Brexit: Doing business in the EU

Global Publication February 2019


The UK Government has announced a temporary permissions regime (TPR) for inbound passporting EEA firms and funds. The TPR will come into effect in the event of a hard Brexit, and will provide a temporary backstop to ensure that such firms and funds can continue their UK business with minimal disruption.

In order to take advantage of the TPR, firms and funds need to make a notification to the UK Financial Conduct Authority (FCA) or UK Prudential Regulation Authority (PRA) as appropriate before the end of March 28, 2019. Once in the TPR, the FCA or PRA (as relevant) will allocate a “landing slot” in which the firm or fund must submit its application for UK authorization. The FCA anticipates that its first landing slot will be October to December 2019, followed by a further five landing slots, with the last one closing at the end of March 2021. Further information on the TPR can be found on our Brexit Pathfinder hub. Registration is free via the NRF Institute portal.

EU response

The TPR is only relevant for firms that passport into the UK. The European Commission has so far not reciprocated with a similar regime and has instead continued to push for UK firms to submit an application for authorization in the relevant Member State where they wish to conduct business. In particular, the “no-deal” Contingency Action Plan of the European Commission deliberately provides for a limited number of contingency measures only (including temporary and conditional equivalence regimes for UK central counterparties and UK central depositaries). However, we have seen a number of EU27 regimes take their own steps.

The following is a summary concerning the current position in some of the key EU27 jurisdictions.


On December 12, 2018, the German Federal Government adopted a bill which, inter alia, sets out a national transition regime for UK credit institutions, investment firms and insurance undertakings in case of a hard Brexit (Brexit-Steuerbegleitgesetz – Brexit-StBG). The provisions regarding market access of UK institutions introduced by the bill will only apply in the event that the EU and the UK will not enter into a withdrawal agreement.

The bill aims at avoiding market distortions and risks to financial stability in a hard Brexit scenario. For that purpose, the German regulator (BaFin) is empowered to allow regulated UK institutions that have operated in Germany under the European passport regime so far to continue to provide certain services for up to 21 months following a hard Brexit without a German license (i.e., until the end of 2020 at the latest).

  • With respect to UK credit institutions that conduct banking business in Germany through a branch or on a cross-border basis under the European passport regime on March 29, 2019, BaFin may determine that the passport regime continues to apply accordingly, fully or partially, for a period of up to 21 months following the time of withdrawal.
  • With respect to UK investment firms providing financial services in Germany through a branch or on a cross-border basis at the exit date, the same rules as for credit institutions will apply.
  • With respect to UK insurance undertakings, BaFin may determine that the respective passport regime continues to apply to UK insurers and reinsurers operating in Germany under a passport on March 29, 2019.

In relation to new business after Brexit, however, the scope of the national transition regime set out in the bill is limited

  • UK credit institutions and UK investment firms are only allowed to conduct their regulated activities if these activities are “closely connected” to contracts that existed at the time of withdrawal. The official explanatory statement of the bill mentions certain examples of the required “close connection” such as (i) hedging transactions, (ii) lifecycle events, (iii) netting transactions, (iv) prolongations or (v) the exercise of contractual option or conversion rights. Given this required legal or commercial connection to existing contracts, Deutsche Börse Group has already expressed its concern that continued regulated trading activities of a passported UK entity will not be covered by the national transition regime.
  • For UK insurance undertakings, the transitional regime only covers the run-off of insurance contracts that were concluded before the time of withdrawal.

Further, the transition regime to be introduced by the bill only covers UK institutions operating under a European passport. Despite criticism by the Association of Foreign Banks in Germany, the bill does not refer to services provided by UK branches of EEA institutions back to the EU. Such structures currently are subject to general debate; the European regulators have explained that they will not accept (at least comprehensive) “back-branching” structures established by EEA institutions after Brexit.

The bill grants BaFin flexibility regarding its orders. BaFin may decide about the length of the transition period at its discretion and may further limit its transitional orders to certain types of transactions. BaFin also has the general power to impose conditions and shall pay particular attention to deposit and investor protection schemes.

