The withdrawal of the United Kingdom (UK) from the European Union (EU) without a related agreement is now a realistic possibility. Less than three months from the UK’s scheduled exit from the EU, the British Parliament has yet to ratify an agreement.
In light of the above, according to news reported in major Italian financial newspapers and other sources, the Italian parliament is considering a vote in early in January on a special law that would entrust to the Italian government, in the absence of an agreement between the UK and the EU, the implementation of specific actions. These would be aimed at:
- recognising the qualifications and professional skills of Italian, British and EU citizens in the UK
- increasing diplomatic consular staff to manage Italian citizens’ needs and those of customs control facilities during the phase of normalisation of bilateral relations
- protecting British citizens’ freedom of movement and doing business in Italy
- allowing the movement of goods and security checks
- ensuring the continuity of contractual arrangements in place as of the date of Brexit, with specific reference to non-standardised derivatives contracts (over-the-counter), and
- supporting the full convertibility, in both countries, of private pension funds.
These actions should be set forth by the Italian government into one or more legislative decrees, to be presented to the competent commissions of the Italian parliament within three months from when the law in question enters into force. There will then be another maximum ninety days period before the decree(s) become effective, depending on whether the parliamentary commissions require changes to be made.
In light of this process and the related timeline, a first concern is clearly that, regardless of the measures the Italian government proposes, they will not be ready and in force by the end of March. Therefore, it could be necessary to adopt an urgency decree, rather than a law delegating action to the government, which would offer the kind of fast-track action required given the circumstances.
However, a second concern is that this draft law, based on available information, offers very limited help to the financial sector, its infrastructure and its operators. This is because it contains no reference to temporary permission for UK firms beyond credit institutions and beyond merely ensuring contractual continuity of OTC derivatives.
Indeed, based on available sources, the Italian government would be delegated to take actions merely to guarantee temporary contractual continuity of OTC derivatives. And, to do so, it would request that CONSOB grant temporary permission only to UK credit institutions (and not, for example, to MIFID firms or management companies) to operate as legitimate counterparties (of OTC derivatives) in the Italian market.
In light of the above, many are lobbying to make changes to the draft law, which is still a starting point, to ultimately ensure that the UK parliament’s lack of approval of an agreement with the EU does not result in severe disruption of the financial markets.
Or instead, the recent example offered by Germany could provide a completely different approach.
The somewhat obvious and most straightforward option is thus, as mentioned above, for the Italian government to adopt an urgency decree. The content of this decree should be that of entrusting CONSOB, the Bank of Italy, IVASS (the insurance regulator), COVIP (the pension fund regulator) and all other relevant Italian regulators, with the adoption of regulatory measures, with force of law (ie with the authority to override conflicting law provisions – eg those conditioning the granting of licences to the existence of cooperation agreements with the regulators of the relevant third Country), providing temporary permissions for UK firms to continue conducting regulated business in Italy.
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