Commenting on the agreement between representatives of the EU Council of Ministers and the European Parliament on the AIFM Directive today, Simon Walker, Chief Executive of the BVCA, said:
"At the outset of this process a faction in the European Parliament explicitly sought to place a regulatory ball and chain on private equity and venture capital with the objective of all but destroying it, regardless of the consequences for employment and pension funds across the EU. As late as this summer it looked as if they might have found enough key allies within the member states of the EU to succeed in this misguided ambition. The Directive agreed today, however, which presumably will be approved by the European Parliament next month, is, in a number of respects, a major improvement on what it might have been. In a series of sensitive areas, radicals within the Parliament have been obliged to trade substance for symbolism. This is because the sector has made its case with vigour. The prospect of a genuine EU "passport" is also a truly encouraging one.
This remains, though, a defective Directive. The EU has taken a hostile interest in the wrong industry at the wrong time and for the wrong reasons. No serious analyst has concluded that private equity (let alone venture capital) caused the economic crisis or served to enhance it. These regulations will needlessly increase costs and disproportionately impose burdens. This is especially disturbing in the case of larger venture capital houses, a set of institutions which it is the stated aim of the European Union that it wants to foster. There are many sections in this text which are ambiguous, inconsistent or incoherent. This means that the detailed procedure for translating this Directive into national law becomes unusually important. The BVCA along with the EVCA will dedicate much of the next two years to a forensic involvement in the critical implementation phase of this exercise.
Europe is still at risk of actively discouraging this sort of investment at precisely the moment when it needs to ensure a collective economic recovery. This would be an act of folly akin to a drowning man waving away a rescue boat because he did not like the colour of it. Private equity and venture capital stand ready to play a powerful and positive role in Europe's economic future. The question remains whether the EU wants this to occur."
