Banks in Britain can sue the EU if it fails to grant them a transitional deal in Brexit negotiations, Reuters reported Dec. 19, citing advice from some of the biggest U.K. law firms.
Linklaters, Freshfields and Clifford Chance, in a document drawn up for banks seeking to retain their passporting rights even after the U.K. exits the bloc, said banks should be able to secure a staggered exit, citing the Vienna Convention on the Law of Treaties, which states that rights awarded under a treaty continue even after the treaty has been withdrawn.
Financial firms are keen for Britain and the EU to negotiate a soft Brexit, allowing for many of the current arrangements to continue for up to five years, the newswire noted. The document further stated that banks could appeal to the European Court of Justice on the basis of "legitimate expectations" of a stable regulatory environment.
"EU firms utilizing their passport rights do have 'legitimate expectations' within the meaning of EU law that their rights will not simply disappear on Brexit," the lawyers said in the document.
Banks have not displayed any intention to use the Vienna Convention to take action against the EU, and other lawyers suggest the chance of such a lawsuit would have limited scope of success. According to EU officials involved in the Brexit negotiations, the Vienna Convention applies to states, rather than to individual firms, Reuters noted.
U.K. Prime Minister Theresa May, in response to a question at the Confederation of British Industry's annual conference in London on Nov. 21, hinted that she would seek a transitional deal on Britain's exit from the EU.