Spain – Financial services: Measures to minimise the impact of a hard Brexit

20 March 2019
Jurisdictions: Spain

Contents

Royal Decree-law 5/2019 of 1 March 2019 adopting contingency measures for the United Kingdom’s exit from the European Union without agreement under Article 50 of the Treaty on European Union was published in Spain’s official gazette on Saturday 3 March (the "RDL").

The measures in the RDL are an attempt to minimise the impact of the UK’s departure from the EU with two fundamental aims: (i) protecting Spanish and British citizens who exercise their right to free movement before the exit date; and (ii) protecting the normal course of trade and Spain’s economic interests.

The RDL sets out general principles and authorises the Spanish government and heads of ministerial departments to issue the necessary rules and procedures for its implementation.

As regards financial services, RDL seeks to protect those relationships (contracts) established before the Brexit date to avoid disruption in the market. We summarise the main aspects below:

  • The RDL guarantees the continuity of contracts for the provision of banking securities, insurance or other financial services entered into in Spain by UK regulated entities before the UK’s withdrawal from the EU (these will remain valid).
     
  • Firms must nonetheless adapt to the rules for third countries, as follows:
     
    • It will not be necessary to apply for authorisation to carry on activities arising from those agreements to the extent those activities are not subject to authorisation in Spain (e.g. merely administering repayments of loans or enforcement of obligations under a derivative agreement).
       
    • However, authorisation will be required under the regime for third countries to (i) enter into new agreements (including new transactions under existing derivative master agreements such as the ISDA); (ii) renew pre-existing agreements; (iii) change parties’ essential obligations under pre-existing agreements; or (iv) provide new services in Spain.
       
    • This authorisation will also be necessary to carry on activities arising from pre-existing agreements if such activities require authorisation in Spain (this would be the case of activities to be conducted under pre-existing agreements that entail ongoing services, such as portfolio management). However, in this case, firms will have a period of nine months from the date of a hard Brexit to apply for the relevant authorisation (or to terminate these agreements or transfer them to another firm), being able to carry on these activities during that period.

 Entry into force
 
The RDL will come into force the day that the Treaties of the European Union cease to apply to the UK, in accordance with Article 50.3 of the Treaty on European Union, unless a withdrawal agreement between the EU and the UK has come into effect beforehand.
 
It should also be noted that the RDL must be ratified by the Spanish parliament before 2 April.