Regulation of Services
The regulation of services usually involves the authorisation, licensing and qualifications of the service provider. This may involve the authorisation or licensing of a company or firm, an individual service provider or in some cases, both the company or firm and individuals within it.
The general principle under European Union law is that a service provider who or which is authorised in accordance with the relevant EU scheme in one EU state, may provide services in that capacity into and in any other EU state. The service provider may also establish a branch or subsidiary in the host EU state. In this latter event, the service provider is generally regulated from a capacity or prudential perspective in the home EU state and is regulated from a doing business or consumer protection perspective by the host EU state.
Many services providers must be licensed or authorised by the regulator in an EU member state in accordance with EU wide standards. They include most businesses and many individuals in the financial services, transport, communications, and energy sectors.
Apart from sectors where there is specific common regulation, there is a general EU services directive and EU Treaty freedom to provide services in other states without discrimination across borders from the home state and the right to establish a branch or subsidiary in another EU state. These rights, which are enforceable in any court in any EU state, can be used to cut through red tape, illegitimate barriers and disguised restrictions on trade in other EU states.
EU legislation also provides for the recognition of qualifications obtained in one EU state in other EU states. There are general EU provisions which apply to most qualifications which allow for automatic recognition or recognition subject to conditions. Other EU sector specific rules provide for the recognition of qualifications in particular cases such as for lawyers, auditors, and the medical professions.
Brexit- Hard or Soft
In the unlikely event of a hard Brexit, then the existing basic rights of UK service providers to provide services throughout the EU would cease overnight (scheduled 29th March 2019 (postponed to 31st January 2020 with a transitional period to effective withdrawal on 31st December 2020)). Branches of UK companies in other EU states (but not subsidiaries) may also lose their right to provide services in the host state, depending on the sector and host state’s legislation. Equally, the rights of Irish service providers to provide services into the United Kingdom would be likely to cease in the same way.
In the more likely event of a so-called soft Brexit,after a transition / implementation period (proposed to run until 2021 with a possible extension), then even with a new trade agreement, it is virtually certain that the above EU rights to provide services in and throughout the EU will no longer be available to companies and businesses established in the United Kingdom.
Even the most comprehensive modern trade agreements do not provide for general rights to provide services. The EU is unlikely to agree to widespread access for UK service providers to the EU market, because services are so intimately linked with the free movement of people. Even in its Chequers White Paper in July 2018, the UK did not aspire to achieve general freedom to provide services into the EU market.
It, therefore, seems very likely that in all circumstances, other than a reversal of Brexit, that UK service providers in many sectors will need to establish a subsidiary within an EU state, in order to have continued access to the EU market for services, including the right to form branches and subsidiaries in yet other EU states. This likely scenario may provide significant opportunities for Ireland as a bridge for UK companies to the EU market.
Equally, issues of access for Irish service providers to the UK market may arise. If the United Kingdom providers have diminished rights of access to the EU market, then it may be expected that the UK may provide equivalent diminished access for EU service providers.
The Common Travel Area
The Common Travel Area (CTA) may assist service providers in some sectors in Ireland and the UK to provide services and establish a base in the other country. The CTA (which is recognised and accepted by the EU) is undefined in its scope at present. However, it goes well beyond the right to travel. It is usually understood to include an immediate right to go to the other country and have immediate settled status, in the same way as a long-term resident, with access to many rights and benefits.
It has been often said that there is a single labour market in Ireland and the United Kingdom. In many sectors, the Irish and the UK services markets have been seamless in practice, since long before both states joined the European Union. In many sectors, qualifications were very readily recognised in the other jurisdiction. In some sectors, there was or still is a single professional body in Ireland and the UK.
Prior to EU regulation, most financial services areas were self-regulated. The Irish Stock Exchange and UK Stock Exchange were a single entity from 1973 until 1995. The Institute of Banking formerly the Institute of Bankers in Ireland had been an all-island body since prior to independence and operates in both jurisdictions.
Irish solicitors have long enjoyed favourable terms for requalification in the United Kingdom under the qualified lawyers’ transfer test. The professional bodies in several sectors have strong links and, in some cases, there is a single body Ireland and UK body. Similarly, in other medical professions and pharmacy training and qualifications were readily recognised by the relevant rules of the Accrediting Council or the agency.
Formerly there was an agreement between Great Britain and Ireland dating from 1927 regarding the registration of the other jurisdiction’s medical practitioners. This was set out in the relevant legislation in both jurisdictions. It was terminated in the late 1970s because it was no longer necessary because of the common EU provisions. Similarly, an agreement in relation to dentistry was terminated in the 1980s when it was supervened by the European Union rights rules.
Establishment in Ireland
An Irish incorporated subsidiary will usually enjoy access to the EU services market, in the same way as an EU citizen. The issue of UK service providers establishing in Ireland has been most prominent in financial services. The Central Bank has published guidance on its approach to authorisation, including the extent which services may be subcontracted to the United Kingdom. The same vital issues of continued access to the EU apply in several other important sectors, where specific EU authorisation requirements and qualifications issues apply.
More generally, the establishment of an Irish subsidiary or relocation to Ireland may be attractive in many services sectors with an international dimension. Freedom of movement between Ireland and the UK combined with free movement from the EU wide labour market, may make Ireland an attractive location for many service providers where ready access to talent is the most important consideration.
The present UK system of immigration control is burdensome and expensive for workers and employers. The Common Travel Area offers the assurance that UK workers can come and go freely without immigration issues. The common language, common legal system geographical proximity, family links, and general familiarity gives Ireland a unique advantage as a home for UK service providers which wish to preserve access to the European Union. The corporation tax regime continues to offer a further significant incentive, even in an era of reducing UK corporation tax rates.
Unless Brexit is reversed, it appears inevitable that UK service providers will lose free access to the EU market. Many will require a UK subsidiary or base to maintain access. Ireland has considerable practical attractions as the bridge to Europe for UK provides. This seems likely to create many opportunities in the years ahead.