UK kicks off Brexit with Article 50 activation
29 March 2017 London
Image: Shutterstock
Image source: Reuters
The UK has officially pulled the trigger on Article 50 and commenced the two-year negotiation process that will end in its exit from the EU.
With the activation of Article 50 of the Treaty of Lisbon, EU legislators will now convene to decide what positions they will take on a range of issues, from the rights of EU citizens in the UK to financial services passporting.
The Article 50 letter, which was signed by UK Prime Minister Theresa May yesterday, was hand delivered to Donald Tusk (pictured right), president of the European Council, at lunchtime.
May, addressing the UK House of Commons immediately after the UK’s Article 50 letter was delivered, said: “This agreement should allow for the freest possible trade in goods and services between Britain and the EU’s member states. It should give British companies the maximum freedom to trade with and operate within European markets—and let European businesses do the same in Britain.”
“But I want to be clear. What I am proposing cannot mean membership of the single market.”
Official negotiations between the European Commission and the UK’s Brexit team are expected to commence on 29 April. The process can take no more than two years, unless the European Council approves an extension, which at present appears unlikely.
Membership of the EU is complex, with many aspects of UK legislation intertwined with or underpinned by EU regulations and directives designed in Brussels.
UK ministers will have to simultaneously negotiate the terms of the exit from the EU, lobby for and begin discussions about a new trade deal with the 27 remaining member states, do the same with every other country around the world, and begin reforming its own laws.
The mooted Great Repeal Bill will preserve EU law in UK legislation in one fell swoop, although this is still subject to the parliamentary scrutiny that almost derailed the so-called Brexit bill earlier in March.
A leaked European Parliament resolution suggested no free trade deal will be forthcoming in the next two years, and that any post-Brexit transition arrangement beginning in 2019 can last no longer than three years.
In particular, the resolution “opposes any agreement between the EU and the UK that would contain piecemeal or sectoral provisions, including with respect to financial services, providing UK-based undertakings with preferential access to the single market and, or the customs union” and “underlines that after its withdrawal the UK will fall into the third country regime foreseen in EU legislation”.
Speaking on the eve of the activation of Article 50, Andrew Dyson, CEO of the International Securities Lending Association, said: “Following the triggering of Article 50 we remain mindful of the potential effects on our industry and member firms. Following the vote to leave on 23 June 2016, we emphasised how our legal constructs and routine operating procedures would remain unaffected by the vote in the short term and that remains the case today.”
“However, as the process of negotiations to leave the EU develops we expect our member firms to be making important decisions about how they will be organised in a post-Brexit world. In that regard we remain opened minded in terms of how we respond to those challenges and will work with our members and regulators as the landscape changes.”
For the securities finance industry, Brexit “may mean a rethink on how to structure, book, execute and report transactions”, according to Michael Huertas and Kai Schaffelhuber of Allen & Overy in Frankfurt.
This includes a need “for market participants to remain cognisant on how the uncertainty that Brexit brings will continue to affect their business and those of their counterparties. This generally merits advance planning.”
"Whilst it is inconceivable that the appeal of English law, as an international public utility in financial market transactions will diminish, the process of reassessing the location of activity has become a key topic for firms with an uplift in activity moving to the eurozone."
Huertas and Schaffelhuber added: “A lot will also hinge on how the EU views the concept of regulatory equivalence, a concept that is itself under review, and whether a post-Great Repeal Bill in the UK will be able to meet the equivalence standards of the EU in its new post-Brexit position as a ‘third-country’.”
"This is possibly the case even if large parts of EU legislation relevant to the securities finance sector are retained, or subjected, as is more likely, to carve-outs that grant exemptions for smaller firms or domestic transactions.”
The UK has officially pulled the trigger on Article 50 and commenced the two-year negotiation process that will end in its exit from the EU.
With the activation of Article 50 of the Treaty of Lisbon, EU legislators will now convene to decide what positions they will take on a range of issues, from the rights of EU citizens in the UK to financial services passporting.
The Article 50 letter, which was signed by UK Prime Minister Theresa May yesterday, was hand delivered to Donald Tusk (pictured right), president of the European Council, at lunchtime.
May, addressing the UK House of Commons immediately after the UK’s Article 50 letter was delivered, said: “This agreement should allow for the freest possible trade in goods and services between Britain and the EU’s member states. It should give British companies the maximum freedom to trade with and operate within European markets—and let European businesses do the same in Britain.”
“But I want to be clear. What I am proposing cannot mean membership of the single market.”
Official negotiations between the European Commission and the UK’s Brexit team are expected to commence on 29 April. The process can take no more than two years, unless the European Council approves an extension, which at present appears unlikely.
Membership of the EU is complex, with many aspects of UK legislation intertwined with or underpinned by EU regulations and directives designed in Brussels.
UK ministers will have to simultaneously negotiate the terms of the exit from the EU, lobby for and begin discussions about a new trade deal with the 27 remaining member states, do the same with every other country around the world, and begin reforming its own laws.
The mooted Great Repeal Bill will preserve EU law in UK legislation in one fell swoop, although this is still subject to the parliamentary scrutiny that almost derailed the so-called Brexit bill earlier in March.
A leaked European Parliament resolution suggested no free trade deal will be forthcoming in the next two years, and that any post-Brexit transition arrangement beginning in 2019 can last no longer than three years.
In particular, the resolution “opposes any agreement between the EU and the UK that would contain piecemeal or sectoral provisions, including with respect to financial services, providing UK-based undertakings with preferential access to the single market and, or the customs union” and “underlines that after its withdrawal the UK will fall into the third country regime foreseen in EU legislation”.
Speaking on the eve of the activation of Article 50, Andrew Dyson, CEO of the International Securities Lending Association, said: “Following the triggering of Article 50 we remain mindful of the potential effects on our industry and member firms. Following the vote to leave on 23 June 2016, we emphasised how our legal constructs and routine operating procedures would remain unaffected by the vote in the short term and that remains the case today.”
“However, as the process of negotiations to leave the EU develops we expect our member firms to be making important decisions about how they will be organised in a post-Brexit world. In that regard we remain opened minded in terms of how we respond to those challenges and will work with our members and regulators as the landscape changes.”
For the securities finance industry, Brexit “may mean a rethink on how to structure, book, execute and report transactions”, according to Michael Huertas and Kai Schaffelhuber of Allen & Overy in Frankfurt.
This includes a need “for market participants to remain cognisant on how the uncertainty that Brexit brings will continue to affect their business and those of their counterparties. This generally merits advance planning.”
"Whilst it is inconceivable that the appeal of English law, as an international public utility in financial market transactions will diminish, the process of reassessing the location of activity has become a key topic for firms with an uplift in activity moving to the eurozone."
Huertas and Schaffelhuber added: “A lot will also hinge on how the EU views the concept of regulatory equivalence, a concept that is itself under review, and whether a post-Great Repeal Bill in the UK will be able to meet the equivalence standards of the EU in its new post-Brexit position as a ‘third-country’.”
"This is possibly the case even if large parts of EU legislation relevant to the securities finance sector are retained, or subjected, as is more likely, to carve-outs that grant exemptions for smaller firms or domestic transactions.”
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