Bonus rules banning bankers from receiving awards of more than twice fixed pay violate the European Union's treaties, lawyers for the UK said on Monday. The bonus curb is "a radical departure" from previous measures taken by the EU, Kieron Beal, a lawyer representing Britain, said at the hearing at the European Court of Justice in Luxembourg on Monday.
The nation clashed with lawyers representing EU institutions over how far the bloc can go in regulating financial industry pay.
EU lawmakers campaigned for the bonus limits in a bid to rein in the gambling culture blamed for fomenting the 2008 financial crisis. They reached a deal with national governments last year to overrule UK opposition and include the measure in legislation that overhauled the bloc's banking rule book.
The UK has filed a series of legal arguments with the EU court, according to documents published on the court's website. These range from allegations that the new rules go beyond what's possible under EU treaties to arguments that they give too much power to the European Banking Authority.
Excessive Risk-taking
The U.K. said that it's not opposed to lawful pay rules that "aim to discourage excessive risk-taking." The bonus-to- salary limit goes beyond that, Beal said.
"Setting the level of variable remuneration by reference to a percentage figure still sets the level of pay for that worker," he said.
"I'm not here to debate whether bankers are paid too much," Beal said.
The U.K.'s interpretation was challenged by lawyers representing the European Commission, which serves as the EU's executive arm, as well as the two branches of its legislature -- the European Parliament and the Council of the European Union.
Britain's argument is based on false claims that the rule, which acts as a ratio between fixed and variable pay, is an outright limit on how much bankers earn, Matthew Moore, representing the Council, said.
'Intellectually Dishonest'
"This is intellectually dishonest," he said. "It is simply not true to describe article 94 as a limit on remuneration." The bonuses rule is legal as it's focused on preventing excessive risk taking that could threaten stability at a bank, and in turn unleash turmoil across the bloc's financial system, the EU's lawyers said.
The "ultimate goal" of the measure is "the smooth functioning of the internal market," Anders Neergaard, representing the European Parliament, said.
"We are not in the business of banker bashing," Moore said.
The nation clashed with lawyers representing EU institutions over how far the bloc can go in regulating financial industry pay.
EU lawmakers campaigned for the bonus limits in a bid to rein in the gambling culture blamed for fomenting the 2008 financial crisis. They reached a deal with national governments last year to overrule UK opposition and include the measure in legislation that overhauled the bloc's banking rule book.
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The rule is set to kick in next year, when it will apply to bonuses based on bankers' performance in 2014. The court's advocate general will issue an opinion on the legal challenge on November 20. Final rulings tend to follow about six months after the court's advisors have delivered their opinions. "The bonus cap sets the level of pay in this important financial sector" and so violates EU treaty provisions and case law that limits legal competence in this area, Beal said.
The UK has filed a series of legal arguments with the EU court, according to documents published on the court's website. These range from allegations that the new rules go beyond what's possible under EU treaties to arguments that they give too much power to the European Banking Authority.
Excessive Risk-taking
The U.K. said that it's not opposed to lawful pay rules that "aim to discourage excessive risk-taking." The bonus-to- salary limit goes beyond that, Beal said.
"Setting the level of variable remuneration by reference to a percentage figure still sets the level of pay for that worker," he said.
"I'm not here to debate whether bankers are paid too much," Beal said.
The U.K.'s interpretation was challenged by lawyers representing the European Commission, which serves as the EU's executive arm, as well as the two branches of its legislature -- the European Parliament and the Council of the European Union.
Britain's argument is based on false claims that the rule, which acts as a ratio between fixed and variable pay, is an outright limit on how much bankers earn, Matthew Moore, representing the Council, said.
'Intellectually Dishonest'
"This is intellectually dishonest," he said. "It is simply not true to describe article 94 as a limit on remuneration." The bonuses rule is legal as it's focused on preventing excessive risk taking that could threaten stability at a bank, and in turn unleash turmoil across the bloc's financial system, the EU's lawyers said.
The "ultimate goal" of the measure is "the smooth functioning of the internal market," Anders Neergaard, representing the European Parliament, said.
"We are not in the business of banker bashing," Moore said.