In a report published in early July, the Legal High Committee for Financial Markets of Paris (HCJP) analysed the legal consequences of a possible hard Brexit, particularly focusing on ongoing financial contracts.
However, in its conclusion, the HCJP report stresses that “A situation of hard Brexit would only raise a few legal complexities with regards to the continuity of ongoing contracts, and that difficulties would, in any case, be limited.”
The potential risks highlighted by the HCJP, an independent organisation, include:
- The loss of the European passport, which “would prevent any service to be provided by UK financial institutions, which would fall within the European monopoly.”
- The risk that the UK regulation differs from that applicable in the EU, which would “be a source of considerable complexities for financial institutions and legal uncertainty for clients residing within the EU.”
- The risk of divergent interpretations between European and UK case law, notably on the essential regulations in the financial sector (EMIR, MIF2, etc.) linked to the UK leaving the European mechanism of judicial cooperation.
As a financial hub, London has a strong focus on banking, as well as insurance and other financial institutions. If a hard Brexit transpires, this would raise significant legal difficulties for both the establishments involved and their clients. However, in most cases, ongoing contracts would continue to be implemented after a hard Brexit. For future activities, a deeper harmonisation of European regulations seems unavoidable to ensure certain key functions within the European Economic Area.
Article published: 8th August 2018
