Lord Hill – nominated Commissioner for Financial Stability, Financial Services and Capital Markets Union, constraints and difficulties

Surprisingly Jean-Claude Juncker nominated Lord Hill as European Commissioner for financial stability, financial services and capital markets union, and, obviously we should welcome this. According to David Cameron this “shows that when we campaign and fight we can get our way in the EU”. However, this is not such an important victory to the UK as it has been claimed.

Jean-Claude Juncker has spoken several times that he wants “to give an answer to the British question”. In fact, he stressed, “We have to do this if we want to keep the UK within the European Union – which I would like to do as Commission President.” Yet, his political guidelines just say “I made clear throughout my campaign that I am ready to listen to the concerns of every Member State and to help find solutions.” Mr Juncker, as well as the other Member States, wants to keep Britain in the EU, but not at any price. He pledged to work for “a fair deal with Britain”, but according to Juncker “a fair deal with Britain” will accept "the specificities of the UK in the EU, while allowing the Eurozone to integrate further.” Referring to David Cameron’s article in the Daily Telegraph, he said “I will be ready to talk to him about these demands in a fair and reasonable manner” stressing “My red line in such talks would be the integrity of the single market and its four freedoms; and the possibility to have more Europe within the Eurozone to strengthen the single currency”. Mr Juncker noted that the other member states would have to accept some of the UK demands but, in exchange of “stronger powers for the monetary union.” Hence, the so-called "fair deal" doesn't mean that all British demands will be accepted, just “some” and in exchange of accepting further integration within the eurozone. David Cameron said that Juncker's appointment “will make renegotiation of Britain’s relationship with the European Union harder”. It seems Mr Juncker believes that by giving Lord Hill such an important portfolio would help him changing his image in the UK and ensuring Britain will remain part of the EU. He wants us to believe that he is serious about the need to address British demands for a new deal with the EU. However, one could say that Mr Juncker is not concerned in giving us back powers but to overcome any possible UK's obstruction to deeper EU integration, particularly in the eurozone, and Lord Hill might help him to achieve this. One could conclude that Juncker’s plan entails more integration to the eurozone, without having to amend the treaties, for the time being, with the UK endorsement in exchange of minor concessions.

Lord Hill will face several constraints and difficulties:

1 Oath to the European Commission

Article 17 TFEU provides that “The Commission shall promote the general interest of the Union and take appropriate initiatives to that end.” Moreover, under Article 245
“The Members of the Commission shall refrain from any action incompatible with their duties” and “Member States shall respect their independence and shall not seek to influence them in the performance of their tasks.” In fact, according to Article 245 TFEU, the European Commissioners will have to give “a solemn undertaking that, both during and after their term of office, they will respect the obligations arising therefrom”. If they breach any of their obligations, the Court of Justice, at the Council or the Commission request, may rule that the Commissioner in question be compulsorily retired.

The European Commissioners are required to be independent and to act on the Union general interests. Lord Hill would be bound to represent the interests of the EU as a whole rather than the UK. Lord Hill pursuant to Article 17 TEU and Article 245 TFEU is required to swear a solemn declaration, before the Court of Justice of the European Union, pledging to be completely independent in carrying out his responsibilities in the general interest of the Union as well as to respect the Treaties and the Charter of Fundamental Rights in the fulfilment of his duties. Lord Hill will have to uphold all the principles and values enshrined in the Treaties and the Charter of Fundamental rights. Moreover, he will have to pledge not to seek or take instructions from the Government or from any other institution in the performance of his tasks. In fact, in his answers to the European Parliament’s questionnaire Lord Hill stressed that he will uphold the Treaties fully.

Having lord Hill as financial services commissioner will enhance the UK position within the Commission but that does not mean that UK’s interest, particularly the interests of the City, would be always upheld and protected. Lord Hill is required to defend the Union general interest, which most often conflicts with the national interest. Hence, Lord Hill wont be able to act in the UK’s interest but in the Union general interest. Consequently, he will not be able to defend the City of London interests, particularly if they conflict with the EU’s general interest.

2 The political guidelines and tasks assigned by Juncker

Jean-Claude Juncker set out in a “mission letter” what he expects from Lord Hill as a commissioner as well as the “specific goals” that he has to reach during his mandate.
Lord Hill is required to deliver the priorities set up by Juncker in the political guidelines and to pursue the EU’s so called reform agenda.

