The UK financial sector thrives on confidence, underpinned by a well-developed and respected legal system. Brexit has knocked global confidence in the UK market, but businesses can still rely on the predictability of the English law system.
Amidst the many uncertainties surrounding Brexit, the potential loss of passporting rights has arguably received the most attention.
"Passporting" permits a financial services firm authorised in the United Kingdom to operate throughout the European Economic Area (EEA), without having to obtain operating licences in other EEA Member States. If the United Kingdom leaves the single market, UK financial institutions will lose their passporting rights, unless they are replicated in a bespoke agreement. This could have a major impact on lending activities throughout the European Union.
The European Banking Authorities' recent opinion on relocating to another EU Member State illustrates the gravity of the issue and how seriously it is being taken. The financial sector is exerting pressure to achieve a solution, including a transition agreement to alleviate some of the uncertainty.
The impact of Brexit on the UK insolvency regime has received less attention, but this may change when the current economic cycle turns and the country actually exits the European Union.
THE INSOLVENCY REGIME
The United Kingdom has traditionally been dominant in the restructuring and insolvency market, partly because of its reliable and well-developed insolvency laws and sophisticated court system.
There is a concern, however, that restructuring and insolvency procedures conducted under English law will be less certain in outcome, and more complex and costly as a result of Brexit. This would mean that businesses could become harder to rescue from financial difficulty, potentially increasing the rate of company failure.
Post-Brexit, the United Kingdom will no longer be a Member State for the purposes of the European Insolvency Regulation (EIR) or European Regulation 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Brussels Regulation). Unless alternative solutions are found, there are implications for two key areas that will come into effect immediately upon Brexit.
Automatic Recognition of Insolvency Proceedings and Judgments
The most important implication is that UK insolvency proceedings, office-holders and judgments will cease to be automatically recognised under the...