The EU regulation on short selling, which empowers ESMA to regulate or prohibit short selling, breaches the limits of the EU Treaty. The relevant article in the regulation should be annulled.

This is the conclusion of the Advocate General at the European Court of Justice. The relevant article gives ESMA the power to intervene against the will of the national supervisors. This, according to the Advocate General, results in replacing national decision-making by decision-making at EU level. The Advocate is of the opinion that the EU Treaty does not provide the correct legal basis for ESMA’s power and advocates annulment of the empowering article. In this, he agrees with the United Kingdom, which lodged an appeal in 2012 to annul the article.

The ECJ will issue a ruling in this case in a few months.