3 The European Commission’s vice presidents

As expected, Mr Juncker has given more powers to the European Commission’s vice-presidents, as they wont have individual portfolios but instead they will be in charge of coordinating the other commissioners’ work. The vice-presidents “will lead project teams” and Mr Juncker has set up the priorities for each team that cover the key areas of the political guidelines and entrusted the vice-presidents with specific tasks that they have to deliver.

Lord Hill belongs to the third level of the Commission’s hierarchical structure; he is “junior commissioner”. Lord Hill, as Commissioner for Financial Stability, Financial Services and Capital Markets Union, will be required to “contribute to projects steered and coordinated by the Vice-President for Jobs, Growth, Investment and Competitiveness and the Vice-President for the Euro and Social Dialogue.” Jyrki Katainen, former prime minister of Finland, is the Vice-President for Jobs, Growth, Investment and Competiveness, and is the team leader of the project team “A New Boost for Jobs, Growth and Investment”. He will be in charge of overseeing the work of the Commissioners for Economic and Financial Affairs; Employment, Social Affairs, Skills and Labour Mobility; Regional Policy; Internal Market, Industry, Entrepreneurship and SMEs; Financial Stability, Financial Services and Capital Markets Union; Digital Economy and Society; Climate Action and Energy; and Transport and Space. Valdis Dombrovskis, former prime minister of Latvia, is the Vice-President for the Euro and Social Dialogue, and is the team leader of the project team “A Deeper and Fairer Economic and Monetary Union”. He will be in charge of overseeing the work of the Commissioners for Economic and Financial Affairs, Taxation and Customs; Employment, Social Affairs, Skills and Labour Mobility; Financial Stability, Financial Services and Capital Markets Union; Internal Market, Industry, Entrepreneurship and SMEs; Education, Culture, Youth and Citizenship; Regional Policy; and Justice, Consumers and Gender Equality.

The Vice-President concerned must now approve initiatives before being presented to the College of Commissioners, as solely the vice presidents will be allowed to present proposals to the college agenda. Lord Hill will have to seek the support either from Jyrki Katainen or Valdis Dombrovskis to present a new initiative into the Commission Work Programme or on to the College Agenda. He would be unable to put forward any initiative without having the green light from the relevant vice president. Jyrki Katainen and Valdis Dombrovskis, as well as the other vice presidents, will have veto powers, consequently they will be able to block any initiative, including legislative proposals, put forward by Lord Hill. He has therefore a limited room for manoeuvre, as he his subordinated to the other two “senior” commissioners. It seems the European Commissioners power to initiate legislation would be just in theory, as the Commission’s power would be centralised in Juncker and his Vice-Presidents. In practice the power of legislative initiative would belong to the so-called “senior” commissioners, as they would have to approval any proposal put forward by the “junior” commissioners. In fact, as above-mentioned they would be able to stop any initiative with their veto powers.

Moreover, Jyrki Katainen and Valdis Dombrovskis will also decide, within their area of responsibility, who will represent the European Commission not only in the other European institutions but also in national Parliaments and in other national, European and international level institutions.

4 EU legislation in force

There has been a EU’s ‘power grab’ over regulation of the British financial services industry. The EU supervision of the financial system has been in place since 2011, and powers have been transferred from the UK’s Financial Services Authority to the new European Supervisory Authorities. This EU framework proposed by the unelected European Commission, then agreed by the Council by majority vote and by the European Parliament, through the ordinary legislative procedure, and then adjudicated by the European Court of Justice has been imposed upon the UK against the national interest. In fact, due to QMV, the UK has been outvoted on matters of extreme importance, such as the EU Regulation on short selling and certain aspects of Credit Default Swaps (CDS), the damaging Directive on Alternative Investment Fund Managers and the EU legislation imposing caps on bankers' bonuses.

The Government has been launching legal challenges at the CJEU to limit the impact of the EU financial regulation in the UK, but the Court has already decided against the UK in two of the cases, short selling and the financial transaction tax.

The Regulation on short selling and certain aspects of Credit Default Swaps (CDS) has further transferred powers from national regulators to the European Securities and Markets Authority (ESMA). From the outset the Government wanted to limit ESMA’s powers. However, due to QMV, it was outvoted in the Council being therefore unable to prevent ESMA of getting the powers to ban short selling. The Government launched a judicial challenge to this Regulation on the grounds that it confers too much discretionary power on the European Securities and Markets Authority. However, the Government has not achieved what it was expecting. The Court has rejected all the four UK's pleas and found the power of the European Securities and Markets Authority to adopt emergency measures on the financial markets of the Member States in order to regulate or prohibit short selling compatible with EU law. The other Member States and the European Parliament have already outvoted the UK, during the negotiation process, and now the CJEU has not only confirmed but also strengthened the ESMA’s powers to override national financial supervisors to regulate or prohibit short selling.

