Britain may lose its challenge to stop plans by 11 euro zone countries to tax financial transactions when the European Union's top court rules next week, lawyers said on Thursday (24 April).
Britain is challenging an EU decision allowing the group of EU members to push ahead with their plans to tax stock, bond and derivatives trades to help make banks pay for the public money they received in the 2007-09 financial crisis.
Britain says the tax would unfairly impinge on its markets, which are the largest in the 28-country bloc. It would also force Britain to collect a tax from which it will not benefit.
It is one of several UK challenges to planned or approved rules from Brussels as Britain tries to stop further EU centralisation in financial services. The tax is backed by France and Germany along with nine other countries.
The ruling, due at 0730 GMT on April 30, comes just ahead of elections for the European Parliament in May.
Britain lodged the challenge at the Luxembourg court last year but a ruling was not expected until 2015.
A spokesman for the ECJ said the court has used its discretion not to hold a hearing or seek views from an adviser first, thereby substantially shortening the time frame.
"It's normal process. It has not been expedited," the spokesman said.
There was no agreement among the bloc's 28 members for a pan-EU tax, forcing the 11 countries to move ahead under a rarely used procedure known as enhanced cooperation.
Lawyers said the speedy ruling probably means that Britain's challenge has not been successful.
"The fact that the court is willing to rule without a hearing or an opinion from its adviser could mean that it will take a preliminary point and rule that the UK challenge is premature," said Alexandria Carr, a financial services lawyer with Mayer Brown.
"A ruling that the UK's challenge is premature would not prevent the UK later challenging any legislation eventually adopted by the 11 countries to tax transactions," Carr said.
But without its early challenge, Britain would risk being told that a challenge to the subsequent legislation was too late, she added.
Elements of the planned tax, as originally conceived, have already been hit by legal doubts when lawyers for EU states said its reach into non-participating countries could be illegal.
The tax, if agreed in detail, is likely to be phased in over time, by different assets and at a lower rate than conceived thereby raising much less than the €35 billion annually that its backers had hoped for.
"The legal challenge is unlikely to derail negotiations as there is strong political backing in key member states," said Florian Lechner, a tax partner at Linklaters law firm.
"Whilst the timetable for implementation may be delayed, it looks like it may well be driven forward, despite ongoing concerns about the impact on financial markets," Lechner said.
- 30 April: ECJ ruling on Britain's challenge to FTT