Political and regulatory news
Issue 4 - 20 October 09
AIFM Directive subject to complex legislative process
The final shape of the AIFM Directive will be determined by a process of negotiation between the European Commission, the European Parliament and the Council of Ministers, making the timetable and outcome uncertain.
The draft Alternative Investment Fund Managers (AIFM) Directive is negotiating a complicated legislative process. The contentious nature of the subject matter, its technical complexities and strong political feelings over this agenda makes the outcome of this process and its timetable extremely difficult to predict.
The proposals started life back in September 2008 when the European Parliament adopted two reports urging the Commission to introduce regulation to curb the activities of private equity and hedge funds (see previous article). In response, the Commission published the draft Directive in April 2009. This draft now provides the basis for final rules to be negotiated by the European Parliament (made up of MEPs elected every five years by voters across the Member States) and the Council of Ministers (comprised of representatives from Member State governments), which each have legislative power to make changes. Each of these bodies considers the draft Directive at the same time and makes their own recommendations on possible changes. When each side is satisfied with their proposed approach, processes are undertaken to converge their drafts and come up with one, final, piece of legislation.
The Economic and Monetary Affairs (ECON) Committee takes centre stage in reviewing the proposals for the European Parliament and prepares recommendations for change. This scrutiny includes a number of evidence sessions (including public hearings) and a member of the Committee (the rapporteur) is responsible for managing the progress of the Directive through the Committee. His report is expected in December. This will include proposed amendments and will be highly influential in determining the Committee’s position on the Directive. Other MEPs will also have the opportunity to suggest changes. Eventually, Parliament’s version of the Directive will be considered alongside the Council’s draft as attempts are made to reconcile a final text.
At the same time, the Council is considering how it wants to change the original draft. It is holding regular meetings to discuss revisions. These are taking place under the chairmanship of the Swedish Presidency. Given the range of issues identified by the Swedish presidency (see article Presidency identifies issues in relation to AIFM Directive), it is hoped that significant change is on the agenda. The Council’s intention is to finalise its own position on the Directive in time to enable comparison with the European Parliament’s response expected at the end of this year.
Formal negotiations on integrating the two drafts (so-called trialogues involving ECON, Council and Commission) are expected in May once the Council and Parliament have reached a position on the Directive. If a compromise position can be agreed by all three parties within this timescale, the final Directive could be approved in Parliament as early as July next year.
The final text of the Directive may therefore be around nine months away. However, this timetable could slip for many reasons. For example, the Council or Parliament may struggle to agree their responses or the trialogues may not reach a consensus. However, if the text is agreed it will not come into force until Member States have introduced implementing measures – possibly 12-18 months after the adoption of the Directive. This implies that it could be fully in place in late 2011/early 2012. However, this is not yet certain and there are opportunities for slips and delays along the way.
This is the last article in this edition.
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