IN BRUSSELS, you can hear the dull sound of hammer on iron: the EU driving nails into a coffin. There may be plenty of zombie banks in the Eurozone, and an undead currency walking the corridors of the European Central Bank, but it’s the City that Brussels wants to bury first.There were two examples in EU committees only the other week: mandatory auditor rotation could cost the UK economy more than a billion pounds a year; and capital buffers that will make some money market funds uneconomic (significantly reducing the $1 trillion of the European debt market they manage).In the near future, we can expect the European Court of Justice (ECJ) to hand down its decision on whether London can continue to clear euros – 40 per cent of global euro trades are done through London at the moment. Even if the Court rules in favour of the City, the EU’s Paris-based financial services regulator, the European Securities and Markets Authority (ESMA), will have the power to veto London’s involvement.The Tories could have retained UK control of the City by voting against the creation of ESMA, but didn’t. How naive could they be? Ukip understood how hungry for power ESMA would become and voted against it – along with just a handful of other MEPs. ESMA has since claimed powers to prohibit short-selling in London.Belatedly realising that ESMA could unilaterally interfere in the free-flow of London’s derivative markets, the government made a desperate legal challenge. But just over a week ago the ECJ replied: “while the treaties do not contain any provision to the effect that powers may be conferred on a Union body, office or agency, a number of provisions in the FEU [Functioning of the EU] Treaty none the less [sic] presuppose that such a possibility exists.” With such legalese, the Court backed ESMA’s wish to be able to ban short-selling in London over the heads of our national regulators.This illustrates an important point. In Britain, we understand that authority does not belong to governments, they are custodians of it. They have an obligation to look after it and return it undamaged to the people in preparation for the election of a new government. For this reason, the courts require any delegation of the state’s authority to be clearly expressed – not merely implied.But in the EU, power and authority is “top-down” (from treaties) rather than “bottom-up” (from the people). It’s a system where the ends justify the means (“out-put legitimacy”, they call it in EU-speak) – and it’s through this looking glass that you must view everything that happens in Brussels.Implied authority in the Treaty was enough for the ECJ to decide that ESMA can impose legislation. And here the technicalities are important. The Court relied on Article 263, which admittedly talks about “acts of bodies, offices or agencies of the Union”. But the context makes it clear such acts are not “legislative” – they’re “intended to produce legal effects vis-a-vis third parties”. It doesn’t say “legal effects between third parties”. If this part of Article 263 meant “legislative acts” or “delegated acts” it should have said so. It does not.When the UK’s attorney general reads ECJ judgements like this, he must feel like he’s fallen down a rabbit hole and into Wonderland. Like Humpty Dumpty in Lewis Carroll’s novel (albeit not sitting on a wall but in a court in Strasbourg), the ECJ is manipulating words to suit demands in EU treaties for “ever closer union” and “harmonisation”. It doesn’t matter what we understand a word to mean, the EU is master now: ignoring not just the natural meaning of words but also the rule of law, referenda and financial markets.This leads to another nail in London’s coffin – global commerce has confidence in the City because of the commercial practicality, stability and the independence of the UK’s legal system. We ignore this heritage at our peril.For as long as the UK is forced to play by the warped rules of the ECJ, the government will be incapable of properly defending the long-term interests of the City, which are best served by being open to global and not just EU business. It is Ukip that truly understands the international value of the English common law; the coalition is happy to replace it with Humpty Dumpty’s EU-harmonised version.Dare we ask if the transfer of power to ESMA triggers the referendum lock, the legal commitment meant to prevent governments from handing over further powers to Brussels without a public vote? The government wasn’t expecting London to be subject to those powers on short selling, so presumably they must be new. We could ask the mad-hatter from the Bullingdon club, the Treasury’s cheshire cat, or Labour’s Tweedle-dum and Tweedle-dee, but we won’t get much sense out of them.Instead, like Alice, we should wake up, leave Wonderland and return to our friends in the real world.Nigel Farage is leader of Ukip.