The FSA is blaming the 45-year-old Treaty of Rome for tying its hands over the polarisation review.
It claims Article 85 of the Treaty of Rome, the foundation stone of the European Community, could be used as the basis of a challenge against the current polarisation regime.
It says all it would take is one European product provider with hopes of entering the UK market to challenge polarisation and the Government would be forced to make changes to it.
Industry sources highlight this has not happened in the 14-year lifespan of polarisation and suggest the Government is falling back on the European excuse to justify its decision.
The FSA s
ays it has always been aware of the risk to the regime but defen ds it by saying that it was in the “public good” to do so.
LIA spokesman John Ellis says: “As far as I know there is no active work at the European level to challenge polarisation. This is not a useful excuse. It is entirely a theoretical exercise.”
An FSA spokesman says: “It has always been defended in the public good. Ever since polarisation was introduced, there has been a risk that challenges could be made under existing EU rules. The risk is increasing, however.”