BRUSSELS (AP) — Britain has filed a complaint with the European Union’s top court in its quest to derail a new EU law that slaps a cap on bankers’ bonuses.
The finance ministry in London argued Wednesday that the legislation goes beyond the scope of the 28-nation bloc’s treaties and fails to achieve what it’s meant to do — create a more stable banking system.
The law will limit bonus payments at one year’s base salary, or double that if a large majority of a bank’s shareholders agrees. It will come into force next year and apply across the European Union, but also to EU banks working overseas — in New York, for example.
The bonus cap was decided by an overwhelming majority of EU governments and the European Parliament this year as part of a wider package of financial reforms. Britain, which is home to the bloc’s biggest financial industry, stridently opposed the law, but found itself isolated.
The European Court of Justice in Luxembourg confirmed it received the British complaint on Friday. It usually takes between three and six months for an initial hearing to take place.
Proponents of the bonus cap say the large payments encouraged bankers to take massive risks at the expense of the long-term future of their businesses, helping to destabilize the financial system and trigger the 2008-2009 financial crisis.
Britain, however, maintains the new rules will only lead to an increase in bankers’ fixed pay, drive talent away and weaken the bloc’s financial industry.
“In other words … they may undermine responsibility in the banking system rather than promote it,” London’s Treasury said.
In its complaint, Britain claims the legal basis for the bonus cap is unsound. It questions the delegation of some oversight to the European Banking Authority and insists the application of the bonus cap outside the EU’s territory is not “properly justified.”
British finance officials are worried about the latter because they say the application of the law to EU banks’ overseas branches would put them at a competitive disadvantage when it comes to attracting talent.
For Britain, the case is also a highly political matter.
The bonus cap marked the first time since the start of the financial crisis that Britain was overruled in the EU on an important financial law.
Prime Minister David Cameron, who sees the EU as meddling too much with the national governments’ business, has vowed to renegotiate his country’s ties with Brussels and hold a referendum on Britain’s membership in a few years.
The U.K. has taken the EU to court an another thorny issue, a European ban on some forms of short-selling — the practice in which an investor sells stock they don’t own in the hope of buying it back at a cheaper price. Britain scored an initial victory this month when an opinion by the court’s advocate general appeared to side with London. The court case is pending.
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