[JURIST] The General Court of the European Union [official website] on Wednesday annulled [press release, PDF; decision] a portion of the European Central Bank’s (ECB) Eurosystem Oversight Policy Framework [text] requiring financial institutions clearing trades in euros to be located in the Eurozone. The UK brought the action before the General Court, contending that the ECB lacked the authority to impose a location requirement on central counterparty clearing houses (CCPs) [EU backgrounder, PDF]. The General Court narrowly nullified Eurosystem Oversight PolicyFramework Eurozone location finding that the “ECB lacks the competence necessary to regulate the activity of securities clearing systems as its competence is limited to payment systems alone by Article 127(2) of the FEU Treaty [text, PDF].” In addition, the court rejected the ECB’s argument that it’s power to “ensure efficient and sound clearing and payment systems within the Union and with other countries” allowed it to regulate securities clearing infrastructures, finding that the ECB would need the EU legislature to amend the Bank’s founding statute to explicitly reference securities clearing systems.

The ECB has played a central role in attempting to remedy financial instability in the Eurozone. In January EU Advocate General Cruz Villalon gave legal support [JURIST report] to the ECB plan to purchase government bonds as an attempt to remedy the financial crisis in the Eurozone. In September 2013 the European Parliament [official website] approved legislation [JURIST report] Thursday that creates a system of banking supervision overseen by a new centralized bank supervision authority supported by the European Central Bank (ECB) [official website]. The regulation puts in place a single supervisory mechanism that will cover 150 of the largest banks in the 17 Eurozone nations.