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Brexit’s Potential Impact on Corporate Passporting and the Banking Industry - Part 7 [VIDEO]

Our panel of leading analysts tackles the complex issue of corporate passporting and how Brexit might complicate the issue even more in this latest addition to our multi-part video series discussing the U.K.’s decision to leave the EU and the potential challenges and opportunities Brexit poses for businesses on either side of the Atlantic.

Mark: Gotcha.  And in London, Jonathan, when we were talking about this concept to, of passporting, you know, immediate after the vote, I wondered if I was going to be able to get back and visit my parents and they said, well, we’ll see you more often now because the Pound is lower but I said, well, only 10 percent more but the, as we start to look at merges and acquisitions and this passporting, and can you tell us just a little bit more about passporting because it’s not just about whether or not I can get back into the UK or the EU, it’s more about how, the freedom of companies to move around, isn’t it?

Jonathan Blair: Yeah, this is very much irregulatory driven issue.  So, passporting is the concept whereby a license effectively is given to financial institutions to sell their services across Europe.  And, the way in which passporting works is that typically London, because London is the world’s largest financial center, is used as the point of entry for many financial institutions, U.S. and elsewhere into Europe.  So, if you have a license to operate in London, then that gives you the ability to sell your services elsewhere in Europe, whether that be Germany, France and elsewhere.  So, that’s what passporting is about, markets, it has nothing to do with whether you can come on holiday to the UK.

Jonathan Blair: I think, you know, sticking with passporting for a moment, I mean, that is a critical, critical issue for the, not just for the United Kingdom but actually probably for the world.  I know it upsets New Yorkers but the reality is that, you know, that London is the largest financial center in the world.  What that means is the infrastructure is here, the people are here, the resources are here, and London is set up as the world’s largest financial center.  So – as well as being a significant contributor to GDP and, you know, London contributes a staggering 22 percent to the UK’s GDP which, that’s another story, but politically, that’s clearly something that government has to address in any event.  But as well as that being critical to the UK, it’s actually just as important to Europe.  We need to have a strong financial center within Europe.  Yes, and Paris, Frankfurt, you know, Dublin was mentioned there before.  They would dearly like and have for many years liked to have had more of that particular pie.  But, there are very strong, practical reasons why that’s going to be difficult.  So passporting is going to be critically important.  That’s something that the UK government has worked hard a building up over the last 40 years while the UK’s been in Europe.  It’s not something that we’re going to give away lightly.  We’re going to work hard to make sure those passporting rights to continue so that’s probably from an economic perspective number one.

The more sensitive one, which was really one of the main themes that was played out during the referendum is around migration so free movement of people.  A lot of people saw this as a vote around migration and whether or not we wanted to see jobs going to non-UK citizens, which actually was a bit of a nonsense, I mean, unemployment in the UK is at its lowest level for many, many years, since 2005.  So, it’s under five percent currently.  There are actually only two million non-UK workers, European workers in the United Kingdom.  And, although this is a generalization, a lot of the work that they do, a lot of the areas they’re operating in are areas where candidly UK work, UK businesses are struggling to get UK workers to do that.  So actually, the UK needs these migrant workers just as much as these migrant workers want to work in the UK.  And, after all, that’s a good thing, isn’t it?  So, without a shadow of a doubt, free movement of people is going to be probably the single biggest issue within the negotiations that take place.  Without a doubt, the European Union is wanting to give the UK a bloody nose, they’re going to say look, this isn’t a good thing.  We don’t want to see France where, actually, the European Union is even less popular than it was in the UK.  I mean, don’t forget, the UK only just voted to leave the UK, 600,000 people there about had gone the other way, we wouldn’t even be having this conversation.  In France, it’s a very different situation so there’s a political imperative around there.  And, I think, without a shadow of a doubt, the political pawn that’s going to be played there is going to be around people and free movement of people.

Mark: Jeremy, as we look at this, you’ve been in diplomatic service for twenty-plus years.  How do you even being to look at all the things that need to be negotiated...

Jeremy Pilmore-Bedford: Oh, you’re right, that’s very complicated and the government’s doing that process at the moment.  It’s still, the government, is consulting all sorts of different stakeholders in formatting what will be asked in our negotiation with the European Union.  There’s, in fact, at least two negotiations anywhere.  There’s the one for actually leaving the European Union which sort of works out the route for leaving and there’s a second negotiation about what will our relationship with the European Union be from the moment we actually finally exit the European Union.  So, those two negotiations will be done.  And, they will need to be done in parallel and that will be part of the talks we’ll be having throughout the Autumn no doubt.  To work at how we’re actually going to structure these negotiations.

But, going back to the consulting, say the British Government will be consulting with the nations and regions of Britain because we had two of the nations of Britain voted to remain.  So, Scotland and Northern Ireland voted to remain as well as important cities like London and Central Manchester and others as well.  So, they will be consulting with them.  They will also be consulting with the different companies and sectors of the British economy so the City of London, we’ve talked about with passporting.  But, there’s other very important sectors that have, that rely full access to the European Union single markets.  So, the automobile sector which has been incredibly successful over the last 15 to 20 years, a massive turnaround in their fortunes.  Huge amount of exports of high value cars and automobiles to the European Union.  They want to make sure that they do not face tariff barriers or lots of paperwork.  And, you know, Certificates of Origin or things like that so that’s all going to be taken into account as well.  And, the government will have to bring that all together into one ask of Europe.  So, a difficult task.  I’m glad I’m in Atlanta.

View Part 1 - Brexit: Overview and Reactions

View Part 2 - Brexit: Currency Issues and Inflation

View Part 3 - Brexit: Outlook for the EU and Impact on the U.S.

View Part 4 - Brexit: U.S. Opportunity in the U.K.

View Part 5 - Brexit: The Impact on Mergers and Acquisitions

View Part 6 - Brexit: What the U.K.’s Exit Might Look Like

View Part 8 - Brexit’s Potential Impact on Corporate Passporting and the Banking Industry

Copyright © 2022 Womble Bond Dickinson (US) LLP All Rights Reserved.National Law Review, Volume VI, Number 307

About this Author

Theodore Claypoole, Intellectual Property Attorney, Womble Carlyle, private sector lawyer, data breach legal counsel, software development law
Senior Partner

As a Partner of the Firm’s Intellectual Property Practice Group, Ted leads the firm’s IP Transaction Team, as well as data breach incident response teams in the public and private sectors. Ted addressed information security risk management, and cross-border data transfer issue, including those involving the European Union and the Data Protection Safe Harbor. He also negotiates and prepares business process outsourcing, distribution, branding, software development, hosted application and electronic commerce agreements for all types of companies.


Jeffrey S. Hay, Corporate lawyer, Womble Carlyle, Law Firm

Jeffrey Hay serves as a member of the Firm’s Management Committee, is the Office Managing Partner of the Charlotte Office and is the Leader of the Firm’s Global Business Group.  He also serves on the leadership group for the Bond Dickinson-Womble Alliance. 

Jeff Hay has represented corporate clients, private equity groups and venture capital funds for more than 30 years. He has extensive experience in representing middle market, emerging growth and technology companies in private equity and venture capital financings, mergers and acquisitions,...