Conor Foley - Norton Rose Fulbright
In two weeks’ time the UK will vote on whether to leave or remain a member of the EU. Throughout the referendum campaign both sides have raised concerns over the possible impact of an in or out vote on the British economy. Many of those calling for the UK to leave the EU have suggested that too many UK businesses have to comply with legislation that is ‘handed down’ from Brussels, without the UK government having the opportunity to help shape it. This new research report, however, shows that the UK Government has played a significant role at the EU level in formulating legislation relating to the financial services sector.
The research analyses five case studies of financial services legislation proposed and adopted in the last ten years, in order to better understand the extent to which the UK has engaged with and influenced legislation successfully. Ultimately, we find that the UK plays a key role in EU negotiations and has been able to shape emerging policies through its membership of the European Union.
The analysis draws on a range of resources, including interviews with current and former EU institution and member state government officials, legislators, lobbyists and other stakeholders. They point to significant successes of UK negotiators, from protecting the choice of investment funds available to UK investors in the ‘Alternative Investment Fund Managers Directive’; to ensuring a workable ‘passporting’ regime in ‘MiFID 2’. Crucially, across all five case studies, it is clear that the UK gains far more often than not through its legislative negotiations.
And how does this compare to the experiences of European countries outside of the EU with access to the Single Market? Iceland, Liechtenstein and Norway in the EEA and, in a different framework, Switzerland, are also assessed on their ability to negotiate and shape policy. The report finds that none of these alternative arrangements provide the same level of potential ability to influence as being an EU member state. These countries do, however, feel the impact of EU legislation on their domestic markets. In order to access the EU’s market of 500 million consumers, they must have domestic laws in place that replicate those of the EU. For Switzerland and other ‘third countries’ this means they must be assessed as ‘equivalent’. For Norway this means EU legislation is added to the EEA agreement and must be adopted nationally. If the UK were to adopt similar arrangements, this would mean that the UK would inevitably need to implement EU legislation without being able to shape it.
There are areas where the UK could do better, but despite this, the results of the research clearly show that outside of the EU, the UK would have almost no ability to influence financial services legislation that directly impacts the City of London.