The CJEU ruling will have far-reaching implications to the City of London and to the UK’s national interest. It not only raises concerns of further powers being transferred to EU agencies using Article 114 TFEU but also the possibility of Brussels widening the use of this legal base. In the light of the CJEU’s judgment, the EU is therefore allowed, particularly in areas that require the deployment of specific technical and professional expertise, to confer discretionary powers upon an agency if such powers are clearly defined by the European Parliament and the Council. Hence, Article 114 TFEU can be used as a legal base for safeguarding financial stability as well as to set up EU agencies and conferring upon them discretionary implementing powers. It is possible to argue that the CJEU by making a broader interpretation and authorising a widener use of Article 114 might create the necessary conditions to eurozone member states to use this as well as other single market provisions to pursue their own interests to the detriment of the UK as well as other non-eurozone countries. The CJEU’s judgement will particularly facilitate the creation of a banking union, and it would allow further integration for the eurozone without the need of amending the Treaties.

In April 2013 the Government also lodged an application at the European Court of Justice for the annulment of the Council’s decision authorising enhanced cooperation for a Financial Transaction Tax. It is important to stress that the UK had a veto over this damaging proposal and the Government has used it. However, despite the veto and despite the non-participation in the enhanced cooperation, the UK will still be affected by such tax. The extra-territorial elements of the Commission’s proposal would impinge on the sovereignty of the non-participating Member States. The FTT would apply to financial products, even if they are traded outside the FTT area or outside the EU, but they are issued from the participating countries, in order to prevent relocation from the participating member states to other financial centres. Consequently, it will have an impact in the City of London, as the tax would apply to any transaction involving investors based in the participating member states, even if it was executed in London. Hence, according to the Government the FTT represents a breach of the EU treaty, as the requirements for the enhanced cooperation procedure have not been properly fulfilled. The FTT proposal does not respect the UK’s jurisdiction over its own tax system. This clearly shows how the UK is subject to damaging proposals even if it does not join in, and the Government ability to protect national interest is being increasingly restricted. Yet, the Government attempt to stop the proposal before being adopted has failed.

Unsurprisingly, the Court considered the UK’s challenge premature, and consequently inadmissible, as the negotiations had not been concluded yet. The CJEU has ruled against the UK, as it has not annulled the Council’s decision authorising enhanced cooperation. The CJEU’s judgment has drawn attention to the Government powerless in stopping other member states moving forward with further integration and joint policies, under enhanced co-operation, that jeopardise UK interests.

Yet the 11 participating member continue supporting the introduction of a FTT and the Commission continues to push for it. The non-participating countries have been kept out of the negotiations, which have been conducted behind closed doors. Last May, at a meeting in the sidelines of the Ecofin, the participating countries reached a broad political agreement on the FTT and confirmed they will progressively implement it, which will initially covered the taxation of shares and some derivatives, and then would be implemented by January 2016. The Government wants to participate in the Council debates on the FTT in order to make sure the final text of any tax agreed by the participating Member States addresses the Government main concerns and reflects the UK’s views. However, the non-participating countries were presented with an extremely vague political deal, with no reference on the FTT impact on them. George Osborne has reiterated that the Government “will not hesitate to challenge a Financial Transaction Tax that damages the UK, other member states or the single market." However, such a challenge does not have a better chance of being successful. The CJEU is likely to confirm that further integration among a group of member states, in the EU and eurozone, can move forward even if it has an impact on the other member states.

There is nothing Lord Hill can do about the FTT. The French Pierre Moscovici will be the commissioner for Economic and Financial Affairs, Taxation and Customs and, it is well known that France has been pushing for the FTT to be introduced in the EU. Jyrki Katainen Vice-President for Jobs, Growth, Investment and Competitiveness and Valdis Dombrovskis Vice-President for the Euro and Social Dialogue are both from non-participating member states, Finland and Latvia respectively, but these countries have not opposed to the FTT either and are considering joining in. Nonetheless, Mr Juncker favours a Financial Transaction Tax and will push for its adoption. He pledged in his political guidelines to “work for the adoption at EU level of … a Financial Transaction Tax.” In fact, Jean-Claude Juncker stressed in his “mission letter” to Pierre Moscovici that he should focus, during his mandate in “seeking to finalise negotiations on the Financial Transaction Tax”.

