The opinion is not binding, but is followed in the majority of cases.
The UK objected to the EU's short selling regulation on a number of levels, but the main concern was that Article 28 of the Regulation - which allows ESMA to impose temporary short selling bans in emergency situations, overruling national financial supervisors - amounted to a significant transfer of power to an EU institution, and therefore Article 114 of the EU treaty (the single market article) was not a valid legal base for the Regulation.
The Advocate General did not side with the UK on all points, but on this key issue, he said:
"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."Jääskinen went on to suggest that an alternative legal base for the regulation could be found and recommended Article 352 of the EU treaties. Although this may seem a technical point, it is extremely important. Article 352 (which sets out the so-called 'flexibility clause') requires unanimity, meaning the UK could veto the proposal.
If the ECJ were to follow the advice of its Advocate General, this could prove to be an important ruling for a number of reasons:
- First, it would halt the transfer of further powers (without national permission) to an EU agency and allow the UK to keep control over an important part of financial services regulation;
- Secondly, it would show that the UK government can have success using the right legal channels effectively. This could bode well for other cases, such as the on-going dispute on UK rules on EU migrants’ access to benefits, or ECB demands that transactions denominated in euros be cleared exclusively within the eurozone;
- It also highlights that the single market article, which, as we noted before, has been stretched significantly, cannot be a ubiquitous catch-all legal base for things the Commission believes fit with its view of the single market. This could become important in future negotiations, particularly over banking union.