UBS Ltd, Re

When sanctioning a Part VII transfer scheme, the court exercises an independent and absolute discretion. It must assess who may be adversely affected and identify the proper comparator. Adverse effects do not automatically prevent sanction where they are mitigated, inevitable, inconsequential, or necessary to achieve a greater objective. The court should consider regulatory views, the scheme actually presented, and the wider arrangements forming its commercial context. It should not substitute a different scheme that might be preferable. The informed responses of financially sophisticated affected parties may be relevant. A scheme may transfer a sufficient and genuine part of a business, together with other business and ancillary provisions necessary to make the transfer effective.

UBS Ltd sought sanction under Part VII of the Financial Services and Markets Act 2000 for the transfer of part of its investment banking, wealth management and asset management business to UBS Europe SE. The application arose from the anticipated loss of EU passporting rights following Brexit. Other business was being transferred consensually to UBS AG, and residual assets were intended to pass through a cross-border merger. The court considered the statutory jurisdiction, the effect on clients and counterparties, regulatory views, and the scheme’s wider commercial context.

1. The court sanctioned the scheme and the ancillary provisions. The discretion under section 111(3) of the Financial Services and Markets Act 2000 was absolute. It required independent judicial consideration, notwithstanding the commercial judgment of UBS’s directors.
2. The appropriate approach was to ask who might be adversely affected and to compare the scheme with the correct alternative. Adverse consequences were not by themselves a bar to sanction where they were mitigated, inevitable, inconsequential, or a necessary price for achieving a greater objective. The court considered regulatory conduct and views, examined the scheme actually presented, and assessed it in the context of the consensual transfers and proposed cross-border merger.
3. The court adopted the approach identified in Alliance & Leicester Plc, ING Direct and Barclays Bank Plc. It also approached the statutory position as it stood and did not speculate about possible future changes, following Re MB Group Plc.
4. The deposit-taking business constituted a sufficient and real business for the Part VII jurisdiction. The scheme was not required to be confined to that business and could include other business transferred alongside it. Ancillary provisions could be sanctioned where necessary to give the scheme effective and commercially sensible operation.
5. The loss or reduction of protections under CASS, the Financial Services Compensation Scheme and insolvency arrangements was considered. Those disadvantages were mitigated or remote in the circumstances. The comprehensive communications exercise, the absence of maintained client objections, and the non-appearance of the FCA and PRA supported sanction.