THE BREXIT NEGOTIATIONS – THE VIEW FROM BRUSSELS ON DEVELOPMENTS IN JANUARY 2018

The Brexit debate often looks different viewed from Brussels rather than from London. It is however important for businesses to also keep in mind the Brussels perspective and therefore we publish a monthly view from our Brussels office on recent developments and the state of the negotiations.

In this issue we focus on the supplement to the negotiation guidelines adopted by the European Council on 29 January 2018, more particularly on the requirements for a standstill transition and on the issues raised by third country agreements. We also take a closer look at the “preparedness notices” issued by the EU by way of preparation for a possible hard Brexit. These are of interest not just for what they say about the EU view of the consequences of a no-deal scenario but also because they effectively constitute the starting point for the forthcoming negotiations.

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Brexit – PRA consults on approach to UK branches of incoming insurers

The post below was first published on our Insurance blog

On 20 December 2017, the Treasury, PRA and FCA clarified their approach to EEA-headquartered financial services firms wishing to carry on business in the UK post-Brexit. More recent evidence to the House of Commons Treasury Committee (“TC”) sheds further light on the PRA’s thinking. It also highlights the difficulty for the PRA of giving guidance to firms while so much uncertainty surrounds the UK’s future relationship with the EU.

The PRA’s consultation (CP30/17) on its approach to third country insurers, a separate “Dear CEO letter” and comments made to the TC on 16 January merit further comment.

To read the full article, click here. Key points for firms discussed in this article include the following:

  • Together, the PRA’s papers and comments provide firms with a greater understanding of how the PRA expects incoming EEA firms to plan for Brexit.
  • Comments made to the TC also recognise the additional costs associated with establishing and maintaining a UK subsidiary as compared to operating through a branch here.
  • The PRA’s proposed requirements for firms to subsidiarise are, nonetheless, worrying. In particular, applying a test based on the amount of a firm’s FSCS-protected business appears to us to be flawed.
  • It is not clear whether the PRA’s comments relate to both new and in-force business. For a non-life insurer, in particular, a requirement to transfer all of its in-force business (much of which will have a duration of less than a year) to a newly-established subsidiary would result in considerable unnecessary expense.
  • The PRA’s approach makes a number of assumptions that may turn out to be incorrect. In particular, Sam Woods (CEO, PRA) warns that, if there is no cooperation between the remaining EU states and the UK post-Brexit, “we are not in the business of allowing branches, and firms would have to subsidiarise”. This leaves firms unclear whether the approach being taken by the PRA today will change again in the lead-up to Brexit.
  • EEA insurers that do business in the UK on a services-only basis are not covered by the PRA’s comments. The difference between the EU law approach to the requirement for a services passport and the UK approach to “non-admitted” business means that some EEA insurers should not need PRA authorisation for their coverage of UK risks post-Brexit.

The deadline for responses to CP30/17 is 27 February 2018.  In the meantime, firms affected by the PRA’s proposals should, if they have not already done so, begin to plan for obtaining authorisation for their activities in the UK.

The PRA is consulting separately on its approach to banks (see CP29/17).

EU Council Adopts Negotiating Directives on the EU Position Regarding Negotiations on a Transition Period

This afternoon the EU Council adopted supplementing negotiating directives for the Brexit negotiations detailing the EU27 position regarding a transition period. These negotiating directives provide the Commission, as the EU negotiator, with a mandate to start discussions with the UK on this matter. The relevant documentation is available here.

EU BREXIT PREPAREDNESS NOTICES

The Commission and the EU agencies have been producing “be prepared for Brexit notices” which give valuable insights into their views of the consequences in the various policy areas of a no-transition or hard Brexit and often include recommendations as to action that stakeholders should take. They also provide clues as to the position that the EU will take in the negotiation of transitional measures and even the future relationship.

We have compiled a list and posted it on our UK/EU Papers page here. We will endeavour to update it as further notices are issued.  There will also be a comment on this development in the next View from Brussels.

THE UNIFIED PATENT COURT (UPC) – OPEN FOR BUSINESS IN 2018?

The post below was first published on our Intellectual Property blog

At the start of 2017 the expectation was that the UPC Agreement would achieve the required ratification levels and that the UK could well ratify in advance of Brexit in order to become a full participant, even given the question marks that arose about the ability of a non-EU jurisdiction to be part of the new unitary and European patent enforcement system. Now, at the start of 2018, things are still uncertain.

