Updated: UK Commissioner called back for second hearing – what happens now?

A couple of developments since we posted the original blog below.

Importantly, the European Parliament’s Economics Committee failed to reach an agreement over Pierre Moscovici and has delayed a decision on whether to approve him or not until 9.30pm CET tonight. Given his clear knowledge and experience in the area as a former French Finance Minister, the objection is clearly being driven by a fundamental split between the EPP (led by the CDU) and the S&D (led by the French socialists) over whether he is the right man for the job given his political allegiances and the fact France has repeatedly missed the deficit targets agreed with the European Commission over the past few years.

As regards Lord Hill, @Brunobrussels points out that a letter will be sent by European Parliament President Martin Schulz to Commission President Jean-Claude Juncker outlining some key questions for the UK’s nominee. It is unclear exactly what these questions will include, but the focus will be on his knowledge of issues such as the banking union, Eurobonds and financial regulation in general. There may also be questions around exactly what will be under his purview and his relationship with the Vice-Presidents. It also seems that concerns over Hungarian Commissioner Tibor Navracsics are growing, as we warned here. Overall, the process is at risk of descending into in-fighting and horse trading between the EPP and S&D (if it hasn’t already) – and Lord Hill has certainly got caught up in that.

 ********************* Original blog below **********************

UK Commissioner designate Lord Hill yesterday faced the European Parliament’s Economic and Monetary affairs committee which has to judge if he is suitable for the proposed role of Commissioner for Financial Services, Financial Stability and Capital Markets Union. 

While Hill went out of his way to charm MEPs, in what the FT terms an “unprecedented move” the committee has recalled Hill for a second hearing early next week (likely Monday), reportedly due to concerns over his lack of detailed knowledge of the brief.

Having watched the hearing it was clear that Hill struggled on the minute details of some of the more technical questions from MEPs, some of whom have been dealing with this area for years. However, even some members of other UK parties have come to Hill’s defence. Labour MEP Richard Corbett wrote on his blog: 

“When all is said and done, he performed far better than many of the other candidate Commissioners.”

 Former Lib Dem MEP and Chair of the EP Econ committee Sharon Bowles tweeted this morning: 

“If you only give commissioners designate 2 weeks to prepare, on sensitive dossiers second hearings/written follow up inevitable.”

Having watched the other Commissioner hearings Hill is certainly not alone in struggling to come up to speed in such a short time. For example, the centre-right EPP group has issued a stark criticism of Commissioner-Designate for Regional Policy Corina Creţu for failing to provide details on how she will tackle the build-up of delayed cohesion payments. Employment Commissioner designate Marianne Thyssen has also taken flak for not knowing details of the posted workers directive, while proposed Digital Commissioner Gunther Oettinger was criticised for being too vague on surveillance, net neutrality and other specifics of his brief. In short, many Commissioners are struggling to tread the fine line of trying to please all sides in the European Parliament (thereby sticking to vague and uncontroversial answers).

Furthermore, let’s not forget that the outgoing Internal Market Commissioner Michel Barnier – who oversees financial services – had little to no experience of the area before he took over the post having been Agriculture Minister in France.

What happens next?

Hill’s second hearing will likely be early next week. Following the hearing another committee vote/discussion will be held on whether to approve him. These ‘votes’ are informal since the EP does not have direct say over each Commissioner, or which roles they fulfil, but only over the Commission as a whole. There are a few different scenarios over how this could play out:

1) The committee eventually approves Hill: The EP will then eventually have to decide whether to approve the whole Commission. As we have pointed out before, it seems likely that the EP will request that at least one or two of the suggested Commissioners are replaced (if only to flex its muscles). There will then be a negotiation until the EP and Commission President Jean-Claude Juncker (and member states) reach an agreement.

2) The committee does not give Hill approval but he goes ahead anyway: Since the EP cannot veto specific people or roles, it is possible they could reach a deal on the overall Commission set up even without explicitly endorsing Hill. This would certainly hamper Hill in his role since he will be forced to engage with and report to MEPs, however, it should not stop him from fulfilling his brief.

3) The committee does not approve of Hill: In this instance, the committee would fail to approve Hill even after a second hearing and would request he be replaced when they negotiate with Juncker over the final approval of the whole Commission. This would be a difficult negotiation and would raise tensions between the UK and EU. Furthermore, even Cameron were to nominate someone else, it's not clear any UK candidate with direct financial experience/expertise would be more in line with EP thinking and sensitivities. Either way this would be a huge snub and would certainly play into the hands of UKIP and others who want the UK to leave the EU.