The CJEU is most likely to decide against the UK in the bonus cap case too. In a hearing at the European Court of Justice, ahead of the decision, that it is only expected next year, the Treasury’s lawyers argued that the bonus cap breaches the EU’s treaties. However, according to The Telegraph, the Advocate General, Nilo Jaaskinen, said that the Government’s argument “was inconsistent.” Jean-Francois Gerard, a lawyer that attended the meeting, said, “The feeling I got from the hearing was not so good for the UK, which is not really a surprise, but more of a surprise was the tone of voice from the court.”

Moreover, it is important to mention that the European Commission is already planning to challenge the use of “cash allowances”, which have been cleared by the
UK’s Prudential Regulation Authority. Michel Barnier, the outgoing internal market commissioner, has raised concerns over “cash allowances” that have been used by UK based banks, in a letter to the European Banking Authority. He said, "It is important to show a collective, proactive stance on this important matter and address the claims made that the spirit -- if not the letter -- of Union law is being disregarded". He then asked EBA to share with the European Commission the outcome of their investigation by the end of September, so that the European Commission “can address any concerns in a timely manner through a coordinated policy response". It remains to be seen what “a coordinated policy response” would entail. Nonetheless, if the UK’s bank use of the “cash allowances” is deemed inconsistent with the bonus cap rules they would have to change this practice.

The CJEU is chiefly a political court and it is unlikely to protect the City’s interests against EU regulations. The CJEU’s ruling on short selling has shown us that the Court is unlikely to annul EU regulations indented to ensure financial stability, particularly in the eurozone. The UK is losing control over financial services and banking in the City of London. The financial crisis has led to an overhaul of the EU regulatory and supervisory framework. The Commission has tabled over 40 proposals in less than 5 years. Such EU regulations and directives have created further burdens on the UK’s financial services. This is irreversible, unless the ESC’s proposal for desaplication of EU legislation notwithstanding the European Communities Act 1972 is introduced.

Mr Juncker is not planning to repeal EU financial regulations and Jonathan Hill will be required to “ensure that the Commission remains active and vigilant in implementing the new supervisory and resolution rules, making European banks more robust so that they can get back to lending to the real economy.” Lord Hill might be able to limit the impact of future financial regulations but he would be unable to address the issues of the regulations already in force, which are having a terrible impact in the City of London. Under the terms of the European Community Act 1972 (ECA) the UK is required to comply with EU law, including the ECJ's decisions, which are, under Section 3(1), binding precedents for all UK courts and tribunals.
Hence, the only possible solution for the UK is to amend the ECA 1972 so that it can disapply EU law where it is in the national interest to do so.

5 European Parliament

The European Commission, as a whole is subject to a vote of consent by the European Parliament and then the European Council formally appoints the Commission acting by a qualified majority. The MEPs will have the so-called commissioner hearings from 29 September to 3 October. Then the European Parliament’s committees will vote on whether to issue a recommendation that the nominee be confirmed. The new whole European Commission would be then subject to a confirmation vote on 22 October.

Theoretically, the European Parliament can only confirm or reject the entire Commission, but it may reject a commissioner nominated by a Member State or asked for a given portfolio to be changed by threatening to reject the college as a whole. In 2004, Rocco Buttiglione and Ingrida Udre had to be replaced and László Kovács had to be assigned a different portfolio.

Martin Schulz, President of the European Parliament, has already said that Lord Hill rejection “cannot be ruled out.” Gianni Pittella, president of the socialist group in the European Parliament said, “It is unacceptable that this important and sensitive job is given to a Conservative, free-market liberal.” Moreover, he said, "The financial sector urgently needs better regulation and we will not accept any backward step on this issue. It's a matter of principle. We promise to be very tough with lord Hill." Lord Hill will have to explain to the MEPs how his work will contribute to joint political priorities, and to demonstrate his “commitment and suitability” for being a member of the European Commission. As John Redwood said, “They will want him to be loyal to the treaties Conservatives have opposed, loyal to a federally inclined Commission which we oppose, and keen on the project of ever closer union which the UK cannot accept. He will doubtless use language to get through his test which will upset eurosceptics.”

