Draft rules allowing the European Securities and Markets Authority to make decisions on what types of over-the-counter derivatives should be traded through clearinghouses clashes with case law dating from 1958, according to an opinion prepared by lawyers for the EU’s governments obtained by Bloomberg News. “A power to adopt decisions of general application cannot be conferred on an agency,” the lawyers said. “It would not be possible for ESMA to rule on clearing of classes of derivative contracts across the EU,” the legal service said.

EU governments are working on how to overcome the problems posed by the legal opinion, Marton Hajdu, a spokesman for Hungary, which holds the EU’s rotating presidency, said: “We are optimistic of finding a solution.” 

The extent of powers that can be granted to agencies such as ESMA is “a legal grey area,” Nicolas Veron, a senior fellow at Bruegel, a Brussels-based economics research group, said. “The legal situation is far too fuzzy for the politics not to matter,” he said.

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