The European Court of Justice: Selling Us Short?

Abstract

The conferral of powers on the European Securities Markets Authority (‘ESMA’) has involved tensions, particularly concerning the boundaries between national and EU powers. A case in point is the recently introduced European Short Selling Regulation: article 28 confers direct powers of intervention on ESMA in exceptional circumstances. Crucially, measures adopted by ESMA under article 28 prevail over measures taken by national regulators. Article 28’s adoption led to a UK challenge at the European Court of Justice seeking its annulment. However the court’s decision, delivered on 22 January 2014 upheld ESMA’s powers.

This paper examines this landmark decision and suggests that while some important consequences result from it in relation to the development of the European Banking Union, the decision is disappointing, not least for its brevity and failure to fully engage with the Advocate General’s arguments. Further the judgment also paves the way for future developments in ESMA’s and other EU bodies’ roles, whilst limiting the possibility of future legal challenges. Finally, the court’s affirmation of the legislative view is also part of a more general and worrying trend that has been evident in its case law over the last decade.

Keywords: short selling, ESMA, European Union

JEL Classification: G10, K22