EU's rejection of UK shorting appeal is "skeletal"
13 February 2014 London
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The EU court’s decision to reject Britain’s appeal over short selling is skeletal and in parts opaque, but there is no avenue of appeal, said lawyers from Mayer Brown.
In an article explaining the decision, Alexandria Carr, Mark Compton and David Sahr said that the decision appears to contradict the Meroni principle, which placed limits on the powers that could be conferred on EU agencies.
In January 2014, judges from the European Court of Justice rejected all of Britain’s to limit the power of Brussels. The UK had argued that the European Securities and Markets Authority (ESMA) had been given a very large measure of discretion of a political nature, which was at odds with EU principles relating to the delegation of powers.
It also submitted that ESMA’s regulation aimed at harmonising short selling—based on article which permits the adoption of harmonisation measures necessary for the establishment and functioning of the internal market— was not the correct legal basis for the adoption of the rules laid down in Article 28 of the regulation, which vests the European Securities and Markets Authority (ESMA) with certain powers of intervention that are legally binding.
But the court found that Article 28 of the regulation does not confer any autonomous power on ESMA that goes beyond the powers granted to that authority when it was created. The court also pointed out that the exercise of the powers laid down in that provision is circumscribed by various conditions and criteria which limit ESMA’s discretion.
The court also observed that ESMA is required to consult the European Systemic Risk Board and, if necessary, other relevant bodies.
The Mayer Brown article described the court in Meroni as referring to the "fundamental guarantee" as to "the balance of powers which is characteristic of the institutional structure of the community" and said "[t]o delegate a discretionary power, by entrusting it to bodies other than those which the treaty has established to effect and supervise the exercise of such power each within the limits of its own authority, would render that guarantee ineffective".
The effect of the Meroni doctrine is evident in the EU legislation that has been adopted since the establishment of the European supervisory authorities (ESAs), said the article.
“There has been a tendency to attempt to limit the discretion of the ESAs by setting out criteria and conditions to guide their decision making or by constructing procedures whereby the ESA decisions require endorsement, typically by the commission. The decision of the CJEU in the short selling case could be used to support the case for the conferral of further discretionary decisions on the ESAs, perhaps even without the requirement of endorsement by the commission.”
The article concluded that the decision, although not unexpected, is also likely to cause concern in the UK and some other member states which are already uneasy with the way in which the EU's legal framework is being stretched as the EU seeks to transfer existing national powers and confer wide new powers on EU bodies whilst avoiding the contentious question of whether this actually necessitates treaty change.
In an article explaining the decision, Alexandria Carr, Mark Compton and David Sahr said that the decision appears to contradict the Meroni principle, which placed limits on the powers that could be conferred on EU agencies.
In January 2014, judges from the European Court of Justice rejected all of Britain’s to limit the power of Brussels. The UK had argued that the European Securities and Markets Authority (ESMA) had been given a very large measure of discretion of a political nature, which was at odds with EU principles relating to the delegation of powers.
It also submitted that ESMA’s regulation aimed at harmonising short selling—based on article which permits the adoption of harmonisation measures necessary for the establishment and functioning of the internal market— was not the correct legal basis for the adoption of the rules laid down in Article 28 of the regulation, which vests the European Securities and Markets Authority (ESMA) with certain powers of intervention that are legally binding.
But the court found that Article 28 of the regulation does not confer any autonomous power on ESMA that goes beyond the powers granted to that authority when it was created. The court also pointed out that the exercise of the powers laid down in that provision is circumscribed by various conditions and criteria which limit ESMA’s discretion.
The court also observed that ESMA is required to consult the European Systemic Risk Board and, if necessary, other relevant bodies.
The Mayer Brown article described the court in Meroni as referring to the "fundamental guarantee" as to "the balance of powers which is characteristic of the institutional structure of the community" and said "[t]o delegate a discretionary power, by entrusting it to bodies other than those which the treaty has established to effect and supervise the exercise of such power each within the limits of its own authority, would render that guarantee ineffective".
The effect of the Meroni doctrine is evident in the EU legislation that has been adopted since the establishment of the European supervisory authorities (ESAs), said the article.
“There has been a tendency to attempt to limit the discretion of the ESAs by setting out criteria and conditions to guide their decision making or by constructing procedures whereby the ESA decisions require endorsement, typically by the commission. The decision of the CJEU in the short selling case could be used to support the case for the conferral of further discretionary decisions on the ESAs, perhaps even without the requirement of endorsement by the commission.”
The article concluded that the decision, although not unexpected, is also likely to cause concern in the UK and some other member states which are already uneasy with the way in which the EU's legal framework is being stretched as the EU seeks to transfer existing national powers and confer wide new powers on EU bodies whilst avoiding the contentious question of whether this actually necessitates treaty change.
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