Passporting of financial services is a European Union mechanism which allows for firms authorised to provide financial services in one jurisdiction to provide them in another without the need for authorisation in this second jurisdiction. This it can do by establishing a branch or providing cross-border services. In order to do this the firm is required to notify its home member state supervisory authority that it wishes to provide these services in a named jurisdiction.
Firms who are authorised by the Financial Services Commission have the right to passport their, banking, investments and insurance services throughout the European Union & European Economic Area. Gibraltar is incorporated into the European Union by virtue of the United Kingdom’s membership. Under Article 299(4) of the Treaty of Rome – which established the European Community – the provisions of the Treaty of Rome are applied throughout the European Territories for whose external relations a Member State is responsible for.
Within the European Union there are various treaty provisions, directives, regulations and decision which require competent authorities to communicate with each other. For these purposes the FSC is the competent authority in terms of regulated financial services activities. Whilst, as the competent authority, the FSC would normally communicate directly with other competent authorities within the European Union, Spanish sovereignty claims over Gibraltar and their consequential non-recognition of Gibraltar institutions required a slightly different process.
The “Post-Box” arrangements
An agreement has been reached between the United Kingdom and its European Union partners of how this communication would take place between the relevant competent authorities and the FSC. The United Kingdom has established the UK Government Gibraltar Liaison Unit for EU affairs at the Foreign and Commonwealth Office. The unit is otherwise known as the “Post-box” and handles and keeps track of all formal communications between Gibraltar and competent and their EU/EEA/EFTA counterparties. This UK government unit is established to ensure that information exchange runs smoothly and effectively.
Areas covered by the Post-Box arrangements are, any present or future treaty concluded within the EU framework.
The Post-Box does not cover other types of correspondence or regulatory co-operation between the FSC and other regulators, including the sharing of information in relation to regulatory enquiries and investigations. These should be dealt with directly between the FSC and the regulatory authority concerned.
The “Post-Box” does not review the documentation received, it simply establishes a mechanism for passing notifications and decisions between Gibraltar and EU/EEA/EFTA competent authorities on treaty issues – for example passporting of firms between one member state and another.
How the process works – Outgoing notifications
Outgoing documents are drawn up by the FSC – the Competent Authority in this scenario and will be addressed to the member state Competent Authority. Once prepared the package of documents will be sent by hand to the Government of Gibraltar – the Chief Secretary’s Office. Accompanying these documents will be a cover letter and 2 copies of the documents. These will be placed in an unsealed envelop addressed to the member state competent authority and the package minus a copy of the documents – which is kept by the Chief Secretary’s office is sent to the UK Government Gibraltar Liaison Unit for EU affairs. See Fig 1 below for details
Fig 1
Fig 2 provides information on the authentication process for the documents sent via the Post Box.
Fig 2
How the process works – Incoming notifications
All incoming documents sent by Competent Authorities to the FSC are to be sent via the UK Government Gibraltar Liaison Unit for EU affairs to the Chief Secretary’s office who will then send these to the FSC.
Fig 3 provides information as to how notifications are received from competent authorities
The Post Box therefore is NOT to be used for routine matters of
communication or regulatory co-operation between Competent Authorities. For
example
• Fit and proper checks of individuals
• Investigations
• Consolidated supervision
• Technical Assistance
The Post Box arrangements do not impact on any arrangements reached between Competent Authorities when entering into a Memorandum of Understanding – these include informal modes of communication such as e-mails. Furthermore the Post Box arrangements are not applied to non-EU Competent Authorities.