International attention has again re-focused on the proposed EU financial transaction tax (FTT) as a result of a recent judgment of the Court of Justice of the European Union (CJEU) and a meeting of the European Union's Council of Economic and Finance Ministers (ECOFIN).
The CJEU judgment
As has been widely publicized, in April 2013 the UK Government launched an application for annulment of the measures which were adopted for the purposes of enabling the implementation of the FTT. On April 30, 2014 the CJEU dismissed the UK Government's application. In short, both the UK Government's arguments, namely that the FTT's "extra-territorial" scope would have adverse effects for, and that the FTT imposes non-recoverable costs on, non-participating Member States, were rejected by the CJEU. It is important to note, however, that the judgment does not preclude the UK Government from raising a new legal challenge once the substantive details of the FTT are more advanced.
As was widely anticipated, following the ECOFIN meeting held on May 6, 2014, it has been announced that those Member States of the European Union who are participating in the FTT (Participating Member States) have reiterated their commitment to the implementation of the FTT. As the announcement only provided very limited technical details relating to the FTT, the most likely intention behind the announcement was presumably to inject further energy into the pro-FTT lobby. The announcement did, however, confirm that Participating Member States are aiming to agree the text of a revised Directive by the end of 2014, with the first round of legislation to be implemented at the latest by January 1, 2016. Furthermore, the Participating Member States agreed that the initial scope of the FTT should include shares and certain derivatives, with the possibility to expand its remit at some point in the future. Accordingly, and although confirming that both the initial scope and pace for implementation of the FTT are somewhat less ambitious than was initially proposed, this development does appear to signal that a meaningful resolve remains within the group of Participating Member States to ensuring that the FTT becomes a reality.
Notwithstanding these developments, there remains a frustration in many quarters with both the idea of, and the implementation process relating to, the FTT, and it cannot be ruled out that a future legal challenge will not be launched. In any event, market participants should continue to keep abreast of developments and should expect further detail and information to be provided during the remainder of 2014.