The UK has failed in its attempt to block a financial transaction tax being implemented across parts of the European Union.

The European Court of Justice (ECJ) threw out the UK's legal challenge to the FTT on the grounds that it must wait until it becomes a reality before it can be contested.

Just 11 of the EU's 28 member states want to introduce an FTT after failing to reach a consensus. The group, which includes France and Germany, are currently hashing out the levy's finer details after agreeing in principle to the FTT.

"The court finds that the contested decision does no more than authorise the establishment of enhanced cooperation, but does not contain any substantive element on the FTT itself," said the ECJ.

Britain's lawyers argued that the FTT would infringe on UK sovereignty because it would be forced to collect the tax on behalf of other states.

The government also argued it would disproportionately affect the UK because London is home to the largest financial sector in the world.

"Today's decision is not entirely surprising given that it's still too early to know exactly what the final version of the FTT will look like," said Florian Lechner, tax partner at Linklaters.

"But the challenge may have helped to focus the minds of the member states backing the tax so that we end up with something that is more agreeable when it comes to the extraterritorial impact."

Under the FTT proposals, shares and bonds transactions would be taxed at 0.1% and derivatives at 0.01%. The EU estimates this would generate revenues of €30-35bn a year.

"The FTT as it currently stands is an extraterritorial tax which will damage the UK's recovery and potential for growth, and the UK government is absolutely right to fight its introduction," said Mark Boleat, policy chairman at the City of London Corporation, which lobbys for the financial sector.

"The governments pushing for the tax have already admitted that it is imperfect; it is time to let go of this punitive measure which will damage the savings of hardworking EU citizens and focus on effective fiscal policy which can create a thriving and sustainable banking culture."