08 November 2016

124th Brussels for Breakfast – Notes

By Paula Martín/Graham Bishop

This blog covers the key subjects since our last meeting that I hoped to cover but, as always, we ran out of time to deal with them all. As a Friend, you can watch the 30 minute `structured’ CPD web-cast with CISI. These Notes may be read to record a further 30 minutes of `structured CPD’, including a dipping into the links to the underlying stories.

Highlights from the “Brussels for Breakfast” meeting

With newspaper headlines dominated by stories about “the enemies of the people”, the Article 50 debate was intense! By the next B4B, we shall have heard the Government’s opening position before the Supreme Court. In the absence of some new arguments, the three most senior High Court judges were so firm in their conclusion that the Government’s appeal may turn out to be a forlorn gesture. However, a key issue that was taken as `common ground’ by both parties at the High Court – that giving Article 50 notice was irrevocable – may be taken up by the Supreme Court. Otherwise, serving the Notice is, in practical terms, the end of UK EU membership. However, interpretation of the word `intention’ in Art 50 is a matter of its effect under EU law. Could the UK’s Supreme Court find a need to request the view of the European Court of Justice – as the German Constitutional Court does?

Eventually, the UK will need to conclude a trade deal with the EU – as opposed to the Exit deal under Art 50. The European Commission and Parliament have both released reports that cover the deals under negotiation by the EU and those already concluded. The EU is responsible for 31% of world trade in goods and services (versus 10% for the US and 8% for China), so it is an influential player. The map below shows that only 5 states do not already have either a trade deal with the EU or are negotiating one.

“Equivalence” is a key topic for the City’s future after Brexit. The discussion made it apparent that a broad-brush approach would be insufficient as some of the Regulations e.g. EMIR have many pages of technical detail that must be satisfied. So the Politiea paper by Barney Reynolds aroused much interest as his argument is that the UK should use its remaining time in the EU to push for “enhanced equivalence” which would be capped by a “deal” that included mutual recognition of each other’s Courts. On this author’s calculations, it might easily be 2025 before such a deal could be in force in the legal system of the EU27 – if it could be negotiated.

A speech by ESMA Director Verena Ross and a paper by CEPS’ Karel Lanoo both pointed in the direction of an enhanced regulatory role for ESMA, post Brexit. In any case, a successful Capital Markets Union must deliver investor protection first of all, as well as orderly markets and financial stability. So any re-thinking of securities market supervision is likely to point to an enhanced role for ESMA. [...]

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