A top EU court advisor rejected Thursday a barrage of British challenges against a cap on banking bonuses, dealing a blow to Prime Minister David Cameron’s government.
Brussels set the rules in a bid to curb excessive risk taking in the wake of the financial crisis, saying that bonuses cannot exceed a banker’s fixed salary, or twice that if given shareholder approval.
But banking is a pillar of the British economy and Cameron’s government fiercely resisted the cap, taking the case to the European Court of Justice in Luxembourg.
The court’s Advocate General Niilo Jaaskinen gave a legal opinion saying that the limits were valid, and although the decision is not binding the European Union’s top court mostly follows such recommendations.
“In his Opinion today, Advocate General Niilo Jaaskinen suggests that all the UKâ€™s pleas should be rejected and that the Court of Justice dismiss the action,” the court said in a statement.
The opinion comes the same day as Cameron faces a local election defeat against the anti-EU UK Independence party led by Nigel Farage.
UKIP is looking to gain a second seat in the British parliament and the courtroom setback will be further ammunition for the party’s arguments that Brussels encroaches on national sovereignty.
The ECJ is Europe’s top court on questions of EU law and regularly publishes opinions by its senior lawyers on pending cases.
Britain put forward a series of arguments against the cap, including the argument that Brussels has no right to limit pay in a member state.
But the advocate general said limiting a bonus “does not equate” to the fixing of pay.
“As there is no legal limit to the basic salary that can be paid there is no limit to the total level of pay,” the statement said.
City of London authorities have come out hard against tighter oversight of banker activity despite multiple scandals.
Britain was pleased earlier this year when its man Jonathan Hill was appointed the new European commissioner for financial services, but responsibility for rules on bankers’ bonuses has been removed from his portfolio.
In a statement, the British treasury said it “notes” the Advocate General’s opinion on our legal challenge against the EU bonus cap.
“We are considering the opinion and its implications in detail,” it said.
The opinion lands as further scandals hit the British banking sector, including the rigging of foreign exchange rates.
Amid the misbehaviour, on Monday Bank of England governor Mark Carney said authorities may need more powers to regulate pay of bankers as well as their bonuses.