| LONDON/BRUSSELS Sept 27
LONDON/BRUSSELS Sept 27 Britain's challenge to
European Union rules capping bankers' bonuses is likely to get
bogged down in court long beyond their implementation, and
critics say it is more about pleasing domestic voters
unimpressed by the loss of powers to Brussels.
The UK, which houses Europe's biggest financial centre, was
outvoted when the European Union agreed that bonuses must be no
more than a banker's fixed pay, or twice that amount with
The British government is now asking the EU's top court, the
European Court of Justice, to rule that the world's toughest
curb on bankers' pay is illegal.
This follows its legal challenges to EU plans for a tax on
financial transactions, new rules on short-selling and a policy
of locating clearing houses in the euro zone.
Its latest case could take up to two years to be heard, by
which time the cap will be common practice, and Britain has said
it would apply it from 2014 as required.
The challenge has been given short shrift by EU lawmakers
and the EU's executive body, the European Commission, which will
defend the cap in court.
"In the months of negotiations, the British never made the
arguments that they are putting forward now," said Othmar Karas,
an Austrian member of the European Parliament who played a key
role in negotiating the rules.
The bonus cap was slipped in at the last minute into a law
that forces banks to hold more capital, and Britain argues that
Brussels failed to consult or study its impact first.
"It is a legal requirement for a proposal to have an impact
assessment and consultation, but that has not happened. I think
their concerns are legitimate," said Alexandria Carr, a former
UK Treasury official and now a lawyer with Mayer Brown.
Britain says the bloc's European Banking Authority (EBA) is
exceeding its powers in deciding whose pay packet will be
affected as this should be done under primary legislation.
It also says that forcing bankers to disclose how much they
are earning contravenes the bloc's rules on the "rights and
interests of employed persons".
The bulk of the bankers to be affected are based in London.
Lawyers, lawmakers and financial industry officials point
out that Britain accepted the principle of curbs on bonuses in
current rules that limit how much can be paid upfront in cash.
"We are entirely entitled to put in place a ratio between
bonus and salaries," said Arlene McCarthy, an EU lawmaker from
Britain's opposition Labour party.
"If the rules kick in at 500,000 euros, which is my
understanding, that means they could potentially only earn about
1.5 million euros. My heart bleeds," McCarthy said.
Earlier this month, Britain's challenge to one aspect of new
EU rules to regulate short-selling of shares was backed by an
adviser to the top court, though the full court has yet to
pronounce on this.
"The UK is on a lucky streak with short selling," said one
bank lobbyist. "But there is concern that if you do launch a
legal challenge, it could take years before you get a ruling."
Britain's court challenges are more a product of its
inability to get its way at the approval stage for new rules,
said Fiona Wright, director at Cabinet DN, a Brussels-based
financial services consultancy.
"It serves the UK purpose of getting their point over in a
different forum. All the questions about the UK's status in
Europe is not helping, and they are being marginalised at the
moment," Wright said.
Britain is on course to hold a referendum in 2017 on whether
to stay in the EU and wants to claw back some powers over
financial services that have shifted to Brussels.
Critics say the Conservative-led UK government is picking
fights with Brussels to stop its core supporters from defecting
to the euro-sceptic UK Independence Party (UKIP).
"There is a growing realisation in Westminster that we have
a problem," UKIP leader Nigel Farage told Reuters. "We have
given away control of our biggest industry."