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20 February 2015

Reuters: EU's top court to rule on ECB challenge to UK clearing on March 4

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The ECB says clearing houses that process more than 5 percent of any euro-denominated security should be based in the single currency area. Includes quote from Graham Bishop.

The central bank argues this would make it easier to help an ailing clearer.

Britain, home to several clearers that serve clients across the EU, believes the ECB's position contravenes the bloc's fundamental single market tenet.

If the ECB prevails, clearers such as LCH.Clearnet, which handles large volumes of euro-denominated securities, may have to decamp to the currency area.

Some lawyers say this would be likely to fuel euroscepticism in Britain, where Prime Minister David Cameron has promised a referendum on EU membership in 2017 if he wins national elections in May.

"This judgment has the potential to be political dynamite as it is possible that the European Court will uphold the right of the ECB to adopt a policy that prefers the euro zone to countries like the UK that do not use the euro," said Alexandria Carr, a lawyer at Mayer Brown.

"The Court will be well aware of the political ramifications of this case, particularly given the UK concerns about recent developments in financial services regulation and the threat of Brexit," she added.

Britain lost a case in Luxembourg over short selling securities, and last November withdrew a case challenging an EU cap on banker bonuses. 

The Luxembourg-based court will publish its judgement on clearers on March 4, skipping an opinion first from a court advisor, which lawyers said could indicate either that Britain has lost or that the court has found no new points of law.

"If they are going for an early judgment then I can't see how the UK has a leg to stand on," said Graham Bishop, who has advised EU institutions on financial services rulemaking.

But Simon Gleeson, a financial services lawyer at Clifford Chance, said the court may rule the case has no substance.

"I would say that there is a significant likelihood for another purely procedural ruling," he said.

Full article on Reuters

© Reuters

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