Brexit : French update as of D-25 days


By Statute n° 2019-30 dated 19 January 2019, the Parliament authorized the government to adopt by way of ordinance measures to prepare for the withdrawal of the United Kingdom from the European Union without any agreement. Those measures will enter into force on 30 March 2019 in the event no withdrawal agreement is ratified by both parties by Brexit date

Since that date, 6 ordinances have been adopted, namely:

  • Ordinance n° 2019-36 dated 23 January 2019 containing miscellaneous provisions for adjustment and temporarily exemptions necessary for carrying out in emergency of works required by the restoration of controls on the border with the United Kingdom due to the withdrawal of this State from the European Union[1];
  • Ordinance n° 2019-48 dated 30 January 2019 in view to authorize the continuation of supply to the United Kingdom of defense related products and space equipment[2];
  • Ordinance n° 2019-75 dated 6 February 2019 relating to the contingency measures for the withdrawal of the United Kingdom from the European Union in the area of financial services (the “Financial Services Ordinance”) [3];
  • Ordinance n° 2019-76 dated 6 February 2019 containing miscellaneous measures relating to the entry, residence, social rights and professional activity, applicable in the event of withdrawal of the United Kingdom from the European Union without any agreement[4];
  • Ordinance n° 2019-78 dated 6 February 2019 relating to the preparation to the withdrawal of the United Kingdom from the European Union in the field of carriage by route of persons and goods and relating to the security in the channel tunnel[5]; and
  • Ordinance n° 2019-96 dated 13 February 2019 relating to the preparation to the withdrawal of the United Kingdom from the European Union in the field of the railway security in the channel tunnel[6].

The Financial Services Regulation combines with the EU Commission measures dated 19 December 2018[7].


I/ Equivalence of settlement systems and clearing houses

The Financial Services Ordinance contains provisions to ensure access of French participants to British interbank payment and securities settlement systems and clearing houses (CLS, CHAPS, CREST) following loss by the above of benefit of the EU Directive 98/26/CE dated 19 May 1998 on settlement finality in payment and securities settlement systems.


II/Measures relating to the financial contracts

In June 2018, the International Swaps and Derivatives Association published a master agreement subject to French law, offering an alternative to the English law ISDA master agreement widely used across the European Union.

However, practitioners sought several modifications of the French law to render recourse to the French law ISDA Master agreement more attractive.

In line with those proposals, the Financial Services Ordinance:

  • Extends the scope of close-out netting provisions to spot FX, sale, purchase and delivery of precious metals and transactions relating to CO2 allowances;
  • Creates a derogation from article 1343-2 of the French Civil Code prohibiting the compounding of interest due for less than one year in relation to financial contracts governed by ISDA and FBF master agreements;
  • To facilitate the entry into new agreements with EU27 counterparties, the Financial Services Ordinance provides for the replication mechanism of master agreements entered with UK entities to analogous agreements entered with a EU27 counterparty during a 12-months’ transition period provided that:

(i) the new master agreement is identical to the initial master agreement, save for clauses relating to the governing law and the competent jurisdiction designating French law and French courts,

(ii) the author of the replication offer is part of the same group as the existing UK counterparty and has the same or better credit rating, the offer is deemed to be accepted within 5 business days following receipt if the French counterparty carries out a new transaction.


III/ Measures relating to the insurance contracts

In the field of insurance activities, the Financial Services Ordinance has a twofold objective: (i) create an incentive to transfer insurance activities that can no longer be carried out by UK entities after the withdrawal of the United Kingdom from the European Union and (ii) provide legal certainty for the French policyholders and insureds.

A/ Continuity of existing contracts

Despite the loss of their EU passport, the UK insurers are authorized to continue the performance of insurance contracts validly entered before the Brexit effective date.

French policyholders and insureds who entered into an insurance contract before the Brexit effective date with a UK insurer, remain covered under their insurance contract.

B/ Prohibition of new regulated activities

After the Brexit effective date, UK insurers will neither be authorized to renew their policies nor enter any new transaction involving the issue of new premiums.

The exercise of prohibited insurance activities is subject to civil and criminal law sanctions. In this respect, the French Insurance Code provides that unlawful renewals and direct insurance transactions giving rise to the issue of new premiums are null and void, such nullity is not enforceable against policyholders, insureds and beneficiaries.

Criminal sanctions of violation of the provisions above are three years’ imprisonment and a fine of EUR 75,000.


IV/ Exposure of collective investment schemes to UK entities

Article 4 of the Financial Services Ordinance contains transitional measures in relation to collective investment schemes subject to ratios of exposure to the EU entities, to be further detailed by the French Economy Minister.


