Monday

20th Feb 2017

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.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

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.

Agenda

Pence, Greece and Brexit This WEEK

The US vice-president becomes the first senior Trump administration official to visit EU institutions. Greece's creditors try to break deadlock in talks, and British Lords will debate Brexit.

Analysis

Why Romania erupted in protest

Current anger over corruption laws can be traced back to a night-club fire in 2015, when many died because of lax safety standards. Romanians then realised that corruption can kill.

Stakeholders' Highlights

  1. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  2. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  3. Centre Maurits CoppietersMinorities and Migrations
  4. Salzburg Global SeminarThe Child in the City: Health, Parks and Play
  5. UNICEFNumber of Ukrainian Children Needing Aid Nearly Doubles to 1 Million Over the Past Year
  6. Centre Maurits CoppietersThe Situation of Refugee Women in Europe
  7. Salzburg Global SeminarToward a Shared Culture of Health: Charting the Patient-Clinician Relationship
  8. European Free AllianceAustria Should Preserve & Promote Bilingual and Multinational Carinthia
  9. Martens CentreShow Your Love for Democracy! Take Part in Our Contest: "If It's Broken, Let's Fix It"
  10. CISPECloud Computing Leaders Establish Data Protection Standards to Protect Customer Data
  11. Malta EU 2017Landmark Deal Reached With European Parliament on Portability of Online Content
  12. Belgrade Security ForumBSF 2017: Building a Common Future in the Age of Uncertainty