4) A re-shuffle: Hill is only one of several candidates who failed to impress MEPs - indeed none of the nominees so far have sailed through, with Spain's Miguel Arias Cañete and Hungary's Tibor Navracsics, both EPP, in trouble (as we predicted) and Slovenia's Alenka Bratusek also facing a tough inquisition. Meanwhile, the EPP could retaliate by blocking one S&D's nominees, with France's Pierre Moscovici the most likely victim. As such, the FT reports there are rumours in Brussels that a "major reshuffle" could be on the cards with the same personnel being moved to 'less problematic' posts. There is a precedent - in 2004, Barroso agreed to swap around a couple of his Commissioners to appease MEPs. Such an approach would fit with the concerns of MEPs which seem to be more centred around the UK having the financial services brief rather than Hill himself.

However, taking financial services away from Hill (even if he is compensated with another big post like Internal Market or Competition) would also be seen as huge slap in the face for Cameron, the City of London, and the UK as a whole. This would probably be the worst outcome in terms of trying to keep the UK in the EU and would play on many of the concerns raised by UKIP.

Ultimately, the most likely scenario remains that Lord Hill is approved albeit with added scrutiny. That said, it seems almost certain the Parliament will request some changes, as it has almost always done, it remains an open question upon whom they will ultimately focus their attention.

Would a stand alone financial services commissioner be a curse or a blessing?

There’s a bit of a debate going on at the moment over whether splitting up the internal market portfolio in the next European Commission is a good or bad thing for UK interests. The idea is to separate financial services from the wider internal market portfolio, to create a more manageable brief and avoid a scenario whereby an activist Commissioner turns this portfolio into a financial services one anyway, neglecting the many other crucial single market issues such as professional services, energy and digital services.

The idea has been subject to a bit of push-back with some worrying that a new “financial services tsar” will turn against the City, while making it more likely that the Commission develops a Eurozone-bias in its financial services legislation. The British Bankers’ Association has come out against the idea, for example. 

There is undoubtedly a risk here: if a free-standing financial services brief goes to a candidate who is anti-free markets, doesn't get financial services and who wants to pursue Eurozone-tailored solutions at the expense of the single market, then of course, it would be a bit of a disaster. However:

• Remember, we’ve lived with a 'financial tsar' over the last fine years. His name is Michel Barnier. Though there are now those within the UK Government who say Barnier “wasn't that bad after all”, it was clear that he saw his primary mission as restricting and controlling financial activity. He focused almost all his energy on this to the detriment of wider internal market issues. 
• Under Barnier’s watch the integrity of the single market has been mostly protected – for example there are now non-discrimination provisions in laws such as MiFID and EMIR – however it has been and remains a daily struggle and most of these protections were inserted by member states during the negotiation process. Let’s not forget, this is the man who has played a leading role in the drive for a Financial Transaction Tax and the banker’s bonus cap. Furthermore, the original proposal for a eurozone banking union transferred huge amounts of power to the Commission and put a eurozone focused brief right at its core (to the chagrin of more than just the UK). 
• More importantly, however, while financial services is hugely important for the UK national interest, it’s not the only interest. The problem with merging financial services and the wider internal market is that the latter tends to get neglected given all the focus on the likes of banking union and regulating sprawling multinational financial institutions. An active Commissioner dedicated to liberalising the single market in services, digital and energy could be hugely beneficial at the moment, particularly since the appetite for a new push in some of these areas may be growing across Europe. Also, this will form a key plank in Cameron’s renegotiation strategy. 
• Splitting off financial services is the only chance the UK has of getting internal market – which even without financial services (for the reasons described above) would be a big prize. 
• While it is often said that keeping financial services inside internal market ties it to the single market, the point also runs both ways. For example, outside the internal market brief, more attention may be paid to the legal justification for financial services regulation rather than it simply being pushed through under a single market justification as is usually the case. 
• In terms of Eurozone-bias – we’re as concerned about it as anyone, as we flagged up as early as 2011 (though we don’t believe that the Eurozone will organise itself as a perfectly coherent entity any time soon) – the key for this is to keep financial services as far away from the Economic and Monetary affairs brief as possible, which for the most part looks to be taking place. 

