George Osborne withdrew the UK's challenge to the EU's rule on bankers' bonuses after the Advocate General expressed his opinion that the challenge should be dismissed. Simon Gorham, a senior associate in the employment practice at international law firm Taylor Wessing, said that while the Advocate General's opinion was hardly a shock, the debate is set to rumble on:
"The Advocate General's opinion was frankly unsurprising, and the chances of the UK's challenge succeeding was always quite remote. However, the most interesting and noteworthy point of his opinion is not that the recommendation that the challenge should fail, but rather that fixed pay is unquestionably an issue for EU members states. Whilst the EBA has criticised the use of role-based allowances, the debate around what constitutes fixed pay, and what alternatives there are for remunerating bankers, will now reopen.
"We're now seeing a tension develop between EU rules and some alternative practical approaches that have been mooted this week. The EBA say that for pay to count as fixed, it needs to be permanent and non-recoverable. That clashes with the idea of performance bonds because they would be subject to claw back, which means they would count as variable pay. Applying claw back to fixed pay is a radical development - it is legally complex and would have a game changing impact on the financial services industry."