Brexit update

On 10 April 2019, the European Council, in agreement with the United Kingdom (“UK”), took a decision to grant a further extension to the period under Article 50(3) of the Treaty on the European Union for the UK to leave the European Union (“EU”) (“Extension Decision”).

The Extension Decision allows the UK more time to ratify the withdrawal agreement endorsed by the European Council on 25 November 2018 (“Withdrawal Agreement”, see the Brexit Update in our December 2018 Newsletter). The extension will last until such UK ratification, but it will not continue past 31 October 2019. If the UK ratifies the Withdrawal Agreement before such date, it will leave the EU on the first day of the month following the completion of the ratification procedures. In any event, the withdrawal must happen no later than 1 November 2019.

The Extension Decision contains the following principles:

• the UK will remain an EU Member State until the new withdrawal date with all the associated rights and obligations;
• the UK must organise elections for the European Parliament in the absence of ratification of the Withdrawal Agreement by 22 May 2019. Failure to do so will imply the end of the extension on 31 May 2019 and a no-deal Brexit will ensue;
• during this extension period, the UK will refrain from any measure which could jeopardise the attainment of the EU’s objectives, and it will not undermine the letter or spirit of the Withdrawal Agreement or hamper its implementation through any unilateral commitment, statement or other act;
• during this extension period, the Withdrawal Agreement will not be open to renegotiation.

The European Council will review the progress of this extension in June 2019.

At national level, the Luxembourg Parliament has adopted a law to protect the rights of UK residents living and working in Luxembourg in the event that the UK leaves the EU without a Withdrawal Agreement (see our Newsflash "Rights of residence safeguarded for UK citizens residing in Luxembourg" on our website). In addition, as discussed in the Banking and financial services and in the Asset management and investment funds sections of this Newsletter, two new laws in relation to the Luxembourg financial sector were adopted providing for protective measures for the banking, investment services, payment services and insurance sector, on the one hand, and the investment funds and asset management sector, on the other hand, in such a scenario.

In parallel, at EU level, the European Parliament has also adopted legislative safeguard measures to limit the negative impact of a no-deal Brexit on citizens.

Further, the European Securities and Markets Authority (“ESMA”) has released several public statements relating to Brexit. Statement 70-155-7253 covers the impact of a no-deal Brexit on MiFID II/MiFIR and Benchmark Regulation provisions. Statement 65-8-6254 covers the impact on ESMA’s databases and IT systems in the event of a no-deal Brexit scenario. Finally,  Statement 70-155-7329 discusses the trading obligation for shares under Article 23 of MiFIR in the absence of an equivalence decision in respect of the UK by the European Commission.