternative Investment Fund Managers Directive (AIFMD) continue to apply after Brexit. These instruments may be found here: https://www.gov.uk/government/publications/draft-markets-in-financial-instruments-amendment-eu-exit-regulations-2018, https://www.gov.uk/government/publications/draft-trade-repositories-amendment-and-transitional-provision-eu-exit-regulations-2018, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/746539/AIFM_Amendment_Regulations_8-10-18__for_publication_.pdf and https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/746543/2018.10.04_CIS__Amendment_etc.___EU_Exit__SI_Draft_40__watermarked___002_.pdf
In addition, on October 10, FCA published two consultation papers relating to Brexit setting out proposed changes to the FCA’s Handbook and to binding technical standards resulting from Brexit and the introduction of a temporary permissions regime for inbound EU firms and funds to enable them to continue business in the UK in the absence of any successor regime being agreed.
These instruments may be found here: https://www.fca.org.uk/publications/consultation-papers/cp18-28-brexit-proposed-changes-handbook-bts-first-consultation and https://www.fca.org.uk/publications/consultation-papers/cp18-29-temporary-permissions-regime-inbound-firms-and-funds
We are watching this week’s Council meeting closely to see if any meaningful progress can be made and will post again shortly.