So it could go go either way. However, you have to compare it against what has gone before and what the likely alternative is. Cameron would have to screw it up badly to make the de facto division of labour worse in this area than what was the case in the previous Commission.

Swedish and Dutch patience running out over proposed FTT?

EU finance ministers met today, with the financial transaction tax (FTT) once again topping the agenda.

They were presented with a new proposal or brief under which the 11 countries pursuing the FTT under enhanced cooperation could move forward. The plan involved significantly amended terms and (again) suffered from a significant lack of detail:

• The scope will be “limited” to “shares and some derivatives”, according to German Finance Minister Wolfgang Schäuble – suggesting bond markets and probably repo markets will be exempt. The level of the tax on shares could be cut from 0.1% to 0.01%.
• This will form part of a “step by step approach”, suggesting the tax will be expanded in the future.
• Non-participating countries will be fully informed on all future FTT discussions.
• The FTT will not be introduced until January 2016.
• It is unclear whether Slovenia will participate in the FTT anymore, given that it did not sign the recent statement on the issue due to domestic problems and uncertainty around its government.
• Reuters reports that the revenue from the adjusted tax is expected to be about a tenth of the original forecasts – putting it at €3.5bn.

Those outside the proposed FTT zone showed quite significant hostility to the process of enhanced cooperation (as it has been conducted in this case) and continued to warn of legal action. UK Chancellor George Osborne said:

“The FTT that people have talked about is not a tax on bankers, it’s a tax on jobs, investment and people’s pensions.”

“Here we have a situation where 11 member states are working up their proposals largely in secret, I do not know how involved the Commission is in this or not. Then as we start our discussions here we get a piece of paper handed to us all by the 11 member states saying this is what we have agreed.”

“We will wait to see the final text of the proposal, but we will not hesitate to [legally] challenge an FTT which has extraterritorial impacts, that damages other member states, including the UK, or that damages the single market.”

Osborne was notably annoyed by the fact that the one page sheet on the new proposal was presented to the other EU ministers only five minutes before the meeting. His position was strongly backed by Swedish Finance Minister Anders Borg, who said:

“Even if this is a rather narrow proposal, there is a clear risk of a slippery slope toward a broader proposal with much more harmful effects on growth, and particularly on the capital markets.”

“The burden of proof is on the countries that want to enter the enhanced cooperation to prove, beyond a reasonable doubt, that those not participating are not harmed by this measure.”

“We did not support the U.K. when they started this legal case; we are much closer to doing that, because the process has not been satisfactory during these last few months…I’m very disappointed in the process.”

While even Eurogroup Chief and Dutch Finance Minister Jeroen Dijsselbloem warned:

“The impression I get is that, you [meaning the 11 FTT countries] have found a very, very small common ground, which is still very vague on the basis for the tax, when it will actually take place, on what products etc. but you have decided we must come out with something before the elections. That’s fine, but please also respect that we’d like to know a little more.”

“I don’t think that there is any basis at the moment for the Dutch government to consider joining, certainly not on what we have here… I’m a little disappointed in the way the process is going at the moment.”

All in all then, while there is talk of progress on the FTT, its scope has been slashed as expected, while the time line has been pushed into the long(er) grass. The process under enhanced cooperation has taken a public hammering, while it remains clear that those involved are struggling to find any clear agreement.

However, the fact that the Swedes and Dutch have expressed their anger so openly highlights that this will continue to be politically fraught. In addition, that the 11 countries seemingly want to reserve the right to expand the FTT in future, means this still has a way to run and future legal challenges are a genuine possibility.

ECJ throws out UK's FTT challenge, raising questions about whether it can be trusted to police the EU treaties

This morning’s ECJ judgement that the UK’s legal challenge against a proposed Financial Transaction Tax (FTT) is premature was what many had expected. The UK had challenged the decision to authorise the use of so-called ‘enhanced cooperation’ (where a smaller group of EU members can move ahead with legislation even if it does not have broader EU support) for the FTT. For the UK Government, today’s result is not what it had hoped for (an annulment of the decision to authorise enhanced cooperation), but neither is it the worst outcome.

Today’s ruling effectively said that the court could not rule on the UK’s substantive objections to the FTT since the final shape of the tax is unknown and subject to further negotiation between those taking part. This does not prejudice the UK’s ability to mount a second challenge once the final FTT has been agreed and its implications are clearer.

