The Electronic Commerce Directive (ECD) provides an exclusion from host state regulation for e-commerce activities provided from one EEA state to a person in another EEA state.
The ECD exclusion is on the basis that the host state regulator can rely on the regulation of the firm’s home state because both are within the same EEA regulatory framework. It can be used to cover activities within a financial services passport, but can also cover activities not covered by passporting. It does not cover effecting or carrying out insurance contracts.
In the UK, the relevant provisions that transpose this exclusion are in:
- Article 72A of the Financial Services and Markets Act (Regulated Activity) Order 2001, and
- Article 20B of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005
- as well as some elements of the Electronic Commerce Directive (Financial Services and Markets) Regulations 2002
What will change after the transition period – UK firms
The ability for UK firms to continue to service EEA customers in this way will end at the end of the transition period. Firms should contact local regulators in other EEA states to check if other methods are available.
UK firms will need to:
- decide on their approach to servicing existing consumers, and
- take the steps available to them to continue to service consumers in accordance with local law and local regulators’ expectations
In all circumstances firms should provide timely and fair, clear and not-misleading information to their customers.
What will change after the transition period – EEA firms
Following the end of the transition period, the ECD exclusion will fall away and EEA-based firms will no longer be able to use it to exempt themselves from UK regulation or from the UK Financial Promotion restrictions, or both, when providing online-only services into the UK market.
EEA-based firms should consider whether they are affected by this change. If they are, they should address any impacts to their business models, their marketing or both before the end of the transition period.
Firms wishing to continue doing new regulated e-commerce business in the UK need to consider whether they require UK authorisation, and if so should consider the timing and other implications of applying for permission. For more information, see our pages on authorisation.
Firms wishing only to wind down their e-commerce business that falls within the exclusion, and that was entered into before the end of the transition period, will be able to do so under the provisions in Part 4 of the Electronic Commerce and Solvency 2 (Amendment etc) (EU Exit) Regulations 2019.
If you have any questions
Please contact us.