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France softens over 3rd country rules

The EU’s leading opponent to letting foreign private equity firms easily access Europe’s deep capital markets has softened its position.

Agreements over the final language of the pending AIFM directive may be reached soon, following France’s softening on a key dispute between EU lawmakers, according to various media reports.

French representatives in the EU government will accept foreign fund managers having pan-EU marketing rights provided they are regulated by a European supervisory body, among other conditions.

EU lawmakers are currently at odds over third-country proposals, which regulate private equity funds and managers based outside the union.

Earlier this month the Belgian presidency of the EU Council issued a compromise proposal which would permit both a passport system, allowing full EU market access with the approval of one member state, or through an individual EU member state’s private placement system.

The private placement system would phase out following a five year trial period should the EU government find no negative effects, such as on “investor protection, market disruption, competition and monitoring of systemic risk“, the proposal stated.

France has been a leading opponent to an easily accessible passport regime for non-EU countries, such as the US.

On 5 October, US Treasury Secretary Tim Geithner issued a letter to French Finance Minister Christine Lagarde arguing any proposal which allowed EU firms and funds a marketing passport while not extending the same benefit to third country firms would be “discriminatory and contrary to G-20 commitments”.

Next month France will hold the G-20 presidency for a year.  

In a response letter quoted in several media reports, Lagarde reportedly dismissed the discrimination charges and argued issuing a passport to third-country firms would not be “satisfactory as they would not be subject to the same regulatory provisions as EU funds”.

Lagarde instead proposed any passport system should be “truly European” and thus supervised by a European body.