British lawyers accused the European Central Bank (ECB) of breaking the single market rules in a landmark case yesterday.
By insisting euro-denominated payment transactions are cleared within the Eurozone, the ECB is breaking the law, the Treasury argued.
The UK complained in 2011 but it has taken until now to reach the European Court of Justice (ECJ).
The ECB is regulating finance in the Eurozone and wants more activities to take place there, where it can more easily keep an eye on them. Lawyers acting for the ECB said that the Bank of England might not support a clearing house during a financial crisis.
The case is particularly important for London as most of the clearing activity takes place in the City.
Lawyers said the case is risky for the UK.
“The UK has strong legal and political arguments in its favour but the ECJ has a tendency to show deference to the EU institutions which determine the policies under challenge,” said Alexandria Carr, from law firm Mayer Brown.