Brussels, 13/09/2013 (Agence Europe) - In an opinion published on Thursday 12 September (in case C-270/12), European Court of Justice Advocate General Niilo Jääskinen recommends that the European Court of Justice annul Article 28 of EU Regulation 236/2012 on short-selling. The judge says that the emergency powers granted by that article to the European Securities and Markets Authority (ESMA) to intervene in the financial markets of member states so as to regulate or prohibit short-selling go beyond what could be legitimately adopted as a harmonising measure necessary for the establishment or functioning of the internal market.. Jääskinen therefore partly agrees with the United Kingdom's arguments in its appeal to the Court of Justice against the use of Article 114 of the Treaty on the Functioning of the EU (TFEU), which allows for the adoption of harmonising measures where necessary for the achievement and functioning of the internal market for the regulation, arguing that the powers granted to ESMA under this article infringe the TFEU measures on the delegation of powers by giving ESMA too much room for manoeuvre in its decisions. In his opinion, the Advocate General proposes that Article 28 of the Regulation be annulled on the grounds that Article 114 TFUE is not a proper legal basis for its adoption. He considers that, whilst in principle there can be no objection to using Article 114 TFUE as a legal basis for EU agencies which adopt legally binding decisions, the determining factor is whether the decisions of the agency in question either contribute to or amount to internal market harmonisation. In his view, the powers vested in ESMA under Article 28 of the Regulation go beyond these limits. The Advocate General points out that ESMA is uniquely empowered to make legally binding decisions in substitution for those of a competent national authority, which may well disagree with the decision of ESMA. This decision will prevail over any previous measure taken by the national authority. In the Advocate General's view, the effect of this 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. Hence, the outcome is not harmonisation but the replacement of national decision-making with EU-level decision-making. This goes beyond the limits of Article 114. Recognising, however, that there is clearly a need for action at the EU level in this field to prevent distortions in the banking systems of other member states following inaction or inadequate action in relation to short-selling by a national authority, Advocate General Jääskinen suggests that a more appropriate legal basis for the adoption of Article 28 would have been Article 352 of the TFUE. In his opinion, recourse to Article 352 would have opened up an important channel for enhanced democratic input as that article requires unanimity among member states (Article 114 requires only a qualified majority vote in the Council) and the Commission is required to bring all proposals based on that article to the attention of national parliaments.
The judge rejects the other arguments advanced by the United Kingdom because, in his view, the powers vested in ESMA are in line with the relevant EU constitutional rules in relation to the delegation of powers to an agency and do not leave too wide a margin of discretion to EMSA. He points out that Article 28 imposes specific procedural safeguards as to the measures that ESMA is empowered to take, including express definitions of the content of measures, the procedure for their adoption, and their temporal effect. Taking note of the judge's opinion, the European Commission says it wants to await the final ruling before commenting. A Commission spokesman, Olivier Bailly, said on Friday 13 September, that there had never been any doubt about the legal basis used for drawing up financial regulations that impact on the single market. (FG/transl.fl)