Alistair Darling on Wednesday made a major concession weakening Britain's power to block new European Union financial regulators from taking decisions that could result in a bill for the taxpayer.

The Chancellor lost a critical fight in Brussels over a British demand that the "burden of proof" should be on European Supervisory Authorities (ESAs) to justify their actions in inevitable disputes over national sovereignty.

Instead, Europe's finance ministers decided the opposite - that, in the event of a challenge, the complaining country must first get the support of a majority of Europe's 27 governments in order to block an ESA ruling.

"The real concession is that burden of proof will rest with Britain, or the complainant country. It has to get a majority against the supervisor. It will not be a question of the supervisor having to get a majority to support it in a dispute with a national government," said an EU official.

"This tips the balance."

Mr Darling insisted that he had secured "safeguards" ensuring that Britain would be able to appeal measures that it regarded as "impinging on the fiscal responsibilities of member states".

He also beat off a European Commission proposal that it should be able to declare a financial crisis, with the power to instruct EU regulators to override national authorities.

Under the agreement, a "council" of finance ministers must declare an emergency. "If the council decides there is a crisis then it does allow regulators, where it is necessary, to ask the home regulator to take action. If we believe that it impinges on our fiscal responsibilities then there is an appeal system leading to an effective veto," said Mr Darling.

But the Conservatives have accused the Government of having "caved in on its red line" that EU regulators must not be able to take decisions that impact on British taxpayers.

"Does the Government have a veto over any decisions made by the ESA in an emergency that have a fiscal impact on Britain, or do they have to make an appeal against these decisions? This is another example of the Government failing to stick to its red lines," said Mark Hoban, the shadow financial secretary.

"It is clear that they can now make binding decisions which could have a fiscal impact but all that national governments can do is to appeal against these decisions."

Christine Lagarde, the French finance minister, who successfully blocked the British "burden of proof" demand, hailed the agreement as "a result".

"We're in the process of creating a real European authority," she said. "It was a laborious process; not everyone was on same wavelength."

Britain and France, whose relations are already strained after the appointment of a Frenchman as the commissioner in charge of financial regulators, clashed over their different visions for the watchdogs.

France has consistently favoured extensive powers but Britain has fought off proposals to win some guarantees preventing powerful regulators from ordering banks and governments what to do.

Mr Darling has invited Michel Barnier, the newly appointed French European commissioner for financial services, to come to London.

"We look forward to working with Monsieur Barnier, the newly appointed commissioner," he said.

"I have today invited him to come to London to meet me and, I hope, to meet other people in the industry, in the City."

The British Bankers' Association on Wednesday accused Nicolas Sarkozy, the French president, of damaging confidence in the new regulators by boasting that the EU "model" had triumphed over the City of London's "financial capitalism".

"Monsieur Sarkozy must surely recognise that he has undermined the EU with his statements and put a question mark over the impartiality of his nominated commissioner that will not be easily dispelled," Angela Knight, the BBA's chief executive, said.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/671...

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