42.Alternative investment funds (“AIFs”) are funds that are not regulated at EU level by the 2014 Undertakings for Collective Investment in Transferable Securities (UCITS) Directive; they are usually aimed at professional and institutional investors. The regulatory framework in the EU for AIF managers is the Alternative Investment Fund Managers Directive (“AIFMD”). In the Explanatory Memorandum (EM) to these draft Regulations, HM Treasury (HMT) says that they propose amendments to existing UK legislation which implemented AIFMD, and to related European Commission delegated and implementing regulations, to ensure that they continue to operate effectively in a ‘no deal’ scenario after exit day.
43.HMT says that the use of the “marketing passport”, which allows EEA AIF managers to market the EEA AIFs they manage in any other Member State, would not operate effectively without a negotiated agreement with the EU. To ensure that UK investors have continued access to AIFs that are currently marketed in the UK, the draft Regulations provide for a temporary permissions regime for EEA AIFs and UK AIFs that have been marketed by EEA AIF managers in the UK via a passport before exit day (as well as making other provisions).
44.On 13 November 2018, HMT laid two other sets of draft Regulations: the draft Social Entrepreneurship Funds (Amendment) (EU Exit) Regulations 2018; and the draft Venture Capital Funds (Amendment) (EU Exit) Regulations 2018. In the EM to those Regulations, HMT referred to the Alternative Investment Funds Managers (Amendment) (EU Exit) Regulations 2018 (“the latest Regulations”), and to the intention that the latter would provide a temporary permissions regime allowing both EU Social Entrepreneurship Funds and EU Venture Capital Funds to continue to access the UK market. Since the latest Regulations were not laid before Parliament at that time, we published additional information from HMT about the interaction between the instruments in our 7th Report of the current Session. HMT stated its intention to lay the latest Regulations during November, and has now done so.
45.The EU framework for electronic communications has already been transposed into UK law, principally through the Communications Act 2003 and (in respect of the management of the radio spectrum) the Wireless Telegraphy Act 2006. These Regulations amend those Acts to ensure that the law on electronic communications will operate in substantially the same way after the UK’s withdrawal from the EU and seeks to remove redundant or inoperable references to maintain the status quo. It provides for powers previously exercised by the European Commission (“the Commission”) to be conferred on the Secretary of State or Ofcom. For example, the instrument removes the obligations on Ofcom to provide information to the Commission and replaces this with a power for Ofcom to share information with the Commission and the Body of European Regulators for Electronic Communicators, where it considers this appropriate. Ofcom is also able to grant licences for wireless telegraphy, in particular to use radio spectrum; however, Ofcom will no longer be restricted to the requirements set out in EU legislation (although must ensure that conditions are objectively justifiable, non-discriminatory, proportionate and transparent). Some stakeholders have expressed concerns that removal of the requirement for EU consultation on certain Ofcom proposed regulatory measures amounts to a loss of a valuable check on Ofcom’s decision-making. Those stakeholders proposed that an equivalent function be recreated domestically to approve certain of Ofcom’s proposed measures. However, the Government decided not to adopt this proposal on the ground that “… it is not necessary to recreate the EU consultation procedure after EU exit, since its principal objective is harmonisation of regulatory practice to consolidate the EU internal market. It is clearly desirable that Ofcom’s decision-making is of a high standard, but safeguards already exist to ensure this, both in the procedural statutory requirements and in the availability of statutory appeal before the Competition Appeal Tribunal (or judicial review before the Administrative Court) of Ofcom’s decisions.” Although the UK will no longer be eligible for EU funding to support projects in this field after exit, a Government guarantee will support some project delivery.
46.These draft Regulations amend the law on ship recycling from exit day to provide that UK flagged ships must use an approved ship recycling facility on a new UK list (rather than on the EU’s approved European list). The UK list will initially include all the recycling facilities (UK, EU and non-EU facilities) that are on the European list. However, the Secretary of State will have the power to accept or remove facilities on the UK list. The Regulations also establish a new procedure to allow ship recycling facilities worldwide to apply for inclusion on the new UK approved list. The EU Regulation on Ship Recycling requires all new UK flagged ships to carry a valid inventory of hazardous materials (IHM) from 31 December 2018 onwards. While this requirement is being retained, the requirement on existing ships to carry an IHM from 31 December 2020 will not be. The Department for Transport has explained that “this is because the EU Withdrawal Act only retains any direct EU legislation that is operative immediately before exit day. However, such ships will still need to have an IHM before the ship is recycled at an approved UK recycling facility. We also expect all ships which call at an EU port will have an IHM by 31 December 2020, as EU Member States will require existing ships to carry one.”