It is well known that the UK is against the cap on bankers’ bonuses therefore it is not surprising that Jonathan Hill, will not be responsible for banker’s pay. Mr Juncker has decided not to include the bankers’ bonuses issue in Lord Hill’s portfolio, as it has transferred it to the Justice, Consumers and Gender Equality portfolio. According to a spokesperson for Jean-Claude Juncker such decision was taken before Mr Juncker has decided to given Lord Hill that portfolio. However, according to The Financial Times, Gianni Pittella said, “The next commissioner on financial services must be crystal clear on this, otherwise we will reject the candidate”. The European Parliament wants the European Commission to stop banks sidestepping the EU’s cap on bank bonus hence, clearly, the MEPs were not eager in having Lord Hill in charge of this issue. According to the EUobserver Gianni Pitella said that he had "obtained a promise from Mr Juncker on depriving Lord Hill of responsibility for overseeing financial sector pay and a commitment about continuing the reform of the financial sector." On the other hand, such move might facilitate the MEPs endorsement of Lord Hill. In his reply to the economic and monetary affairs committee’s questionnaire Lord Hill pointed out “I am aware that the UK has legally challenged the CRDIV Directive on this issue in a case brought before the ECJ.” He then stressed, “it is the Commission's policy to uphold the law.” Lord Hill further said “If a Member State does not comply with EU rules, or tries to circumvent them, I will ensure that full use will be made of the various enforcement tools available.” In fact, he said, “The Community method is both the right way to proceed in our complex democracy and the most effective way to get things done.”

It is important to note that the EPP and the Socialists hold a majority whereas the European Conservative and Reformist Group (ECR) despite being the third political party just has 9.05 % of the vote. Lord Hill might not be rejected by the MEPs but they are likely to demand to Lord Hill's portfolio to be reassigned. Lord Hill’s hearing will take place before the Economic and Monetary Affairs Committee Wednesday 1 October 2014.

6 The political guidelines

It is important to recall that the European Parliament elected Mr Jucker on the basis of his Political Guidelines. He made several promises to MEPs, of all political groups, in exchange for their support. Mr Juncker’s political guidelines reflect indeed the MEPs demands. He was particularly praised by the Socialists and the Liberals, and, obviously, by the EPP. These guidelines would be now developed into the European Commission working programme, which will shape the future direction of the EU for the next five years, covering policy priorities and the legislation that the Commission will put forward.

Jean-Claude Juncker set out in a “mission letter” the “specific goals” that Lord Hill would have to reach during his mandate. Lord Hill is required to deliver the priorities set up by Juncker in the Political Guidelines and to pursue the EU’s so called reform agenda, hence is room for manoeuvre is very limited. He is restricted by Juncker’s priorities and policy limits.

Mr Juncker has asked Lord Hill to, during the first three months of his mandate, “contribute to projects steered and coordinated by the Vice-President for Jobs, Growth, Investment and Competitiveness and the Vice-President for the Euro and Social Dialogue”, particularly “to the jobs, growth and investment package”. This would entail “measures to improve the investment environment” and “presenting concrete initiatives on the long-term financing of the economy.” Lord Hill has been asked to seek “appropriate ways to revive sustainable and high quality securitisation markets, to reduce the cost of raising capital in the Union and to develop alternatives to … companies’ dependence on bank funding.” He is also expected to contribute to the project team leaded by Andrus Ansip, Vice-President for the Digital Single Market, “to ensure the safety and the modernisation of the Union’s regulatory framework on digital/electronic payments in order to facilitate online purchases” and to assess “the safety and appropriateness of certain virtual currencies” so that “relevant policy measures” can be proposed. Mr Dombrovskis and Mr Katainen will mainly supervise Lord Hill.

Stressing his support of the banking union, namely “the development of stricter controls on banks through a Single Supervisory Mechanism and a Single Resolution Mechanism with a Single Resolution Fund”, Juncker announced, in his political guidelines, his intention to create a Capital Markets Union, complementing “the new European rules for banks”. Mr Juncker has stressed, “a much stricter control of financial markets and institutions is necessary.” Lord Hill would have to ensure that “the Commission remains active and vigilant in implementing the new supervisory and resolution rules fully”. He will have to carry on with the regulatory and supervisory reforms. Lord Hill is required to continue, “to put in place a regulatory framework which ensures the resilience and stability of the financial services sector.” Juncker has requested Lord Hill to ensure “timely and effective implementation of the financial services regulatory reform agenda, including the accompanying delegated/implementing acts.” The president of the European Commission has stressed that “Financial markets and institutions should be appropriately regulated and supervised with, where relevant, appropriate crisis management tools.” Hence, according to Juncker’s plans, the European Commission will continue to proposed more legislation affecting financial services, and the city of London.

