A European court has struck down a pre-emptive challenge to the adoption of a financial transaction tax (FTT) in Europe.
The European Court of Justice dismissed an action today that was brought by the UK against a decision authorizing Europe to establish enhanced cooperation to facilitate the imposition of an FTT. The idea of introducing such a tariff in the wake of the financial crisis does not have universal support in Europe, but 11 countries had agreed to go ahead and establish an FTT.
The UK challenged that decision in court, arguing that a decision authorizing the adoption of an FTT produces extraterritorial effects and will impose costs on countries that don’t participate.
The court dismissed the UK’s action, ruling that the decision simply authorizes enhanced cooperation, but does not contain any substantive element on the FTT itself. It said the UK’s arguments are directed at elements of a potential FTT and not at the authorization to establish enhanced cooperation, and so those arguments must be rejected and the action must be dismissed.
Simon Lewis, chief executive of the Association For Financial Markets In Europe (AFME), expressed disappointment at the decision, acknowledging however that “this has always been a possible outcome”, given the fact that it focused on procedural matters, rather than the proposed tax itself.
“We urge the 11 countries involved to take the opportunity to revisit the need for a tax that will act as a brake on economic recovery in Europe by increasing costs to investors and companies,” he said. “All the evidence continues to show that the proposed transaction tax will have serious harmful economic effects for end‐users of financial markets throughout Europe – not only within the 11 member states that are considering it. Against this background, the UK was right to mount a legal challenge.”