The ECJ judgement (in full here) said:

“It is clear that the objective of the contested decision is to authorise 11 Member States to establish enhanced cooperation between themselves in the area of the establishment of a common system of FTT with due regard to the relevant provisions of the Treaties. The principles of taxation challenged by the United Kingdom are, however, not in any way constituent elements of that decision.”

“The two pleas in law relied on by the United Kingdom in support of its action must be rejected and, accordingly, that the action must be dismissed.”

“Those effects are dependent on the adoption of ‘the counterparty principle’ and the ‘issuance principle’, which are however not constituent elements of the contested decision, as stated in paragraph 36 of this judgement.”

“That review should not be confused with the review which may be undertaken, in the context of a subsequent action for annulment, of a measure adopted for the purposes of the implementation of the authorised enhanced cooperation.”

However, while the UK will get a second stab at challenging the FTT, today’s ruling poses major questions about how ‘enhanced cooperation’ works and how it is used in the future. The EU Treaties stipulate that authorisation of enhanced cooperation (which is given by a qualified majority vote of all EU member states) is conditional on the proposed legislation respecting the integrity of the single market and not impacting on those not taking part – this is meant to be a legally enforceable safeguard for those countries not participating.

Enhanced cooperation is a relatively new phenomenon that has only been used twice before (for a European Patent Office and divorce law), but it could have huge implications for the future of the EU and Britain’s place within it. In an increasingly multi-tier EU, enhanced cooperation may be used more often by countries that want to integrate further. For those that don’t wish to follow suit, it is vital that their rights in the single market are respected.

Let us start with an analogy. Imagine you had agreed to let your neighbour build a new house based on a certain agreement and set of plans. Halfway through building it becomes clear that he has adopted a new plan which will hamper your view or infringe on your land. You appeal to the council but they rule that it is too soon to tell where the house will end up and that they can only rule when the house is built. Tearing down a house is much messier and more costly than stopping one being built in the first place. Hardly seems efficient or fair, does it?

Yet, in this case, this seems to be what the ECJ has done. It has effectively decided that it could not decide whether the decision to authorise the FTT proposal does respect the rights of those not taking part because the final outcome of the FTT negotiations cannot be known now. This is strange because this is by definition true in pretty much all cases of enhanced cooperation, since the countries involved negotiate the finer points of the legislation amongst themselves after getting approval to go ahead.

While this may seem legalistic and technical it raises a fundamental question: are the authorisation criteria for enhanced cooperation worth anything? Surely, any decision on the use of enhanced cooperation should be made on the basis of the proposal that is on the table, irrespective of whether it might change (for the better or worse) by the time it is finally agreed as a legal act, which could still be challenged in any case. The potential spill-overs should be examined before those member states not involved give those involved the go ahead. Otherwise they are ultimately authorising an unknown piece of legislation, which once it has built up a political head of steam could be much harder to challenge later on.

By its very nature, enhanced cooperation will be used for controversial proposals but today’s ECJ judgement has increased uncertainty surrounding this procedure (it was already uncertain) and undermines the logic of the process for authorising its use. We cannot know what the long term implications of this will be for the EU and the UK but they could be important.

As for the FTT, the UK will have another chance to challenge the final legislation (which may end up being watered down anyway due to concerns from those taking part) but by the time it gets to that point, there will be so much political capital invested in it, it may make it harder for the court to strike it down, even if the UK has good legal grounds.

Gaining allies for #EUReform: Open Europe / Fresh Start Project's EU Reform Conference is drawing huge levels of interest

Advocates of 'Out' of the EU or the 'Status Quo', are fond of saying that EU reform is impossible - it suits their respective cases. They are wrong. Reform is possible, but will not happen on its own, reformers in the UK need to go out there and win allies and put forward solid thought-through proposals to make the EU more competitive and closer to voters.

This week Open Europe and the Fresh Start Project will attempt to do just that by hosting a ground-breaking conference for EU Reform in London.

It will be a landmark event - and the response to this conference has been absolutely amazing. A reminder to those who say there's "no appetite" for reform in Europe that they may be speaking too soon. There will be 300 delegates from over 30 countries debating a full spectrum of ideas on how to achieve major reform in Europe. Keynote speakers include eight ministers from across the continent, leading business people, MPs, MEPs, former heads of state and a European Commissioner.

Here are some highlights:

• A major contribution from a senior UK Minister.

