Britain's EU bonus challenge offers scant hope for bankers

Fri Sep 27, 2013 5:10am EDT
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By Huw Jones and John O'Donnell

LONDON/BRUSSELS (Reuters) - Britain's challenge to European Union rules capping bankers' bonuses is likely to get bogged down in court long beyond their implementation, and critics say it is more about pleasing domestic voters unimpressed by the loss of powers to Brussels.

The UK, which houses Europe's biggest financial center, was outvoted when the European Union agreed that bonuses must be no more than a banker's fixed pay, or twice that amount with shareholder backing.

The British government is now asking the EU's top court, the European Court of Justice, to rule that the world's toughest curb on bankers' pay is illegal.

This follows its legal challenges to EU plans for a tax on financial transactions, new rules on short-selling and a policy of locating clearing houses in the euro zone.

Its latest case could take up to two years to be heard, by which time the cap will be common practice, and Britain has said it would apply it from 2014 as required.

The challenge has been given short shrift by EU lawmakers and the EU's executive body, the European Commission, which will defend the cap in court.

"In the months of negotiations, the British never made the arguments that they are putting forward now," said Othmar Karas, an Austrian member of the European Parliament who played a key role in negotiating the rules.

The bonus cap was slipped in at the last minute into a law that forces banks to hold more capital, and Britain argues that Brussels failed to consult or study its impact first.   Continued...

Britain's Chancellor of the Exchequer George Osborne speaks at the Institute of Directors annual convention in London September 18, 2013. REUTERS/Suzanne Plunkett