LONDON Jan 21 Europe's top court will rule on
Wednesday on a UK challenge to a European Union market
watchdog's powers to ban short-selling in an emergency, which
Britain argues unduly shackles national supervisors.
A win at the European Court of Justice in Luxembourg could
force Brussels to limit the scope of financial rules and lend
momentum to UK Prime Minister David Cameron's push to
renegotiate the country's membership of the EU and put it to a
referendum in 2017.
Polls suggest his government faces a drubbing in May's
European Parliament elections by the anti-EU UK Independence
Party, which on Monday sought to woo the financial vote.
Britain is challenging part of a law regulating
short-selling, or the sale of borrowed shares in a bet the price
will fall so they can be bought back more cheaply to turn a
Under the law the European Securities and Markets Authority
(ESMA) has the power to ban or curb short-selling if stocks come
under extreme pressure.
An advisor to the European Court of Justice in September,
sided with the UK in September, saying in an opinion that such
an emergency power went beyond what the watchdog could do under
the EU treaty provision used to approve the law.
Alexandria Carr, a regulatory lawyer at Mayer Brown, said
that if the court endorsed the opinion it could have a big
effect on several financial rules being negotiated.
Britain is also challenging three other EU rules: A cap on
bankers' bonuses; plans for a financial transaction tax; and the
European Central Bank's attempt to force some clearing houses to
relocate to the euro zone.
The bloc reached a political deal last week on a sweeping
reform of its securities trading rules, which could be affected
if the court backs Britain.
Carr said that if the court sided with the UK over short
selling it could mean that ESMA's new powers to regulate
commodities markets under last week's deal may also be curbed.
Separate plans are being finalised to centralise powers to
wind down troubled euro zone banks and such decision-making
could become open to question, Carr added.