The explanatory statement also mentions that the general powers of BaFin remain unaffected. In the individual case, the regulator may therefore allow a UK institution to conduct regulated activities on a cross-border basis (for example, until a German license has been granted or for purposes of the run-off of business).

Pursuant to the explanatory statement of the bill, the German Federal Government expects UK institutions to either terminate the relevant business relationships, obtain a German license (by establishing a dependent German branch) or transfer the respective business to a licensed provider before the end of the national transition period. In this regard, it is worth noting that the reasoning does not mention the possibility to provide regulated services without a German license at the request of the client (so called reverse solicitation).

The bill also covers various other Brexit-related matter (including tax issues triggered by the withdrawal of the UK). It is intended to enter into force on March 29, 2019.

Norton Rose Fulbright LLP: Contact Martin Krause or Michael Born


Currently there is no proposal similar to Germany’s Brexit-StBG (see above). A proposal for a "BREXIT- Accompanying Law 2019" has been introduced into the Austrian Parliament but it currently does not provide for a temporary permissions regime which makes it possible for UK investment firms to provide services in Austria. The only financial market matter which is currently dealt with by the proposal is the fact that UK UCITS shall not be treated immediately as alternative investment funds (AIFs) after a no-deal Brexit, meaning that employee pension funds may not need to sell UK UCITS before March 29, 2019 in order to comply with the investment limits for AIFs.

Geppert & Maderbacher Rechtsanwälte: Contact Stefan Geppert


On February 7, 2019, Ordinance No. 2019-75 dated February 6, 2019 relating to the preparatory measures for the withdrawal of the UK from the EU with respect to financial services (the Ordinance)1 was published.

The Ordinance provides for a number of measures in relation to financial services which will enter into force as from the date of exit of the UK from the EU, in the event of hard Brexit, i.e. a Brexit with a no-deal.

Below is a high level summary of the measures provided by the Ordinance

  • Interbank settlement systems and delivery and settlement systems:
  • a measure is designed to recognise UK interbank settlement systems and delivery and settlement systems (such as CLS, CHAPS, CREST and the UK clearing houses) as interbank settlement systems and delivery and settlement systems benefitting from the provisions of Directive 98/26/EC on settlement finality in payment and securities settlement systems; and
  • the rationale of this measure is to avoid French participants to these systems being excluded from the UK systems on the basis of the legal uncertainty which would result from the absence of recognition (by French authorities) of the UK systems as benefitting from the provisions of the Directive 98/26/EC.
  • Supervision powers of the Autorité de Contrôle Prudentiel et de Résolution (ACPR):
  • the Ordinance provides that: “This power of sanction is exercised in respect of persons and facts which are within its scope of supervision on the date of the breach or the offense.” This provision provides that the ACPR remains competent for control of the acts or omissions committed by UK regulated firms prior to the withdrawal of the UK from the EU; and
  • the Ordinance also provides that the ACPR is competent to control compliance with French law with respect to the performance of agreements entered into pre-Brexit, on the basis of the cross-border passport or branch passport, which parties continue to perform after Brexit.
  • Designation of the Autorité des marchés financiers as a competent authority to supervise activities relating to securitization.
  • Implement specific rules for the management of collective investment schemes, the assets of which comply with specified investment ratios in European entities:
  • the Ordinance provides for a grandfathering clause in relation to investment in UK entities for collective investment schemes; and
  • broadly, UK entities will still be eligible for specified investment ratios in European entities after Brexit during a period of time to be set by an Arrêté of the French Minister of Economy, within a maximum of 3 years.
  • Ensuring the continuity of the use of master financial services agreements (such as ISDA agreements):
  • the French Government took measures to adapt French law in relation to the scope of the transactions eligible to netting and the possibility to provide for compound interests in order to allow master financial services agreements to be governed by French law; and
  • the Ordinance also provides for a mechanism of transfer of master financial services agreements (such as ISDA agreements) from UK entities to French entities belonging to the same group. This transfer of master financial services agreements can be carried out on the basis of the implicit consent of the French counterparty on the basis that the French counterparty has not opposed to such transfer within 5 days from the receipt of the offer of transfer. The transfer must also comply with a number of other requirements. This mechanism of transfer will only be available during 12 months as from the date of entry into force of the Ordinance (i.e. the date of withdrawal of the UK from the EU in absence of a deal).
  • Finally, a provision of the Ordinance aims, broadly, at protecting French insured having entered into an insurance contract with a UK risk carrier before Brexit, whilst encouraging the latter to transfer to an EU risk carrier its insurance business in respect of risk located in France.