It is important to note that Juncker said in his “mission letter” that he wants Lord Hill to “look at the social fairness of regulation in this field”, then he particularly stressed “we should avoid wrong incentives for managers in these industries”. Juncker has made therefore clear that Lord Hill has to uphold and implement the EU rules on bankers bonus cap. In fact, as above-mentioned, Lord Hill will not be responsible for overseeing the EU’s bank bonus rules, as the responsibility for the financial sector pay has been assigned Věra Jourová, the commissioner for justice, consumers and gender equality.

The banking union would dominate Lord Hill’s work, as he would have to make “all necessary arrangements for the Banking Union”, in order that “the Single Resolution Board is set up and operational on time.”

Lord Hill has also been instructed to review “the functioning and the operation of the European Systemic Risk Board and the three Supervisory Agencies (“ESAs”), including their interaction with the Single Supervisory Mechanism and the Single Resolution Mechanism”. Such review should particularly focus on “the governance and the financing of these Agencies”. Juncker instructed Lord Hill to “find a way to eliminate EU and national budgetary contributions to the ESAs which should be wholly financed by the sectors they supervise.” The president of the European Commission has not shown any intention of limiting the powers of these authorities by returning them to national regulators.

Lord Hill has also been instructed to put in place “a well-regulated and integrated Capital Markets Union, encompassing all Member States, by 2019, with a view to maximising the benefits of capital markets and non-bank financial institutions for the real economy.” It remains to be seen what such union would entail, but as Alex Barker and Peter Spiegel said in The Financial Times “the move to deepen market integration could stretch to common rules for non-bank finance, moves to revive securitisation markets and possibly the central supervision of critical infrastructure, such as clearing houses.”

It is important to recall that Mr Juncker played an important role in the creation of the common currency, negotiated the Maastricht treaty, and he was president of the euro group from January 2005 to January 2013. He also played a key role in the negotiation and adoption of all the measures intended to tackle the debt crisis, including the EFSF and the ESM, which breached the EU Treaties, in order to save the euro. He is therefore a euro enthusiast, and, consequently he will focus the Commission work in protecting eurozone interests. He said to the MEPs, “The single currency doesn’t harm Europe, it protects Europe”. According to Mr Juncker’s political guidelines, the European Commission will continue with its reform “to preserve the stability of our single currency”. He is also an advocate for closer EU integration, particularly within the eurozone, therefore, unsurprisingly he wants “to enhance the convergence of economic, fiscal and labour market policies between the Member States that share the single currency.” Mr Juncker wants a “deeper Economic and Monetary Union”, he has endorsed and will pursue the recommendations of the “Four Presidents Reports” and the Commission’s Blueprint for a Deep and Genuine Economic and Monetary Union. He has instructed the Vice-President for the Euro and Social Dialogue, Valdis Dombrovskis, to pursue “the work of the “Four Presidents’ report” and the Commission’s Blueprint for a Deep and Genuine Economic and Monetary Union, integrating the social dimension.” It is important to recall that these reports proposed far reaching measures, urging the EU leaders to move towards a banking union, a fiscal union and, ultimately a political union.

Moreover, Juncker wants to strengthen the external representation of the EMU, and instructed Valdis Dombrovskis and Pierre Moscovici to put forward a proposal for “a more efficient external representation of our Economic and Monetary Union.” A joint representation of the Eurozone in the International Monetary Fund (IMF), has been a European Commission policy for a long time. Juncker stressed that only requires “a qualified majority of Eurozone countries”. If approved, eurozone countries would no longer represent themselves, which would increase eurozone influence at the IMF. Such move is likely to affect UK’s position at this organisation.

Valdis Dombrovskis, as project leader, and Pierre Moscovici, the Commissioner for Economic and Financial Affairs, Taxation and Customs, have been instructed to launch, during the first year of their mandate, legislative and non-legislative initiatives to deepen the EMU, which will deeply affect the UK, including “a stability-oriented review of the “six-pack” and “two-pack” legislation”. It is important to mention that there are provisions on economic coordination and surveillance that also apply to the UK, which is unacceptable. The UK has been subject to burdensome reporting requirements and surveillance missions from the Commission. Moreover, it is subject to the Commission’s warnings and Council recommendations if our economic policy is not consistent with the broad economic guidelines, and might be placed in Excessive Imbalance procedure. Lord Hill would be powerless to reverse this.

