Sunday

3rd Mar 2024

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

Get the EU news that really matters

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.

EU docks €32m in funding to UN Gaza agency pending audit

The European Commission will release €50m out of €82m in funds for the UN aid agency (UNRWA) operating in Gaza. The remaining €32m will come pending an audit. The commission has received no evidence to support Israeli allegations against UNRWA.

'Outdated' rules bar MEP from entering plenary with child

During a plenary session in Strasbourg, an MEP was denied access to the chamber because he was carrying his young child, due to unforeseen circumstances. The episode shows parliament's rules need to be updated, several MEPs told EUobserver.

Commission plays down row over Rwanda minerals pact

The European Commission has played down a diplomatic row over its recent minerals agreement with Rwanda, after Congolese president Felix Tshishekedi, who accuses Rwanda of plundering his country's natural resources, described the deal as a "provocation in very bad taste".

'Outdated' rules bar MEP from entering plenary with child

During a plenary session in Strasbourg, an MEP was denied access to the chamber because he was carrying his young child, due to unforeseen circumstances. The episode shows parliament's rules need to be updated, several MEPs told EUobserver.

Opinion

Why are the banking lobby afraid of a digital euro?

Europeans deserve a digital euro that transcends the narrow interests of the banking lobby and embodies the promise of a fairer and more competitive monetary and financial landscape.

Latest News

  1. EU docks €32m in funding to UN Gaza agency pending audit
  2. 'Outdated' rules bar MEP from entering plenary with child
  3. Commission plays down row over Rwanda minerals pact
  4. EU socialists set to anoint placeholder candidate
  5. Why are the banking lobby afraid of a digital euro?
  6. Deepfake dystopia — Russia's disinformation in Spain and Italy
  7. Putin's nuclear riposte to Macron fails to impress EU diplomats
  8. EU won't yet commit funding UN agency in Gaza amid hunger

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Join EUobserver

EU news that matters

Join us