Brussels, 14/10/2010 (Agence Europe) - On Wednesday 13 October, the EU27 member states failed to reach agreement in principle on the draft EU rules on alternative investment funds (hedge funds). Germany, France and the United Kingdom all oppose the draft deal, each for different reasons. The inter-institutional negotiating meeting scheduled for Thursday 14 October was therefore cancelled. Informal discussions are continuing between the Belgian Presidency and the member states ahead of the Tuesday 18 October ECOFIN Council meeting in Luxembourg.
The question of how non-EU hedge funds are to be allowed to sell their products in the European Union is still subject to dispute among the big EU countries. A diplomat commented that it would be very difficult for the Belgian Presidency to get agreement on a deal opposed by three big member states. Berlin is unhappy at the idea of too many powers being granted to the new European financial markets supervision authority (ESMA) when viewed against its operational capacities and against the backdrop of what is planned in the financial supervision package. Paris was for a long time hostile to the idea of giving non-EU funds a “European passport” to operate in the EU, but has now changed tack and wants a European passport to be as European as possible, granted and supervised by ESMA. Pointing out on Wednesday that they had made a “huge change”, the French government also called for reciprocal opening of markets in non-EU countries and a clarification of the European Commission's duties when reporting on application of the new EU legislation in the future. Italy, Portugal and, to an extent, Poland support France's line on the role of ESMA but would be prepared to compromise. Believing that the deal on the table would not introduce a genuine passport, London refuses to agree to the scrapping in the medium-term of national private investment systems. The Dutch believe the draft deal is “a European passport with 27 national visas”, a view shared by Sweden and the Czech Republic.
In the absence of a Council common position, the Belgian Presidency and the EP decided to postpone the three institutions' negotiating meeting due to be held on 14 October, but EP rapporteur Jean-Paul Gauzès (EPP, France) told this newsletter he would be waiting until 18 October, just in case. He said that the EP would vote on the issue in November, in either Strasbourg or Brussels, on a draft agreement on which agreement had been reached with the Council or on the EP's own proposal. As with the financial supervision package, the MEPs are putting pressure on the Council by planning to vote on a text based on the most recent Presidency compromises that include what the MEPs see as important issues, like introducing rules to govern “passive marketing” of non-EU funds and tackling asset-stripping by private equity funds.
The rapporteur repeated on several occasions that the EP and Council were equal partners, each with co-decision powers, but on dealing with non-EU hedge funds (and only on this thorny topic) the MEPs are happy to go along with a compromise deal that may be reached by the Belgian Presidency in the future. Gauzès said that it was not a matter of the EP abandoning its principles, but rather a gesture of goodwill given the problems the member states are having in reaching agreement. He said that when the Belgian Presidency finds a solution and a line that suits the EP, then the EP will go along with it. He hailed the exemplary attitude of the G4 (the four main political parties at the EP) that manifested itself in constant seeking of an EU solution that favours the general interest when it comes to reforming financial regulations. (M.B./transl.fl)