Pierre Moscovici, as Commissioner for Economic and Financial Affairs, Taxation and Customs, will have a role “helping to coordinate the economic policies of the Member States and to strengthen the EU’s social market economy.” Pierre Moscovici “Working closely with the Vice-President for the Euro and Social Dialogue” will have to “ensure that the EU’s economic policy coordination is effective and successful, in line with the goals of our social market economy.” Mr Juncker confirmed to be a “strong believer in the social market economy” however a “social market economy” equals low growth and high unemployment.

Pierre Moscovici has been entrusted to “ensure that taxation and customs union policies remain part and parcel of the genuine Economic and Monetary Union and contribute to the smooth functioning of the overall economic governance framework of the EU.” In fact, the new president of the European Commission also favours a Common Consolidated Corporate Tax Base and a Financial Transaction Tax and will push for the adoption of this two damaging pieces of EU legislation. Mr Juncker wants to strengthen Europe’s competitiveness but such proposals will undermine the competitiveness of the EU and the UK. Pierre Moscovici has been entrusted to continue to “improve the functioning of the internal market in indirect taxation and developing the definitive VAT system at EU level, as well as seeking to finalise negotiations on the Financial Transaction Tax and the Common Consolidated Corporate Tax Base.” It is clear that Mr Juncker has tax harmonisation in mind.

Some of the Lord Hill’s responsibilities are likely to overlap with Pierre Moscovici’s portfolio. It remains to be seen how the vice-presidents will coordinate overlapping proposals.

Lord Hill will face difficulties to make his ideas to protect the City of London heard. Obviously, Lord Hill will have an important role in deciding the number and direction of EU financial regulation, he is in charge of proposing legislation in this area. However, Mr Dombrovskis and Mr Katainen will have veto power over any initiative, including legislative proposals. Hence, they would be able to block any proposal that Lord Hill might put forward. Lord Hill, as a 'junior commissioner' wont be able to present any initiative, any legislative proposal, without the support of the relevant Vice-President. His room for manoeuvre is very limited, particularly to protect the City interests. Moreover, he wont be able to avoid further financial market regulation as he has to comply with Juncker's political agenda and policy priorities. There is no doubt that the European Commission will continue to proposed more legislation affecting financial services, which is then subject to the CJEU’s jurisdiction. Furthermore, this concentration of power in the hands of the President and his Vice-Presidents will further ensure that the Commission represents the EU's general interest rather than member states individual interests. Hence, the “senior commissioners” would block any proposal that Lord Hill might present ensuring that the UK, and the city interests, is protected.

Moreover, it is important to note that Lord Hill is a PR man, he has no in-depth knowledge of the financial sector hence he would have to rely on a new Directorate-General for Financial Stability, Financial Services and Capital Markets Union that will report to him. It remains to be seen who will run this DG and would help him shaping policies.

Lord Hill will be in charge of EU financial policy and regulating the City of London. The banking union will dominate the work of Lord Hill. Obviously, Lord Hill would not conduct the EU financial services policy in favour of the eurozone, he will seek to keep the EU's financial services policy focused on the single market rather than the eurozone. Although, Lord Hill would not have much say in setting up the EU agenda for this policy area, at least he will seek to ensure that the EU financial regulations wont be mainly intended to address the eurozone interests and protect the single currency. Having Lord Hill as Commissioner for Financial Stability, Financial Services and Capital Markets Union, will help to ensure, as David Cameron's spokesman said that “the voice of countries that are not in euro and will not join the euro - such as the UK - are fully represented." Lord Hill might have and important role in protecting the single market against a eurozone caucus however as Professor Hix told the European Scrutiny Committee, “There is nothing you can write down in law that could stop a political agreement amongst states acting together in the Council.” Hence, there is nothing Lord Hill can do to prevent the eurozone and other member states part of the banking union to vote in block in financial and banking matters outvoting the UK in matters of national interest, imposing, in this way, further regulations on the City of London. In fact, Lord Hill in his reply to the European Parliament’s questions said, “As European Commissioner, my job will be to build greater trust and confidence between the euro “ins” and “outs” in the interest of the European Union as a whole.”

