Brexit and EU Foreign Subsidies Regulation, Economic Crime & Corporate Transparency Bill & trade with Canada

Brexit and the EU Foreign Subsidies Regulation

On 10th November 2022, the EU Parliament announced that it had voted to give “its green light to a new EU law ensuring foreign subsidies granted by non-EU countries do not distort the internal market”.

The EU Parliament’s press release on the subject of this proposed EU Foreign Subsidies Regulation explained that “the new regulation, adopted by 598 votes, with five against and nine abstentions, enables the [EU] Commission to investigate subsidies granted by non-EU public authorities to companies operating in the EU. If it is found that subsidies are distortive, the Commission can apply measures to address this and avoid companies benefitting, for example, from zero-interest loans, below-cost financing, preferential tax treatment or direct state grants [so that they] do not outbid EU competitors in mergers, acquisitions or public procurement procedures”.

The press release goes on to explain that “according to the new rules, companies will need to let the Commission know about planned mergers and acquisitions if one of the parties involved has an EU turnover of at least €500 million and there is a foreign financial contribution of at least €50 million. The Commission will also investigate tenders in public procurements if the value of a procurement is at least €250 million”.

On timing, the press release pointed out that, given the EU Parliament’s approval, the Council of the European Union was expected to officially adopt the Regulation on 28th November 2022 and that the Regulation would enter into force 20 days after its publication in the Official Journal of the EU.

The press release states that “the Regulation addresses a longstanding regulatory gap as no regime currently regulates support granted by non-EU countries, while EU countries are bound by strict state aid rules”.

Interesting times!

Brexit and the Economic Crime and Corporate Transparency Bill

The UK Government has introduced the Economic Crime and Corporate Transparency Bill (“the Bill”) into the UK Parliament with a view to giving the UK Registrar of Companies more powers to deal with lax corporate paperwork and to plug holes in the somewhat porous corporate regulatory system that some would say has prevailed in the UK to date.

The Bill may also be an attempt by the UK Government to demonstrate that, far from standards of corporate governance in the UK falling as a result of Brexit, the UK Government is trying to raise them.

The Bill proposes a new section 1081A (“Registrar’s objectives to promote integrity of registers etc”) to be introduced into the UK Companies Act 2006, providing as follows:

“The registrar must, in performing the registrar’s functions, seek to promote the following objectives:”

Objective 1 – to ensure that any person who is required to deliver a document to the registrar does so (and that the requirements for proper delivery are complied with)

Objective 2 – to ensure that documents delivered to the registrar are complete and contain accurate information

Objective 3 – to minimise the risk of records kept by the registrar creating a false or misleading impression to members of the public.

Objective 4 – to minimise the extent to which companies and others –

(a) carry out unlawful activities

(b) facilitate the carrying out by others of unlawful activities

The Bill is divided into 6 Parts (with a total of 8 Schedules)  as follows:

Part 1: Companies etc

This part has sub-headings dealing with the registrar of companies; company formation (including directors’ identity verification procedures); company names; business names; registered offices; registered email addresses; disqualification in relation to companies; directors; registers of members; the registration of directors, secretaries and persons with significant control; accounts and reports; confirmation statements; identity verification; restoration to the register; who may deliver documents; facilitating electronic delivery; promoting the integrity of the register; inspection etc of the register; the registrar’s functions and fees; information sharing and use; and general offences and enforcement.

Part 2: Limited Partnerships etc

This part has sub-headings dealing with the meaning of “limited partnership”; required information about limited partnerships; registered offices; registered email addresses; the general partners; removal of the option to authenticate application by signature; changes in partnership; accounts; dissolution and winding up of partnerships; disclosure of information; dissolution, revival and deregistration; delivery of documents; service on a limited partnership; application of other laws; regulations; and further amendments;

Part 3: Register of Overseas Entities

Part 4: Cryptoassets

Part 5: Miscellaneous

This part has sub-headings on money laundering and terrorist financing; disclosures to prevent, detect or investigate economic crime etc; regulatory and investigatory powers; and reports on payments to governments; and

Part 6 : General

The Bill has been promoted by the UK Government as constituting major legislative reform but it remains to be seen whether in practice it keeps the UK in parallel alignment with the EU and EU member states on economic crime and corporate governance or whether more needs to be done to safeguard the UK‘s reputation.

Brexit and Canada

According to the UK – Canada trade and investment factsheet published by the UK Department for International Trade (DIT) on 18th November 2022, Canada was the UK’s 15th largest trading partner in the four quarters to the end of Quarter 2 (Q2) 2022, accounting for 1.6% of total UK trade.

Canada is an important trade and investment partner of the UK and, judging from the DIT factsheet, it is clearly growing. The factsheet showed that total trade in goods and services (exports plus imports) between the two countries was £23 billion in the four quarters to the end of Q2 2022, an increase of 11.1% or £2.3 billion from the four quarters to the end of Q2 2021. Of this £23 billion:

  • Total UK exports to Canada amounted to £13 billion in the four quarters to the end of Q2 2022 (an increase of 15.5% or £1.8 billion compared to the four quarters to the end of Q2 2021); and
  • Total UK imports from Canada amounted to £9.9 billion in the four quarters to the end of Q2 2022 (an increase of 5.9% or £552 million compared to the four quarters to the end of Q2 2021).

The DIT factsheet also showed that, in 2020, the outward stock of foreign direct investment (FDI) from the UK in Canada was £29.6 billion accounting for 1.8% of the total UK outward FDI stock and that, in the same year, the inward stock of FDI in the UK from Canada was £40.7 billion accounting for 2.1% of the total UK inward FDI stock.

On the Brexit front, the UK and Canada have signed and ratified the UK – Canada Trade Continuity Agreement which came into effect on 1st April 2021 and effectively rolled over much of the Canada – EU Comprehensive Economic and Trade Agreement (CETA)  into the ongoing bilateral trade relationship between the UK and Canada.

On 24th March 2022, the UK and Canada launched negotiations towards a broader and deeper Free Trade Agreement between the two countries and these negotiations are ongoing.

Given the excellent political relations and close cultural ties that the UK and Canada enjoy with each other, both countries seem very positive about the future of their bilateral trade and investment relationship.

The Canadian High Commission in the UK as well as various Canadian provincial government delegations in the UK play a strong role in supporting the Canada – UK trade and investment relationship.