Welcome to CanadianHedgeWatch.com
Monday, May 20, 2024

The EU's anti-hedge fund proposal is probably illegal


Date: Friday, August 20, 2010
Author: Daniel Hannan,

All right, hereís one last go. For the past year, Iíve been banging on about the sheer awfulness of the EUís Alternative Investment Fund Managers Directive: a scheme to regulate, not just hedge funds, but all private equity. Since most such funds are based in London, the Directive will disproportionately damage the United Kingdom.

Iíve been touring City boardrooms in an attempt to drum up opposition to the measure and have been struck, more than once, by the aptness of Ayn Randís description of company directors in Atlas Shrugged: ďMen who, through the decades of their careers, had relied for their security on keeping their faces blank, their words inconclusive and their clothes impeccableĒ.

The problem is not that our financiers are unaware of the measure; itís that they donít see any prospect of stopping it. Most of the other member states support the AIFM Directive, whether from envy, dislike of capitalism or anti-Britishness. If itís coming anyway, say our financial Masters of the Universe, why waste time attacking it?

Well, hereís a reason: it may be illicit. The European Commission maintains that the legal basis of the Directive is Article 47(2) of the Nice Treaty. The Nice Treaty has since been supplanted by the Lisbon Treaty, and Article 47 has become Article 53(1). It reads as follows:

In order to make it easier for persons to take up and pursue activities as self-employed persons, the European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure, issues directives for the mutual recognition of diplomas, certificates and other evidence of formal qualifications and for the co-ordination of the provisions laid down by law, regulation or administrative action in Member States concerning the taking up and pursuit of activities as self-employed persons.

What? What? The basis of this wretched directive, which will disable one of the few parts of our economy with the locomotive power to drag us back to growth, is a clause providing for the mutual recognition of qualifications among the self-employed?

Come on, any hedgies reading this: donít sit around waiting for Commissioner Barnier to exile you to Singapore or Geneva. For a tiny fraction of the cost of complying with the Directive, you could fund a court challenge.