As above-mentioned Lord Hill would have to seek approval from the relevant vice president before presenting an initiate, legislative proposal, to the College of Commissioners. Only the president and the vice presidents can decide whether to put an initiative in the Commission agenda. Then, the proposal will have to be endorsed by a simple majority of the commissioners sitting in the College. However, it would be very difficult for Lord Hill to ensure the protection of the UK's interests in his proposals. It is important to note that any proposal on financial services will be subject to the Ordinary legislative procedure and QMV. The ordinary legislative procedure enables the European Parliament to override a decision taken by the Council. The cap on banker’s bonuses has been inserted into the EU’s rules at the European Parliament’s insistence, which clearly shows the power of the European Parliament in changing the outcome of negotiations, to the detriment of the UK. Whereas the European Parliament was able to influence the Council and to change the outcome of negotiations the Government was only able to win minor concessions. As the European Scrutiny Committee noted, “Proposals may change significantly as a result of compromise agreements negotiated with the European Parliament after the relevant EP Committee has scrutinised the Council's 'common position' or 'general approach' and significant new provisions may emerge at a late stage during trilogue negotiations which have never been subject to scrutiny”.

It is important to recall that the UK no longer has an MEP chairing the European Parliament's Economic and Monetary Affairs Committee, which is now chaired by an Italian socialist MEP, Roberto Gualtieri. The MEPs, particularly left wing MEPs, have been pushing for EU measures that have a negative impact in the City, such as the financial transaction tax and the cap on bankers’ bonuses. It is well know that the European Parliament has been voting against the City. The Government is not always able to form political alliances to block damaging proposals from being adopted. For instance, the UK was opposed to the Alternative Investment Fund Managers Directive and the cap on bankers' bonuses but they were nevertheless adopted.

It is important to note that Mr Juncker committed the new Commission “to filling the special partnership with the European Parliament”, in fact he wants to have “a political dialogue” with the MEPs. He wants therefore to further strengthening the relationship between the commission and European parliament. The European Parliament secretary general, Klaus Welle, German MEP, said “we can expect much, much closer co-operation between the commission president and the parliamentary majority, which brought him into office,". He stressed that such relationship “will not just be a technical relationship but a political relationship.” In fact, Mr Juncker pointed out “The larger the majority that supports me and my agenda today, the stronger will my hand be in forming the next Commission, and the more effective I will be in delivering swiftly on this agenda.” The EPP and the Socialists, as well as the Liberal MEPs, have already joined forces as a ‘grand coalition’ in favour of more Europe integration, they want to find a common ground on as many policies as possible. Hence, as in the previous legislatures, most of the decisions will be done through a grand coalition. Decision-making would be even more made through the recourse of the so-called trialogues, consequently it would be even more undemocratic. The pro EU coalition is therefore seeking to greatly influence the EU priorities and agenda in the next five years. In fact, Mr Juncker has taken on board the priorities of the three groups that elected him and said "Europe’s policy agenda must be shaped in close partnership between the European Commission and the European Parliament, and in cooperation with the Member States" and "in line with the Community method." He stressed, "The commission will be a political body. I want it to be an even more political body”. Hence, the European Commission would have even a more interventionist role in the EU law making, in partnership with the European Parliament, particularly with the so call pro EU coalition, sidelining, as much as possible, the member states governments and national parliaments.

It is increasingly hard to the Government to keep the UK out of the EU banking regulations, bit-by-bit EU regulation takes over from national regulation, and this is irreversible. There is not much Lord Hill or the Government can do while QMV and the ordinary legislative procedure are the rule, unless the ESC’s proposals for desaplication of EU law and unilateral veto are introduced.

In the EU decision-making process, the common interest prevails over the national interest. The text ultimately adopted by the legislative bodies takes into account the EU’s interest and objectives as a whole. Lord Hill would not be able to get the European Commission, the other Member States, and the European Parliament to agree to a satisfactory change to the EU secondary law, which would entail repealing the burdensome regulation, which is already in force and is threatening the competitiveness of the City of London. The new European Commission, lead by Mr Juncker, would be like a central government representing the EU’s general interest jeopardising the UK’s individual interests. There is no doubt that the European Commission will continue to proposed more legislation affecting financial services, which is then subject to the CJEU’s jurisdiction.

Without a fundamental renegotiation of the treaties, there is nothing the Government can do to protect the UK and the city interests against EU financial services regulation, unless it amends the ECA 1972 introducing a unilateral veto over EU legislative proposals and disapplication of EU legislation notwithstanding the European Communities Act 1972, which are not in Britain's national interest. There is no other way that would enable the Government to stop the European Commission and the European Parliament proposals that jeopardise UK national interest. This would enable the UK to regain regulatory sovereignty over financial and baking matters whilst the City would be able to regain its competitiveness.

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