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Brexit Revisited: London Calling - Part 1

Services: Knowledge Hub DATE: 20/04/2023

Matheson LLP's most recent Knowledge Insights Series event on 30 March 2023, which was hosted in the firm's new London office, saw a panel of Matheson partners from Dublin and London discuss with Mr Dan O' Brien, chief economist at the Institute for International and European Affairs, the implications of Brexit on the latest economic services data from Ireland, the UK and a number of EU economies.  The event was organised in the wake of the "Windsor Framework," agreed on 27 February between the UK and the EU, and as the Retained EU Law (Revocation and Reform) Bill reached Report Stage in the House of Lords.

The Windsor Framework makes changes to the Northern Ireland Protocol which formed part of the UK-EU Withdrawal Agreement which formally took the UK out of the EU.  One of the key changes will involve dividing imports from the UK into Northern Ireland into “green lane” and “red lane” products.  It is expected that this system will significantly reduce checks on imports and that these arrangements will be facilitated by increased data sharing and market monitoring.  The European Union (Withdrawal) Act 2018 created a new category of retained EU law and the most important provisions of the Retained EU Law (Revocation and Reform) Bill involve sun-setting or turning off secondary retained EU law by 31 December 2023.

The main takeaway from the event was that the UK’s services sales with the EU continue to grow across almost all areas, but particularly in financial services and insurance / pension services.  Meanwhile, bilateral trade in services between Ireland and the UK has grown strongly since 2016, and continued to increase during 2022.  This has been due in large part to strong technology exports from Ireland to the UK, followed by the areas of business services and financial services.  Trade from the UK into Ireland has similarly been strong.

Beyond this account of stability and continuity, three possibilities for future regulatory developments were discussed: convergence, equivalence and divergence.

Joe Beashel, partner in Matheson's Financial Institutions Group, explained that there is already a commonality of enforcement trends across the EU, and a central setting of regulatory priorities.  Change is not likely in cases involving established frameworks like the Basel III Reforms (Basel 3.1) or Insolvency II.  This is largely due to the need to align with broader international standards and circumstances which might constrain any divergence.  On the other hand, Karen Reynolds, partner in the firm's Commercial Litigation and Dispute Resolution department, said that in some emerging areas, a rule book does not exist as yet and so it is open to regulators to create rules as required.  Finally, there is already evidence of divergent regulatory systems and legal practices in the ESG area with the US taking the lead in terms of enforcement actions.

A second theme emerged during the discussion, namely a division between areas of practice where there were established regulatory frameworks exemplified by Basel 3.1 and Insolvency II on the one hand, and then emerging areas of practice such as ESG where, in the absence of long established and internationally agreed regulatory approaches there may be increased divergence.  Having opened the panel discussion with a short summary of the Retained EU Law (Revocation and Reform) Bill, Rory O'Keeffe partner in the firm's Technology and Innovation Group predicted different effects in terms of divergence or equivalence, depending on which particular practice area was involved.  In relation to data protection he said that the UK was adopting its own legislative framework - the UK Data Protection and Digital Information (No 2) Bill - which represents a change from earlier UK approaches.  In relation to AI regulation he said that there may be opportunities in the UK taking a different approach and in this regard an additional alternative for the UK was identified, not only in this area, namely the adoption of a wait and see approach.

We will continue to discuss the reality of regulation and compliance post-Brexit, with further events on specific practice areas as events unfold.  We will publish a further Insight piece on the progress of the Retained EU Law (Revocation and Reform) Bill on our website in the near future.

In the meantime, please contact your regular Matheson advisor if any of the topics mentioned in this seminar are of interest to you.