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Italy: Legislation in the Event of Brexit Takes Effect

(May 21, 2019) On March 23, 2019, new legislation addressing the potential effects of Brexit entered into force in Italy. (Decree-Law No. 22 of March 25, 2019, Urgent Measures to Ensure Safety, Financial Stability and the Integrity of Markets as well as the Protection of the Health and Freedom of Residence of Italian Citizens and United Kingdom Citizens in case of Brexit) (Decree Law No. 22), GAZZETTA UFFICIALE [G.U., Official gazette], Mar. 25, 2019, G.U. website (in Italian).)

The new legislation approves comprehensive provisions aimed at regulating the possible impacts on multiple stakeholders in the event that the United Kingdom (UK) exits from the European Union (EU) without an accord with the EU (UK withdrawal).

Banks and Investment Firms

The new Law provides that, following the UK withdrawal, UK banks that are authorized to conduct operations in Italy in the same terms that Italian banks are authorized to carry out activities in the UK may continue carrying out such activities after notifying the Bank of Italy. (Decree Law No. 22, art. 3(1)–(2).)

UK banks and UK investment firms that, on the UK withdrawal date, provide investment services and activities in Italy, may continue to perform the same activities only with respect to qualified counterparties and professional clients as provided in applicable legislation. (Id. art. 3(3).)

Banking, financial, and other related entities operating in Italy remain bound by contractual extrajudicial dispute resolution mechanisms after the date of the UK withdrawal. Alternatively, these entities may adhere to other mechanisms established by the EU Commission-approved Fin-Net network. (Id. art. 7(2).)

UK banking institutions operating in Italy through branches will continue to be members of the guarantee systems established for Italian depositors regulated by current banking legislation. (Id. art. 8(1).)

UK payment institutions, fund managers, and investment banks operating in Italy under the current freedom of service regime at the time of the UK withdrawal must cease their activities on that date. (Id. art. 4(1).) To avoid prejudice to their existing clients, these institutions are authorized to carry out operations necessary to close their activities within the shortest possible time and within a maximum of six months from the UK withdrawal date, after complying with applicable contractual notices (Id.)

As an exception, UK banks and investment firms remain authorized to manage existing derivative over-the-counter contracts even if such activities involve the modification of existing contracts or the execution of new contracts. (Id. art. 4(4).)

UK payment institutions, fund managers, and investment banks that are that registered in Italy and that on the date of the UK withdrawal conduct businesses in the UK may continue to operate during the transitional period in accordance with UK legislation. (Id. art. 5(1).)

Electronic Money Institutions

Decree Law No. 22 provides that UK electronic money institutions operating in Italy under the current freedom of service regime at the time of the UK withdrawal must cease their activities on that date (id. art. 4(1)), but those operating through branches in Italy on the UK withdrawal date in accordance with the right of establishment may continue to operate during the transitional period after notifying the Bank of Italy (id. art. 3(5)).

Insurance Companies

Under the new Law, UK insurance companies authorized to operate in Italy on the date of the UK withdrawal will be excluded from the list of EU companies authorized to operate in the country, but will be permitted to carry out activities during the transitional period that are necessary to grant coverage to their insured under existing contracts. (Id. art. 9(1).)

Effective on the date of the UK withdrawal, the insured may withdraw from existing insurance contracts entered into with UK companies, without prejudice to the insured, provided that previous notice has been given to such companies under existing contracts. (Id. art. 9(3).)

Italian insurance and reinsurance companies operating in the UK on the date of the UK withdrawal may continue carrying out their activities in accordance with UK laws. (Id. art. 11(1).)

Pension Fund Investments

Investments arising from UK-based pension funds will continue to enjoy the same legal treatment after the UK withdrawal. (Id. art. 12(1).)