EUROPE: ECJ decision on ESMA`s EU short selling powers expected 22nd January

Thursday January 16 2014

The decision of the European Court of Justice on the European Securities and Markets Authority`s powers under Article 28 of the EU Short Selling Regulation is expected next Wednesday, 22nd January.

In August 2012, the UK government lodged a case with the court regarding ESMA`s far-reaching powers under the Regulation on Short Selling, requesting the court annul Article 28 of the Regulation. This Article requires ESMA to prohibit or impose conditions on the entry by natural or legal persons into short sales or similar transactions, or to require such persons to notify or publicise such positions.

Advocate-General Opinion

In an Opinion delivered in September 2013, Advocate-General Niilo Jääskinen agreed with the UK government that Article 28 of the EU Short Selling Regulation should be annulled. According to Jääskinen, Article 114 TFUE was not a proper legal basis for the adoption of Article 28. In his view, the powers vested in ESMA under Article 28 of the Regulation go beyond these limits as the effect of ESMA’s emergency powers is to create an EU level emergency decision-making mechanism that becomes operable when the national authorities do not agree on a course of action. The outcome was therefore not harmonisation but the replacement of national decision-making with EU level decision-making.

A further update will be provided on publication of the decision of the European Court of Justice.