Despite the IP Minister’s announcement in November 2016 that the UK would ratify, no ratification was forthcoming, although the UK has drawn closer to ratification as a result of the International Organisations (Immunities and Privileges) (Scotland) Amendment (No 2) Order 2017 being approved by the Scottish Parliament on 25 October 2017. This order will confer certain privileges and immunities on the UPC and its judges and other staff. The equivalent statutory instrument, the Unified Patents Court (Immunities and Privileges Order) 2017 was laid before the House of Commons on 26 June 2017 and following approval by both chambers of the Westminster parliament (including the House of Lords in December 2017), it is waiting approval by the Privy Council, along with the Scottish order. Representative bodies of IP practitioners joined together shortly before Christmas 2017 to send a note to the Government on the key areas that need addressing prior to Brexit, including ratification of the UPC Agreement (see our post on this here).

Elsewhere in the EU three more states ratified the UPCA in 2017: Italy, Estonia and Lithuania, and Latvia on 11 January 2018. This brings the total number of ratifying states to 15 more than the 13 required, but still missing two of the mandatory ratification states other than France: Germany and the UK (while it is still in the EU).

However, with France ratifying the Protocol on Privileges and Immunities at the end of December 2017 and Belgium adopting legislation in December to implement the UPC, the EU looks poised to commence the new court system as soon as possible once the UK leaves the EU. This will be possible only once Germany has ratified. Italy will take the place of the UK as the third mandatory ratifier after France and Germany, and has already ratified as mentioned above. Continue reading

BREXIT AND IP – LAW SOCIETY NOTE CALLS FOR GOVERNMENT ACTION

The post below was first published on our Intellectual Property blog

The exact mechanics of how Brexit will materialise and what it would mean for intellectual property rights in the UK is still unclear. However, time is now running short and the main representative bodies for IP practitioners have become concerned that IP rights (which are some of the assets most likely to be adversely impacted by Brexit – indeed in some cases at risk of being lost without specific provision being made by the UK Government prior to Brexit) have not been receiving the attention they require.

On 22 December, a note was sent to the UK Government by the Law Society which had been contributed to and signed by representatives of the IP Committee of the Law Society of England and Wales, and of the IP Bar Association, the Chartered Institute of Patent Attorneys (CIPA), the Chartered Institute of Trade Mark Attorneys (ITMA) and the IP Federation (whose website also carries a copy of the note).

The note makes the case for the UK as a key IP forum and identifies “a short list of the biggest areas where Government action is necessary to ensure continuity and certainty of IP law and to prevent disruption both to undertakings which use IP services and IP service providers“.

The following are some of the key recommendations made by the note:

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Crunch time on Brexit and climate policy

Note: This article first appeared in Energy & Climate Intelligence Unit on 3 January 2018 and we have permission to republish it.

The UK and the EU27 have said they want a close partnership post-Brexit but this year could test their co-operation on environmental protection in three ways.

Firstly, Brexit could have short term implications for the monitoring and reporting of the European Emissions Trading System – precisely at a time where annual allowances are up for negotiation.  Secondly, planning for longer term climate action will become more challenging in the absence of a clear steer from the UK on whether it plans to participate in EU climate schemes and targets post-Brexit. Finally, the loss of a strong proponent of climate action in the European Council could also constrain the EU27’s ambition for global climate action post-Brexit.

Despite the potentially far reaching consequences for climate policy the UK Government has not, as yet, published detailed examination of the possible impacts of Brexit.  Furthermore, there was no Government climate sector analysis in the documents released by the Exiting the EU Committee of the Parliament, in late December.

Read more on this issue here.

Brexit – EIOPA publishes opinion on cross-border legacy business

This post was originally published on our Insurance notes blog.

An opinion published by EIOPA on 21 December 2017 raises concerns for UK insurers who have policyholders in EEA states other than the UK. This will include, for example, every life company with annuitants living in an EEA state*, perhaps because they moved from the UK on retirement.

Insurers have been aware of issues raised by Brexit for legacy contracts written (or performed) cross-border since the UK referendum on EU membership (see, for example, our client briefing issued in July 2016). However, it has been widely hoped, to now at least, that a sensible compromise would be reached by the UK government and EU authorities to ensure that firms do not need to embark on expensive and time-consuming processes to avoid detriment to policyholders once the UK finally leaves the EU. Such a compromise currently appears less likely. Continue reading