On June 23, 2016, the United Kingdom voted by referendum to leave the European Union, a historical event that will most likely lead to turmoil and uncertainty for years to come.
What will be impacted by Brexit?
If the UK leaves the EU without an agreement which provides for the on-going application of EU law as regards products and services, the potential consequences are numerous and far-reaching for corporate entities.
Contracts and disputes
Brexit is likely to have an impact on jurisdiction clauses of financial agreements that up to now have almost exclusively referred to the English courts. Post-Brexit, the UK will be considered a third country for the purposes of the Recast Brussels Regulation 1215/2012, which enables the enforcement of national judgements handed down in one member state throughout the EU. The enforceability of these clauses will be all the more uncertain since the UK is not party to the Lugano II Convention, nor the 2005 Hague Convention on the Choice of Court Agreements.
Brexit will have a significant impact on the ability of financial institutions to passport services between Europe and the UK. Pending agreement on the future post-Brexit settlement, banks will need to review the configuration of their branch, subsidiary and headquarters presence within the UK, EU and elsewhere.
A similar passporting issue will affect UK insurance businesses under Brexit.
The UK is one of the world's largest asset management centres, second only to the US. As it is with other financial institutions, Brexit is already having a significant impact on the asset management industry, which will inevitably be felt in Luxembourg.
Brexit can have a major impact on the import and export of products between the EU-27 and the UK. Supply chains will be affected as UK products may lose their EU certifications, necessary on industries like the aviation, chemicals and automotive sectors.
Transfers of data
There may be restrictions on data transfers between the EU and the UK and which authorities are expected to monitor compliance with data protection regulations and handle instances of data breaches.
Employment of UK staff in Luxembourg
Issues could also be raised as regards dual employment contracts, secondments and social security.
How can we help?
Luxembourg is increasingly cited as a key jurisdiction in addressing the challenges raised by the UK’s decision to leave the EU, and Arendt believes the grand duchy offers you unique opportunities as companies impacted by Brexit.
It also adds a rationale to our firm's presence in London. On a short-term basis, many of our clients including banks, investment managers and insurance companies have questions about Luxembourg as an option for relocating some of their activities. On a medium- to long-term basis, Brexit will make our London office particularly useful in conveying messages from the UK business community to the Luxembourg authorities, as well as channelling communications from Luxembourg on the government’s approach to Brexit.
In addition, our dedicated EU law practice regularly advises clients, including international companies and EU bodies, on different markets and aspects of EU law, including banking, financial services, competition, relationships with non-EU countries on the part of both the EU and member states, plus international economic sanctions and restrictions, as well as representing clients before EU and national courts.
About the documents below:
Brexit - The Arendt eye on Brexit - Brochure - This document aims at presenting what we think you should know about Luxembourg when assessing the country / jurisdiction as a solution for the business challenges created by Brexit.
In case of a Hard Brexit: banking and financial services - At a time when the EU and the UK are struggling to agree on the nature of their relationship post-Brexit, please find below a presentation which runs through the main consequences for banking and financial services operators of a Hard Brexit.