On 31/12/2020, the transitional period set in United Kingdom’s withdrawal agreement from the EU ended and therefore, as from that date, EU law ceased to apply in the UK, UK entities are no longer entitled to European rights or, more specifically, to resort the European passport for financial services.

Against this background, the Portuguese Government approved a special transitional regime applicable to UK financial and insurance entities that have operations in Portugal by the end of 2020. New Decree-Law No. 106/2020 of 23 December (DL 106/2020) contains a set of rules that, in practical terms, grants to these institutions an additional period of one year to request authorizations to operate or, alternatively, to cease their contracts in the national territory.

I. As regards Investment Services and Management of Collective Undertakings

Credit institutions, investment companies and UCITS and AIFS’ management companies authorized to provide financial services in Portugal, with no establishment in the Portuguese territory but with operations in Portugal must, until 1 March 2021 deliver to the Portuguese Securities Commission (CMVM) their business programme and indicate whether they intend to terminate ongoing agreements, or request authorization to maintain the activity in Portugal, in which case the respective application must be submitted until 1 June 2021.

Institutions failing to comply with the submissions above may only carry out the operations necessary to terminate all ongoing arrangements.

Operations in the Portuguese territory shall comply with Portuguese law, namely the provisions of the Portuguese Securities Code, and the General Regime of Collective Undertakings.

UK entities authorized to provide investor representation services, which act as bondholders’ common representatives in Portugal, may continue to exercise their activity until maturity of the bonds or of the programme, provided that, on 24 December 2020, the issue or the programme had already a defined term, and the appointment of the entity occurred before 31 December 2020.

II. As to Insurance Services:

UK-based insurance companies, operating in Portugal and intending to continue their operations in the country, must establish a branch in Portugal and comply with the national Insurance Activity Act.

Nevertheless, insurance agreements signed until 31 December 2020, under the authorization to exercise the insurance activity in Portugal, will remain valid until the contracted term.

In addition, these companies must provide initial and continuous information to the Insurance and Pension Funds Supervisory Authority in order to allow the regulatory entity to supervise the run-off process of the portfolio.

III. Banking, Payment Services and Electronic Money Institutions

DL 106/2020 provides that UK-based credit institutions, payment institutions and electronic money issuers operating in Portugal may carry out operations such as receiving deposits, credit granting, payment services and issuance of electronic money, as long as they result from agreements executed until 31 December 2020.

As of this date, the entities may only enter into agreements or carry out new operations if they have previously obtained an authorization from the Bank of Portugal as per the regime applicable to entities from non-EU countries.

Until 1 March 2021, the entities shall communicate to the Bank of Portugal their intention regarding future operations and contracts in Portugal and provide general information on their identification and contracts executed before 31 December 2020.