Draft Bill on the regulation of UK providers of financial services passed in the Czech Republic

Czech Republic, UK

On 23 January 2019, the Draft Bill on the temporary adjustment of relations in connection with the United Kingdom leaving the EU (the “Bill”) was passed by the Chamber of Deputies. The Senate will commence a review of the Bill on 27 February 2019, and it is widely expected the legislation will be passed.

The Bill concerns the rights and obligations of financial services providers who are active in the Czech Republic. It is based on authorisation granted in the United Kingdom, prior to the date of the Bill becoming effective.

The Bill preserves the right of UK financial services providers to perform their activities in the Czech Republic, which are necessary to settle their receivables and debts from the financial services already provided. In the course of undertaking its activities, the UK financial services provider is deemed to be a provider of financial services with a registered seat in a Member State, and may perform its activities in the territory of the Czech Republic under the relevant Czech laws.

The Bill has significant consequences for insurance and reinsurance undertakings. They will be able to administer existing policies issued for their Czech clients, collect premiums, handle claims etc. On the other hand, such UK financial services providers will not be permitted to arrange or seek a conclusion of new policies.

The Czech National Bank (the “CNB”) shall supervise the observance of the financial services provider´s rights and obligations stemming from such preserved right. Additionally, CNB will ensure that obligations imposed on a provider of financial services with its registered seat in the Czech Republic (the “Czech financial services provider”) together with provisions on remedial measures.

Last but not least, UK financial services providers may be subject to a fine if any of their actions may fulfil the conditions of an offence or breach of obligation imposed on a Czech financial services provider.

The Ministry of Interior of the Czech Republic which proposed the Draft Bill expressed that the legal framework is intended to serve only temporarily for the transition period between a possible hard Brexit and any permanent measures which are expected to be adopted in the long-run.