The French Government has not to date announced a temporary permissions regime for inbound passporting UK financial firms and funds.

Norton Rose Fulbright LLP: Contact Roberto Cristofolini


On January 24, 2019, the Ministry of Economic and Finance issued a press release to inform the market that the Italian Government is preparing the necessary measures to ensure the continuity of markets and intermediary business should a hard Brexit occur (i.e. exit with no deal). The press release is available at this link (in Italian).

The measures, which have been drafted after consulting with competent supervisory authorities and hearing relevant sectoral association, are aimed at ensuring financial stability, market integrity and business continuity as well as protecting investors and depositors, and more generally, clients. This aim would be achieved through an “adequate” transitional period where relevant persons may carry on their activities. The envisaged duration of such a transitional period has not been specified, yet.

During such a proposed transitional period, UK banking, financial and insurance entities (including entities operating in the context of secondary welfare) that passport into Italy before the UK exits the EU will be able to continue to provide their activities in Italy and vice versa (Italian entities in UK; obviously, this would be subject to UK laws and regulations, as well).

As for the content, the measures are expected to discipline inter alia

  • The requirements to be met under sectoral legislation to carry on business after the transitional period, so as to ensure a stable legal framework to which entities can gradually get used to.
  • The trading venues’ regime and operators’ access.
  • Investments by Italian pension funds in UK funds (the aim is allowing them to keep such UK investments in the transitional period).

To date, the measures, which need a law decree to be issued by the Italian Government to be enacted, have not yet been published. However, the Italian Government will ensure, given that the date of publication will depend on future developments and on decisions adopted within the UK, that the measures will be published in draft in advance to allow the orderly performance of activities in a certain legal framework, even in case of hard Brexit.

For the sake of completeness, this topic was also raised by the former CONSOB chairman, Mario Nava, who, during a public speech held on September 10, 2018 regarding the impact of Brexit on the Italian market, mentioned that CONSOB was working – in the remit of what is set out under the existing Italian regulatory framework – to ensure that Italian trading venues could export their business in the UK (as well as in other EU countries), and mentioned the possibility of adopting a “temporary permissions regime,”such as those already developed by the UK authorities, to let Italian trading venues permit UK entities trading on their facilities subject to certain conditions.

Norton Rose Fulbright LLP: Contact Salvatore Iannitti or Pietro Altomani


In the Netherlands, a transitional regime has been published for investment firms (beleggingsondernemingen) with their seat in the UK in case of a no-deal Brexit. For other financial institutions such as banks, regulated markets and insurers, no transitional regimes have been proposed yet. This would mean that in case of a no-deal Brexit, these financial institutions will be treated as third country firms under the Act on the Financial Supervision (Wet op het financieel toezicht, AFS) and in principle require authorization in order to continue to provide regulated services within the Netherlands.

More generally, legislation is in preparation regarding the so-called "Dutch Brexit Act", making it possible to quickly take necessary legislative action by means of a general administrative order or Ministerial decree instead of by changing the law.

Transitional regime for investment firms

On February 12, 2019, the amendments to the Exemption Regulation AFS (Vrijstellingsregeling Wft, the Exemption Regulation) in relation to the (temporary) exemptions for investment firms based in the UK was published in Dutch Government Gazette (Staatsblad), stipulating that Article 10 of the Exemption Regulation will apply to investment firms with their seat in the UK if the UK and the EU have not entered into an agreement on the exit of the UK from the EU. The Exemption Regulation is available in Dutch only.

