Clifford Chance have recently put together a very useful client briefing sheet that helpfully explains many of the surrounding issues...

With decisive votes in both the European Parliament and the EU Council having taken place recently, the innocent bystander would be forgiven for concluding that the major debates on the Alternative Investment Fund Managers (AIFM) Directive are now behind us and that the path to implementation is clear. Sadly, that is not the case. There are some very significant differences remaining between the Parliament and Council texts and these will now need to be resolved through a "Trialogue" process. This is "Trialogue", rather than "Dialogue", because it involves the Commission as well as the Parliament and Council. The expectation is that Trialogue will produce a single text, on which all involved can agree, by around July.

So what are the remaining key points which this Trialogue process must now resolve?

Third country funds: Arguably the most significant and seemingly one of the most irreconcilable differences between the two texts relates to the steps that non-EU funds and fund managers will need to go through to be allowed to offer their funds into the EU.

Specifically, the Parliament text proposes a single EU-wide solution to some requirements applicable to third country managers and funds when those non entities look to market to EU investors. On the face of it a single, EU wide solution to this issue would be advantageous as it offers the prospect of a single, EU-wide ticket to a European investor base. But the cost of that ticket, as proposed by the Parliament draft, would be very high. The Parliament text would only allow a non-EU fund, even where managed by an EU based manager – so this would include the case of a London based hedge fund manager with a Cayman based fund –to be marketed into the EU where the jurisdiction of the fund grants the EU reciprocal access to their market. In addition, the third country would need to demonstrate compliance with international standards on money laundering and to have signed an agreement with all relevant Member States relating to tax information sharing. However, it is as yet unclear how the test of reciprocal access would be assessed and what would need to be shown to demonstrate this to the satisfaction of the EU authorities. So this may prove a very high hurdle and the timing for assessing who meets this hurdle is far from clear.

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