On 30 April 2014 the Court of Justice of the European Union (“ECJ”) dismissed the UK’s initial challenge to the financial transaction tax (“FTT”).

The ECJ concluded that at the present time the UK can only challenge the decision of the Council of the EU to authorise enhanced cooperation regarding the FTT.  However, on the grounds it presented, the UK does not have a case against this decision.  As there is no European law in place yet regarding the FTT, simply a proposal for it, a challenge against the FTT itself or elements of it is premature.

The ECJ’s ruling that the UK's challenge is premature will not prevent the UK later challenging any European legislation on the FTT eventually adopted by the 11 Member States under the enhanced cooperation procedure.  It follows that the ECJ’s judgment is not dismissing the UK’s arguments in substance and these should be able to be argued by the UK once the FTT Directive has been adopted.  The UK government will be hoping that the continuing threat of a challenge to the FTT will be taken into account by policymakers in designing the version of the tax to be adopted by the European Parliament. 

On 14 February 2013 the European Commission published its detailed proposal for a radical and wide ranging Financial Transaction Tax.  The scope of the proposed FTT would be broad and its impact on the City would be significant. 

Click here to view the ECJ judgement.