47.An EU Directive requires all waste electrical and electronic equipment (WEEE) to fall within the scope of the Directive unless specifically exempt or excluded (called the “open scope” principle) and requires the categorisation and reporting of WEEE into six revised categories. The Waste Electrical and Electronic Equipment Regulations 2013 (which implemented the EU Directive) (“the WEEE Regulations”) provided for compliance with the EU Directive by moving from 14 to six categories from 1 January 2019. However, as the Department for Environment, Food and Rural Affairs explains in the Explanatory Memorandum, “financial obligations imposed on UK producers of electrical and electronic equipment are based on their market share in each of these categories. An assessment of costs and benefits demonstrated that the move to 6 categories would result in huge changes to individual producers’ market shares in each category. This would result in large swings to many individual producers’ costs under the WEEE Regulations with many producers paying significantly more.” Therefore, these Regulations will provide for the introduction of “open scope” whilst maintaining the existing 14 categories to “minimise burdens of EU legislation on the UK WEEE industry at a time where the UK is leaving the EU.”
48.Producers of electrical and electronic equipment are required under the WEEE Regulations to join producer compliance schemes (PCS), which deal with financial responsibilities in respect of the treatment, reuse, recovery, recycling and environmentally sound disposal of WEEE on their behalf. The WEEE Regulations also permit local authority designated collection facility operators who do not have a contract with a PCS to require any PCS to arrange for the collection and treatment of deposited WEEE (Regulation 34 collections). The PCS Balancing System (PBS) shares the cost of such collections amongst all member PCSs on a market share basis. Under the new Regulations, membership of the PBS will be mandatory for all PCSs. This is intended to ensure that all Regulation 34 requests are dealt with by a PCS and the cost shared on a market share basis amongst all PCSs in the UK.
49.This Order designates specified offences relating to the use of goods vehicles and trailers without the appropriate authorisation or registration, as offences that may be enforced through the Financial Penalty Deposit and Fixed Penalty Notice regimes, and sets the monetary amount for fixed penalties. The Road Safety (Financial Penalty Deposit) (Appropriate Amount) (Amendment) Order 2018, which the Committee considered in its 2nd report, set the FPD amount. The Department for Transport (DfT) has explained that the amounts provided for in this instrument mirror those which currently apply to similar offences and the DfT has an ongoing communications campaign about the new haulage permits and trailer registration schemes, targeted to those affected by these changes, to inform them about what they are required to do under the new regulations.
50.In the Explanatory Memorandum to this Order, HM Treasury (HMT) says that it implements EU Directive 2017/2399 (the Bank Creditor Hierarchy Directive), which amends the EU’s 2014 Banking Recovery and Resolution Directive (BRRD), specifically on the ranking of unsecured debt within the insolvency hierarchy. The instrument provides for a new class of secondary non-preferential debt to be issued by financial firms. HMT says that this will predominantly benefit building societies (for reasons arising out of their legal structure).
51.On 23 October 2018, HMT laid the draft Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018. HMT explained that the UK had implemented the BRRD, to achieve a common approach within the EU to the recovery and resolution of banks and investment firms; and that the draft Regulations were intended to ensure that the UK’s Special Resolution Regime (for dealing with failing banks and other institutions) was legally and practically workable on a standalone basis once the UK had left the EU (a process termed “onshoring”). We published information about the draft Regulations in our 4th Report of this Session.
52.We asked HMT whether it would need to make a further instrument to “onshore” the implementation through this Order of the Bank Creditor Hierarchy Directive (since the latter amends the BRRD). The Department has told us that the instrument has been drafted so that a separate “onshoring” instrument would not be required; and that there should be no deficiencies or provisions in the Order which would fail to operate effectively after exit day.
16 amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities [accessed 11 December 2018].
17 on Alternative Investment Fund Managers [accessed 11 December 2018].
18 Notably, the Alternative Investment Fund Managers Regulations 2013 () [accessed 11 December 2018].
19 , Session 2017-19 (HL Paper 238).
20 of the European Parliament and of the Council on waste electrical and electronic equipment [accessed 11 December 2018].
21 Which is approved by the Secretary of State.
22 , Session 2017-19 (HL Paper 203).
23 establishing a framework for the recovery and resolution of credit institutions and investment firms.
24 The hierarchy dictates the order in which assets are distributed to creditors in the case of an insolvency or resolution.
25 , Session 2017-19 (HL Paper 217).