Whether or not Britain or the United States likes them, the European Union’s proposed alternative investments regulations are likely to move a few steps closer to reality next week.
Having failed to convince the U.K. to accept the rules, Spain, which holds the rotating presidency of the EU, plans to push forward with a vote of financial ministers on the matter next week. Britain is almost certain to be outvoted at the meeting, which will come a day after a key European Parliament committee meets to vote on the proposals.
Both bodies must approve the controversial rules in order for them to become law.
Former British Prime Minister Gordon Brown blocked the directive’s adoption in March. The new prime minister, David Cameron, is not likely to be any more supportive. But the rules have sufficient support from other countries in the 27-member bloc to override British objections. The only other countries known to oppose the rules are Cyprus and Malta.
The EU’s finance ministers, including the new British Chancellor of the Exchequer, George Osborne, are due to meet in Brussels on Tuesday.
The proposed rules would impose strict new reporting and custody requirements on hedge funds and private equity funds, as well as potential leverage and borrowing limits. There are concerns—mostly from the U.S. and U.K.—that the proposals could block foreign funds from the European market.
EU Internal Markets Commissioner Michel Barnier promised yesterday to prevent that from happening. But he warned that U.S. and other foreign funds would have to live up to European standards in order to do business in the EU.
“I am not here to do a deal with the United States,” Barnier said after a meeting with U.S. Treasury Secretary Timothy Geithner, a vocal critic of the EU rules. “This agreement is between Europeans.”
Barnier said he would press the EU to institute a “passport” program that would grant foreign hedge funds that meet EU standards access to all EU countries. But he warned, “if we end up with a passport, it will be a passport that will have to be deserved.”