EU high court advisor rejects UK challenge to banker bonus cap legislation News
EU high court advisor rejects UK challenge to banker bonus cap legislation

[JURIST] Advocate General Niilo Jaaskinen [official profile] of the European Court of Justice [official website] issued an opinion Thursday endorsing an EU plan to cap [EU backgrounder] bankers’ bonuses. The UK had challenged [BBC report] the cap, which restricts bonuses to 100 percent of banker’s pay or 200 percent with shareholder approval. The non-binding opinion rejected the UK government’s six legal and technical arguments against the EU legislation, but the matter still requires a final judgement from the court. The British Banking Association [official website] criticized the ruling [press release], stating that “[the] law runs counter to recent reforms and will make the system less robust by incentivising firms to increase fixed pay. It also puts European banks at a disadvantage when competing with firms in other parts of the world.” The legislation is seen as a direct response to the 2008 financial crisis and the ongoing Eurozone debt crisis.

The EU has continued to grapple with the economic aftermath of the 2008 financial crisis which has led to severe financial situations in a number of Eurozone countries. In March the Federal Constitutional Court of Germany [official website, in German] upheld [JURIST report] the constitutionality of the European Stability Mechanism [text, PDF]. In 2013 the European Parliament [official website] approved legislation [JURIST report] that creates a system of banking supervision overseen by a new centralized bank supervision authority supported by the European Central Bank [official website].