Documents considered by the Committee on 27 March 2019 Contents

Meeting Summary

The Committee looks at the significance of EU proposals and decides whether to clear the document from scrutiny or withhold clearance and ask questions of the Government. The Committee also has the power to recommend documents for debate.

Brexit-related issues

The Committee is now looking at documents in the light of the UK’s decision to withdraw from the EU. Issues are explored in greater detail in report chapters and, where appropriate, in the summaries below. The Committee notes that in the current week the following issues and questions have arisen in documents or in correspondence with Ministers:

Summary

Financial services: EU regulation of the derivatives market

The Committee has cleared from scrutiny the EU’s “EMIR REFIT” proposal, new legislation that will update how the European market for derivatives—like currency or interest rate swaps—is regulated, primarily through the obligation to ‘clear’ such transactions via a Central Counterparty. The new rules are likely to have a direct and significant impact on the UK clearing industry despite Brexit, given the pre-eminent position of the UK’s clearing industry worldwide and the large amounts of euro-denominated derivatives that are traded in London. If the UK wants to retain current levels of market access after it leaves the Single Market—in a ‘no deal’ scenario or at the end of any post-Brexit transitional period if the Withdrawal Agreement is ratified—it will need to obtain ‘equivalence’ with EU rules, limiting the UK’s domestic regulatory flexibility even when EU law now longer directly applies here.

Cleared from scrutiny; drawn to the attention of the Treasury Committee

Financial services: European prudential standards for investment firms

The European Scrutiny Committee considered the state of play on the EU’s new stand-alone prudential framework for investment firms (the “Investment Firm Review”), which is due to be formally adopted shortly after more than a year of negotiations in Brussels. The new legislation is driven in part by Brexit, which will cause a large part of Europe’s investment services industry to fall beyond the jurisdiction of EU financial services law. The new legislation therefore introduces stricter conditions for ‘equivalence’—the mechanism by which non-EU firms can access the Single Market for investment services—under the Markets in Financial Instruments Regulation. The extent to which this will bind UK financial services regulations to EU law in the long term in return for market access is one of the key concerns flagged by the Committee.

Cleared from scrutiny; drawn to the attention of the Treasury Committee

Stronger EU rules on the return of illegal migrants

The Government informs the European Scrutiny Committee that it has decided not to opt into a proposed EU Directive which seeks to strengthen existing EU rules on the return of illegal migrants and to prevent their re-entry into the EU. The Committee clears the proposal from scrutiny whilst expressing disappointment at the time taken to notify the Government’s decision (taken in January). In doing so, the Committee seeks assurance that the procedural safeguards set out in the proposed Directive are adequate given the risk of inadvertent breaches of national immigration rules while UK nationals adjust to the loss of free movement rights after leaving the EU.

Cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs Committee.

Documents drawn to the attention of select committees:

(‘NC’ indicates document is ‘not cleared’ from scrutiny; ‘C’ indicates document is ‘cleared’)

Business, Energy and Industrial Strategy Committee: Copyright in the Digital Single Market [Proposed Directive (NC; scrutiny waiver granted)]

Digital, Culture, Media and Sport Committee: Copyright in the Digital Single Market [Proposed Directive (NC; scrutiny waiver granted)]

Environmental Audit Committee: EU framework on endocrine disruptors [Commission Communication (C)]

Home Affairs Committee: Stronger EU rules on the return of illegal migrants [Proposed Directive (C)]

International Trade Committee: EU retaliatory duties on imports from the US (Byrd amendment WTO dispute) [(a) Proposed Delegated Regulation; (b) Commission Report (C)]

Science and Technology Committee: Copyright in the Digital Single Market [Proposed Directive (NC; scrutiny waiver granted)]

Treasury Committee: Regulation of covered bonds [Proposed (a) Directive; (b) Regulation (C)]; Prudential requirements for investment firms [Proposed (a) Regulation; (b) Directive (C)]; Financial services: Trade in over-the-counter derivatives (EMIR REFIT) [Proposed Regulation (C)]





Published: 2 April