On 21 October 2020, HM Government published the Financial Services Bill 2019-21 (the “Bill”). The Bill amends the U.K.’s existing legislative framework for financial services in 17 distinct areas, addressing issues arising from the U.K’s departure from the E.U. In this context, the FMLC has sent a letter drawing attention to a few areas of legal uncertainty within the Bill’s provisions.
Clause 36 of the Bill is designed to address concerns that the Financial Collateral Arrangements (No. 2) Regulations 2003 (the “2003 Regulations”), which implement Directive 2002/47/EC on financial collateral arrangements (the “Financial Collateral Arrangements Directive”) might be ultra vires the powers in Section 2 of the European Communities Act 1972. Clause 36 of the Bill acts retrospectively to cure any lack of vires in the making of the 2003 Regulations. Stakeholders have expressed to the FMLC concerns as to whether Clause 36 of the Bill sufficiently meets the standard for retrospective legislation, established by the European Court of Human Rights (“ECHR”). The FMLC urges HM Government to consider adding a provision to Clause 36 of the Bill establishing a cut-off date so as to not interfere with asserted claims and to ensure that the ECHR standard is met.
The Bill also amends the U.K’s “onshored” version of Regulation (EU) 2016/1011 on indices used as benchmarks (the “Benchmarks Regulation” or “BMR”) to provide an overarching legal framework which gives the FCA new and enhanced powers to manage the wind-down of a critical benchmark. The prospective use of such powers in the context of the discontinuation of LIBOR was the subject of comment in the FMLC’s Report published in October 2020. The FMLC draws attention to the complexities which may arise in the context of the possible interaction of these powers with similar measures in other jurisdictions, and urges the authorities to engage in careful international coordination.
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