February 11, 2019 - At 11PM on 29 March 2019, the UK is due to exit the European Union – and it may indeed be a hard Brexit.  On February 7^th, the LSTA hosted a webinar, “Brexit: Deal or No Deal”, presented by Elizabeth Leckie and Bob Penn of Allen & Overy.  Nearly three years after a referendum was passed to leave the EU, the details of the terms of that withdrawal remain to be finalised.  The negotiations between the EU and the UK could result in a number of different outcomes, including any of the following: (1) a hard Brexit on March 29^th with no arrangements at all in place between the UK and the EU;  (2) a hard Brexit on March 29th with arrangements in place in relation to particular areas such as the supply of medicine and aviation; (3) a deal which includes an article 50 withdrawal agreement coming into force on March 29th followed by (a) an agreement on the future relationship coming into force at the end of the transitional period (31 December 2020 or any agreed extension date) or (b) a hard Brexit (and the proposed Irish backstop arrangement coming into force) at the end of the transitional period; (4) an extension to the article 50 negotiation period followed by (a) an article 50 withdrawal agreement or (b) a hard Brexit, and (5) the UK remaining part of the EU following revocation of  the Article 50 notice (it seems this last option – a rejection of the 2016 referendum results – has virtually no chance of happening).  Financial services firms have been preparing (and bracing themselves) for a hard Brexit.  If one does occur next month, then EU treaties will cease to apply to the UK from March 30^th, UK entities will no longer be able to exercise passporting rights to undertake financial services on either an establishment or services basis into the EEA, and relevant product related passports will also no longer apply.  Conversely, EEA firms will lose the right to passport into the UK. As of March 30^th, the UK will effectively be considered a third country – as the US is today – and any applicable third country access rights of the remaining EEA member states will remain as they exist today.  To continue to access the full EU market, UK financial services firms need to establish a new passported EU27 subsidiary before March 29^th, and EU27 firms need to become authorized in the UK, but they have been given three years in which to obtain that authorisation. The UK government, too, has been preparing for a no deal exit and in June 2018 they passed the European Union (Withdrawal) Act 2018.  That Act repeals the European Communities Act which provides the legal basis for EU law having effect in the UK, sets out Parliament’s oversight of the outcome of the government’s negotiations with the EU on the withdrawal agreement, and converts EU law as it stands on Exit Day into domestic law and preserves laws made in the UK to implement EU obligations. There are several Brexit related issues that loan market participants should consider, including the bail-in provisions in their agreements, the loss of their financial services passports, and withholding tax because certain interest payment by EU27 borrowers to UK lenders may now be faced with withholding tax.  Fortunately, it seems, however, that there should be no need to move away from English governing law clauses which has traditionally been chosen because it is certain, stable, and predictable (English and EU courts will continue to uphold a choice of English law post-Brexit; however, recognition of choice of law and judgments may be less straightforward).  Please click here for A&O’s client alert “Brexit – English law and courts: should recent developments change your approach?  The final page of the presentation slides also includes additional links to many helpful Brexit-related  materials.