Brexit

Brexit: a Maltese perspective

Ever since that faithful day on 24 June 2016 Brexit has been characterized by disarray, discord and disorder. The British Parliament has been in disarray and even after countless parliamentary votes remains undecided on the next course of action. 29th March 2019 should have marked the day the United Kingdom (UK) officially leaves the European Union (EU). That day has come and gone with British lawmakers still unable to decide on a way forward. 

The EU had set April 12th as the deadline for the UK to either leave the EU without a deal or revoke article 50. In the latest twist to this saga, the British Parliament voted in favour of a delay in Brexit beyond the current 12th April deadline. It now remains to be seen whether the EU will accede to this request. In view of this latest development what are the likely scenarios we could be faced with?

Options in the pipeline

Currently there are four possible ways how this could end:

No deal – This would see the UK crashing out of the EU without any deal at all, a hard Brexit. Businessmen, politicians and economists alike all believe that leaving without a deal is the worst-case scenario and would bring about a catastrophic scenario bringing trade between the EU and the UK to a grinding halt.

Soft Brexit/Brino – Mrs May’s deal has been branded by many euro-sceptic MPs as a ‘Brexit In Name Only’ or Brino for short. There remains the possibility that Britain’s lawmakers agree to pass Mrs May’s deal through parliament.  At the same time a proposal has been put forward to debate a law which would force Mrs May to seek a longer extension to Article 50, thus delaying Brexit again and affording the UK Parliament more time to plan for an orderly Brexit.

Early election – Next Britain’s election is due to be held in 2022 but Mrs May has offered to step down before the end of her term in the hope of breaking the existent deadlock and bring some order to the chaos and order to Brexit.

A second referendum – The possibility of a second referendum is seeming less and less likely although, as we have seen throughout these tumultuous 18 months you cannot discount anything.  Many believe that this saga could be resolved through a second public vote now that all people are better informed of what Brexit actually entails.

Inbound and outbound business

As part of its efforts to ensure minimal disruption to the financial services industry the UK Government has introduced a Temporary Permissions Regime (TPR) for EEA companies and funds passporting their services into the UK which will be set in motion if a hard Brexit takes place.

So far, the European Commission has not reciprocated with a similar EU wide regime despite the European Securities and Markets Authority (ESMA) and the national regulators of the EU27 countries having agreed certain Memoranda of Understanding with the Financial Conduct Authority (FCA) and with the Bank of England.

Throughout this journey several governments of the EU27 countries’ have started talks and implemented rules to attract UK based business to their jurisdiction. Germany, Luxembourg, Netherlands, Norway and Finland are leading this movement by setting some form of regime or regulations in place with the hope to curtail any disruption in case of a hard Brexit.

Malta’s position

On the 28th of March the MFSA issued a circular announcing its intention to introduce a TPR for UK Investment Funds, Asset Managers and Investment Firms passporting into Malta in the scenario of a hard Brexit. It is envisaged that the TPR shall grant temporary permission to UK entities which already passport their services into Malta. It is planned that the TPR granted by the MFSA would remain active for twelve months from the date of Brexit. UK entities which passport into Malta under the TPR would not be allowed to engage new clients/investors post-Brexit date.