Inquiry Into the Brexit -Effect on UK Financial Services Starts. What About the CDOTs?

 

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Less than 3 months after the success of the UK ‘leave’ referendum, the House of Lords EU Sub-Committee on Financial Affairs (the Sub-Committee) has commenced an inquiry into Brexit and financial services in the UK. 

The following group of experts is expected to give evidence in support the work of the Sub-Committee:

  •  Professor Eilis Ferran, Professor of Company & Securities Law, Cambridge University
  • Professor Sir Charles Bean, Professor of Economics, London School of Economics
  • Andrew Gray, UK regional financial services leader, PricewaterhouseCoopers
  • Anthony Browne, Chief Executive, British Bankers’ Association
  • George Hay, European Financial Editor, Breaking views, Reuters
  • Professor Eilis Ferran, Professor of Company & Securities Law, Cambridge University
  • Professor Sir Charles Bean, Professor of Economics, London School of Economics

Here are some of the questions the Sub-Committee is likely to pose:

  • The reaction of financial services firms to the outcome of the EU referendum result
  • The possibility of relocation of financial services firms from the UK
  • Critical priorities for the UK financial services sector in both the withdrawal negotiations and in negotiating a future relationship for the UK with the EU
  • ‘Equivalence’ rights to access the EU Single Market for the UK
  •  Financial regulatory cooperation between the UK and the EU under different models of EU membership
  • A potential free trade agreement and the UK’s financial sector
  • Potential transitional arrangements
  • The importance of the financial passport for firms operating in the UK
  • Risks for retail customers and investors
  • Considerations for non-EU firms wishing to gain access to the EU via the EU’s equivalence regime

 What About the Effect on UK’s Overseas Territories and Crown Dependencies

(CDOTs) ?  Perhaps this will be the subject of a separate Sub-Committee.

No doubt when the ‘horse-trading’ begins between the UK and the EU it will be important that the CDOTs are not inadvertently disadvantaged. This is a practical negotiating issue because if Brexit means Brexit means that, London will have to more aggressively assert is ‘offshore’ profile, then the City becomes another competitor for international business.

In an era of comprehensive international tax reform which challenges the business models of International Business and Financial Service centres who focus on zero tax; like the CDOTs, it will be increasing difficult to escape the pressure to adopt some level of taxation.Moreover, the BEPS project is another challenge to ‘tried and tested’ IFC modalities. This means that it cannot be presumed that the Brexit-effect on the UK will be the same for its CDOTs.

 

 

 

 

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