On 18 April 2013, a legal challenge was launched by the Government of the United Kingdom in front of the Court of Justice of the European Union against the decision adopted by the Council on 22 January 2013 to authorise enhanced cooperation between 11 Member States in the field of the FTT. This initiative is reportedly meant as a precautionary measure aimed at protecting the position of the United Kingdom, pending the adoption of the relevant directive by the Participating Member States.
The formal application submitted by the United Kingdom is not available to the public at the time of writing. According to an information note dated 24 May 2013 prepared by the legal service of the Council of the European Union, the grounds of the challenge are, essentially, that the underlying authorising decision is unlawful in the sense that it authorises the adoption of a financial transaction tax with extraterritorial effects, which is contrary to the substantive requirements laid down by the EU Treaties for enhanced cooperation and customary international law.
A note prepared by the ABBL further elaborates on these arguments.
The Luxembourg Government is supportive of the initiative of the United Kingdom.
As of today, it remains to be seen how this initiative will alter the overall landscape for an FTT, bearing in mind that, should the EU FTT project derail, there would be nothing preventing individual Member States from introducing their own unilateral FTT schemes, along the French and Italian precedents. Arguably, the final scope of the scheme will be decided in the aftermath of the negotiations currently under way at the level of the Council. In this perspective, the essential merit of the UK’s challenge, irrespective of its (legal) outcome, is that it will help ensure that close(r) attention will be paid to the concerns voiced by the relevant stakeholders (including non-participating Member States), thus providing the financial services community with a valuable opportunity to articulate its concerns with respect to the operational challenges posed by the current Commission’s proposal.
Recent statements from other relevant stakeholders, in particular the European Central Bank (ECB) 1 and certain Member States participating to the scheme 2 suggest that the discussions are turning in the favourable direction.
1 Benoît Cœuré, Executive Board member of the ECB, told the Financial Times on 26 May 2013 that the ECB could advise on the design of the tax so as to avoid negative impact on financial stability.
2 Some Participating Member States reportedly plan to scale back a proposed financial transactions tax drastically, initially imposing a nominal charge on share transactions, while the material scope of the tax could be extended step by step in subsequent phases.
Source: Reuters - http://www.reuters.com/article/2013/05/30/us-eu-tax-idUSBRE94T0GL20130530
By Camille Seillès, Legal & Tax Adviser - ABBL