UK v Council of the European Union

The European Court of Justice (ECJ) on 30 April 2014 rejected the UK’s challenge to the use of the enhanced cooperation procedure (ECP) to enable the introduction of an EU Financial Transaction Tax (FTT). In its ruling the ECJ stated that the challenge was premature as the Directive has yet to be adopted.

The ECP is a legislative measure which was introduced by the 2009 Lisbon Treaty. It is adopted to circumvent EU rules which require the unanimous consent of all Member States to approve new EU legislation. A minimum of nine Member States are required to agree to the adoption of the proposal. Eleven Member States including Germany, France, Belgium and Spain have agreed to the EU FTT proposal which has been opposed by the UK.

Extraterritorial effect

The UK argued that according to an EU Treaty (TFEU), any enhanced cooperation shall not have extraterritorial effect. Any Member States not participating under the ECP must not be forced to experience its impact. Under the proposed Directive, the FTT would affect non-participating Member States if one of the transacting parties is located in a participating Member State. The UK argued that this provision adversely affects the rights and competencies of non-participating Member States thus breaching the TFEU and contravening international law.

The TFEU also states that expenditure resulting from the implementation of enhanced cooperation should be borne solely by the participating Member States. Under the EU Mutual Assistance and Administrative Cooperation Directives, non-participating Member States will be responsible for collecting and enforcing this tax resulting in a breach of this provision.


The ECJ dismissed the UK’s challenge on the grounds that the decision to allow the use of the ECP system was not the cause of the consequences complained of. The arguments advanced by the UK relate to the actual effect of the proposed Directive and not the consequences of implementing the ECP.  The ECJ held:

 " ... the contested decision does no more than authorise the establishment of enhanced cooperation, but does not contain any substantive element on the FTT itself."

As the ECJ failed to address the issues of the FTT Directive in this decision, the opportunity remains for a future challenge to be brought if the Directive is adopted.