Public Law analysis: Tony Watts, a consultant solicitor at Keystone Law, says the biggest questions for UK lawyers may concern what will be the impact and role of the European Supervisory Authorities (ESAs)— including the European Banking Authority (EBA)—and EU financial services regulation generally in the aftermath of Brexit.
The EBA has welcomed the Council of the European Union’s decision on its relocation to Paris, given the UK's intention to withdraw from the EU. The EBA says the decision reassures its staff over the new location and puts an end to a period of uncertainty.
What is the background to the relocation of the EBA and what was the decision-making process applied?
In view of the UK’s withdrawal from the EU, agencies such as the EBA had to be relocated—there was no real
alternative.The procedure was agreed on 22 June 2017 in the margins of the Council of the EU, ie by the heads of state or government of 27 Member States. They agreed a procedure with an organised call for offers based on criteria, which were:
Assessment also involved six specific issues:
These were, above all, practical criteria stressing the logistics of the move.
There was a complex assessment and voting procedure where the Commission examined all offers for the benefit of the Council of the EU. These were then subject to a complex voting procedure by the Council of the EU consisting of up to three rounds of voting.
In the first round, heads of the EU27 voted in order of preference for their three preferred locations. In the second round, Member States had a single vote. If that produced an outright majority (ie 14 votes), the relevant country was selected. If not, the two countries with the highest number of votes went to the third round (if there was a tie, the three or more countries with equal votes went to the third round). The third round would be decided on a simple majority—with the President drawing lots in the event of a tie.
Which locations were in the running and which one did the EU27 vote for? Was this expected?
There were eight offers: from Paris, Brussels, Dublin, Frankfurt, Luxembourg, Prague, Vienna and Warsaw. Frankfurt and Vienna were favourites (bookies rated them first and second respectively) with Paris trailing Dublin in fourth place with odds of 8/1 a few days before the vote.
There was surprise at Vienna not progressing and Frankfurt being eliminated in the second round. The third round was between Paris and Dublin and was decided by the Estonian President of the Council drawing lots.
What was the Commission’s assessment of the chosen location? What were the key criteria?
The Commission performed a detailed examination of each offer based on the criteria stated above, and published these.
What is the EBA’s stance? How is it preparing for relocation?
The EBA has welcomed the decision and stated that it ‘guarantees a seamless continuation of its activities by reassuring its current and future staff over the new location and putting an end to a period of uncertainty’. It is difficult to see how they could have said anything else, but this is probably a welcome move for those in the EBA.The EBA is relatively small (189 staff) so possibly the move will be relatively trouble-free. Paris will now host two of the
three ESAs; the European Insurance and Occupational Pensions Authority remains in Frankfurt and may begin to assume a more central role as a financial centre.
Have the EBA’s activities been affected by the uncertainty? How will its activities be affected going forward?
There has inevitably been uncertainty, and the EBA recognised this in its press statement referred to above. It’s still a busy time for European financial services regulation with MiFID II, the Packaged Retail and Insurance-based Investment Products Regulation and PSD 2 on the horizon. Overall, it may be affected less by the fact that the UK (the leading financial centre with the most developed system of financial regulation) will no longer be involved.
When will the necessary legislative proposals be prepared and adopted?
The Commission is now preparing legislative proposals reflecting the vote for adoption under the ordinary legislative procedure, with the involvement of the European Parliament. The Council of the EU and the Commission are committed to ensuring that these legislative proposals are processed as quickly as possible in view of the urgency of the matter.
What are the next steps/possible timescales for relocation?
The EU is stressing the urgency of the move and, in accordance with the criteria above, it must take place by the time of the UK exits from the EU. The French offer stated that it could be completed by January 2019.
What are the practical implications going forward?
It’s not easy to predict. The biggest questions for UK lawyers may concern what will be the impact and role of the ESAs (including the EBA) and EU financial services regulation generally in the aftermath of Brexit. Presumably it will still cast a long shadow…
Tony Watts is a financial services and banking specialist. He has held senior legal positions at a range of household names including Barclays Wealth where he was Co-head of Legal. Since 2007 he has been in private practice, specialising in financial services law and FSMA regulation. Tony has wide experience of advising financial services businesses in both wholesale and retail sectors. He frequently advises new businesses looking for practical assistance on how far regulation applies to them, as well as individuals with financial services issues arising from their employment or investment activities.
Interviewed by Kate Beaumont.
This article was first published on Lexis®PSL Public Law on 1 December 2017.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.