UK Conservatives say would oppose EU hedge fund law

Date: Tuesday, March 23, 2010
Author: Reuters

A British government led by the Conservative party would oppose a planned European law for hedge funds as it stands, one of the party's leading lawmakers in Brussels overseeing the law has told Reuters.

Last week, British premier Gordon Brown intervened to stop EU ministers signing off on a draft law curbing pay and borrowing at hedge funds and private equity firms until after UK elections in May, diplomats said.

Conservative opposition to the bill now sets the stage for a showdown between Brussels and a new London government if either Labour or the Conservatives win an election which is expected in May. Opinion polls point to a hung parliament with the Conservatives as the largest party but not enough seats to form a government.

"What's on the table -- to make it difficult for European investors to invest in non-EU hedge funds -- is protectionism," Syed Kamall, a leading Conservative parliamentarian in Brussels, told Reuters. "They (a Conservative government) would make it clear that it isn't acceptable."

The position of the Conservatives, a party traditionally skeptical of the European Union and allied with London's financial community, could set Britain on a collision course with continental Europe.

An ongoing row between France and Britain over how to control hedge funds and private equity will be one of the first issues facing the new British government.

Britain was almost entirely isolated among the 27 EU members last week when it blocked the signing off of the Europe-wide hedge fund legislation.

The delay throws a question mark over a high-profile piece of legislation, which many hoped would prove the European Union's resolve in tackling the causes of the worst financial collapse in a generation.

Although Germany and France, who favor harsher controls on hedge funds, could overrule Britain to push the new rules through, there is reluctance to do so.

"It would not look good if the other EU countries were to gang up against Britain," said Kamall.

Nonetheless, there is growing pressure on politicians to reach agreement on the new law. The European Parliament, whose approval is needed for the draft rules to become law, is preparing its own version.

On Monday, Jean-Paul Gauzes, a European parliamentarian who will play a key role in drafting the law, said: "Ordinary people don't understand what Europe is doing or rather when it is finally going to do something."

Jean-Claude Juncker, who chairs regular meetings of euro zone finance ministers, also said he was frustrated by delays in reaching a deal over hedge funds.

"Ideally, we should have made more progress on financial regulation. Where there is a large member state that is not yet able to join consensus, it is thought to be better to wait. That's Europe and I regret it."