The consequence of this exemption is that investment firms with their seat in the UK are exempted from the license obligation for providing investment services and/or the investment activity dealing on own account in the Netherlands, insofar provided to professional investors or eligible counterparties. A condition is that the investment firm will need to be supervised in the UK and it will need to notify the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, the AFM). The investment firm will largely be exempted from the prudential and ongoing code of conduct requirements as set out in the AFS.

The exemption will apply to investment firms from the UK acting on a cross-border basis or via a branch office in the Netherlands. The fees for the notification with the AFM are €4,400.

The date of entry into force of this exemption can be set by means of a ministerial decree (where necessary retroactively). This means that any registration of UK investment firms is currently still conditional to such ministerial decree in case of a no-deal Brexit. If there is a deal on Brexit and a transitional regime for investment firms, registration under this exemption will not take place.

Despite the aforementioned conditionality, UK investment firms are nevertheless urged to register themselves with the Netherlands Authority for the Financial Markets Authority (Autoriteit Financiële Markten, the AFM) as soon as possible. The notification form that needs to be used for this purpose is now available on the AFM’s website.

Dutch Brexit Act

In addition, on November 16, 2018, the Dutch Minister of Justice and Security (Minister van Justitie en Veiligheid, the Minister) submitted a legislative proposal to the Dutch Parliament proposing changes to a number of laws and regulations in the Netherlands in preparation for Brexit (the Dutch Brexit Act). On January 29, 2019, the draft Dutch Brexit Act was adopted by the Dutch Parliament (Tweede Kamer) and has been sent to the Dutch Senate (Eerste Kamer) for consideration.

The explanatory notes to the Dutch Brexit Act provide that the proposal is a product of an inventory that was carried out to see whether Dutch laws needed to be amended as a result of Brexit. This inventory was based on the fact that the withdrawal of the UK will lead to the loss of its EU membership, irrespective of whether consensus will be reached on a Withdrawal Agreement or the UK leaves the EU without an agreement in place (hard Brexit). For most cases, it turned out that the existing legislative frameworks offer sufficient freedom to be able to act quickly and adequately in each of the currently foreseen scenarios. Therefore, the Dutch Brexit Act only contains technical amendments to Dutch legislation that are strictly necessary and need to enter into effect as of March 30, 2019.

In view of the complexity and the amount of legislation possibly affected by Brexit, the Dutch legislator believes it to be important that quick legislative action can be taken in cases of urgent, unforeseen issues resulting from Brexit. This is only insofar as is necessary for the proper implementation of a Brexit-related binding EU legal act or to avoid unacceptable consequences. Therefore, the Dutch Brexit Act contains a generic provision making it possible to quickly take necessary legislative action by means of a general administrative order or ministerial decree instead of by changing the law. These emergency legislative actions will in principle have a transitional nature, meaning that they will generally apply only temporarily and/or will be substituted by a more structural/formal legislative action.

It is important to note that neither the Dutch Brexit Act nor the explanatory notes thereto include (or mention) changes or measures aimed specifically at the financial sector. However, the aforementioned generic provision can also be used as a basis for legislative actions that may need to be taken in the financial sector.

Norton Rose Fulbright LLP: Contact Floortje Nagelkerke and Nikolai de Koning


The Swedish Government has decided on a legislative proposal giving rights to the Swedish government to issue temporary regulations, or to delegate the authority to issue such regulations to the Swedish Financial Supervisory Authority (the SFSA) making it possible for UK MiFID II investment firms to provide services into Sweden until the end of 2021. This is on the basis that approximately 150 Swedish companies of various size and in various industries have derivatives relationships with UK counterparties.

