Brexit: Luxembourg prepares for transitional period
Draft Bill n°7401 sets out the measures to be taken in relation to the Luxembourg financial sector in the event of a “hard Brexit”.
Passporting and Continuity
The Draft Bill grants the Luxembourg financial regulator (the CSSF) and insurance regulator (the CAA) the ability to ensure the continuity of existing contracts between UK firms and their Luxembourg counterparties during a transitional period of 21 months after Brexit. It also permits passporting arrangements to continue to function during this time. It does not, however, extend to any new contracts concluded after Brexit unless it is possible to establish a close link between those contracts and existing contracts executed prior to the withdrawal date.
UK firms will therefore be allowed to provide the following services during the transitional period without any new authorisation:
- banking/investment services;
- electronic money/payment services;
- management of UCITS;
- management of AIFs; and
- insurance/reinsurance activities.
The Council of State published its opinion 5 March 2019 and the Draft Bill is now following the legislative process. The Draft Bill leaves flexibility to the CSSF regarding the implementation of the transition arrangements through either:
- Publication of a general measure granted to all supervised entities; or
- Individual decisions granted on a case-by case basis.
Brexit is approaching and an efficient process for confirming extensions of existing passporting arrangements is critical.