Legal development

UK extends UK EMIR intragroup and pension scheme exemptions

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    On 27 April 2023, HM Treasury published The Pension Fund Clearing Obligation Exemption and Intragroup Transaction Transitional Clearing and Risk-Management Obligation Exemptions (Extension and Amendment) Regulations 2023 (the Regulations) under UK EMIR . The Regulations, which enter into force on 12 June 2023:

    • extend the UK EMIR temporary intragroup exemption regime until 31 December 2026; and 
    • extend the UK EMIR temporary clearing exemption for pension funds until 18 June 2025.

    Temporary UK-to-non-UK intragroup exemption regime

    The temporary intragroup exemption regime, or TIGER, is established under Regulation 82 of  The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2019 (EMIR onshoring regulations), which form part of the suite of documents onshoring and amending UK EMIR. Under Regulation 82, temporary exemptions from clearing and margining are available for intragroup transactions between a UK entity and a non-UK entity established in a jurisdiction which has not been found equivalent by the Treasury. 

    The exemptions were originally due to run until 31 December 2023, but the Regulations extend their application until 31 December 2026. If equivalence is granted in respect of an applicable jurisdiction in the meantime, the exemptions will be curtailed and will expire either two months (for clearing exemptions) or four months (for margin exemptions) after equivalence is granted. Permanent exemptions – for which equivalence is a pre-requisite – can then be sought instead. 

    Temporary clearing exemption for pension funds

    The Regulations also extend the temporary clearing exemption for pension scheme arrangements by a further two years, until 18 June 2025. 

    The Treasury considers this necessary because clearing requires the provision of cash variation margin to the central clearing counterparty. A requirement to clear derivative transactions would therefore oblige pension schemes to have cash readily available, which could impact their investment strategies and adversely affect the retirement benefits of future pensioners. The Treasury plans to conduct a full review of the exemption before June 2025 and develop a more sustainable long-term approach.

    Position under EU EMIR

    Temporary intragroup exemption regime: In February 2023, the EU extended its temporary intragroup exemption regime so that it expires on 30 June 2025, eighteen months before the UK regime. Intragroup exemptions are widely used by international groups conducting cross-border transactions, so affected entities should monitor developments closely and ensure that they are aware of (i) the expiry date of the applicable regime and (ii) any relevant equivalence decisions that curtail the current protection and require action to obtain a permanent exemption. 

    In conjunction with the extension, the European Commission has also proposed amendments to the EU EMIR intragroup regime, which would replace the requirement for an equivalence decision with a requirement that the third-country jurisdiction is not a "blacklisted" jurisdiction (read more in our briefing).

    Pension scheme arrangement exemption: The corresponding pensions exemption under EU EMIR, which only applies to EU pension scheme arrangements and does not extend to UK equivalents (unlike the UK exemption, which does extend to EEA schemes), is due to expire on 18 June 2023.

    For more information on UK EMIR and EU EMIR, please see our EMIR Hub.

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