The new rules have so far not yet been published. However, the Ministry of Finance has informally confirmed that there will be no delegation to the SFSA of authority to issue the upcoming transitional regulatory regime. Instead, the regime will take the form of a government regulation. The change in law is proposed for a March 29 effective date which means the final rules cannot be issued until that date. However, it is generally expected that the legislation will reach the next stage of the process in the next couple of weeks and for an official proposal to be published then, and this should allow the Ministry of Finance to draft its regulation. However, it is not expected that there will be any advance publication of the expected government regulation substantially ahead of its effective date.

Gernandt & Danielsson: Contact Niclas Rockborn, Klara Tersman or Rikard Sundstedt


The Finnish government has concluded that it is necessary to add a provision to the Investment Services Act (747/2012) (ISA) that would enable third country investment firms to offer services into and conduct investment activities in Finland without establishing a branch. This would involve applying for authorization from the Finnish Financial Supervisory Authority (FIN-FSA). Such proposal is currently being processed by the Finnish Parliament and it is expected to be approved.

The proposed authorization to provide services cross-border into Finland would essentially act as an extension of UK investment service providers’ (including banks providing these services under a MiFID II passport regime) right to offer services and conduct investment activities in Finland under their currently valid EU passports.

According to the proposed Chapter 5 Section 7 of the ISA, the FIN-FSA will grant the authorization, if

  • The European Commission has not adopted an equivalence decision concerning the service provider’s home country, or if such a decision would not be in force. (If such a decision were in force, the investment firm could be entered into a register maintained by the European Securities Markets Authority (ESMA), allowing the investment firm to provide services also to Finnish investors).
  • The regulatory environment in the third country and the supervision of the service provider by the third-country regulator is essentially equivalent to the regulation and supervision under the MiFID II and ISA. In practice, the service provider’s home country regulator should have concluded a memorandum of understanding concerning cooperation arrangements with the FIN-FSA.
  • The service provider is authorized in its home country to provide investment services.
  • The service provider has an action plan specifying the services and possible ancillary services to be offered and activities to be conducted, its organizational structure and description of possible outsourcings of critical and important functions.
  • The service provider has sufficient capital.

Other possible requirements specified by the FIN-FSA based on the final legislation must also be met. The bill does not specify the exact documentation or information to be provided, nor does it list the possible reporting requirements or application fees. According to the Finnish Parliaments’ Economic Committee’s proposal the annual supervisory fee would be €3,210 per year.

According to Chapter 3 Section 2 of the ISA, the FIN-FSA must process an authorization application within six months of receiving the application. If the application is incomplete, the six months will be calculated from the date on which the applicant has provided all necessary documents and information.

Interim arrangements for UK investment firms

The Finnish government’s bill also specifies interim arrangements for UK firms, enabling them to temporarily continue their activities in Finland after Brexit. This option would be reserved for UK investment firms or credit institutions providing investment services based on a valid EU passport, provided that they apply for cross-border authorization by no later than the date Brexit enters into force. These service providers could then continue to provide the services specified in their passporting notification until the FIN-FSA has processed their authorization. After that, the applicant could operate in Finland with the new cross-border authorization, if granted. Any new services, however, would have to be authorized separately, as described above.

It would also be possible to submit the application before the amendments enter into force, provided that the application be supplemented as needed, and considering that the processing period for the application would not begin before Brexit enters into force. During the six-month processing period specified above, the service provider would be subject to the regulations of its home country.

Roschier: Contact Jussi Pelkonen or Jaakko Laitinen


At the time of writing, draft financial services legislation concerning a no deal Brexit had been approved by the Cabinet, but had not been submitted to the Belgium Parliament. Therefore no predictions can currently be made as to whether the Belgium authorities will institute any sort of national transition regime for UK credit institutions, investment firms and insurance undertakings in event of a hard Brexit.

Lydian: Contact Tom Geudens or Pieterjan Van Assche


Under Danish legislation, third-country firms may obtain a cross-border license for non-retail business. Retail business requires the establishment of a branch. The Danish Financial Supervisory Authority (DFSA) will permit applications from UK investment firms before the UK leaves the EU even though such firms are not (yet) third country firms. The DFSA will grant a conditional license to such firms but the license does not enter into force until and unless the UK leaves the EU. The ESMA multilateral MoU between EEA regulators and the FCA announced on February 1, 2019 satisfies Danish UCITS and AIFM regulatory requirements for an MoU.