• Agnieszka Pomaska, Chair of the EU Affairs Committee in the Polish Parliament, and Priti Patel MP debating EU free movement and rules on access to benefits.
• Rachida Dati MEP, Deputy President of the French UMP Party, asking if it’s time for a “realist revolution” in Europe.
• Leading German MP Klaus-Peter Willsch and former EU Commissioner and Dutch minister Frits Bolkestein discussing if, and how, powers can flow back from the EU to its member states.
• UK Europe Minister David Lidington and Irish Europe Minister Paschal Donohoe discussing the role of national parliaments with break-out sessions looking at whether national parliaments should be given veto rights over EU law.
• Maria Damanaki, European Commissioner for Fisheries, explaining why EU reform is possible using the case of the EU’s fisheries policy.
• Bruno Maçães, Portuguese Secretary of State for European Affairs, discussing how services liberalisation can be achieved in Europe.
• Serial entrepreneur Luke Johnson and Dr Daniel Mitrenga of the German Association of Family Enterprises identifying ways to cut EU regulation.
• UK Foreign Secretary William Hague addressing the “Reformers’ Reception”.
• Bulgarian Foreign Minister Kristian Vigenin, Estonian Foreign Minister Urmas Paet, and former Slovakian Prime Minister Iveta Radicova, drawing lessons on reform from Eastern and Central Europe.
• Peter Norman, the Swedish Minister for Financial Markets, looking at how the single market can work for economic recovery.
• Young reformers from across Europe setting out their ideas for change in the concluding “Future of Europe” panel.

What do we hope to achieve?One conference will not achieve #EUReform on its own, but ahead of a crucial year in Europe - with the European elections and the selection of a new European Commission - it'll be a hugely important opportunity to really delve into the kind of policies that will achieve sweeping change in Europe. It'ls also be a key testing ground for what kind of reforms David Cameron might achieve ahead of a potential 2017 EU referendum.

We have provided a platform, now lets see what the delegates make of it...


UK lines up another court challenge against EU financial regulation

Last week, the UK launched another legal challenge at the European Court of Justice (ECJ) against an unwanted piece of financial regulation – this time, the bankers' bonus cap. This comes in the wake of some favourable legal assessment from a UK point of view, on short selling and the FTT (though both those cases are  still pending), as well as a win on benchmark regulation.

The details on the exact basis for the challenge remain vague but the key points of contention seem to be:

• The CRD IV legislation transfers power to the European Banking Authority (specifically the power to regulate wages in some form). When the EBA along with other supervisors was established there were clear limits put on the powers it can have, particularly ones transferred under the single market legal base (article 114). This was also a key point in the short selling case and one that the ECJ backed the UK on. Furthermore, the use of technical standards allows a significant amount of power to the EBA officials to set the boundaries of the cap.

• The second key issue is the legal base itself, should something such as a wage cap fall under the single market legal base? Furthermore, should it even be allowed under EU treaties? This may come down to a question of to the extent to which the cap actually play a role in regulating the financial system (we would say not much).

• The next issue is related to the above. The UK claims that the law is being enacted without any significant cost benefit analysis of its impact and that it remains unfit for purpose.

• There is also an extraterritoriality point to be made potentially, given that all banks headquartered in the EU will have to apply the rules across their businesses around the world, thereby setting rules outside the EU. However, this home vs. host interpretation of regulation is not unheard of. (This obviously makes the plan flawed from a practical perspective although how strong a point it is legally is not clear).

This could prove to be another important case for the UK for a number of reasons:

• It highlights a growing trend that the UK is aware it has significant legal recourse on EU issues which it does not agree with. Using this effectively will be a big part of future EU engagement.

• As we have noted before, the EU is increasingly trying to push through a wider range of measures using single market articles. Showing the limits of this approach, as was done with the short selling ruling, will be key in defining the limits to what the eurozone in particular can push ahead with under the current treaties (though the cap isn't itself a eurozone-specific issue).

• If the UK is able to secure a victory or even an adjustment in the rules it will be significant since this is the first financial services issue which the UK has been directly out voted on – making it a key symbolic point.

Having said all that, on this one, the UK will have a tough time.

What would leaving the EU mean for the UK's services sector?

Our Director Mats Persson writes on his Telegraph blog,

The UK’s services sector accounts for around 75 per cent of the country’s GDP. Britain’s 0.6 per cent growth in the second quarter of this year was largely thanks to this sector, which grew at its fastest rate in over two years.

