Linklaters acts as expert witness at House of Lords sub-Committee meeting on post-Brexit contractual continuity
On Wednesday 16 May, Linklaters partner Simon Firth presented to the House of Lords’ EU Financial Affairs Sub-Committee on post-Brexit contractual continuity.
The Committee was concerned about whether contractual continuity will pose a problem for the financial services sector post-Brexit or whether transactions entered into by investment firms will otherwise be undermined.
Evidence was provided to the Committee that post-Brexit, while there may be contractual continuity issues associated with some contracts (where performance of the contract requires authorisation in an EU member state), most financial services contracts should remain enforceable. However, the servicing of contracts could be affected. For example, in some member states EU authorisation may be required to exercise an option, where this involves the delivery of a financial instrument or the entry into of a financial contract (such as a swap). Authorisation may also be required to close out a financial exposure by entering into an offsetting transaction.
Find out more and watch the recording of the session.
Linklaters partner Simon Firth comments:
“If firms lose the ability to service their existing contracts, they will need to transfer the contracts to an EU regulated affiliate, which will require the repapering of thousands of customer relationships. That is disruptive for the firm itself but it could also have a negative impact on the firm’s EU customers, for example by triggering a tax charge or exposing them to additional administrative costs. It is in everyone’s interests to find a solution to this problem.”
In his evidence to the Committee, Simon Firth said that an EU legislative solution would be desirable to address the problem.
“Prior to the introduction of the Euro, EU legislation was passed to make it clear that the enforceability of existing contracts would not be affected”, he said. “A similar approach, to make it clear that existing contracts can continue to be serviced, would welcomed by the financial services sector and would protect EU customers”.
Simon Firth, partner in our London Capital Markets practice, is a leading authority on derivatives, specialising in the structuring and documentation of derivatives transactions and advising about issues arising in relation to derivatives and the financial markets generally.
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