The final part of our series of articles focusing on Brexit and the impact to the Channel Islands, courtesy of Carey Olsen.
Today, we focus on some of the opportunities that lie ahead for the Channel Islands.
Times of great change such as Brexit lead to uncertainty and can be challenging, especially in the unprecedented circumstances represented by Covid 19.
However, such times also present great opportunities.
UK fund managers
As described above, talks have begun between the UK and the EU on the future of the UK’s access to EU financial markets, with the objective of agreeing a Financial Services MoU by the end of March 2021. In the absence of Brussels granting regulatory equivalence or a free trade agreement covering services (which is rare), WTO terms will continue to apply. If no such agreement is reached, this could create challenges for UK-based fund managers. In particular:
- UK fund managers who currently use the EU passport under the Alternative Investment Fund Managers Directive (AIFMD) may no longer be able to do so because the UK is outside the EU.
- Until the UK implements cooperation agreements with Member States those managers may not be able to market funds in the EU by private placement.
Some UK fund managers have responded to this challenge by building a presence in the EU. However many fund managers continue to market Guernsey and Jersey funds in continental Europe using national private placement regimes.
The Islands already have in place the necessary cooperation agreements to enable local fund managers to do so. Accordingly, the Islands may be a suitable alternative home for UK fund managers facing such challenges.
UK insurance market access
The withdrawal of the UK from the EU should allow the UK to determine for itself what access to grant to its markets. Unlike the Islands, the British Overseas Territory of Gibraltar is leaving the EU alongside the UK. However, the UK has granted to Gibraltar ‘passporting rights’ to enable Gibraltar insurers to write insurance business in the UK without being licensed by the FCA. Those rights stem from a bilateral agreement between Gibraltar and the UK. It is possible that the Islands could secure similar access to the UK market now that the Transition Period has ended.
Free trade and other international agreements
As noted above, the UK has sought to roll international trade agreements and arrangements to which it was a party by virtue of it being an EU Member State.
However, one of the express intentions of the UK government was to exploit the opportunities presented by its departure from the EU to negotiate new international agreements (i.e. with countries and trading blocs with which the EU does not have agreements and currently trades on WTO terms). That includes negotiations for agreements with Commonwealth countries such as Australia and New Zealand, and others such as the USA. The Islands have already confirmed their wish that the UK’s Department for International Trade consider the Islands’ interests within those negotiations.
Our thanks to the Carey Olsen teams in Guernsey and Jersey for sharing their expertise and advice.
- Guernsey: Christopher Anderson (Partner), Elaine Gray (Partner), Matthew Brehaut (Senior Associate), Julia Schaefer (Senior Associate)
- Jersey authors: Robert Milner (Partner), David Patterson (Senior Associate)