Exclusive: Banks want to
be subject to EU laws for five years in post-Brexit deal
Send a link to a friend
[December 09, 2016]
By Andrew MacAskill and Anjuli Davies
LONDON
(Reuters) - Large banks in Britain want the UK government to allow their
industry to remain subject to EU laws for up to five years after Brexit,
a move likely to enrage eurosceptics who want to break away from the
bloc's legal system as soon as possible. The banks - international
players - are also pressing the government to allow the European Court
of Justice to rule on decisions related to their businesses during that
period, according to a document reviewed by Reuters.
The document was drawn up by law firms on behalf of banks lobbying the
government for a departure in stages from the EU. It has the support of
major banks, has been shared with the Treasury and is the most detailed
request yet by Britain's financial industry for a transitional period to
give it longer to adapt to Brexit, bankers said.
The Treasury declined to comment on the document.
"The report has been received as a fairly serious piece of work. It
focuses on the legal underpinning of a transitional arrangement,"
according to one banker at a large international firm. "It's a
heavyweight legal piece of work."The British government is currently
divided on whether to support demands for transitional arrangements -
and if so, in what form - reflecting diverging views about the best way
to leave the EU and concerns about a backlash from those who campaigned
and voted for Brexit.
![](http://archives.lincolndailynews.com/2016/Dec/09/images/ads/current/bennett_lda_123015.png)
While some Treasury officials are backing the move, the Brexit minister
David Davis and Prime Minister Theresa May are yet to commit publicly to
supporting any deal.
The Treasury said in a statement finance minister Philip Hammond is
closely listening to the financial sector's views.
The Department for Exiting the European Union referred Reuters to the
Treasury for comment.
The document warns of the potential shock to the British and European
economy from a loss of critical financial services if banks do not
secure a transition phase beyond the two-year withdrawal period that
will begin when the government invokes Article 50 of the EU's Lisbon
Treaty.
If no transition deal is agreed, there is a risk that some banks may not
be able to move parts of their operations out of Britain or set up new
British subsidiaries in time, the document says, running the risk that
the banks may have to halt their EU business activities abruptly.
It would normally take banks as long as three years to relocate
operations, according to the document, but due to the large number of
firms seeking to do this simultaneously regulators may be flooded with
requests, slowing down the process.
"Transitional arrangements are likely essential," the document says.
"This is important in order to avoid potential damage to the "real
economy" that is reliant upon uninterrupted access to financial
services."
The demands for special treatment for an industry scorned by Britons
since the financial crisis may put it on a collision course with swaths
of the public and politicians who voted for Brexit because they wanted
Britain to regain control of its law.
![](http://archives.lincolndailynews.com/2016/Dec/09/images/ads/current/napa_bch1-3108.png)
[to top of second column] |
![](../images/120916pics/busine53.jpg)
A clock strikes midday in front of the Bank of England in the City
of London, Britain, November 3, 2016. REUTERS/Peter Nicholls
![](http://archives.lincolndailynews.com/2016/Dec/09/images/ads/current/North_Green_Golf_lda_Xmas_2016.png)
OPPOSITION
Hardline supporters of Brexit are opposed to any transitional
arrangement worrying it could become permanent as final trading terms
can take years to agree.
Richard Tice, co-chairman of the Leave Means Leave campaign, which is pushing
for a so-called "hard Brexit", where Britain leaves the EU's single market in
order to impose controls on immigration, said the banks are exaggerating the
potential disruption.
"This
is a nonsense. It is just the banks, frankly, not dealing with the issue," he
said. "The country voted for change and the sooner they wake up and accept it
the better."
The document was drawn up by three of Britain's biggest law firms - Linklaters,
Freshfields and Clifford Chance - and says it is "intended to provide technical
support to those developing a negotiating position for the UK."
All the law firms declined to comment.
Financial services firms face some of the biggest challenges of all sectors
responding to the vote to leave the EU because large areas of their businesses
are governed by passporting rules, which allow them to operate across Europe.
Finance accounts for about 10 percent of Britain's economy, a larger share than
in other big economies, highlighting its importance as the government embarks on
talks that may determine if it remains a leading global financial center for
years to come.
The
document argues that Britain must secure an agreement with Brussels – around the
time of triggering Article 50 – for a period of delay following the two-year
exit process for it to have any impact.
The document says the transitional deal should last a minimum of between 3 to 5
years. It says for any transitional deal to be accepted it would require the
British government to accept EU law in financial services for the duration of
any deal.
The document also suggests that the European Court of Justice - one of the most
detested institutions by British eurosceptics because it can override UK courts
- would most likely have to govern any disagreements that arise during the
transition.
"We well understand the political sensitivity to that proposition," the document
says.
(Additional reporting by Huw Jones, Elizabeth Piper and William Schomberg;
editing by Janet McBride)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
![](http://archives.lincolndailynews.com/2016/Dec/09/images/ads/current/richardson_lda_090916.png) |