With negotiations at political level to resume in Brussels this Tuesday (see other article), the British government on Monday 20 August unveiled a blueprint aiming to clarify its vision of future bilateral relations between the EU and the United Kingdom in the field of financial services.
Readers may recall that the structure set out by London in the White Paper published in mid-July (see EUROPE 12061) was ultimately that of “enhanced equivalences”, although the country had initially thought that it could retain the same advantages as those offered by the European passport, which would have given it greater access to the European market.
Although equivalences are less comprehensive systems of recognition on a case-by-case basis between the EU and third countries, the UK hopes to improve these to bring them into line with the reality of financial ties with the EU.
“We are not proposing an expansion of the third-country equivalence regime to all the areas covered by the passport. Instead, we propose that the scope of the relationship should be defined appropriately in relation to mutually economically beneficial global market activity”, the 20-page document, in the form of a slide presentation, goes on to explain.
In the introduction, it uses many graphics and figures to reiterate that the UK is a global financial centre and that it provides the EU and the world with a large range of financial services.
The presentation then goes into greater detail than the White Paper on the proposed model. Schematically, it is primarily based on the principle of autonomy, whereby each party would determine its own rules and decide whether access to its market is maintained.
The UK is also aiming for equivalence from the outset, namely a single set of rules and intertwined supervision, together with initial mutual recognition agreed for all third-country regimes as well as common principles on governance, such as a commitment to global standards.
The scope of activities permitted at cross-border level would also be enlarged, giving priority to activities that are the most mutually beneficial to the economy, have no adverse consequences and involve no arbitration.
As regards the section on withdrawing equivalence, everything would have to be done in a structured manner with consultations and discussions before either side loses access to the other market. Clear timeframes, notice periods and grace periods for businesses and supervisors to adapt should also be agreed upon. The framework would also take account of acquired rights and protect existing obligations to customers in the event that equivalences are withdrawn.
In its white paper, the UK proposed a dual relationship to enact this, connecting autonomous decision-making concerning market access on the one hand with an economic and regulatory arrangement on the other to govern commitments and processes.
The blueprint lays particular emphasis on this bilateral component, to add certainty and stability over and above the existing EU equivalence regimes, and points out the shortcomings of these, particularly the limited scope of application.
The document refers to a number of international European precedents to be used as a basis to build this new model, but focuses specifically on the EU-Japan agreement (see EUROPE 12064), which, its authors point out, includes a similar dual approach.
It is worth noting that the document excludes recourse to the dispute settlement mechanism for all matters that would come under the 'autonomy' section, preserving this solely for the commitments set out in the bilateral agreement.
In conclusion, the UK government argues that this agreement “avoids needless fragmentation and divergence of our markets, of our shared regulatory rulebook, and of cross-border supervisory cooperation”.
The document can be consulted at https://bit.ly/2OR59Iy . (Original version in French by Marion Fontana)