British diplomats yesterday began the final stage of a desperate rearguard action against new European legislation that London-based hedge funds and private equity firms warn could drive them out of business.
While Britain has been fighting for some time for a significant watering down of the reforms proposed by the
Alternative Investment Fund Management (AIFM) directive, time is running out to secure concessions on behalf of the City, home to much of Europe's hedge fund and private equity sector.
Britain has spent much of the weekend trying to win the support of smaller European countries. This week, the directive will move to the European Commission's Committee of Permanent Representatives for consideration. Britain's representative, the diplomat Kim Darroch, will have a final chance to persuade colleagues that amendments are necessary.
The legislation will then be rubber-stamped by the EC's Economic and Financial Affairs Council on March 16 before being presented to the European Parliament for a vote.
A powerful alliance that includes France, Germany, Italy and Luxembourg is pushing for the AIFM directive to proceed unamended, while the UK can depend on the support of Sweden, Finland, Ireland and the Czech Republic. The Spanish, who currently chair the EC, are thought to be sympathetic to the French and German position, while the UK believes it is supported by Estonia. The votes of Hungary, Romania and Bulgaria are being keenly sought by both sides.
Negotiations are continuing on three key features of the directive. The UK expects to get its way on the issue of thresholds, securing exemptions for investment managers with the smallest assets under management.
On deposits and custody, the French are continuing to push for the strictest rules possible, though there is some room for flexibility. But the third and most important issue remains unresolved, with the French and Germans determined that the directive should apply to investment managers based outside the EU if they want to market their services within the bloc.
It is this rule Britain is most opposed to, because many of the hedge funds and private equity firms operating in London but based in territories such as the US or Switzerland could be forced out of the City.
- INDEPENDENT