Kromann Reumert: Contact Andreas Hallas or Susanne Schjølin Larsen

Republic of Ireland

The ESMA Multilateral Memorandum of Understanding with the FCA announced by ESMA on February 1, 2019 will facilitate Irish fund management companies to be able to continue to delegate investment management activities to UK firms post-Brexit, and for UK firms to be able to continue providing investment services to, and to engage in investment activities with, regulated Irish funds, fund management companies and other per se professional clients and eligible counterparties in Ireland.

Delegation by Irish fund management companies to UK firms of the investment management of Irish funds post Brexit

Regulation 21(1)(d) of Ireland’s EU (Alternative Investment Fund Managers) Regulations, 2013 (AIFMD Regulations) requires that an Irish-authorized Irish alternative investment fund manager (AIFM) or internally managed alternative investment fund (AIF) cannot delegate portfolio management or risk management to a third country firm unless, inter alia, “co-operation between the [Central] Bank and the supervisory authority of the undertaking shall be ensured”.

Similarly, Regulation 23(1)(d) of Ireland’s European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011, as amended (UCITS Regulations), requires that an Irish UCITS management company or self-managed UCITS cannot delegate investment management to a third country firm unless “co-operation between the [Central] Bank and the supervisory authorities of the third country concerned is ensured.”

The ESMA Multilateral MoU between EEA regulators and the FCA announced by ESMA on February 1, 2019 satisfies both of these requirements.

UK AIFMs acting as AIFMs to Irish AIFs post Brexit

Upon a hard Brexit, such entities will become third country AIFMs for Irish regulatory purposes. The Central Bank of Ireland has confirmed in its AIFMD Q&A (ID 1129) that, firstly, an Irish AIF can retain or appoint UK AIFMs post-Brexit and secondly, that the relevant Irish AIF must contractually impose on any third country AIFMs the requirements which the Central Bank imposes on Irish-registered AIFMs that act as AIFMs to Irish-regulated AIFs. These requirements, which are largely taken from organizational and conduct of business requirements of the AIFMD Regulations, are set out in Part III of Chapter 2 of the Central Bank’s AIF Rulebook.

Procedurally, the Central Bank has requested Irish AIFs that wish to retain UK AIFMs post March 29, 2019 to notify the Central Bank by email by February 22, 2019.

Legal capacity of UK firms to provide investments services to, or engage in investment activities with, Irish clients post Brexit.

Regulation 5(5)(b) of Ireland’s European Union (Markets in Financial Instruments) Regulations, 2017 (MiFID II Regulations) provides a full exemption for a third country firm which provides one or more investment services to, or engages in one or more investment activities (with or without ancillary services), with, per se professional investors/eligible counterparties in Ireland provided that

  • The firm does not establish a branch in Ireland.
  • Is subject to authorization and supervision in the third country where the third-country firm is established and the third-country firm is authorized so that the appropriate regulatory body in that third country pays due regard to any recommendations of FATF in the context of anti-money laundering and countering the financing of terrorism.
  • Cooperation arrangements that include provisions regulating the exchange of information for the purpose of preserving the integrity of the market and protecting investors are in place between the Central Bank of Ireland and the competent authorities where the third country firm is established.

The ESMA Multilateral MoU between EEA regulators and the FCA announced by ESMA on February 1, 2019 satisfies the requirement at “(c)”. The Central Bank of Ireland had previously confirmed that the IOSCO multi-lateral Memorandum of Understanding, of which the Central Bank and FCA are signatories, also satisfied this requirement.

Dillon Eustace: Contact Donnacha O’Connor


Global Director of Financial Services Knowledge, Innovation and Product
Global Head of Financial Services

Recent publications

Subscribe and stay up to date with the latest legal news, information and events . . .