Lapsing of the Luxembourg transitional Brexit regime
Head of Finance regulatory
06 February 2020
On 8 April 2019, the Luxembourg legislator adopted a specific Luxembourg (Brexit-related) act (the Brexit Act) to anticipate the consequences of the loss by UK firms of their passporting rights.
The Brexit Act also aimed to ensure the continuity of existing contracts and the orderly functioning and stability of the financial markets in the event of withdrawal of the UK from the EU without conclusion of a withdrawal agreement based on Article 50(2) of the Treaty on European Union (the so-called Hard Brexit).
Under the Brexit Act, the CSSF had the power to grant, from the date of a Hard Brexit and for a limited period of time, a derogation from the requirements applicable to third-country firms wishing to provide, among others, banking, investment or payment services in Luxembourg with respect to UK-authorised firms providing their services in Luxembourg on the basis of the freedom to provide services.
In light of the withdrawal agreement, which provides for a transition period until 31 December 2020 during which EU laws and regulations will continue to apply to UK entities (meaning that the latter still benefit from their passporting rights in Luxembourg) and which was formally adopted last week confirming the UK’s decision to leave the EU with a withdrawal agreement on 31 January 2020 at midnight (Brussels time), the CSSF issued a press release on the same day to inform all UK-authorised firms that all individual decisions (and, as the case may be, pending notifications) under the Brexit Act would lapse accordingly.
UK-authorised firms are invited to take all necessary steps, including contingency planning and client information, in consideration of the expiry of the transition period on 31 December 2020.
1. This derogation was of a temporary nature only, applicable with respect solely to existing business relationships with Luxembourg clients and designed to enter into play in the case of a Hard Brexit only. The CSSF set the period of time during which UK-authorised firms could benefit from this derogation to 12 months. Furthermore, UK-authorised firms had to formally notify the CSSF if they wanted to benefit from the transitional regime. See CSSF press releases 19/33 and 19/41: http://www.cssf.lu/fileadmin/files/Publications/Communiques/Communiques_2019/PR1933_mandatory_notification_UK_firms_Brexit_150719.pdf https://www.cssf.lu/fileadmin/files/Publications/Communiques/Communiques_2019/PR1941_mandatory_Brexit_notification_forms_020819.pdf