UK wins in European Central Bank court challenge
The UK has won a court ruling against the European Central Bank which could have forced firms handling large euro transactions to move to the eurozone.
The surprise victory ends a three-year dispute which could have banned the clearing and settlement of euro-transacted deals in the UK.
The ECB had said firms managing large euro deals should be eurozone-based.
But the EU General Court ruled that the ECB lacked the legal powers to enforce this.
"The ECB lacks the competence necessary to regulate the activity of securities clearing systems as its competence is limited to payment systems alone," the Luxembourg-based court said in its ruling.
The UK had argued that the ECB policy, set out in an 2011 paper but never enforced, went against the EU's single market establishing the free movement of goods, people, services and capital.
If the ECB had won the ruling, it could have seen the City of London lose some of its influence as a financial trading centre.
Some of the biggest clearing houses including LCH. Clearnet and ICE Clear Europe are based in London.
Clearing houses enable the trading of shares between two parties, charging a fee to guarantee the sales should one side default.
Demand for clearing transactions has increased over the past few years as regulators force banks and other parties to channel trades through regulated clearing houses to ensure their risk positions can be better monitored.
Chancellor George Osborne said the verdict was a "major win for Britain and a major win for all those who want to see a European economy that is both open and successful".
Alexandria Carr, regulatory lawyer at Mayer Brown said: "This is not just a victory for the UK: it is a victory for all those who believe in the internal market and equal treatment for all 28 EU Member States."