The eventuality of a hard Brexit currently appears to shade fear and despair in the financial sector across Europe. While there is a lot of uncertainty around dates and options, Member States try to mitigate the impact of a no-deal Brexit as best as they can. Here's how Luxembourg deals with it.
For the Financial Sector
On 26 March, the Luxembourg Parliament adopted a bill that grants specific powers to the Commission for the Supervision of the Financial Sector ("CSSF") and the Luxembourg Insurance Supervisory Authority (Commissariat aux Assurances, "CAA") to take transitional measures to compensate for the loss of the benefit of the European passporting regime.
On a case-by-case basis, the CSSF and the CAA will be able to allow UK professionals that already service Luxembourg to continue to do so for a maximum period of 21 months after the withdrawal without the requirement to be granted an additional license in Luxembourg.
For Investment Funds
As early as January, the CSSF reminded the industry that the delegation of portfolio management or risk management functions relating to Luxembourg UCITS, UCIs and AIFs to non-EU countries (i.e., the UK in case of a no-deal Brexit) is permissible under the condition that a Memorandum of Understanding is in place with the UK.
Further, firms and funds established in Luxembourg, wanting to make use of the UK temporary permission regime ("TPR") to passport their activities into the UK, that they need to inform the CSSF of any notifications to the FCA under TPR.
Further, and in order to ensure the ongoing smooth functioning and stability of financial markets and the protection of investors, the Luxembourg Parliament adopted a bill on 28 March 2019 which grants UCIs 12 months to comply with potential breaches of investment policies and/or restrictions due to Brexit. These provisions will apply as soon as the UK will become a third country i.e., regardless of whether there will be a deal or not.
The Luxembourg indirect tax authority for instance issued a Brexit preparedness notice early on, setting out the changes in treatment of supplies of goods and services between the EU and the UK.
The UK deposited its instrument of accession to the Hague Convention on Choice of Court Agreements 2005 to become effective in the event of a no-deal Brexit.
In addition the Luxembourg Parliament adopted a "social bill" to provide for transitional provisions to guarantee a number of social rights to British nationals (e.g., access to the social inclusion revenue).
A bill dedicated to the roughly 45 British national Luxembourg public servants has been adopted on 26 March 2019 to protect their status. Whilst the dedication of the Luxembourg legislator is commendable, this bill could raise a certain number of questions as to the equal treatment and the access to public servant positions for nationals of other third countries.
Further, the Luxembourg Parliament adopted a draft law on the residence permit for UK nationals. In essence, the aim of the bill is to ensure that UK nationals residing in Luxembourg before Brexit can continue to do so, without too much trouble. UK nationals would have roughly the same rights as EU nationals’ for a transitional period. Details and deadlines change depending on whether there is a deal or not.
Even with these precautions in place there are still a lot of uncertainty and grey areas.
