A looming crisis over the failure of cross-border financial contracts post-Brexit is posing a significant risk to financial stability and the personal finances of millions of people, according to a paper by TheCityUK, an industry-led body representing United Kingdom-based financial and related professional services.
Among other things, TheCityUK paper said that 36 million insurance policyholders across the U.K. and the European Economic Area (“EEA”) could be impacted if the U.K. and European Union fail to agree on a solution. The paper, “Continuity of cross-border financial contracts post-Brexit,” suggested that the only workable solution to this problem was a coordinated U.K./EU response involving both the public and the private sectors.
TheCityUK argued that the full range of affected cross-border contracts must be grandfathered, either for a time-limited period, or potentially until maturity. This would protect U.K. and EEA policyholders and institutions and avert potential widespread financial losses.
Miles Celic, chief executive officer of TheCityUK, said, “This sounds like an obscure issue, but ignoring the question of contract continuity post-Brexit is to play a dangerous game of chicken with the finances of customers across the whole of Europe. Without a viable solution, millions of people could be left without a safety net. This must not be sucked into the Brexit negotiations. It is a non-political, technical issue and needs a non-political, technical solution.
“Continuing to be able to serve customers and clients is the industry's number one priority. While firms are doing everything they can, this is not a problem that businesses can fix alone and requires a coordinated U.K./EU approach. Without it, people and businesses across Europe could be left dangling over a cliff edge following Brexit.”
The grandfathering of contracts could be achieved in three different ways, according to the paper:
- A bilateral agreement between the U.K. and EU, supported by regulatory co-operation.
- Separate regulatory action or legislation in each jurisdiction, consistent with the approach agreed between the U.K. and EU.
- Inclusion in the EU withdrawal agreement alongside appropriate regulatory backing for such a political agreement.
Any of these options would need to be underpinned by ongoing supervisory cooperation between the U.K. and the EU regulators beyond Brexit, TheCityUK said.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].