On the 4th of March, the EU General Court ruled in favour of the British government in its challenge to the European Central Bank's right to insist on the location of clearing houses. The court explicitly stated that the ECB does not hold the right to require companies clearing euro-denominated financial trades to operate from within the Eurozone.
According to the court, the ECB "lacks the competence necessary to regulate the activity of securities clearing systems" particularly since its competence is restricted to payments systems only. In a policy framework paper published in 2011, the ECB emphasised that in order for it to be able to properly fulfil its role of ensuring the proper function of the Eurozone, it was necessary for clearing houses handling euro-denominated transactions to be based in a Eurozone country.
This claim was refuted by the court as it stated that the ECB should amend its statute if it believes that its responsibility should extend to having authority over clearing systems. Furthermore, the British government countered the ECB in stating that the clause breached EU single market rules on the right of companies to provide services anywhere within the EU. Alexandria Carr, from law firm Mayer Brown said, "This is not just a victory for the UK, it is a victory for all those who believe in the internal market and equal treatment for all 28 EU member states."
Effectively, ECB's plan would have seen business relocating in other European cities such as Frankfurt after moving away from the City of London, Europe's largest financial district. London is currently home to some of the world's largest clearing houses and if the court has backed ECB, these would have felt increased pressure to move elsewhere.
The British government has raised three separate cases to the EU court, challenging ECB policies that would compromise the presence of financial services companies in the UK. The other two cases are still awaiting judgement.
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