The Cicero Brexit Insights team is producing regular updates, comment and insight on both the broad themes and the technical detail of Brexit. We aim to give readers a clear view of the issues and challenges as they are seen in Brussels, London and Member States. This week, the UK team considers the passage of the European Union (Notification of Withdrawal) Bill through the Lords and Thursday’s by-election results and the EU team considers the misconceptions of the EU’s top negotiating priorities.


Despite suffering a second defeat in the House of Lords this week, the Government is now within days of being able to legally trigger Article 50. When the Bill moves back into the House of Commons on Monday (13 March) for ping pong, MPs will be considering both the amendment on rights of EU nationals and an amendment on giving Parliament a “meaningful vote” on the final terms of the UK’s withdrawal from the EU and its future relationship with the bloc.

The two amendments backed by the Lords can however be reversed by MPs, and Brexit Secretary David Davis MP is confident that a potential backbench rebellion will be headed off. Immediately following the Lords vote, the Brexit Secretary issued a statement confirming that the Government will seek to overturn the amendments, adding that the peers vote this week was “disappointing” and criticising the upper-house for seeking to “frustrate” the process.

Whether or not the amendments are overturned, these are expected to be very close votes. In addition to SNP and the majority of Labour MPs who will almost certainly vote for the amendments, a handful of Conservative backbenchers may change their minds in light of the Lords’ decision. Among them, former business minister, Anna Soubry MP, has suggested she believes a “significant” number of her colleagues might defy the whip.

In theory, in the event of a Commons defeat, Peers could push back and re-add the amendments, but it is widely expected that they will back down from their challenge. At the beginning of the process, Labour peers said they would give their due scrutiny and then recognise the will of the Commons. Further, it is recognised that significant further challenge could risk a constitutional crisis on the future of the House of Lords.

Once Theresa May has the official go-ahead from Parliament, it is expected that she will act fairly quickly to trigger Article 50. Speaking at the European Council Summit yesterday in Brussels, the Prime Minister said that it is “time to get on” with starting the formal Brexit talks. Her statement to European colleagues made clear that she is also eager to begin negotiations. However, with the upcoming Dutch general elections and the Treaty of Rome anniversary celebrations, the Prime Minister will need to consider how much emphasis she places on avoiding antagonising her peers ahead of a long negotiation period.

Jasmin Harper
Senior Account Executive

“Europe would suffer if it lost access to the UK’s financial markets” is a statement often heard in London when discussing a future financial services relationship between the EU and the UK. London is Europe’s only global financial capital, with deep pools of liquidity many consider essential for the success of the EU’s Capital Markets Union, and through which Europe clears a large majority of its euro-denominated derivatives.

It is however, not a view that is fully reciprocated across the channel. As heard again in yesterday’s ECON Committee session on the equivalence framework, European officials place at least as much importance on financial stability and the potential to import risk as they do on minimising disruption to the financial services sector.

The head of DG FISMA, Olivier Guersent, stressed that for ‘high impact countries’ to be granted equivalence status, it would have to be balanced by a framework that provides equally high confidence that risk is sufficiently supervised. MEP Jakob von Weizsacker (S&D) argued the process should be conducted through a sliding scale between a robust third country equivalence regime to elements of extra-territoriality to repatriation.

So what would this mean for a potential UK-EU financial services relationship post-Brexit? A ‘high-impact country’ like the UK may have to allow in European supervisors or even cede – rather than be equivalent – to EU rules to permit the EU to supervise risk. Further, the Committee has underlined its opinion that clearing of euro-denominated derivatives trade will have to be controlled by EU institutions after Brexit in preparatory documents feeding into the Parliament’s Brexit position.

It should be noted that it remains possible that the UK-EU financial services relationship will be conducted through a variant of the current equivalence regime that will be negotiated as part of the Free Trade Agreement. EU officials have warned that the framework would be “overburdened” by the interconnected nature of the relationship, while most financial services firms would not be content to be governed by a process that could be rescinded unilaterally at a month’s notice.

However, the general concerns voiced about the equivalence framework would equally hold for any potential bespoke arrangement with the UK. The EU will expect to have a substantial degree of control over the supervision of risks affecting the European market for financial services. UK firms should expect to have to deal with EU supervisors and rules long after Brexit.

George Winkler
Account Executive


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