EUROPE: ECJ dismisses UK action on Article 28 EU Short Selling Regulation

Wednesday January 22 2014

The European Court of Justice has given its decision in Case C270/2012 on the application of Article 28 of the EU Short Selling Regulation.

In May 2012, the UK government lodged a case with the court regarding ESMA`s 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. 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.

The European Court of Justice has dismissed all the pleas in law brought by the UK government.

The United Kingdom had contended that ESMA has 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 was also argued that Article 114 TFEU was not the correct legal basis for the adoption of the rules laid down in Article 28 of the regulation.

In its judgment, the Court has 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 has 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 has stated that the powers available to ESMA are precisely delineated and amenable to judicial review in the light of the objectives established by the authority which delegated those powers to it. The Court has thus concluded that those powers are compatible with the FEU Treaty.

As a result of the rejection of all the pleas in law relied on by the UK government, the Court has dismissed the action in its entirety.

Click on the above link for the text of the judgement.