The United Kingdom has surrendered in its fight against European Union-wide banker bonus caps, abandoning a legal challenge at the EU's highest court but urging global regulators to study the growing trend of inflated salaries.
The climbdown by Chancellor of the Exchequer George Osborne came hours after a top adviser to the Court of Justice of the European Union in Luxembourg recommended that judges dismiss the U.K.'s challenge, though a decision had not been expected until next year.
In an open letter from Osborne to Bank of England Governor Mark Carney, who chairs the G20's Financial Stability Board, the Conservative politician wrote that even though the EU bonus clampdown risked pushing "base" salaries up, "it now looks clear that there are minimal prospects for success with our legal challenge, so we will no longer pursue it."
"But that should not stop us from pursuing our objective of ensuring a system of remuneration that encourages responsibility instead of undermining it," he added.
The measure in question, passed by EU governments in 2013, prohibits bonuses of more than twice fixed salary, part of stricter bank and liquidity rules known as the Capital Requirements Directive IV, or CRD IV.
Unable to stop the measure from going ahead, the U.K. took its battle to court, arguing that the bonus ceiling oversteps the EU's powers. In Thursday's opinion, EU Court of Justice advocate general Niilo Jääskinen recommended that judges reject the U.K.'s entire case and dismiss its action.
Jääskinen said the bonus restriction is legally sound and didn't equate to an EU-wide fixing of pay limits, and noted that there is no limit anyway to basic salary or total pay.
Although there was no certainty the Court would follow the opinion, it does so in the large majority of cases.