V/ Supervision of regulated activities

  • Supervision of pre-Brexit and run-off activities carried out in France by UK entities

The ACPR retains power as regards financial activities carried out in France by UK entities before Brexit and during the run-off of transaction portfolios upon the occurrence of the Brexit effective date.

  • Designation of the AMF as a securitization supervisor



  1. Credit agreements

Contrary to what the report accompanying the bill suggested, the ordinance has not defined what credit activities under agreements entered into before the Brexit date would be allowed and what events would not. In line with recommendations of the Paris Europlace High committee, the report had proposed that the contracts concluded prior to the withdrawal of the United Kingdom with French contractors located in the territory of the Union would not see their continuity questioned, even though the renewal of pre-Brexit contracts, new funding under uncommitted credit facilities, adding a new French borrower, changing the maturity date or the financing amount would be prohibited. Drawdowns under committed credit facilities, payment of a guarantee extended prior to Brexit after Brexit would remain authorized…

The ordinance has implicitly taken the view that professionals should rely on contractual provisions if they want to reduce legal uncertainty.

  1. Derivative agreements

Given the prohibition for the UK entities to carry out provision of new financial services following hard Brexit date, life cycle events under the derivative contracts entered into with UK counterparties prior to Brexit will require that the contract be transferred to an authorized counterparty established in the European Union. The French Financial Services Ordinance only deals with the consent to a new master agreement with a EU27 counterparty, whereas the two EU Commission delegated regulations providing temporary exemptions to modified terms such as the clearing and the posting of new collateral with the new EU27 counterparty, so as to allow a seamless transition from one agreement to another.



[1] Ordonnance n° 2019-36 du 23 janvier 2019 portant diverses adaptations et dérogations temporaires nécessaires à la réalisation en urgence des travaux requis par le rétablissement des contrôles à la frontière avec le Royaume-Uni en raison du retrait de cet Etat de l’Union européenne

[2] Ordonnance n° 2019-48 du 30 janvier 2019 visant à permettre la poursuite de la fourniture à destination du Royaume-Uni de produits liés à la défense et de matériels spatiaux

[3] Ordonnance n° 2019-75 du 6 février 2019 relative aux mesures de préparation au retrait du Royaume-Uni de l’Union Européenne en matière de services financiers

[4] Ordonnance n° 2019-76 du 6 février 2019 portant diverses mesures relatives à l’entrée, au séjour, aux droits sociaux et à l’activité professionnelle, applicables en cas d’absence d’accord sur le retrait du Royaume-Uni de l’Union européenne

[5] Ordonnance n° 2019-78 du 6 février 2019 relative à la préparation au retrait du Royaume-Uni de l’Union européenne en matière de transport routier de personnes et de marchandises et de sûreté dans le tunnel sous la Manche

[6] Ordonnance n° 2019-96 du 13 février 2019 relative à la préparation au retrait du Royaume-Uni de l’Union européenne en matière de sécurité ferroviaire dans le tunnel sous la Manche

[7] On 19 December 2018, the EU Commission adopted the 2 decisions and 2 delegated regulations, also conditioned on a hard Brexit scenario, that provide:

  • A temporary and conditional equivalence decision for a period of 12 months to ensure that there will be no immediate disruption in the central clearing of derivatives;
  • A temporary and conditional equivalence decision for a period of 24 months to ensure that there will be no disruption in central depositaries services for EU operators currently using UK operators;
  • Twelve-month exemptions from certain obligations for certain OTC financial contracts to facilitate their transfer from a UK to an EU27 counterparty:

– a twelve months’ exemption from clearing obligation of miscellaneous classes of OTC derivatives when such contracts are novated for the sole purpose of replacing the counterparty established in the United Kingdom with a counterparty established in a EU member State (Commission Delegated Regulation of 19.12.2018 amending Commission Delegated Regulation (EU) 2015/2205, Commission Delegated Regulation (EU) 2016/592 and Commission Delegated Regulation (EU) 2016/1178 supplementing Regulation (EU) n° 648/2012 of the European Parliament and of the Councils as regard the date at which the clearing obligation takes effect for certain types of contracts (the “Clearing Exemption Regulation”); and

– a twelve months’ exemption from collateral posting obligation of miscellaneous classes of OTC derivative contracts not cleared  by a CCP when such contracts are novated for the sole purpose of replacing the counterparty established in the United Kingdom with a counterparty established in a EU member State (Commission Delegated Regulation of 19.12.2018 amending Delegated Regulation (EU) 2016/2251 supplementing Regulation (EU) n° 648/2012 of the European Parliament and of the Council as regards the date until which counterparties may continue to apply their risk-management procedures for certain OTC derivative contracts not cleared by a CCP (the “Collateral Posting Exemption Regulation”).


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