Whether we like it or not, the UK will remain a services-based economy for a very long time. So it goes without saying that as David Cameron looks to negotiate a new settlement with Europe, getting a good deal for the UK’s services sector should feature highly.

By far the most common argument from Better Off Outers is: “We sell more to them than they sell to us”, implying that the UK’s trade deficit would give London leverage to secure a favourable Free Trade Agreement in place of EU membership. It’s a persuasive argument. It is also simplistic. As the graph below shows (click to enlarge), the UK’s trade deficit with the EU is the result of a large goods deficit, while it is a net exporter of services.

This is critical for several reasons.

First, UK services firms clearly use their comparative advantage to do business in Europe, boosting UK growth.

Secondly, if you buy into the “trade deficit” argument, it follows that while Germany and others would have an interest in maintaining open markets for selling manufactured goods in the UK, this logic does not apply for services, where they are net importers from the UK.

Therefore, the UK would be vulnerable to tit-for-tat trade games in its key economic sector. Perhaps Germany would be so keen to continue selling tariff-free cars that it would happily offer market access for UK services firms as part of a new deal. However, it’s far easier to remove tariffs for goods than it is to eliminate the myriad of barriers that exist to market access in services. Despite 40 years of negotiations, the Swiss still have patchy EU market access for services, while the EU and US have spent decades trying but failing to agree reciprocal market access for certain types of funds.

Critically, there’s only one off-the-peg model offering full market access for services outside the EU – the Norwegian model (EEA) – which for a range of other reasons would be a bad deal for the UK. The other potential models – the Swiss, Turkish and WTO options – would restrict access for the UK services industry absent separate agreements for specific sectors. This also spells problems for the City of London, currently used by a range of firms as an entry point to the single market, often via a so-called passport (involving a firm being allowed to sell its services across the EU as long as it’s authorised to do so in one member state).

Again, given that the City is also a gateway to global markets for European firms, a deal might be struck. However, since “Anglo-Saxon” bankers and fund managers aren't exactly universally loved on the continent, it’s also easy to see France et al blocking passport-style provisions for UK financial firms in perpetuity.

So, there’s a strong argument for the UK to remain a full member, not only of the single market in goods, but also in services. Now, this cost-benefit analysis could of course change. For example, if the many non-trade costs of EU membership aren't reduced through fundamental reform; if the single market in services – which is under-developed – continues to be held up by protectionist interests; if the EU prevents the UK from taking advantage of growth opportunities from around the world; if Brussels continues to be more interested in restricting financial services activity rather than facilitating trade – then the case for fully remaining in the single market could weaken significantly.

Which is why another round of serious liberalisation of the EU services market is long overdue. Over to you, Berlin.

MEPs reject plans for controversial fund managers' bonus cap

The European Parliament has voted down a controversial proposal put forward by German Green MEP Sven Giegold to introduce a bonus cap for managers of UCITS investment funds. Mr Giegold wanted to curb bonuses so that they could no longer exceed managers' basic salaries.

However, UK Conservative MEP Syed Kamall brokered an amendment with the European People's Party (EPP) and the Liberals (ALDE) to scrap the bonus cap. The amendment was passed this morning. It establishes that bonuses

"shall be considerably contracted where subdued or negative financial performance of the management company or of the UCITS concerned occurs, taking into account both current compensation and reductions in payouts of amounts previously earned."

MEPs will now wait for EU member states to agree on a common position on the new UCITS rules. After that, negotiations will start.

Mr Giegold has called today a 'schwarzer Tag' (a 'black day'), but the truth is the bonus cap would have been a bad idea for a number of reasons:

• Unlike banks, investment funds haven't received a penny from taxpayer-backed rescue packages. Therefore, although one can agree with the need to align pay with performance in the financial services sector, it would have made little sense to impose on fund managers a harsher bonus cap than the one recently introduced for bankers.

• The cap would also have undermined the competitiveness of the UCITS industry, which currently accounts for over 70% of net assets managed by the entire European investment fund industry.

• Perhaps most importantly, such a largely ideological measure could have made the City of London more eurosceptic at a time when the debate over the future of UK-EU relations is at a crucial stage.

So, good news from Strasbourg, although similar proposals on remuneration in the financial services sector are likely to come up again sooner or later - especially from the European Parliament.

However, today's vote shows that the UK is indeed listened to in Europe when it comes to financial regulation (although it also helped that a lot of UCITS funds are based in France). It's all about having a clear negotiating strategy and moving early enough in the EU's law-making process.