31/07/2009 Author: Tony Griffiths

Europe's dividing lines

As the debate over the EC’s draft AIFM Directive’s proposals for hedge funds rages on, HFMWeek tracks the industry’s progress in crystallising opposition across  Europe, and looks ahead to the next stage in the Directive’s development

The period of confusion and knee-jerk fury that characterised the first few months of the draft AIFM Directive’s life is, generally speaking, over. This is not to say that opposition to the proposals is any less vociferous, just that the hedge fund industry – along with fellow Directive critics – has moved on to a stage of calm, calculated action.

The fear of the unknown has subsided thanks to an increasing awareness of the issues at hand and a better understanding of the processes that lie ahead. Timelines and timeframes mapping the Directive’s journey through the halls of Brussels, the heartland of European politics, are getting clearer by the day.

Most importantly, however, the European voices that need to be heard are, by and large, arriving – from the ministers and mayors in the glare of the public eye, to the civil servants and lobbyists working below the radar. In the case of the latter group, not all wish to be named, but their willingness to provide the likes of HFMWeek with their unique, immediate experiences has helped the spread of information and improve the chances of a favourable outcome.
In the past weeks, HFMWeek has been able to share with readers developments throughout Europe: the ongoing lobbying efforts of Aima;  the words and work of city minister Lord Myners and his UK Treasury team; letters penned by Directive opponents, including one from the Association of British Insurers and Dutch counterpart Eumedion, and another written by the Association of Global Custodians; and, most recently, the possible identity of the Directive’s parliamentary representative, the rapporteur – rumoured to be French MEP Jean-Paul Gauzes.   

The appointment of the rapporteur, chosen from within the European Parliament’s Committee on Economic and Monetary Affairs (ECON), is key. Once identified, the EU’s twin-track decision system – which sees laws and regulations decided via both the council and the parliament – can, finally, converge. Of the council’s 27 members, 26 have finalised their comments on the Directive, with only EU presidency-holder Sweden – required, as chair, to formulate its statement last – yet to establish its position.

“We’re going to analyse all the comments, see which ones require further discussion and decide how we proceed,” Raana Farooqi-Lind, the civil servant and economist heading up the four-strong Swedish team, told HFMWeek. The council is due to meet twice more in September, by which point the rapporteur is expected to have been named.  “Once we know the rapporteur we will start talking to them immediately,” she adds.

Although Farooqi-Lind was unable to share information regarding member comments and positions, HFMWeek’s own, ongoing research continues to throw out fresh perspectives, changing the political map. Our latest poll of industry insiders reveals new allies for the UK, but also a possible defector. Denmark – at last count thought to side with the UK (see original map, page 4 issue 154) – is now, according to a Brussels source, sending out “mixed messages”. Poland and the Czech Republic, on the other hand, now seem to favour an overhaul, while Aima’s lobbying in Eastern Europe also appears to be paying off.

Further work – both in terms of lobbying and understanding – is required, of course, but an informed, composed and united industry response, the kind that only communication and disclosure can provide, is underway, thanks, in part, to those in Europe willing to fill in the gaps. As part of this process, HFMWeek has gathered the views of those closest to the European action, for an update on proceedings.

"There are growing signs that opposition to the directive across Europe is beginning to reach critical mass… We are not out of the woods yet, however, in terms of securing a fair, effective and proportionate directive. Although there are grounds for hope that some aspects can be redrafted, it still has to pass through both the Council of Ministers and the European Parliament"
Andrew Baker, Aima CEO, writing exclusively for HFMWeek

"The UK is playing a strong role in negotiations on the AIFM Directive, both through active and constructive participation in Brussels negotiations and direct engagement with member states"
Spokesperson for the UK Treasury

"It’s too early to draw any conclusions and we don’t want to draw any conclusions without parliament. Once we know the rapporteur, we will start talking to them immediately. At some point, when all the issues are discussed and the presidency has all the input, then they have to sit down and propose a compromise"
Raana Farooqi-Lind, head of Sweden’s EU Council team of experts

"The issue of the regulation of managers of alternative investment funds will be given high priority during the Swedish presidency. It is important for us that all member states work together to find a balanced and appropriate solution"
Mats Odell, Sweden’s minister for financial markets

"Early indications from the Council Working Group are positive. Discussions have taken place in a constructive atmosphere. It is apparent that there is a shared commitment to deliver a regulatory regime that responds robustly and proportionately to risks in the alternative investment sector"
Charlie McCreevy, EU internal markets commissioner 

Poul [Rasmussen, PES president] and I agree that hedge funds must be regulated. We disagree, perhaps, as to how they should be regulated and what aspects should be regulated... I see myself as a bridge. We have to find a middle way which satisfies; where both sides can meet, and I think there is a good chance that we can"
Peter Skinner, MEP for South-East England, member of the party of european socialists (PES) and ECON