Friday

30th Sep 2022

Court slaps down UK challenge to EU short-selling ban

The European Court of Justice has in a surprise move thrown out a UK legal challenge to EU rules on short-selling.

The ruling refers to legislation adopted in 2012, which gives the Paris-based European Securities and Markets Authority (ESMA) the power to ban short-selling as an emergency measure if it deems that there is a threat to the bloc's financial markets.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The UK argued that these powers to directly intervene in financial markets went beyond the terms of the single market and should only lie in the hands of national governments.

Short-selling involves traders borrowing shares and immediately selling them before buying them back at a lower price when their value falls.

Although advocates of the practice say that it leads to more accurate share pricing, it can also fuel speculation and undermine public confidence in markets.

In a ruling on Wednesday (22 January), the ECJ dismissed "in its entirety" four complaints by the UK government, finding that the regulation was "precisely delineated and amenable to judicial review" and conformed with the EU treaty.

It pointed out that the legislation requires ESMA to inform national regulators before it takes decisions and review them every three months.

But the ruling comes as a surprise. Less than four months ago, an opinion by the Court's advocate-general Niilo Jaeaeskinen suggested that ESMA's powers "go beyond what could be legitimately adopted as a harmonising measure necessary for the establishment or functioning of the internal market."

Although such opinions are not binding on the court, they are rarely contradicted by its team of judges.

The ruling also overturns a legal mechanism that UK officials have relied on to prevent 'mission-creep' since joining the European Community in 1971.

Under the so-called 'Meroni' ruling of 1958, which originally applied to the European Coal and Steel Community, delegated powers from EU institutions to agencies could not involve political judgements because this would undermine the balance of power between EU institutions.

Contacted by this website, a government spokesman said that the UK was "disappointed" with the ruling.

"We've consistently said we want tough financial regulation that works but any powers conferred on EU agencies must be consistent with the EU Treaties and ensure legal certainty," he said.

"We will now consider the judgment in detail and respond, in full, at a later date."

The case is the first of a series of legal challenges that the UK, which has Europe's largest financial services sector, has launched against EU regulation.

In 2013, the UK joined with Luxembourg to oppose plans by eleven EU countries to set up a financial transactions tax. It is also challenging new rules to cap bank bonuses.

Brussels to tame 'Wild West' derivatives and short-selling

In the latest part of its endeavour to bring an end to the light-touch regulatory climate that produced the economic crisis, the European Commission has proposed a series of rules intending to shine a light on the until-now murky trading in some of the market's more complicated financial practices: derivatives and short-selling.

EU miffed by unilateral German ban on short-selling

Germany's decision to place a unilateral ban on naked short-selling of eurozone sovereign debt instruments has drawn a frosty response from its EU partners, with the European Commission saying the move highlighted the need for a more co-ordinated regulatory approach.

Feature

Why northeast Italy traded in League for Brothers of Italy

EUobserver spoke with several business figures and all confirmed they voted for Georgia Meloni's Brothers of Italy because it promised stability, less bureaucracy and tax cuts. Matteo Salvini's anti-EU rhetoric scared them, while they trust Meloni has "more common sense".

News in Brief

  1. EU ministers adopt measures to tackle soaring energy bills
  2. EU takes Malta to court over golden passports
  3. EU to ban Russian products worth €7bn a year more
  4. Denmark: CIA did not warn of Nord Stream attack
  5. Drone sightings in the North Sea 'occurred over months'
  6. Gazprom threatens to cut gas deliveries to Europe via Ukraine
  7. New compromise over EU energy emergency measures
  8. 15 states push for EU-wide gas price cap

Stakeholders' Highlights

  1. The European Association for Storage of EnergyRegister for the Energy Storage Global Conference, held in Brussels on 11-13 Oct.
  2. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  3. European Committee of the RegionsThe 20th edition of EURegionsWeek is ready to take off. Save your spot in Brussels.
  4. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  5. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  6. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries

Latest News

  1. Ukrainian chess prodigy: 'we are not going to resign...anywhere'
  2. Going Down Under — EU needs to finish trade deal with Australia
  3. MEPs worry Russian disinfo weakens support for Ukraine
  4. Everything you need to know about the EU gas price cap plan
  5. Why northeast Italy traded in League for Brothers of Italy
  6. How US tech giants play EU states off against each other
  7. Deregulation of new GMO crops: science or business?
  8. The European shipping giants plying Putin's fossil-fuels trade

Join EUobserver

Support quality EU news

Join us